Highlights of Stadshypotek's annual report January - December 2007

Performance
Stadshypotek's operating profit for 2007 was SEK 3,926m (4,851). The
decrease was mainly due to the net interest income being SEK 477m
lower than the previous year. For the past couple of years the
competition for private customers' mortgage loans has led to reduced
margins, which has had a negative impact on the net interest income.
However, for the past six months, the margins for newly-priced
mortgage loans have remained stable. Stadshypotek's lending volume in
the private market continued to perform well during the year. But the
increase could not compensate for the lower lending margins. Net
interest income was also negatively affected due to the remaining
effects from previously repurchased bonds.

Loan losses
Recoveries exceeded new loan losses and the net amount recovered was
SEK 70m (278), which corresponded to a loan loss ratio of -0.01 %
(-0.06) of lending. Bad debts before deduction of the provision for
probable loan losses amounted to SEK 267m (393) at the end of 2007.
SEK 41m (44) of the bad debts were non-performing loans, while SEK
226m (349) 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
318m (229) that are not assessed as being bad debts. After deduction
of the provision for probable loan losses, the volume of bad debts
was SEK 190m (284).

Growth in lending
Lending to the public was SEK 524bn, an increase of 44bn.
Stadshypotek's share of net growth in the private market
developed favourably and the market share went up to 25.6% (25.5).
Stadshypotek retained its position as a leading player on the Swedish
corporate market, with a market share of 34.2% (34.8).

Capital ratio
On 1 February 2007, new capital adequacy regulations were implemented
- the Basel II rules. The new rules 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 rules allow for an adaptation over three
years. As at 31 December 2007, the capital ratio was 9.3% (8.3). As
at 31 December 2007, the Tier 1 capital ratio was 6.6% (7.1). Further
information concerning capital adequacy is provided in the section
entitled capital base and capital requirement.

Rating
Stadshypotek's rating was unchanged.


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 Annual Accounts Act for Credit
Institutions and Securities Companies (ÅRKL) and the directives
issued by the Swedish Financial Supervisory Authority are also
applied. The same accounting policies have been applied as in the
latest anual report.




Stockholm, 27 February 2008

Lars Kahnlund
Chief executive

The full report including tables can be downloaded from the following
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