Highlights of Annual Report January–December · Highlights of Stadshypotek’s Annual Report...
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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 | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 20122
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 %
Profit for the period 1,520 1,207 26 1,429 6 5,801 4,407 32
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
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 2012
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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
Derivative instruments Note 8 11,988 7,765
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
Equity at 31 December 2012 4,050 -54 21,944 25,940
Statement of changes in equity – GroupJan–Dec 2011SEK m
Share capital *
Translation reserve
Retained earnings Total
Equity at 31 December 2010 4,050 -37 20,418 24,431
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
Equity at 31 December 2011 4,050 -44 21,361 25,367
* Average number of shares, before and after dilution 162,000
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 20124
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
Loans to credit institutions 5,758 9,435
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
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 2012
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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
Profit for the period 1,520 1,207 26 1,429 6 5,801 4,407 32
Summary balance sheet – parent companySEK 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
Derivative instruments Note 8 11,988 7,765
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
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%
Profit for the period 1,520 1,207 26 1,429 6 5,801 4,407 32
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
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 20126
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.
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 2012
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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.
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 20128
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
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 2012
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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
Provisions for probable loan
lossesLoans after 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
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 201210
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
Provisions for probable loan
lossesLoans after provisions
Loans before provisions
Provisions for probable loan
lossesLoans after 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
of which in operations outside Sweden
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).
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 2012
11
Non-performing loans by borrower category 31 Dec 2012 31 Dec 2011
SEK m
Non-performing loans which are
not impaired loans
Non-performing loans which are
included in impaired loans
Non-performing loans which are
not impaired loans
Non-performing loans which are
included in 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
of which in operations outside Sweden
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
Non-performing loans which are
not impaired loans
Non-performing loans which are
included in impaired loans
Non-performing loans which are
not impaired loans
Non-performing loans which are
included in 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
of which in operations outside Sweden
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.
NOTE 7 Loans to the public, cont.
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 201212
Impaired loans by borrower category31 Dec 2012 31 Dec 2011
SEK mImpaired
loans
Provision for probable
lossesNet impaired
loansImpaired
loans
Provision for probable
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
of which in operations outside Sweden
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
Provision for probable
lossesNet impaired
loansImpaired
loans
Provision for probable
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
of which in operations outside Sweden
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.
NOTE 7 Loans to the public, cont.
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 2012
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.
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 201214
Related-party transactions
Group claims/Group liabilities SEK m
31 Dec2012
31 Dec2011
BALANCE SHEET
Group claims
Loans to credit institutions 5,758 9,435
Derivative instruments 20,618 18,030
Other assets 60 55
Total 26,436 27,520
Group liabilities
Due to credit institutions 286,294 263,341
Derivative instruments 11,769 7,403
Other liabilities 7,791 5,536
Subordinated liabilities 16,700 16,700
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.
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 2012
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.
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 201216
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.
STADSHYPOTEK | HIGHLIGHTS OF ANNUAL REPORT JANUARY–DECEMBER 2012
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