18 February 2003 Press release Highlights of Stadshypotek s Annual Report 2002 Summary Operating profit increased to SEK 4 711m Net interest income rose by SEK 212m to SEK 4 820m Expenses fell by 20% due to ongoing improvements in efficiency Recoveries exceeded new loan losses Increased marketshare for corporate lending and stable growth of private market volumes Increased customer benefit through development of new Internet-based services Redemption of preference shares in Handelsbanken Hypotek Merger process between Stadshypotek and Handelsbanken Hypotek going according to plan Results continue to be strong The Stadshypotek Group s operating profits increased to SEK 4 711m (4 543), the highest result ever for Stadshypotek. This means that operating profits have improved each year since Handelsbanken acquired the company in 1997. The higher result is mainly due to increased net interest income and lower expenses. Operating income Net interest income rose by SEK 212m to SEK 4 820m (4 608). The increase is the result of higher lending volumes and an improved lending margin due to further increase in private market lending. Lower interest rates in 2002, combined with lower shareholders equity, have had a negative impact on net interest income. Street Address Mail Address Phone Fax Stadshypotek AB (publ) Registered in: Stockholm Business org. no: 556459-6715 Kungsträdgårdsgatan 2 103 70 STOCKHOLM 08-701 5400 08-701 5605
2 Expenses The Group s total expenses continue to fall, mainly as a result of ongoing improvements in efficiency. They were SEK 259m (323), a decrease of SEK 64m or 20%. Expenses include the agents commission which Handelsbanken Hypotek pays to Handelsbanken. Due to the subsidiary s lower lending volumes, agents commission was reduced by SEK 48m. Loan losses Recoveries exceeded new loan losses and the net amount recovered was SEK 160m (193), which corresponds to a loan loss ratio of -0.05% (-0.06) of lending. As at 31 December 2002, Stadshypotek s volume of bad debts before deduction of the reserve for probable loan losses amounted to SEK 1 939m (2 717). Of the bad debts, SEK 310m (620) were non-performing loans and SEK 1 629m (2 097) were loans on which the borrowers pay interest and amortisation but which are considered doubtful in view of the borrowers' repayment capacity and due to uncertainty as to the value of the collateral. After deduction of the reserve for probable loan losses, the volume of bad debts was SEK 1 350m (1 887). Lending Lending to the general public continues to increase and was SEK 366.2bn (349.9) as at 31 December 2002. Private market lending shows stable growth with an increase of SEK 17.4bn (20.5). Stadshypotek s share of the corporate market increased despite total corporate lending decreasing by SEK 1.1bn (3.4). Focus on customer benefit During the year, Stadshypotek launched two new Internet-based services which have been very well received by customers. In the summer, Fixing interest rates on the Internet was introduced, which since then has been used for some 25% of all rate fixings by customers. In the autumn, customers were able to use a function called Changing loan terms on the Internet which makes it easier and more flexible to select a new interest rate fixing period. The application procedure for the e-giro billing service was also improved and simplified in the autumn, which has led to a substantially increased interest in this service. Capital ratio As at 31 December 2002, the capital ratio was 9.8% (10.8). The lower capital ratio compared to the same date in the previous year is mainly due to increased lending volume. Mortgage company merger Stadshypotek and Handelsbanken Hypotek have applied to the Swedish Patent and Registration Office to implement the merger plan decided by the two companies in October 2002 whereby Handelsbanken Hypotek will be incorporated into Stadshypotek. The merger is expected to be completed in spring 2003 after which remaining loans in Handelsbanken Hypotek will be transferred to Stadshypotek s loan system. Stockholm, 18 February 2003 Claes Norlén Chief Executive
