Highlights of Annual Report January–December · Highlights of Stadshypotek’s Annual Report...

Highlights of Annual Report January–December

2012

Highlights of Stadshypotek’s Annual ReportJanuary – December 2012

SUMMARY OF JANUARY – DECEMBER 2012 COMPARED WITH JANUARY – DECEMBER 2011

• Income totalled SEK 8,195 million (6,251).

• Operating profit increased by SEK 1,892 million to SEK 7,886 million (5,994).

• Net loan losses totalled SEK 21 million. In 2011, recoveries exceeded new loan losses and totalled SEK 12 million net.

• The profit after tax amounted to SEK 5,801 million (4,407).

• Lending increased by SEK 47 billion (85) to SEK 891 billion.

SUMMARY OF Q4 2012 COMPARED WITH Q3 2012

• Income totalled SEK 2,181 million (2,006).

• Operating profit increased by SEK 132 million to SEK 2,071 million (1,939).

• Net loan losses totalled SEK 15 million (6).

• The profit after tax amounted to SEK 1,520 million (1,429).

STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 2012

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FINANCIAL PERFORMANCEFull year 2012 compared with full year 2011 Operating profit increased by SEK 1,892 million to SEK 7,886 million (5,994). Net interest income amounted to SEK 8,052 million (6,244), with the branch in Norway accounting for SEK 649 million (396), the branch in Denmark for SEK 115 million (89) and the branch in Finland, which was established on 1 May 2011, for SEK 258 million (79). Excluding the branches, net interest income thus increased by SEK 1,350 million. The growth in net interest income was attributable to an increase in lending volume and to improved margins due to the company’s good position in the funding market. Net gains/losses on financial items at fair value amounted to SEK 150 million (19).

Expenses rose by SEK 19 million to SEK 288 million (269). This increase was primarily due to IT expenses related to the branch in Finland, and to services purchased from the parent company. Net loan losses totalled SEK 21 million. In 2011, recoveries exceeded new loan losses and totalled SEK 12 million net. Before deduction of the provision for probable loan losses, the volume of impaired loans was SEK 141 mil-lion (110). SEK 94 million (57) of the impaired loans were non-performing loans, while SEK 47 million (53) were loans on which the borrowers pay interest and amortisation, but which are nevertheless regarded as impai-red. There were also non-performing loans of SEK 1,008 million (906) that are not classed as being impaired loans. After deduction for specific provisions totalling SEK -50 million (-44) and collective provisions of SEK -4 million (-6) for probable loan losses, impaired loans totalled SEK 87 million (60).

Q4 2012 compared with Q3 2012Stadshypotek’s operating profit increased by SEK 132 million to SEK 2,071 million (1,939). Net interest income grew by SEK 207 million to SEK 2,161 million (1,954). SEK 208 million (161) of the net interest income was attributable to the branch in Norway, SEK 33 million (31) to the branch in Denmark and SEK 82 million (69) to the branch in Finland.Excluding the branches, net interest income increased by SEK 145 million. Net gains/losses on financial items at fair value amounted to SEK 22 million (53). Expenses grew by SEK 34 million to SEK 95 million (61), mainly due to an increase of SEK 27 million in administrative expenses. The increase was chiefly attributable to services purchased from the parent company, expenses related to the updating of existing international loan programmes, and IT expenses.

GROWTH IN LENDINGLoans to the public increased by around 6 per cent, or SEK 47 billion, from the end of the previous year, and stood at SEK 891 billion (844).On 1 September, Stadshypotek’s branch in Finland acquired a mortgage loan portfolio of around EUR 0.5 billion from the parent company’s branch in Finland, which corresponds to approximately SEK 4 billion of the increase in lending during the year.

FUNDINGIssues of covered bonds from Stadshypotek's benchmark series during the year totalled SEK 90.0 billion (102.8). Issues of covered bonds under the EMTCN programme totalled the equivalent of approximately EUR 3.9 billion (4.1), and under the American programme, an issue of USD 1.5 billion was carried out. During the year, Stadshypotek issued covered bonds on the Norwegian market for the first time. In total, NOK 8.8 billion was issued in 2012. Also carried out during the year were Stadshypotek’s first issues of covered bonds on the Australian market, totalling AUD 0.75 billion.

CAPITAL ADEQUACYThe capital ratio according to Basel II was 56.9 per cent (58.1), while the tier 1 ratio calculated according to Basel II was 40.6 per cent (40.5).Further information on capital adequacy is provided in the ‘Capital base and capital requirement’ section on page 15.

