Highlights of annual report

Transcription

1 20 09 Highlights of annual report

2 Highlights of Stadshypotek s annual report January December Summary Operating profit was SEK 1,341 million in the fourth quarter compared with SEK 1,400 million in the third quarter. Operating profit for was SEK 5,761 million (3,682). Recoveries exceeded loan losses for the year. Lending increased by SEK 70 billion (91) to SEK 685 billion. The increase in included SEK 44 billion from the establishment of the branch in Norway.

3 Highlights of Stadshypotek s annual report PERFORMANCE Full year compared with full year Stadshypotek s operating profit increased by SEK 2,079 million to SEK 5,761 million (3,682). As of August, Stadshypotek s branch in Norway is included in the figures and this contributed SEK 346 million to operating profit. Excluding the branch in Norway, operating profit rose by SEK 1,733 million. Net interest income increased by SEK 2,167 million, of which SEK 368 million was attributable to the branch in Norway. The increase in net interest income was due to higher volumes and higher margins as a result of the company s good position in the funding market. Net gains/losses on financial operations were SEK -101 million (-71). Expenses amounted to SEK 212 million (191), of which SEK 38 million (16) was attributable to the branch in Norway. Recoveries exceeded new loan losses and the net amount recovered was SEK 31 million (75), which corresponds to a loan loss ratio of percent (-0.01) of lending. After deduction of the provision for probable loan losses, the volume of impaired was SEK 116 million (193). SEK 61 million (56) of the impaired were non-performing, while SEK 55 million (137) were on which the borrowers pay interest and amortisation, but which are considered doubtful. In addition, there were non-performing of SEK 591 million (605) that are not assessed as being impaired. After deductions for specific provisions totalling SEK -55 million (-73) and provisions by group of SEK -11 million (-12) for probable loan losses, net impaired totalled SEK 50 million (108). Q4 compared with Q3 Stadshypotek s operating profit for the fourth quarter of decreased by SEK 59 million to SEK 1,341 million (1,400). Net interest income was SEK 1,414 million (1,568), of which SEK 130 million (132) was attributable to the branch in Norway. The average margin in the private market during the quarter was 0.65 percent (0.63). Net gains/losses on financial operations increased by SEK 108 million to SEK -12 million (-120). GROWTH IN LENDING During the year, to the public increased by SEK 70 billion or 11 percent to SEK 685 billion (615). Stadshypotek's share of the private market in Sweden was approximately 25 percent and its share of the corporate market in Sweden was approximatel y 30 percent. CAPITAL ADEQUACY The capital ratio according to Basel II was 39.9 percent (37.1) while the Tier 1 capital ratio calculated according to Basel II was 28.4 percent (25.9). Further information concerning capital adequacy is provided in the Capital base and Capital requirement section. Rating Stadshypotek s rating remained unchanged, with a stable outlook. Stadshypotek Covered bonds Long-term Short-term Moody s Aaa - P-1 Standard & Poor s AA- A-1+ Fitch AA- F1+ 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 and the directives issued by the Swedish Financial Supervisory Authority are also applied. As of the financial year, new regulations in IAS 1 have affected the presentation of the Group s financial reports so that changes in equity not deriving from transactions with the owners are presented in a separate statement of Other comprehensive income. In addition to total comprehensive income for the period, changes in equity thus only include changes in equity deriving from transactions with the owner. As from, IFRS 8 Operating Segments is applied whereby identification and measurement of reportable segments is carried out on the basis of the same principles as used for internal reporting to central and managing functions. The application of IFRS 8 has not led to any changes in the division of segments for the Stadshypotek Group. In all other respects, the highlights of the annual report have been prepared in accordance with the same accounting policies and calculation methods that were applied in the annual report for. Stockholm, 18 February 2010 Lars Kahnlund Chief executive Highlights of annual report JANUARY DECEMBER 1

4 Stadshypotek Group Income statement Q 4 Q 3 Jan Dec Interest income 4,800 5, ,944 29, Interest expense -3,386-3, ,877-25, Net interest income Note 1 1,414 1, ,067 3, Net gains/losses on financial operations Note Fee and commission income Fee and commission expense Net fee and commission income Total income 1,396 1, ,942 3, Staff costs Other administrative expenses Note Depreciation and amortisation Total expense Profit before loan losses 1,338 1, ,730 3, Net loan losses Note Operating profit 1,341 1, ,761 3, Tax ,521-1, Profit for the period 986 1, ,240 2, Net earnings per share, SEK 6,089 6,369 26,176 16,388 Consolidated statement of comprehensive income Q 4 Q 3 Jan Dec Profit for the period 986 1, ,240 2, Translation differences for the period Total comprehensive income for the period 996 1, ,254 2, Quarterly earnings performance Q 4 Q 3 Q 2 Q 1 Q 4 Interest income 4,800 5,076 5,486 6,582 8,392 Interest expense -3,386-3,508-3,894-5,089-7,228 Net interest income 1,414 1,568 1,592 1,493 1,164 Net gains/losses on financial operations Net fee and commission income Total income 1,396 1,442 1,635 1,469 1,063 Staff costs Other administrative expenses Depreciation and amortisation Total expense Profit before loan losses 1,338 1,394 1,582 1,416 1,010 Loan losses Operating profit 1,341 1,400 1,599 1, Highlights of annual report JANUARY DECEMBER

