Interim report JANUARY SEPTEMBER Lending increased by SEK 25 bn (21) to SEK 469 bn. Operating profi ts were SEK 3,408 m (4 212). Expenses decreased by SEK 6 m to SEK 97 m (103). Recoveries exceeded new loan losses. All outstanding bonds have been converted into covered bonds, which have received an Aaa rating from Moody s. a Svenska Handelsbanken company
Stadshypotek s interim report January September Performance Stadshypotek s operating profit for the nine-month period was SEK 3,408m. The profit for the corresponding period in was SEK 4,212m. The change in the profit figure was chiefly attributable to lower net interest income, mainly due to decreasing lending margins. Stadshypotek s lending volumes on the private market showed a positive trend during the period, but this did not fully offset declining lending margins resulting from price competition on the market. In addition, lower interest rates than in the corresponding period last year had an adverse effect on net interest income, due to a reduced return on equity. Lower expenses and low loan losses The company s expenses dropped from the same period in, and were SEK 97m (103). Recoveries exceeded new loan losses and the net amount recovered was SEK 82m (75), which corresponds to a loan loss ratio of -0.02% (-0.03) of lending. As at tember, Stadshypotek s bad debts before deduction of the provision for probable loan losses amounted to SEK 430m (790). SEK 45m (57) of the bad debts were non-performing loans and SEK 385m (733) 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 328m (390) that are not classed as bad debts. After deduction of the provision for probable loan losses, the volume of bad debts was SEK 317m (594). Growth in lending Lending to the general public was SEK 469bn an increase of SEK 25bn during the period. The past quarter has seen a very favourable increase in Stadshypotek s share of net growth in the private market. Stadshypotek s overall share of mortgage institutions lending on the private market was 26.3%. Capital ratio As at tember, the capital ratio was 8.2 % (8.7). As at ember, the capital ratio was 8.8 %. The decrease is due to a higher risk-weighted volume. As at 30 September, the Tier 1 capital ratio was 6.9 % (7.3). Stadshypotek s rating Stadshypotek s rating was unchanged. Stadshypotek s rating Long-term Short-term Moody s Aa1 P-1 Standard & Poor s AA- A-1+ Fitch AA- F1+ Covered bonds In September, all outstanding bonds were converted into covered bonds. These bonds have received an Aaa rating from Moody s. New issues in Sweden and abroad will be in the form of covered bonds. Stadshypotek s rating Moody s Covered bonds Aaa Accounting policies Accounting in the parent company and Group follows the regulations of the Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL) and the directives issued by the Swedish Financial Supervisory Authority (FFFS :33). These directives mean that the Swedish Financial Accounting Standards Council s recommendation 32 is applied, and that the accounting complies with IFRS through what is known as statutory IFRS. The same accounting policies have been applied in the interim report as in the most recent annual report. Stockholm, 24 October Frank Vang-Jensen Chief executive This interim report has not been examined by the company s auditors. INTERIM REPORT JANUARY SEPTEMBER
Income statement Group Change % Full year Interest income 12,926 12,919 0% 16,989 Interest expense -9,718-8,932 9% -11,752 Net interest income 3,208 3,987-20% 5,237 Net result on financial operations 250 290-14% 414 Comission income 8 9-11% 11 Comission expense -43-46 -7% -62 Total income 3,423 4,240-19% 5,600 General administrative expenses Staff costs -14-13 8% -17 Other -83-90 -8% -117 Depreciation according to plan 0 0-0 Total expenses -97-103 -6% -134 Profit before loan losses 3,326 4,137-20% 5,466 Loan losses, net Note 1 82 75 9% 133 Operating profit 3,408 4,212-19% 5,599 Taxes -931-1,179-21% -1,568 Profit for the period 2,477 3,033-18% 4,031 Net earnings per share, SEK 15.29 18.72 24.87 Note 1 Loan losses Specifi c provision for individually assessed loan receivables Full year The period s write-down for actual loan losses -11-39 -45 Writeback of previous provisions for probable loan losses reported as actual loan losses in the period s accounts 5 28 29 The period s provision relating to probable loan losses -4-3 -8 Recovered from actual loan losses in previous years 61 62 76 Write-back of provisions for probable loan losses which are no longer necessary 31 27 81 Net recoveries for the period for individually assessed loan receivables 82 75 133 INTERIM REPORT JANUARY SEPTEMBER
