Stadshypotek's interim report January-March 2008

Performance
Stadshypotek's operating profit for the first quarter of 2008 was SEK
767m (1,097). The decrease was partly due to the net interest income
being SEK 137m lower than the same period in the previous year. Net
result on financial operations also decreased by SEK 170m, compared
to the same period in the previous year, which was mainly due to
unrealised changes in market value of financial assets and
liabilities subject to hedge accounting and derivatives. Unrealised
changes in market value have had a negative impact due to falling
market interest rates in the first quarter of 2008.
 
For the past few years, competition for private customers' mortgage
loans has led to reduced margins, with a negative impact on the net
interest income. However, the margins for mortgage loans where the
rate is newly set was stable during the second half of 2007, and
increased slightly in the first quarter of 2008. Stadshypotek's
lending volume in the private market continued to perform well during
the period. But when comparing the net interest income to the
corresponding period in the previous year, the increase could not
offset the falling lending margins. Net interest income was also
negatively affected by the remaining effects from previously
repurchased bonds. When comparing the first quarter of 2008 and the
fourth quarter of 2007, however, net interest income has increased by
SEK 54m, mainly due to higher margins and increased lending volume.
 
Loan losses
Recoveries exceeded new loan losses and the net amount recovered was
SEK 11m (29), which corresponds to a loan loss ratio of -0.01%
(-0.02) of lending.
 
After deduction of the provision for probable loan losses, the volume
of bad debts was SEK 266m (328). SEK 58m (35) of the bad debts were
non-performing loans, while SEK 208m (293) 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 416m (221) that are not assessed as being
bad debts. After deduction of the provision for probable loan losses,
the volume of bad debts was SEK 191m (236).
 
Growth in lending
Lending to the public was SEK 533bn, an increase of just over SEK 9bn
in the first quarter. The trend for Stadshypotek's share of net
growth in the private market was favourable and the market share was
25.5%. Stadshypotek retained its position as a leading player on the
Swedish corporate market, with a market share of 31.8%.
 
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 March 2008, the capital ratio was 9.6% (10.3). As at
31 March 2008, the Tier 1 capital ratio was 6.8% (7.3). 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        |
|-------------------+-----------+------------|
| Standars & 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 interim report is also adapted to these. The same
accounting policies and calculation methods have been applied in the
interim report as in the latest annual report.
 
Stockholm, 22 April 2008
 
Lars Kahnlund
Chief executive