3 Profit and loss account Group Parent company SEK m 2002 2001 Change 2002 2001 % Interest income 20 525 19 969 3 19 654 18 454 Interest expense -15 705-15 361 2-15 376-14 490 Net interest income 4 820 4 608 5 4 278 3 964 Other operating income -10 65-431 554 Total income 4 810 4 673 3 4 709 4 518 General administrative expenses - Staff costs -20-23 - 13-18 -21 - Other -239-300 - 20-131 -141 Depreciation according to plan 0 0-0 0 Total expenses -259-323 - 20-149 -162 Result before loan losses 4 551 4 350 5 4 560 4 356 Loan losses, net 1) 160 193-17 147 185 Operating profit 4 711 4 543 4 4 707 4 541 Minority interests - 11-22 -50 - - Appropriations - - - 802 817 Profit before taxes 4 700 4 521 4 5 509 5 358 Taxes - 1 314-1 289 2-1 542-1 522 Net profit for the year 3 386 3 232 5 3 967 3 836 1) Loan losses Individually valued claims The year s write-down for actual loan losses - 167-155 Write-back of previous provisions for probable loan losses which are reported as actual loan losses in the year s accounts 135 119 The year s write-down relating to probable loan losses - 48-103 Recovered from actual loan losses in previous years 86 105 Write-back of provisions for probable loan losses which are no longer necessary 154 227 The year s net expense for loan losses 160 193
4 Balance sheet Group Parent company 31 December 2002 2001 2002 2001 SEK m Assets Lending to credit institutions 1 972 2 297 15 294 19 484 Lending to the general public 366 216 349 884 344 360 317 318 Tangible assets 0 1 0 1 Other assets 7 149 6 641 12 201 11 839 Total assets 375 337 358 823 371 855 348 642 Liabilities and shareholders' equity Liabilities to credit institutions 153 036 150 848 183 319 187 665 Deposits from the general public 0 0 0 0 Issued securities etc. 189 867 174 899 156 430 128 832 Other liabilities and provisions 12 285 12 088 12 858 12 900 Minority interest 0 261 - - Total liabilities 355 188 338 096 352 607 329 397 Shareholders' equity 20 149 20 727 19 248 19 245 Total liabilities and shareholders' equity 375 337 358 823 371 855 348 642 Change in shareholders equity 31 december 2002 2001 SEK m ----------------------------------------------------------------------------------------------- Opening shareholders' equity 20 727 21 350 Group contribution -5 505-5 355 Tax on paid group contribution 1 541 1 500 Net profit for the period 3 386 3 232 Closing shareholders' equity 20 149 20 727
5 Bad debts for the Stadshypotek Group 31 December 2002 2001 SEK m Bad debts, gross 1 939 2 717 Reserve for probable loan losses - 589-830 Bad debts, net 1 350 1 887 Non-performing loans for which interest is reported as income 763 787 Derivatives for the Stadshypotek Group 31 December 2002 Interest-rate related instruments Currency-related instruments Fair Book Fair Book SEK m value value value value Positive values 1 398 774 76 6 Negative values 2 077 1 813 833 75 Stadshypotek uses derivatives in order to hedge against risks on its own balance sheet and therefore applies hedge accounting with acquisition valuation. This means that the book values stated here only express the accrued interest amounts on the instruments. The differences between the fair values of the derivatives and the book values correspond to equally large, but opposite, differences between the fair values and the book values of the items on the balance sheet which are hedged by the derivatives. Quarterly earnings for the Stadshypotek Group SEK m 2002:4 2002:3 2002:2 2002:1 2001:4 Interest income 5 214 5 217 5 129 4 965 4 860 Interest expense - 3 990-3 996-3 970-3 749-3 632 Net interest income 1 224 1 221 1 159 1 216 1 228 Other operating income -4-2 -2-2 11 Total income 1 220 1 219 1 157 1 214 1 239 General administrative expenses Staff costs - 5-5 - 5-5 - 5 Other - 55-54 - 64-66 - 69 Depreciation according to plan 0 0 0 0 0 Total expenses - 60-59 - 69-71 - 74 Result before loan losses 1 160 1 160 1 088 1 143 1 165 Loan losses 79 37 21 23 97 Operating profit 1 239 1 197 1 109 1 166 1 262
6 Key financial figures and ratios for the Stadshypotek Group 2002 2001 Overall interest margin, % 1,33 1,33 C/I ratio before loan losses, % 5,4 6,9 C/I ratio after loan losses, % 2,1 2,8 Loan loss level - 0,05-0,06 Proportion of bad debts, % 0,4 0,5 Bad debt reserve ratio, % 30 30 Return on shareholders' equity, % 14,1 13,3 Capital ratio, % 9,8 10,8 Tier 1 capital ratio, % 9,8 10,8 Cash flow statement for the Stadshypotek Group 2002 2001 Cash flow on operating activities 5 563 5 386 Cash flow on investing activities 0 0 Cash flow on financing activities -5 355-5 390 Cash flow for the year 208-4 Liquid funds at beginning of period 1 268 1 272 Cash flow for the year 208-4 Liquid funds at end of period 1 476 1 268 Publication dates for interim reports: Jan Mar 28 April 2003 Jan-June 19 Aug 2003 Jan-Sep 21 Oct 2003