5 Balance sheet Group Assets Loans to credit institutions 10,578 26,887 Loans to the public Note 5 684, ,263 Value change of interest hedged item in portfolio hedge 2, Derivative instruments Note 6 17,416 13,374 Other assets 6,897 3,830 Total assets 722, ,498 Liabilities and equity Due to credit institutions 212, ,602 Issued securities 458, ,404 Derivative instruments Note 6 3,433 3,231 Other liabilities and provisions 17,347 14,443 Subordinated 8,800 8,800 Total liabilities 701, ,480 Shareholder s equity 21,692 20,018 Total liabilities and equity 722, ,498 in equity Share capital Translation reserve Retained profits Total Opening equity 4, ,972 20,018 Total comprehensive income for the period 14 4,240 4,254 Group contribution provided -2,580-2,580 Equity December 4, ,632 21,692 Opening equity 4,050-15,823 19,873 Total comprehensive income for the period -4 2,655 2,651 Group contribution provided -2,506-2,506 Equity December 4, ,972 20,018 Cash flow statement Cash flow from operating activities 2,491 52,404 Cash flow from investing activities 0-47,981 Cash flow from financing activities -3,480-3,425 Cash flow for the period Liquid funds at beginning of period 1, Cash flow for the period Exchange rate difference on liquid funds 40 7 Liquid funds at end of period 490 1,439 Highlights of annual report JANUARY DECEMBER 3

6 Key figures Net interest margin, C/I ratio before loan losses, C/I ratio after loan losses, Return on equity, Capital ratio according to Basel II, Tier 1 ratio according to Basel II, Turnover of own debt instruments Stadshypotek issues and repurchases debt instruments which it has issued on its account. This is for the purposes of financing its operations. Turnover during the period was as follows: Issued (sold) SEK 381bn Repurchased SEK 107bn Matured SEK 253bn Segment information January December Private Corporate Total Private Corporate Total Net interest income 4,238 1,829 6,067 2,744 1,156 3,900 Net gains/losses on financial operations Net fee and commission income Total income 4,152 1,790 5,942 2,672 1,126 3,798 Administrative expenses Profit before loan losses 4,002 1,728 5,730 2,536 1,071 3,607 Loan losses Operating profit 4,015 1,746 5,761 2,600 1,082 3,682 Loans to the public 474, , , , , ,263 Private market is defined as lending secured by mortgages in single-family or two-family houses, second homes, housing co-operative apartments or residential farms. Corporate market is lending secured by mortgages in multi-family dwellings, family farms, commercial and office buildings or state and municipal. 4 Highlights of annual report JANUARY DECEMBER

7 Parent company Income statement Q 4 Q 3 Jan Dec Interest income 4,800 5, ,944 29, Interest expense -3,386-3, ,877-25, Net interest income Note 1 1,414 1, ,067 3, Net gains/losses on financial operations Note Fee and commission income Fee and commission expense Net fee and commission income Total income 1,396 1, ,942 3, Staff costs Other administrative expenses Note Depreciation and amortisation Total expense Profit before loan losses 1,338 1, ,730 3, Net loan losses Note Operating profit 1,341 1, ,761 3, Appropriations Profit before tax 1,389 1, ,809 3, Tax ,533-1, Profit for the period 1,022 1, ,276 2, Balance sheet Assets Loans to credit institutions 10,578 26,887 Loans to the public Note 5 684, ,263 Value change of interest hedged item in portfolio hedge 2, Derivative instruments Note 6 17,416 13,374 Other assets 6,897 3,830 Total assets 722, ,498 Liabilities and equity Due to credit institutions 212, ,523 Issued securities 458, ,483 Derivative instruments Note 6 3,433 3,231 Other liabilities and provisions 17,347 14,430 Subordinated 8,800 8,800 Total liabilities 701, ,467 Untaxed reserves - 48 Shareholder s equity 21,692 19,983 Total liabilities and equity 722, ,498 Highlights of annual report JANUARY DECEMBER 5

