Highlights of Stadshypotek's annual report: January - December 2008

Performance
Stadshypotek's operating profits for the year were SEK 3,682m
(3,926), a decrease of SEK 244m, or 6.2%, compared to the previous
year. As of August 2008, Stadshypotek's branch in Norway has been
included, which had a SEK 108m positive effect on operating profit
for the period. Thus, excluding the branch in Norway, operating
profits were down by SEK 352m on the previous year. The decrease was
chiefly attributable to a negative net result on financial operations
of SEK -71m, compared with a positive figure of SEK 360m the previous
year. This stemmed mainly from unrealised changes in market value of
financial assets and liabilities subject to hedge accounting and
derivatives. Unrealised changes in market value were negatively
affected, due to falling market interest rates in the second half of
the year. On the other hand, during the first half of the year,
unrealised changes in the market value were positively affected, due
to rising market rates.

Net interest income totalled SEK 3,900m. This was an increase of SEK
197m over the previous year, of which SEK 123m was attributable to
the branch in Norway. Thus, excluding the branch in Norway, net
interest income grew by SEK 74m, chiefly due to higher volumes, as
well as favourable funding costs in the prevailing market situation.
For a number of years, the competition for private customers'
mortgage loans has led to sharply reduced margins, which has had a
negative impact on net interest income. In 2008, margins on
Stadshypotek's lending volume to the private market were down
somewhat on the previous year.

Loan losses
Recoveries exceeded new loan losses and the amount recovered was SEK
75m (70), which corresponds to a loan loss ratio of -0.01% (-0.01) of
lending.

Bad debts before deduction of the provision for probable loan losses
amounted to SEK 193m (267) at the end of 2008. SEK 56m (41) of the
bad debts were non-performing loans, while SEK 137m (226) were loans
on which the borrowers pay interest and amortisation, but which are
considered doubtful in view of the uncertainty as to the borrowers'
repayment capacity and the value of the collateral. In addition,
there were non-performing loans of SEK 605m (318) that are not
assessed as being bad debts. After deductions for specific provisions
SEK -73m (-77) and provisions by group for individually assessed loan
receivables SEK -12m (-) for probable loan losses, bad debts totalled
SEK 108m (190).

Growth in lending
Stadshypotek's lending volume continued to increase during the
period. Lending to the public totalled SEK 615bn. This was an
increase of SEK 91bn, of which SEK 44bn was attributable to the
branch in Norway which was added during the third quarter.
Stadshypotek's share of the private market in Sweden was maintained
at around 25%. Stadshypotek retained its strong position as a leading
player on the Swedish corporate market, with a market share of some
30%.

Capital adequacy
On 1 February 2007, new capital adequacy regulations were implemented
- the Basel II regulations. The new regulations entail major changes
in how the capital requirement is to be calculated and how a
satisfactory capital base is to be ensured. They will be implemented
gradually, since the transitional regulations allow for an adaptation
over three years. As at 31 December 2008, the capital ratio in
accordance with Basel II was 37.1% (40.3). As at 31 December 2008,
the Tier 1 capital ratio in accordance with Basel II was 25.9%
(28.5). Further information concerning capital adequacy is provided
in the 'Capital base and Capital requirement' section.

Rating
Stadshypotek's rating was unchanged, with a "stable outlook".


Stadshypotek

                  Long-term Short term
Moody's           Aa1       P-1

Standard & Poor's AA-       A-1+

Fitch             AA-       F1+


Covered bonds

Moody's                     Aaa




Accounting policies
The accounts comply with the IASB accounting standards adopted by the
EU.  The regulations of the Swedish Annual Accounts Act for Credit
Institutions and Securities Companies and the directives issued by
the Swedish Financial Supervisory Authority are also applied.

Accounting policies are unchanged from the previous annual report.

Stockholm, 10 February 2009



Lars Kahnlund
Chief executive


The full report including tables can be downloaded from the following
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