RATINGStadshypotek’s rating remained unchanged during the year, 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+

Highlights of Stadshypotek’s Annual Report January – December 2012


Stadshypotek Group

Income statement – GroupSEK m

Q42012

Q42011

Change %

Q3 2012

Change %

Jan–Dec2012

Jan–Dec2011

Change %

Interest income 7,693 8,216 -6 7,949 -3 32,163 29,869 8

Interest expense -5,532 -6,502 -15 -5,995 -8 -24,111 -23,625 2

Net interest income Note 3 2,161 1,714 26 1,954 11 8,052 6,244 29

Net gains/losses on financial items at fair value Note 4 22 23 -4 53 -58 150 19 -

Fee and commission income 4 3 33 3 33 14 12 17Fee and commission expense -6 -5 20 -4 50 -21 -24 -13

Net fee and commission income -2 -2 0 -1 100 -7 -12 -42

Total income 2,181 1,735 26 2,006 9 8,195 6,251 31

Staff costs -16 -14 14 -9 78 -49 -49 0

Other administrative expenses Note 5 -76 -68 12 -49 55 -227 -208 9

Depreciation and amortisation -3 -3 0 -3 0 -12 -12 0

Total expense -95 -85 12 -61 56 -288 -269 7

Profit before loan losses 2,086 1,650 26 1,945 7 7,907 5,982 32

Net loan losses Note 6 -15 -9 67 -6 - -21 12 -

Operating profit 2,071 1,641 26 1,939 7 7,886 5,994 32

Tax -551 -434 27 -510 8 -2,085 -1,587 31

Profit for the period 1,520 1,207 26 1,429 6 5,801 4,407 32

Net earnings per share, before and after dilution, SEK 9,384 7,456 8,819 35,811 27,204

Statement of comprehensive income – GroupSEK m

Q4 2012

Q4 2011

Change %

Q3 2012

Change %

Jan–Dec 2012

Jan–Dec 2011

Change %


Translation differences for the period 46 -26 - -57 - -10 -7 -

Total comprehensive income for the period 1,566 1,181 33 1,372 14 5,791 4,400 32

Quarterly performance – GroupSEK m

Q42012

Q32012

Q22012

Q12012

Q42011

Interest income 7,693 7,949 8,113 8,408 8,216

Interest expense -5,532 -5,995 -6,134 -6,450 -6,502

Net interest income 2,161 1,954 1,979 1,958 1,714

Net gains/losses on financial items at fair value 22 53 19 56 23

Net fee and commission income -2 -1 -3 -1 -2

Total income 2,181 2,006 1,995 2,013 1,735

Staff costs -16 -9 -12 -12 -14

Other administrative expenses -76 -49 -51 -51 -68

Depreciation and amortisation -3 -3 -3 -3 -3

Total expense -95 -61 -66 -66 -85

Profit before loan losses 2,086 1,945 1,929 1,947 1,650

Net loan losses -15 -6 3 -3 -9

Operating profit 2,071 1,939 1,932 1,944 1,641


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Summary balance sheet – GroupSEK m

31 Dec2012

31 Dec2011

Assets

Loans to credit institutions 5,758 9,435

Loans to the public Note 7 891,200 843,929

Value change of interest-hedged item in portfolio hedge 5,271 4,490

Derivative instruments Note 8 20,708 18,211

Other assets 3,024 3,962

Total assets 925,961 880,027

Liabilities and equity

Due to credit institutions 286,294 267,353

Issued securities 565,865 546,149


Other liabilities and provisions 19,174 16,693

Subordinated liabilities 16,700 16,700

Total liabilities 900,021 854,660

Equity 25,940 25,367

Total liabilities and equity 925,961 880,027

Statement of changes in equity – GroupJan–Dec 2012SEK m

Share capital *

Translation reserve

Retained earnings Total

Equity at 31 December 2011 4,050 -44 21,361 25,367

Profit for the year 5,801 5,801Other comprehensive income -10 -10

Total comprehensive income for the year -10 5,801 5,791

Group contributions provided -7,080 -7,080

Tax effect on group contributions 1,862 1,862


Statement of changes in equity – GroupJan–Dec 2011SEK m

Share capital *

Translation reserve

Retained earnings Total


Profit for the year 4,407 4,407Other comprehensive income -7 -7

Total comprehensive income for the year -7 4,407 4,400

Group contributions provided -4,700 -4,700

Tax effect on group contributions 1,236 1,236


* Average number of shares, before and after dilution 162,000


Key figuresQ4

2012Q4

2011Q3

2012Jan – Dec

2012Jan – Dec

2011

Net interest margin, % 0.94 0.78 0.86 0.89 0.75

C/I ratio before loan losses, % 4.3 4.9 3.0 3.5 4.3

C/I ratio after loan losses, % 5.0 5.4 3.4 3.8 4.1

Return on equity, %* 20.0 17.1 19.8 19.6 16.3*)

Capital ratio according to Basel II, % 56.9 58.1 62.3 56.9 58.1

Tier 1 ratio according to Basel II, % 40.6 40.5 46.0 40.6 40.5

* The comparative figure for the full year 2011 has been adjusted with effect from Q1 2012 following the rectification of a calculation error.