8 Notes The information in these notes relates to both the Group and the parent company. Note 1 Net interest income Q 4 Q 3 Interest income Loans to the public 4,754 5, ,677 28, Loans to credit institutions Total interest income 4,800 5, ,944 29, Interest expense Due to credit institutions ,460-6, Issued securities -3,873-3, ,388-16,753-8 Subordinated Other 1, ,083-1,099 Total -3,386-3, ,877-25, Net interest income 1,414 1, ,067 3, In the parent company, interest expense for liabilities to credit institutions was SEK -606 million in Q4 (-659), and SEK -3,657 million (-7,303) for the January to December period. Interest expense for issued securities in the parent company was SEK -3,879 million in Q4 (-3,694), and SEK -15,191 million (-16,285) for the January to December period. Note 2 Net gains/losses on financial operations Q 4 Q 3 Hedge accounting, fair value hedges of which hedged item , of which hedging , Loan receivables, valued at cost Financial liabilities, valued at cost Derivative instrument not recognised as hedges Total Note 3 Other administrative expenses Q 4 Q 3 IT costs Cost of premises Purchased services Other administrative expenses Total Highlights of annual report JANUARY DECEMBER

9 Note 4 Loan losses Q 4 Q 3 Specific provision for individually assessed loan receivables Provision for the period Writeback of previous provisions Total Collective provision Provision by group for individually assessed loan receivables Write-offs Actual loan losses for the period Utilised share of previous provisions Writeback of actual loan losses in previous years Total Net loan losses Impaired Impaired Specific provision for individually assessed loan receivables Provision by group for individually assessed loan receivables Net impaired Level of impaired, Reserve ratio for impaired, Loan loss ratio, Non-performing which are not impaired Highlights of annual report JANUARY DECEMBER 7

10 Note 5 Loans to the public Loans to the public, by sector ember Loans before provisions Provisions for probable loan losses Loans after provisions Loans before provisions Provisions for probable loan losses Loans after provisions Households 495, , , ,658 Public sector, municipal companies 15,801-15,801 8,974-8,974 Housing co-operative associations 92, ,872 90, ,358 Other legal entities 80, ,326 62, ,285 Total to the public, before collective provisions 684, , , ,275 Collective provision Total to the public 684, , , ,263 of which in the Norwegian operations Households 39,299-39,299 36,612-36,612 Public sector, municipal companies Housing co-operative associations 6,172-6,172 4,975-4,975 Other legal entities 3,458-3,458 2,610-2,610 Total to the public in the Norwegian operations 48,929-48,929 44,197-44,197 Loans to the public, by type of property ember Loans before provisions Provisions for probable loan losses Loans after provisions Loans before provisions Provisions for probable loan losses Loans after provisions Single-family housing 367, , , ,626 Housing co-operative apartments 101, ,676 90, ,694 Owner-occupied apartments* 5,100-5,100 4,070-4,070 Private market 474, , , ,390 Multi-family housing 176, , , ,423 Offices and commercial buildings 34, ,747 20, ,462 Corporate market 210, , , ,885 Total to the public, before collective provisions 684, , , ,275 Collective provision Total to the public 684, , , ,263 of which in the Norwegian operations Single-family housing 34,184-34,184 32,473-32,473 Housing co-operative apartments Owner-occupied apartments* 5,100-5,100 4,070-4,070 Private market 39,299-39,298 36,611-36,611 Multi-family housing 8,930-8,930 6,964-6,964 Offices and commercial buildings Corporate market 9,630-9,630 7,586-7,586 Total to the public in the Norwegian operations 48,929-48,929 44,197-44,197 * Owner-occupied apartments entail individual ownership of a specific apartment in a multi-family dwelling and a share in an association for joint management of the property. 8 Highlights of annual report JANUARY DECEMBER

11 Non-performing by borrower category ember Non-performing which are not impaired Non-performing which are included in impaired Non-performing which are not impaired Non-performing which are included in impaired Households Public sector, municipal companies Housing co-operative associations Other legal entities Total of which in the Norwegian operations Households Public sector, municipal companies Housing co-operative associations Other legal entities Total non-performing in the Norwegian operations Non-performing by type of property ember Non-performing which are not impaired Non-performing which are included in impaired Non-performing which are not impaired Non-performing which are included in impaired Single-family housing Housing co-operative apartments Owner-occupied apartments* Private market Multi-family housing Offices and commercial buildings Corporate market Total of which in the Norwegian operations Single-family housing Housing co-operative apartments Owner-occupied apartments* Private market Multi-family housing Offices and commercial buildings Corporate market Total non-performing in the Norwegian operations *For a definition see page 8. Highlights of annual report JANUARY DECEMBER 9

12 Impaired by borrower category ember Impaired Provision for probable losses Net impaired Impaired Provision for probable losses Net impaired Households Public sector, municipal companies Housing co-operative associations Other legal entities Total Impaired by type of property ember Impaired Provision for probable losses Net impaired Impaired Provision for probable losses Net impaired Single-family housing Housing co-operative apartments Owner-occupied apartments* Private market Multi-family housing Offices and commercial buildings Corporate market Total *For a definition see page 8. Impaired relate in their entirety to the Swedish operations. The reserved amount for probable losses in the tables showing non-performing and impaired consists of a specific provision for individually assessed receivables. Note 6 Derivative instruments Fair value Fair value Positive values Interest-rate related instruments 14,340 6,140 Currency-related instruments 3,076 7,234 Total 17,416 13,374 Negative values Interest-rate related instruments 2,089 2,460 Currency-related instruments 1, Total 3,433 3,231 Net 13,983 10,143 Stadshypotek mainly uses interest rate swaps and caps as hedge instruments for protection against changes in value due to changes in market interest rates. Hedge accounting is applied for these hedges in accordance with the company s accounting policies. Interest rate swaps and currency futures are also used as hedges for fair value changes without hedge accounting being applied. 10 Highlights of annual report JANUARY DECEMBER

13 Related-party transactions Group claims/group liabilities Group Parent company Balance sheet Group claims Loans to credit institutions 10,551 26,851 10,551 26,851 Derivative instruments 17,277 12,814 17,277 12,814 Other assets 1, , Total 29,509 39,712 29,509 39,712 Group liabilities Due to credit institutions 204, , , ,774 Derivative instruments 3,317 3,036 3,317 3,036 Other liabilities 3,680 6,319 3,680 6,319 Subordinated 8,800 8,800 8,800 8,800 Total 219, , , ,929 INCOME STATEMENT Interest income Interest expense -3,537-6,401-3,734-6,869 Fee and commission expense Other administrative expenses Total -3,430-5,844-3,627-6,312 Inter-company transactions are reported under the above headings in the balance sheet and income statement, either between the companies in the Stadshypotek Group or between these and other companies in the Handelsbanken Group. Highlights of annual report JANUARY DECEMBER 11

14 Disclosures Risk Stadshypotek s operations are conducted with a controlled, low level of risk. Stadshypotek s risks are credit risk, market risk, liquidity risk, operational risk and business risk. Credit risk is the risk that an individual borrower cannot fulfil his or her commitments. Market risk is the risk of price changes in the financial markets. The market risks affecting Stadshypotek are interest rate risk and currency risk. Liquidity risk is the risk that Stadshypotek will not be able to meet its payment obligations when they fall due. Operational risk is the risk of processing errors in procedures and systems, and business risk is the risk of unexpected changes in financial performance. Credit risk is considered to be the most significant risk for Stadshypotek. The Stadshypotek board establishes policy documents and instructions describing how various risks should be managed and reported. Stadshypotek s risk management aims to ensure that the strict approach to risk that the board has established is maintained. Stadshypotek s lending operations and treasury function are integrated with those of Handelsbanken, which means that Stadshypotek s lending is carried out via the Bank s branch office network. A collaboration agreement regulates the overall relationship between the parties and relates to the services which the branches are to perform on behalf of Stadshypotek. Thus, business operations at Stadshypotek are conducted according to the same fundamental principles which apply at Handelsbanken. The Bank s culture is based on the responsibility of each employee who makes business decisions. The person who best knows the customer and the market conditions is also in the best position to assess the risk. In the Bank s decentralised organisation, the positive and negative outcomes of each branch are evaluated, which provides a natural risk limitation and caution in business operations. The responsibility of those who make business decisions is supplemented by checking that excessive risks are not taken in individual transactions or local operations. In lending, this means that limits are set for large and these are assessed in a special credit organisation. Decisions on limits are made at the branch, regional or central level, depending on the size of the credit limit. For market risks and liquidity risks, the corresponding control at Stadshypotek implies that the board of the company establish limits which restrict these risks. There is also risk control independent of the treasury function at Stadshypotek s Control and Accounting Department which is responsible for regular follow-up and monitoring of the market risks, liquidity risks and counterparty risks. The risk control function carries out daily measurements and checks to ensure that risk exposure remains within the set limits. Limit utilisation is reported internally within the company, and to the parent company s central risk control function. In addition, limit utilisation is reported regularly to the chief executive and board of the company as well as to the group chief executive, CFO, and board of Handelsbanken. Stadshypotek is also covered by the central risk control at Handelsbanken, which is designed to identify the Bank s risks, gauge them, and ensure that management of these risks complies with the Bank s low risk tolerance. Moreover, Stadshypotek has a procedure for continual capital planning to ensure that Stadshypotek has a sufficient amount of capital to secure the company s survival if a serious loss were to occur, despite the measures taken to manage the risks. The method for calculating economic capital ensures that all risks are considered in a uniform manner when the need for capital is assessed. Information about credit risks regarding loan losses and nonperforming and impaired can be found in notes 4 and 5 of this highlights report. As at ember, Stadshypotek s interest rate risk in the case of a parallel increase in the yield curve of one percentage point was SEK -306 million (-183). Capital-related matters At the start of the transition to Basel II, Stadshypotek entered into a guarantee facility relating to mortgages for housing cooperative properties, to speed up the transition. In June, Stadshypotek utilised the guarantee, which had a 0.74 percentage point effect on the Tier 1 ratio as at ember. This transaction affects only capital adequacy, in accordance with the transitional rules. 12 Highlights of annual report JANUARY DECEMBER

