Swedbank Hypotek: Interim report 2010

Regulatory News:

- Operating profit amounted to SEK 3 179 m (3 631)
- Net interest income decreased by SEK 339m to SEK 4 069m
- Covered bonds amounting to SEK 234bn have been issued during the year

Swedbank Mortgage

The Swedbank Mortgage Group (in Swedish: Swedbank Hypotek) comprises the parent company, Swedbank Mortgage AB (publ) and the wholly owned subsidiary Swedbank Skog och Lantbruk AB (inactive company). Swedbank Mortgage is wholly owned by Swedbank AB (publ).

Swedbank Mortgage provides long-term financing for residential housing, commercial properties, municipal investments and agricultural and forestry properties.

Numbers within parenthesis refer to the corresponding period from the previous year unless noted otherwise.

Profit analysis

Operating profit amounted to SEK 3 179m (3 631). Net interest income was reduced by SEK 339m to SEK 4 069m (4 408). The dominating reason for the lower net interest income was a lower average margin during 2010 compared to the previous year despite an increasing trend, which was due to a low starting level for the year. The turning point appeared in the beginning of the past year. The increase in volumes for the year, amounting to SEK 30bn, compensated to some extent the lower margin.

Funding costs have been considerably affected by the extended average maturity of the debts. The increased costs of funding have certainly affected the net interest income negatively but it has also resulted in a reduced need of liquidity reserves which has had a positive effect on the net interest income. The lower levels of interest rates during most of the year compared to previous year have led to somewhat lower return on equity.

Of the commission costs most part is arising from the interchange between the savings banks and partly owned banks. These costs amounted to SEK 562m (661). The reduction is a result of changes in the agreement on commission with the savings banks and partly owned banks.

In net gains and losses on financial items at fair value are included changes and realizations of market value on items for which fair value option is applied. In April 2009 a gradual transition was initiated to increase amortized cost accounting and hedge accounting by applying fair value hedge accounting and cash flow hedging.

Changes in value in fair value hedges on the hedged item and the hedging instrument is reported in the income statement while the effective part of the changes in value on a cash flow hedge is reported in equity and is included in other comprehensive income. In net gains and losses in financial items at fair value are also included profit and losses on prepayments on loans at amortized cost and repurchases of issued securities at amortized cost. All included the net gains and losses on financial items at fair value amounted to SEK -206m (-131).

Swedbank Mortgage Interim report 2010

Swedbank Mortgage is wholly owned by Swedbank AB (publ). Swedbank promotes a sound and sustainable financial situation for the many people, households and companies. Our vision is to contribute to a development "Beyond Financial Growth". As a leading bank in the home markets Sweden, Estonia, Latvia and Lithuania, Swedbank offers a wide range of financial services and products. Swedbank has 9.5 million retail customers and 535,000 corporate customers with approximately 400 branches in Sweden and over 200 branches in the Baltic countries. The group is also present in other Nordic countries, the U.S., China, Russia and Ukraine. As of June 30 2010 the group had total assets of SEK 1,905 billion. Read more at www.swedbank.com (http://www.swedbank.com/)

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