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 237 billion (220)Repurchased SEK 61 billion (30)Matured SEK 125 billion (78)

Segment information Jan–Dec 2012 Jan–Dec 2011

SEK m Private Corporate Group Private Corporate Group

Net interest income 5,883 2,169 8,052 4,607 1,637 6,244

Net gains/losses on financial items at fair value 108 42 150 14 5 19

Net fee and commission income -5 -2 -7 -9 -3 -12

Total income 5,986 2,209 8,195 4,612 1,639 6,251

Expenses -210 -78 -288 -202 -67 -269

Profit before loan losses 5,776 2,131 7,907 4,410 1,572 5,982

Net loan losses -29 8 -21 9 3 12

Operating profit 5,747 2,139 7,886 4,419 1,575 5,994

Loans to the public 607,018 284,186 891,204 581,665 262,270 843,935

Private market is defined as lending secured by mortgages in single-family or two-family houses, second homes, housing co-operative apartments, owner-occupied apartments or residential farms. Corporate market is defined as lending secured by mortgages in multi-family dwellings, family farms, commercial and office buildings, or state and municipal loans.

Geographical breakdown of business segments Jan–Dec 2012 Jan–Dec 2011

SEK m Income Total assets Income Total assets

Sweden 7,167 817,203 5,685 786,604

Norway 650 60,124 397 54,466

Denmark 115 13,812 89 10,005

Finland 263 34,822 80 28,952

Group 8,195 925,961 6,251 880,027

Summary cash flow statement – GroupSEK m

Jan – Dec2012

Jan – Dec2011

Cash flow from operating activities 4,991 24,894

Cash flow from investing activities -3,923 -27,881

Cash flow from financing activities -4,700 6,272

Cash flow for the year -3,632 3,285

Liquid funds at beginning of year 4,319 1,049

Cash flow for the year -3,632 3,285

Exchange rate difference on liquid funds -1 -15

Liquid funds at end of year 686 4,319

Liquid funds consist of funds available with banks and equivalent institutions, excluding funds in blocked account.

Liquid funds with banks and equivalent institutions 686 4,319

Funds in blocked account with banks relating to issuance of covered bonds 5,072 5,116


Acquisition of mortgage loans

On 1 August 2011, Stadshypotek’s branch in Finland (Handelsbanken Asuntoluottopankki) acquired mortgage loans from Svenska Handelsbanken’s branch in Finland. The acquired assets had the following carrying amounts.

Loans to the public 27,843

On 1 September 2012, Stadshypotek’s branch in Finland (Handelsbanken Asuntoluottopankki) acquired mortgage loans from Svenska Handelsbanken’s branch in Finland. The acquired assets had the following carrying amounts.

Loans to the public 3,907


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Parent company

Income statement – parent companySEK m

Q42012

Q42011

Change%

Q3 2012

Change%

Jan – Dec2012

Jan – Dec2011

Change%

Interest income 7,693 8,216 -6 7,949 -3 32,163 29,869 8

Interest expense -5,532 -6,502 -15 -5,995 -8 -24,111 -23,625 2

Net interest income Note 3 2,161 1,714 26 1,954 11 8,052 6,244 29

Fee and commission income 4 3 33 3 33 14 12 17

Fee and commission expense -6 -5 20 -4 50 -21 -24 -13

Net fee and commission income -2 -2 0 -1 100 -7 -12 -42

Net gains/losses on financial operations Note 4 22 23 -4 53 -58 150 19 -

Total income 2,181 1,735 26 2,006 9 8,195 6,251 31

Staff costs -16 -14 14 -9 78 -49 -49 0

Other administrative expenses Note 5 -76 -68 12 -49 55 -227 -208 9

Depreciation and amortisation -3 -3 0 -3 0 -12 -12 0

Total expense -95 -85 12 -61 56 -288 -269 7

Profit before loan losses 2,086 1,650 26 1,945 7 7,907 5,982 32

Net loan losses Note 6 -15 -9 67 -6 - -21 12 -

Operating profit 2,071 1,641 26 1,939 7 7,886 5,994 32

Tax -551 -434 27 -510 8 -2,085 -1,587 31


Summary balance sheet – parent companySEK m

31 Dec2012

31 Dec2011

Assets


Loans to the public Note 7 891,200 843,929

Value change of interest-hedged item in portfolio hedge 5,271 4,490


Other assets 3,024 3,962

Total assets 925,961 880,027

Liabilities and equity


Issued securities 565,865 546,149


Other liabilities and provisions 19,174 16,693


Total liabilities 900,021 854,660

Equity 25,940 25,367

Total liabilities and equity 925,961 880,027

Memorandum items

Assets pledged for own debt* 612,301 594,238

Other pledged assets none none

Contingent liabilities none none

Undertakings 2,648 4,077

* Assets pledged for own debt relates to collateral for covered bonds, which comprises loans against mortgages in single-family dwellings, second homes, multi-family dwellings and housing co-operative apartments with a loan-to-value ratio of up to 75 per cent of the market value, as well as office and commercial properties with a loan-to-value ratio of up to 60 per cent of the market value, and additional collateral in the form of cash funds on a blocked account.