15 Capital base and capital requirement Capital base Equity 21,692 20,018 Deduction for intangible assets Special deduction for IRB institutions Tier 1 capital 21,633 19,913 Perpetual subordinated 5,300 5,300 Dated subordinated 3,500 3,500 Special deduction for IRB institutions Tier 2 capital 8,756 8,695 Capital base 30,389 28,608 Capital adequacy analysis Capital requirement in Basel II compared with Basel I Capital requirement in Basel II compared with transitional rules Capital ratio according to Basel II Capital ratio according to Basel I Capital ratio according to transitional rules Tier 1 ratio according to Basel II Tier 1 ratio according to Basel I Tier 1 ratio according to transitional rules Capital requirement Credit risk according to standardised approach Credit risk according to IRB approach 5,543 5,493 Operational risk Total capital requirement according to Basel II 6,097 6,161 Adjustment according to transitional rules 17,594 18,100 Capital requirement according to Basel II, transitional rules 23,691 24,261 Capital base in relation to capital requirement Basel II Capital base in relation to capital requirement Basel I Capital base in relation to capital requirement according to transitional rules The figures reported in this section refer to the minimum capital requirements under Pillar 1 of the new capital adequacy rules in Basel II. In the table, According to Basel II means that the figures are based on the minimum capital requirements after the transitional rules have ceased to apply. In December, the Swedish Financial Supervisory Authority decided that the transitional rules would apply for a further two years, that is until the end of Handelsbanken has decided to implement the advanced IRB method for corporate exposues and this also applies for Stadshypotek. Handelsbanken is planning to start using this method during Risk-weighted assets according to Basel I 371, ,871 Capital requirement according to Basel I (8 of risk-weighted assets) 29,724 27,190 Risk-weighted assets in accordance with transitional rules 296, ,259 Transitional rules result in lowest permitted capital requirement 23,691 24,261 Risk-weighted assets according to Basel II (capital requirement/8) 76,213 77,013 Credit risks ember Standardised approach Capital requirement Exposure after credit risk protection (EAD) IRB approach Average risk weight Capital requirement Institutions Companies - 188, ,398 Households , ,145 Others Total , ,543 Credit risks ember Standardised approach Capital requirement Exposure after credit risk protection (EAD) IRB approach Average risk weight Capital requirement Institutions Companies - 166, ,511 Households , ,982 Others Total , ,493 The capital requirement according to Basel II is 79 (77) lower than the requirement in accordance with Basel I. Households represent some 80 (85) of the reduction and companies approximately 20 (15). A large proportion of credits to households with property as collateral are the main reason for the lower capital requirement. Highlights of annual report JANUARY DECEMBER 13

16 Notes 14 Highlights of annual report JANUARY DECEMBER

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18 16 Highlights of annual report JANUARY DECEMBER

19 Registered name: Stadshypotek AB (publ). Corporate identity number: Ownership: A subsidiary of Svenska Handelsbanken AB (publ), corporate identity number The Bank publishes consolidated annual accounts in which Stadshypotek AB is included. Next interim report: will be published on 28 April ADDRESS Stadshypotek AB Street address: Torsgatan 12 Postal address: SE Stockholm, Sweden Phone: , Fax Website:

20 SE Stockholm, Sweden Production: Hallvarsson & Halvarsson. Printing: Larsson Offsettryck AB. Photographers: Johnér Bilbyrå.