Balance sheet Group Assets Loans to credit institutions 4,042 666 962 Loans to the public Note 2 469,483 435,750 445,361 Derivatives Note 3 2,328 5,153 3,004 Other assets 3,442 2,723 5,747 Total assets 479,295 444,292 455,074 Liabilities and shareholders equity Liabilities to credit institutions 136,878 168,458 166,214 Issued securities etc. 307,773 238,806 251,999 Derivatives Note 3 3,300 5,702 4,893 Other liabilities and provisions 6,318 6,389 9,419 Subordinated loans 3,500 3,500 3,500 Total liabilities 457,769 422,855 436,025 Shareholders equity Note 4 21,526 21,437 19,049 Total liabilities and shareholders equity 479,295 444,292 455,074 Note 2 Loans to the public LOANS TO THE PUBLIC BY SECTOR tember Lending before deduction of provisions Provisions for probable loan losses Lending after deduction of provisions Households 327,287-23 327,264 Municipalities 7,423-7,423 Housing co-operatives 74,263-58 74,205 Other legal entities 60,623-32 60,591 Total loans to the public 469,596-113 469,483 NON-PERFORMING LOANS BY BORROWER tember which are included in bad debts which are included in bad debts which are not bad debts which are not bad debts Households 298 15 301 22 Municipalities - - - - Housing co-operatives - 3 6 11 Other legal entities 30 27 83 24 Total 328 45 390 57 BAD DEBTS BY BORROWER tember debts Provision for probable losses debts net debts Provision for probable losses debts net Households 64-23 41 104-35 69 Municipalities - - - - - - Housing co-operatives 227-58 169 357-86 271 Other legal entities 139-32 107 329-75 254 Total 430-113 317 790-196 594 The provision for probable losses refers to a specific provision for individually valued claims. INTERIM REPORT JANUARY SEPTEMBER
Note 3 Derivatives tember Interest-rate related instruments Currency-related instruments Fair value Book value Fair value Book value Positive values 1,978 1,978 350 350 Negative values 3,300 3,300 - - Stadshypotek mainly uses interest rate swaps as instruments to hedge 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, currency futures and interest rate options are also used as hedges for fair value changes without hedge accounting being applied. Note 4 Change in shareholders equity Opening shareholders equity 19,049 19,049 19,049 Group contribution -4,703 Tax on group contribution 1,317 Restatement according to IAS39-645 -645 Profit for the period 2,477 3,033 4,031 Closing shareholders equity 21,526 21,437 19,049 CASH FLOW STATEMENT Cash flow from operating activities 7,783 1,683 Cash flow from investing activities 0 0 Cash flow from financing activities -4,703-3,192 Cash flow for the period 3,080-1,509 Liquid funds at beginning of period 962 2,001 Cash flow for the period 3,080-1,509 Liquid funds at end of period 4,042 492 TURNOVER 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 first three quarters of the year was as follows: Issued (sold) SEK 314 bn Repurchased SEK 62 bn Maturity SEK 197 bn Quarterly performance Q3 Q2 Q1 Q4 Q3 Interest income 4,468 4,274 4,184 4,070 4,120 Interest expense -3,482-3,222-3,014-2,820-2,812 Net interest income 986 1,052 1,170 1,250 1,308 Net gain/losses on financial items -2 168 84 124 250 Net operating income -13-10 -12-14 -12 Total income 971 1,210 1,242 1,360 1,546 General administrative expenses Staff costs -5-5 -4-4 -4 Other -27-28 -28-27 -30 Depreciation according to plan 0 0 0 0 0 Total expenses -32-33 -32-31 -34 Profit before loan losses 939 1,177 1,210 1,329 1,512 Loan losses 17 11 54 58 20 Operating profit 956 1,188 1,264 1,387 1,532 INTERIM REPORT JANUARY SEPTEMBER
Key fi gures Jan-Sep Jan-Sep Full year Overall interest margin, % 0.92 1.28 1.23 C/I ratio before loan losses, % 2.8 2.1 2.4 C/I ratio after loan losses, % 0.4 0.3 0.0 Loan loss ratio, % -0.02-0.03-0.03 Proportion of bad debts, % 0.1 0.1 0.1 debt provision ratio, % 26.3 24.9 24.3 Return on shareholders equity, % 15.0 18.2 18.1 Capital ratio, % 8.2 8.7 8.8 Tier 1 capital ratio, % 6.9 7.3 7.4 Other disclosures The Handelsbanken Group has conducted a number of disputes in various tax courts. For Stadshypotek, the total claim was SEK 23m. The disputes have been settled in favour of the company and thus previously reported contingent assets relating to taxes for SEK 23m have been recognised as income. Parent company Total income for the period was SEK 3,423 m (4,240). Profit before appropriations and tax was SEK 3,408 m (4,212). LENDING PERFORMANCE 30 Jun 31 Mar Loans to credit institutions 4,042 1,031 444 962 666 Loans to the public 469,483 461,057 452,976 445,361 435,750 Total 473,525 462,088 453,420 446,323 436,416 BORROWING PERFORMANCE 30 Jun 31 Mar Liabilities to credit institutions 159,723 154,590 172,752 177,658 175,398 Issued securities 284,928 278,689 255,170 240,556 231,866 Subordinated loans 3,500 3,500 3,500 3,500 3,500 Total 448,151 436,779 431,422 421,714 410,764 a Svenska Handelsbanken company 103 70 Stockholm, Telephone +46 8 701 54 00, www.stadshypotek.se Stadshypotek Production: Börstryck Photo: Håkan Flank