Statement of comprehensive income – parent company SEK m

Q42012

Q42011

Change%

Q3 2012

Change%

Jan – Dec2012

Jan – Dec2011

Change%


Translation differences for the period 46 -26 - -57 - -10 -7 -

Total comprehensive income for the period 1,566 1,181 33 1,372 14 5,791 4,400 32


NotesThe information in these notes relates to both the Group and the parent company.

NOTE 1 Accounting policies

Information relating to the Group has been stated in accordance with IAS 34. The contents of the report also comply with the applicable provisions of the Swedish Act on Annual Reports in Credit Institutions and Securities Companies, the Swedish Financial Supervisory Authority’s regulations and general guidelines FFFS 2008:25 on annual reports in credit institutions and securities companies and recommendations from the Swedish Financial Reporting Board.

The report for the parent company has been prepared in accordance with the Swedish Act on Annual Reports in Credit Institutions and Securities Companies and the Swedish Financial Supervisory Authority’s regulations and general guidelines FFFS 2008:25 on annual reports in credit institutions and securities companies.

None of the changes in the accounting standards which have come into force during the year has had a material impact on the parent company’s or the Group’s financial reports.

The Group’s and parent company’s reports have been prepared in accordance with the same accounting policies and calculation methods that were applied in the annual report for 2011.

NOTE 2 Other information

RISKStadshypotek’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 exchange rate risk. Liquidity risk is the risk that Stadshypotek will not be able to meet its payment obligations when they fall due. Ope-rational risk is the risk of processing errors in procedures and systems, and business risk is the risk of unexpected changes in financial per-formance. Credit risk is the most significant risk for Stadshypotek. The Stadshypotek board establishes policies which describe how various risks should be managed and reported. In addition, Stadshypotek’s chief executive sets guidelines and instructions for managing and controlling all types of risk. These documents have been based on the policies that the Handelsbanken Board has adopted for managing and reporting risks within the Handelsbanken Group as a whole. Stadshypotek’s risk management aims to ensure compliance with the strict approach to risk established by the board.

Stadshypotek’s lending operations and treasury function are integra-ted with those of Handelsbanken, which means that Stadshypotek’s lending is carried out via the Bank’s branch network. A collaboration agreement regulates the overall relationship between the parties and specifies the services which Handelsbanken is to perform on behalf of Stadshypotek. Thus, the business operations at Stadshypotek are conducted according to the same fundamental principles which apply at Handelsbanken. The Bank’s corporate culture is centred around the principle of delegating responsibility to the employees who make business decisions. The person who is most familiar with the customer

and the market conditions is also the best person to assess the risk. In Handelsbanken’s decentralised organisation, the positive and negative outcomes of each branch are evaluated, which provides a natural risk limitation and caution in business operations.

In addition to the accountability of decision-makers, control procedu-res are in place to ensure that excessive risks are not taken in individual transactions or local operations. In lending, this means that limits are set for large loans and these loans are assessed by a special credit orga-nisation. Decisions on limits are made at the branch, at regional level or at central level, depending on the size of the credit limit. Procedures also exist to limit market risk and liquidity risk at Stadshypotek. Here, the company’s board establishes limits. However, the limits set by the board of Stadshypotek may not exceed the limits for market risks and liquidity risks assigned by Handelsbanken to Stadshypotek. Stadshypotek has risk control which is independent of the business operations for the regular follow-up and monitoring of all risks applying to operations, primarily credit risk, market risk, liquidity risk, counterparty risk and operational risk. 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 Stadshypotek as well as to the Group Chief Executive, CFO and Board of Handelsbanken.

Stadshypotek is also covered by the central risk control at Handels-banken, which is designed to identify the Handelsbanken Group’s risks, gauge them, and ensure that management of these risks complies with the Group’s low risk tolerance. The central risk control function is responsible for the independent reporting of risks for the banking group of which Stadshypotek is a part. Further, the central risk control function develops and provides models for measuring risk that are applied in Stadshypotek’s operations and perform certain calculations that provide a basis for some of Stadshypotek’s external reporting.

