Stadshypotek's interim report January - June 2008

Performance

Stadshypotek's operating profit for the first half of 2008 was SEK
1,865m (2,229). The decrease was mainly due to net interest income
being SEK 232m lower than the same period the previous year. Net
gains/losses on financial operations decreased by SEK 107m, compared
to the same period the previous year. This was mainly due to
unrealised changes in the market value of financial assets and
liabilities subject to hedge accounting and derivatives. Unrealised
changes in market value were negatively impacted in the first quarter
as a result of falling market interest rates. However, during the
second quarter, unrealised changes in market values were positively
affected due to rising market rates.

For a number of years the competition for private customers' mortgage
loans has led to reduced margins, which has had a negative impact on
net interest income.  However, the margins for mortgage loans where
the rate is newly set were stable during the second half of 2007, and
increased in the first half 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 due to the
remaining effects from previously repurchased bonds.

Loan losses

Recoveries exceeded new loan losses, and the net amount recovered was
SEK 28m (49), which corresponds to a loan loss ratio of -0.01%
(-0.02) of lending.

Before deduction of the provision for probable loan losses, the
volume of bad debts was SEK 247m (284). SEK 62m (32) of the bad debts
were non-performing loans, while SEK 185m (252) 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 490m (283) that are not assessed as being
bad debts. After deduction of the provision for probable loan losses,
the volume of bad debts was SEK 171m (204).

Growth in lending

Lending to the public was SEK 546bn, an increase of SEK 22bn in the
first half of the year. The trend for Stadshypotek's share of net
growth in the private market was favourable, and the market share was
some 25%. Stadshypotek retained its position as a leading player on
the Swedish corporate market, with a market share of approx. 32%.

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 30 June 2008, the capital ratio was 10.9%
(10.0). As at 30 June 2008, the Tier 1 capital ratio was 7.7% (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 |
+--------------------------------------------+


Material events after the balance sheet date

Stadshypotek has decided to start up branch operations in Norway
during the third quarter. A mortgage loan portfolio of approx. NOK 35
billion will initially be transferred from the parent company's
branch in Norway to Stadshypotek's branch. The objective of the
establishment is to expand the Handelsbanken Group's collateral for
issuing covered bonds, thereby enabling increased funding via such
bonds.

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. The
accounting policies are unchanged from the previous annual report.

Stockholm, 22 July 2008

Lars Kahnlund
Chief executive

This interim report has not been examined by the company's auditors.


The report can be downloaded from the following link: