Highlights of Stadshypotek's annual report January-December 2006


* Lending increased by SEK 35bn (32) to SEK 480bn.
  * Operating profit was SEK 4,581m (5,599).
  * Recoveries exceeded new loan losses.
  * Covered bonds were issued in Sweden and internationally during
    the fourth quarter.


Highlights of Stadshypotek's
annual report January - December 2006

Performance
Stadshypotek's operating profit for 2006 was SEK 4,581m. The figure
for the previous year was SEK 5,599 m. The change in the profit
figure was chiefly attributable to lower net interest income, partly
due to decreasing lending margins. Stadshypotek's lending volumes on
the private market showed a very positive trend during the year, but
this did not fully offset declining lending margins resulting from
price competition on the market. In addition, net interest income was
burdened by effects attributable to the changeover to IFRS, which
will gradually diminish until 2008. Moreover, return on equity was
lower than in the previous year.

Low loan losses
Recoveries exceeded new loan losses; the net amount recovered was SEK
278m (133), which corresponds to a loan loss ratio of -0.06% (-0.03)
of lending. As at 31 December 2006, Stadshypotek's bad debts before
deduction of the provision for probable loan losses amounted to SEK
393m (600). SEK 44m (54) of the bad debts were non-performing loans,
while SEK 349m (546) were loans on which the borrowers pay interest
and amortisation, but which are considered doubtful in view of
uncertainty as to the borrowers' repayment capacity and the value of
the collateral. In addition, there were non-performing loans of SEK
229m (325) that are not assessed as being bad debts. After deduction
of the provision for probable loan losses, the volume of bad debts
was SEK 284m (454).

Growth in lending
Lending to the general public was SEK 480bn - an increase of SEK 35bn
during the year. Last year saw 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 26.4%. Stadshypotek strengthened its position as
the leading player on the Swedish corporate market, with a share of
34,8 %.

Capital adequacy
As at 31 December 2006, the capital ratio was 8.3% (8.8). The
decrease was due to a higher risk-weighted volume. As at 31 December
2006, the Tier 1 capital ratio was 7.1% (7.4). In February 2007, a
decision was taken to raise a subordinated loan of SEK 4,800m from
the parent company, with the aim of reinforcing the capital base.

Rating
Stadshypotek's rating was unchanged.

Stadshypotek

                          Long-term          Short-term
Moody's                   Aa1                P-1
Standard & Poor's         AA-                A-1+
Fitch                     AA-                F1+



Covered bonds
Moody's                        Aaa


In September, all Stadshypotek's outstanding bonds were converted
into covered bonds, which received an Aaa rating from Moody's. In the
fourth quarter, new issues of covered bonds were carried out in
Sweden and internationally.

Events after the balance sheet date
Stadshypotek will submit an application to the Swedish Financial
Supervisory Authority regarding the establishment of a branch in
Norway.

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 2005:33). 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".

Stockholm, 20 February 2007


Frank Vang-Jensen
Chief executive


Definitions:
Private market = lending secured by mortgages in single-family or
two-family houses, housing co-operative apartments or residential
farms.
Corporate market= lending secured by mortgages in multi-family
dwellings, family farms, commercial and office buildings or state and
municipal loans.

The full report including tables can be downloaded from the following
link:

Attachments

Annual Report January-December 2006.pdf