Stadshypotek has a contingency plan for managing a liquidity shortage, and this plan also describes the company’s liquidity-creating measures. Moreover, regular stress tests are carried out on the company’s cash flows on the basis of certain assumptions relevant to the business. Stress tests for the entire group are also performed by the central risk control function, and here, Stadshypotek’s liquidity requirements are taken into consideration.

Moreover, Stadshypotek has a procedure for continual capital plan-ning to ensure that it has a sufficient amount of capital to secure the company’s survival if a serious loss were to occur, notwithstanding 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 about non-performing loans and impaired loans can be found in notes 6 and 7 of this report.

At 31 December 2012, Stadshypotek’s interest rate risk in the case of a parallel increase in the yield curve of one percentage point was SEK -185 million (-129), which was well within the limit set by the board.


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NOTE 3 Net interest income

SEK m Q4

2012Q4

2011Change

%Q3

2012Change

%Jan – Dec

2012Jan – Dec

2011Change

%

Interest income

Loans to the public 7,602 8,124 -6 7,869 -3 31,822 29,516 8

Loans to credit institutions 91 92 -1 80 14 341 353 -3

Total 7,693 8,216 -6 7,949 -3 32,163 29,869 8

Interest expense

Due to credit institutions -1,312 -1,981 -34 -1,603 -18 -6,524 -7,381 -12

Issued securities -4,272 -4,359 -2 -4,302 -1 -17,168 -16,260 6

Subordinated liabilities -157 -119 32 -179 -12 -720 -333 -

Derivative instruments* 270 26 - 145 86 529 572 -8

Fee to the Swedish Stabilisation Fund -59 -63 -6 -54 9 -216 -202 7

Other -2 -6 -67 -2 0 -12 -21 -43

Total -5,532 -6,502 -15 -5,995 -8 -24,111 -23,625 2

Net interest income 2,161 1,714 26 1,954 11 8,052 6,244 29

* Net interest income from derivative instruments derived from Stadshypotek’s funding, which can have both a positive and a negative impact on interest expenses.

NOTE 4 Net gains/losses on financial items at fair value

SEK m Q4

2012Q4

2011Change

%Q3

2012Change

%Jan – Dec

2012Jan – Dec

2011Change

%

Hedge accounting, fair value hedges 4 4 0 41 - 67 -69 -

of which hedged items -99 -475 -79 -982 -90 -716 -3,604 -80

of which hedging 103 479 -78 1,023 -90 783 3,535 -78

Loans, valued at cost 81 51 59 68 19 267 174 53

Financial liabilities, valued at cost -40 -23 74 -64 -38 -188 -41 -

Derivatives not recognised as hedges -23 -9 - -39 -41 -43 -45 -4

Other realised gains - - - 47 - 47 - -

Total 22 23 -4 53 -58 150 19 -

The profit/loss item ‘Fair value hedges’ includes the net result of unrealised and realised changes in the fair value of financial assets and liabilities which are subject to hedge accoun-ting. Interest income and interest expenses for these instruments are recognised under net interest income. Derivatives not recognised as hedges are included in the held-for-trading category.

Loans, valued at cost, refers to the early redemption charge for loans and other receivables which are repaid ahead of time. Financial liabilities, valued at cost, refers to realised price differences when repurchasing bonds.

CAPITAL-RELATED MATTERSIn connection with the start of the transition to Basel II, Stadshypotek entered into a guarantee facility relating to mortgages for housing co-operative properties, to speed up the transition. The transaction affected the Tier 1 capital ratio according to the transitional rules by 0.15 percen-

tage points at 31 December 2011. The guarantee facility was completed in Q3 2012.

MATERIAL EVENTS AFTER BALANCE SHEET DATEThere have been no material events after the balance sheet date.

NOTE 2 Other information, cont.


NOTE 6 Loan losses

SEK m Q4

2012Q4

2011Change

%Q3

2012Change

%Jan – Dec

2012Jan – Dec

2011Change

%

Specific provision for individually assessed loans

Provision for the period -12 -8 50 -5 - -28 -16 75

Reversal of previous provisions 0 2 -100 0 - 3 7 -57

Total -12 -6 100 -5 - -25 -9 -44

Collective provision

Collective provision for individually assessed loans 1 -1 - 1 0 2 0 -

Write-offs

Actual loan losses for the period -22 -10 - -8 - -56 -31 81

Utilised share of previous provisions 6 1 - 0 - 18 7 -

Reversal of actual loan losses in previous years 12 7 71 6 100 40 45 -11

Total -4 -2 100 -2 100 2 21 -90

Net loan losses -15 -9 67 -6 - -21 12 -

Impaired loans SEK m

31 Dec2012

31 Dec2011

Impaired loans 141 110

Specific provision for individually assessed loans -50 -44

Collective provision for individually assessed loans -4 -6

Net impaired loans 87 60

Proportion of impaired loans, % 0.01 0.01

Reserve ratio for impaired loans, % 35.4 39.8

Loan loss ratio, % 0.00 0.00

Non-performing loans which are not impaired loans 1,008 906

NOTE 5 Other administrative expenses

SEK m Q4

2012Q4

2011Change

%Q3

2012Change

%Jan – Dec

2012Jan – Dec

2011Change

%

IT costs -29 -28 4 -24 21 -104 -94 11

Cost of premises -1 -1 0 -1 0 -4 -4 0

Purchased services -37 -23 61 -21 76 -100 -86 16

Other administrative expenses -9 -16 -44 -3 - -19 -24 -21

Total -76 -68 12 -49 55 -227 -208 9


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NOTE 7 Loans to the public

Loans to the public, by borrower category 31 Dec 2012 31 Dec 2011

SEK mLoans before

provisions

Provisions for probable loan

lossesLoans after provisions

Loans before provisions



Households 632,258 -33 632,225 604,994 -22 604,972

Public sector, municipal companies 26,237 - 26,237 25,706 - 25,706

Housing co-operative associations 117,827 -12 117,815 110,529 -14 110,515

Other legal entities 114,932 -5 114,927 102,750 -8 102,742

Total loans to the public, before collective provisions 891,254 -50 891,204 843,979 -44 843,935

Collective provision -4 -4 -6 -6

Total loans to the public 891,254 -54 891,200 843,979 -50 843,929

of which in operations outside Sweden

Households 85,685 - 85,685 76,266 - 76,266

Public sector, municipal companies 5,626 - 5,626 1,482 - 1,482

Housing co-operative associations 12,484 - 12,484 10,065 - 10,065

Other legal entities 4,580 - 4,580 3,858 - 3,858

Total loans to the public in operations outside Sweden 108,375 - 108,375 91,671 - 91,671


NOTE 7 Loans to the public, cont.

Loans to the public, by type of collateral 31 Dec 2012 31 Dec 2011

SEK mLoans before

provisions



Loans before provisions



Single-family housing 460,369 -24 460,345 439,372 -14 439,358

Housing co-operative apartments 134,874 -4 134,870 130,983 -1 130,982

Owner-occupied apartments* 11,803 - 11,803 11,325 - 11,325

Private market 607,046 -28 607,018 581,680 -15 581,665

Multi-family housing 220,799 -22 220,777 203,814 -26 203,788

Offices and commercial buildings 63,409 0 63,409 58,485 -3 58,482

Corporate market 284,208 -22 284,186 262,299 -29 262,270

Total loans to the public, before collective provisions 891,254 -50 891,204 843,979 -44 843,935

Collective provision -4 -4 -6 -6

Total loans to the public 891,254 -54 891,200 843,979 -50 843,929


Single-family housing 71,064 - 71,064 61,915 - 61,915

Housing co-operative apartments 4,563 - 4,563 4,335 - 4,335

Owner-occupied apartments* 11,803 - 11,803 11,325 - 11,325

Private market 87,430 - 87,430 77,575 - 77,575

Multi-family housing 20,568 - 20,568 13,665 - 13,665

Offices and commercial buildings 377 - 377 431 - 431

Corporate market 20,945 - 20,945 14,096 - 14,096

Total loans to the public in operations outside Sweden 108,375 - 108,375 91,671 - 91,671

* Owner-occupied apartments entail individual ownership of a specific apartment in a multi-family dwelling, consisting either of an undivided interest in the property where the apart-ment is situated (direct ownership), or an interest in a legal entity which owns the property where the apartment is situated (indirect ownership).


11

Non-performing loans by borrower category 31 Dec 2012 31 Dec 2011

SEK m

Non-performing loans which are

not impaired loans


included in impaired loans


not impaired loans



Households 950 83 770 48

Public sector, municipal companies - - - -

Housing co-operative associations 3 - 5 -

Other legal entities 55 11 131 9

Total 1,008 94 906 57


Households 93 3 99 -

Public sector, municipal companies - - - -

Housing co-operative associations - - - -

Other legal entities 12 1 - -

Total non-performing loans in operations outside Sweden 105 4 99 -

Non-performing loans by type of collateral 31 Dec 2012 31 Dec 2011

SEK m


not impaired loans




not impaired loans



Single-family housing 750 67 629 34

Housing co-operative apartments 133 14 118 2

Owner-occupied apartments* 30 1 20 -

Private market 913 82 767 36

Multi-family housing 55 11 120 14

Offices and commercial buildings 40 1 19 7

Corporate market 95 12 139 21

Total 1,008 94 906 57


Single-family housing 75 3 72 -

Housing co-operative apartments - - 7 -

Owner-occupied apartments* 30 1 20 -

Private market 105 4 99 -

Multi-family housing - - - -

Offices and commercial buildings - - - -

Corporate market - - - -

Total non-performing loans in operations outside Sweden 105 4 99 -

* For a definition, see page 10.



Impaired loans by borrower category31 Dec 2012 31 Dec 2011

SEK mImpaired

loans

Provision for probable

lossesNet impaired

loansImpaired

loans


lossesNet impaired

loans

Households 100 -33 67 63 -22 41

Public sector, municipal companies - - - - - -

Housing co-operative associations 29 -12 17 35 -14 21

Other legal entities 12 -5 7 12 -8 4

Total 141 -50 91 110 -44 66


Households 3 0 3 - - -

Public sector, municipal companies - - - - - -

Housing co-operative associations - - - - - -

Other legal entities 1 0 1 - - -

Total impaired loans in operations outside Sweden 4 0 4 - - -

Impaired loans by type of collateral31 Dec 2012 31 Dec 2011

SEK mImpaired

loans


lossesNet impaired

loansImpaired

loans


lossesNet impaired

loans

Single-family housing 83 -24 59 44 -14 30

Housing co-operative apartments 15 -4 11 6 -1 5

Owner-occupied apartments* 1 0 1 - - -

Private market 99 -28 71 50 -15 35

Multi-family housing 42 -22 20 53 -27 26

Offices and commercial buildings 0 0 0 7 -2 5

Corporate market 42 -22 20 60 -29 31

Total 141 -50 91 110 -44 66


Single-family housing 3 0 3 - - -

Housing co-operative apartments - - - - - -

Owner-occupied apartments* 1 0 1 - - -

Private market 4 0 4 - - -

Multi-family housing - - - - - -

Offices and commercial buildings - - - - - -

Corporate market - - - - - -

Total impaired loans in operations outside Sweden 4 0 4 - - -

* For a definition, see page 10.

The reserved amount for probable losses in the tables showing impaired loans consists of a specific provision for individually assessed receivables.



13

NOTE 8 Derivative instruments

SEK mMarket value31 Dec 2012

Market value31 Dec 2011

Positive values

Interest rate instruments 20,272 17,399

Currency instruments 436 812

Total 20,708 18,211

Negative values

Interest rate instruments 3,469 2,614

Currency instruments 8,519 5,151

Total 11,988 7,765

Net 8,720 10,446

Stadshypotek uses fair value hedges to protect the Group against undesirable impact on profit/loss due to changes in the market prices of reported assets or liabilities. Hedged risks in hedging packages at fair value comprise interest rate risk on lending and funding at fixed interest rates and currency risk on funding in foreign currency. The hedging instru-ments in these hedging packages consist of interest rate swaps and cross-currency interest rate swaps. Fair value hedges are also applied for portfolios of financial instruments. The hedged risk in these portfolio hedges is the interest rate risk for lending where the original interest rate was fixed for three months and interest rate caps for lending with a fixed-interest period of three months. The hedging instruments in these portfolio hedges consist of interest rate swaps and interest rate options (caps). Interest rate swaps and currency swaps are also used as hedges for changes in market value without hedge accounting being applied.


Related-party transactions

Group claims/Group liabilities SEK m

31 Dec2012

31 Dec2011

BALANCE SHEET

Group claims


Derivative instruments 20,618 18,030

Other assets 60 55

Total 26,436 27,520

Group liabilities


Derivative instruments 11,769 7,403

Other liabilities 7,791 5,536


Total 322,554 292,980

INCOME STATEMENT

Interest income 286 294

Interest expense -7,058 -6,990

Fee and commission expense -5 -9

Other administrative expenses -192 -180

Total -6,969 -6,885

The business operations of Stadshypotek are highly decentralised. The basic principle is that organisation and working practices are determined by the branch offices of the Handelsbanken Group, which are responsible for all the business of individual customers. One consequence of this approach is that Stadshypotek’s lending operations are run via Handelsbanken’s Swedish branch operations and the lending operations in Stadshypotek’s branches in Norway, Denmark and Finland are run via Handelsbanken’s branch operations in the respective countries. Lending is to be carried out to the extent and on the terms stated in Guidelines for granting credits, established annually by the board of Stadshypotek. These guidelines include the maximum permitted loan-to-value ratio for various property types, as well as the decision limits which apply to the branches’ lending. In addition, for loan amounts in excess of a certain limit, an advance examination of the case is to be conducted by Stadshypotek’s credit department before the loan can be dis-bursed. Stadshypotek’s treasury function is also integrated with Handelsbanken’s Treasury department. Functions necessary for management and control of the company remain within Stadshypotek. Those services which Handelsbanken performs on behalf of Stadshypotek are regulated in a collaboration agreement between the parties.

Most of the inter-company transactions are thus with the parent company, Handelsbanken. The services that Stadshypotek purchases from the parent company, which are inclu-ded in other administrative expenses, consist primarily of IT services and the treasury function. As in previous years, no payments have been made to the parent company in respect of the services performed by the latter in relation to the sale and administration of mortgage loans in Sweden. However, at Stadshypotek’s branches outside Sweden, payments in line with market levels have been made to Handelsbanken’s branches in the respective countries in respect of services performed by these branches on behalf of Stadshypotek’s branches in relation to the sale and administration of mortgage loans. In addition, inter-company transactions consist of funding from the parent company, derivative transactions and lending to the parent company.


15

Capital base and capital requirement

Capital baseSEK m

31 Dec2012

31 Dec2011

Equity 25,940 25,367

Tier 1 capital contribution 3,000 3,000

Deduction for intangible assets -41 -37

Special deduction for IRB institutions -34 -11

Tier 1 capital 28,865 28,319

Perpetual subordinated loans 5,300 5,300

Dated subordinated loans 6,300 7,000

Special deduction for IRB institutions -34 -11

Tier 2 capital 11,566 12,289

Capital base 40,431 40,608

Capital requirementSEK m

31 Dec2012

31 Dec2011

Credit risk according to standardised approach 31 20

Credit risk according to IRB approach 4,897 4,918

Operational risk 760 655

Total capital requirement according to Basel II 5,688 5,593

Adjustment according to transitional rules 28,960 26,894

Capital requirement according to Basel II, transitional rules 34,648 32,487

Risk-weighted assets in accordance with transitional rules 433,104 406,091

Risk-weighted assets according to Basel II (capital requirement/8%) 71,100 69,913

Capital adequacy analysis 31 Dec2012

31 Dec2011

Capital requirement in Basel II compared with transitional rules 16% 17%

Capital ratio according to Basel II 56.9% 58.1%

Capital ratio according to transitional rules 9.3% 10.0%

Tier 1 ratio according to Basel II 40.6% 40.5%

Tier 1 ratio according to transitional rules 6.7% 7.0%

Capital base in relation to capital requirement Basel II 711% 726%

Capital base in relation to capital requirement according to transitional rules 117% 125%

The figures reported in this section refer to the minimum capital requirements under Pillar 1 of the capital adequacy rules, 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.

Stadshypotek has applied the advanced IRB approach for retail exposures (households and small companies) since 2007. Since 31 December 2010, the advanced IRB approach has been applied for medium-sized companies, housing co-operative associations and property companies. For the remaining credit risk exposures, the capital requirement is measured using the Basel II standardised regulations.


Credit risks31 December 2012

Standardised approach IRB approach

SEK mCapital

requirement

Exposure after credit risk

protection (EAD)Average risk

weightCapital

requirement

Institutions 7 - - -

Corporate 9 247,998 11.2% 2,218

of which advanced approach 246,956 11.1% 2,194

of which foundation approach 1,042 28.3% 24

Households 11 612,132 5.5% 2,679

Other 4 - - -

Total 31 860,130 7.1% 4,897

Credit risks31 December 2011

Standardised approach IRB approach

SEK mCapital

requirement

Exposure after credit risk

protection (EAD)Average risk

weightCapital

requirement

Institutions 7 - - -

Corporate - 226,311 13.1% 2,373

of which advanced approach 225,251 13.0% 2,344

of which foundation approach 1,060 17.9% 29

Households 10 586,238 5.4% 2,545

Other 3 - - -

Total 20 812,549 7.6% 4,918

Capital base and capital requirement, cont.


17

SUBMISSION OF REPORTI hereby submit this financial report.

Stockholm, 6 February 2013

Per BeckmanChief Executive

Next report: will be published on 17 July 2013Starting in 2013, Stadshypotek will publish six-monthly reports.

Registered name: Stadshypotek AB (publ). Corporate identity no.: 556459-6715.Ownership: A subsidiary of Svenska Handelsbanken AB (publ), corporate identity number 502007-7862. The Bank publishes consolidated accounts in which Stadshypotek AB is included.

AddressStadshypotek ABOffice address: Torsgatan 12Postal address: SE-103 70 Stockholm, SwedenTel: +46 (0)8 701 54 00, Fax: +46 (0)8 701 55 40Website: www.stadshypotek.se

FACTS ABOUT THE COMPANY

Pro

duc

tion:

Hal

lvar

sson

& H

alva

rsso

n.

www.stadshypotek.se +46 (0)8 701 54 00 SE-103 70 Stockholm, Sweden

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