Interim Report first half 2008


The Copenhagen Stock Exchange
The Luxembourg Stock Exchange
The Frankfurt Stock Exchange
The Düsseldorf Stock Exchange
Euronext N.V.
Oslo ABM
The Press 

31 July 2008

Stock Exchange Announcement No. 8/2008 - FIH Interim Report first half-year 2008

•	Profit after tax for the group amounted to DKK 361 million 
•	Satisfactory profit from net interest income
•	Capital losses on holdings of bond along with interest rate and FX
in-struments 
•	Satisfactory liquidity of DKK 20 billion has been maintained
•	FIH's exposure to the property market constitutes 23.5 per cent distributed
between Denmark, Germany and Sweden 
•	Moderate writedowns at a FIH group level

Net profit for the period
Net profit for the first half-year of 2008 was DKK 361 million after tax, a
decrease of DKK 283 million compared with the same period of 2007. Profit
before tax was DKK 418 million, which is DKK 379 million down compared to the
same period last year. 
	
Activities
The net interest income generated in the business segments continues to be
satis-factory. The past year's turmoil in the financial markets has increased
the costs imposed on FIH; however, FIH has managed to raise the interest rate
imposed on borrowers in line with the increase in funding costs. The loan
portfolio grows satis-factorily and has risen by DKK 1 billion in the first
half-year of 2008. 

The turbulence in the financial markets and the subsequent interest rate
increase has affected FIH's investments and has entailed capital losses,
especially related to the bond holdings and thus has had a negative impact on
net financials. 

FIH PARTNERS A/S and Capital Markets have continued to show satisfactory
re-sults and the high expectations to both business segments are maintained. 

In H1, FIH has withdrawn DKK 9.2 billion of the DKK 15 billion credit facility
agreed to with ATP in connection with the establishment of FIH Kapital Bank in
Q1 2007. The establishment of FIH Kapital Bank provides FIH with large
flexibility in the li-quidity management and the agreement continues to be
favourable in the light of the development in the financial markets. FIH
retains a solid liquidity position of DKK 20 billion. 

On 1 April, FIH opened a new netbanking facility - FIH Netbank Privat. This
initia-tive is FIH's first move into the retail market in Denmark. After only
three months, FIH has attained deposits from retail customers of DKK 868
million which is con-sidered highly satisfactory. FIH expects to further
develop its product offerings to this customer segment. 

FIH's exposure to the property sector constitutes 23.5 per cent of the total
loans and quarantees. Half of the exposure is placed in Denmark and the other
half in Germany and Sweden. The portfolio is hedged by first priority pledge
and other security. 
	
Net interest and fee income
Net interest and fee income amounted to DKK 759 million, up 23 per cent from
the same period of 2007. 

Interest income from loans and other receivables rose by 23 per cent to DKK
2,350.3 million. The rise is mainly attributable to a higher average nominal
interest rate on the loan portfolio as well as a higher loan portfolio compared
with the first six months of 2007. 

Interest on bonds came to DKK 470.9 million, up from DKK 347.7 million in the
first six months of 2007. The rise is mainly attributable to higher bond
holdings in the first half-year of 2008 compared to the same period of 2007. 

Interest on derivative financial instruments, mainly interest income and
interest ex-penses linked to swaps, amounted to DKK 5.8 million against DKK
12.9 million in the first half-year of 2007. FIH uses swaps to hedge interest
rate risks in the gen-eral management of interest rate risks, and for trading
with customers. 

Overall, interest income increased by DKK 401.1 million, to DKK 2,942.3
million, compared with the first half-year of 2007. 

Interest expenses increased by a total of DKK 306.9 million, to DKK 2,313.7
million compared with the first half-year of 2007. 

Fee and commission income increased by DKK 34.3 million, compared with the
first half-year of 2007, to a total of DKK 137.6 million. The increase in
earnings is attributed to the activities established in the investment banking
area, as well as activities in Capital Markets and the banking areas. 
	
Market value Adjustments
Market value adjustments were DKK 10.4 million against DKK 442.6 million in the
first half-year of 2007. 

Market value adjustments of mortgage loans were DKK -15.5 million, which is
off-set by corresponding income under market value adjustments of issued
mortgage bonds. Market value adjustments of loans etc. were negative by DKK
132.5 million in respect of loans hedged by financial instruments. Market value
adjustments of bonds totalled a negative DKK 274.9 million against a negative
DKK 241.0 million in the first half-year of 2007. Shares were value adjusted by
DKK 46.5 million against DKK 392.4 million in the half-year of 2007, while
market value adjustments of foreign currencies amounted to a negative of DKK
25.1 million against DKK 15.5 million in the same period of 2007. 

Investment properties (operational leasing) was fair value adjusted by a
negative of DKK 21.3 million, which is largely equivalent to the repayment
proportion of the lease payment recognised under “Other operating income”.
Market value adjust-ment of derivative financial instruments came to DKK 194.5
million. Bonds issued refer to issued mortgage bonds as well as bonds issued
and hedged using finan-cial instruments. The market value adjustments totalled
DKK 238.7 million. 

The return on the bank's portfolio of shares has been satisfactory in the first
half-year of 2008. The market value adjustments are shown in the table below. 
	
Other operating income
Other operating income totalled DKK 43.6 million against DKK 41.0 million in
the same period of 2007. 
	
Expenses	Expenses rose by DKK 67.8 million to DKK 384.4 million in the first
half-year of 2008. The average number of employees was 382.5, up from 314.6 in
the first half-year of 2007. 
	
Losses and Writedowns
Writedowns during the period amounted to DKK 79.9 million compared to 79.8
mil-lion in the same period of 2007. Reversal of previous year's write-downs
amounted to DKK 49.5 million, a decrease of DKK 35.5 million compared with the
same pe-riod of 2007.  Losses recorded for the period were DKK 8.2 million
against DKK 0.4 million in the first half-year of 2007. 
	
Balance sheet
Before writedowns, total loans to customers including investment properties
increased by DKK 1,024 million, or by 1.3 per cent, to a total of DKK 77,169
million. 

Bond holdings were DKK 24,602 million, up from DKK 13,639 million at the
beginning of the year. 

Holdings of shares and investments in associates amounted to DKK 1,241 million
up from DKK 1,016 million at the end of 2007. 

Bonds issued totalled DKK 39,846 million against DKK 53,632 million at the
beginning of 2008. 
	
Equity and solvency
Equity totalled DKK 8.0 billion at the end of June 2008 inclusive of the
period's profits to which DKK 2.8 billion of subordinated capital can be added.
The bank's capital thereby amounted to DKK 10.8 billion. 

The solvency ratio for the group was 11.9 per cent at the end of June 2008 and
the core capital ratio was 8.9 per cent. For 2008, the solvency ratio is
determined by the standard approach under the new Basel II-rules and is
therefore not directly comparable to historical solvency figures. 

At the end of 2007 the same figures were 11.5 per cent and 8.4 per cent
respectively. 
	
Basel II
FIH Erhvervsbank reports the solvency ratios in accordance with the standard
approach under the Capital Requirement Directive, Pillar 1. The standard
approach is also used for assessing market risk, while the standard indicator
approach is used for the assessment of operational risk. The applied methods
are unchanged compared to the first quarter of 2008. The solvency ratios are
reported in parallel by using the internal ratings-based approach (Foundation)
for credit risks to the Danish FSA. 

The bank has applied for permission to use the internal ratings-based approach
(Foundation) for the assessment of credit risks and has also applied for
permission to use internal models for assessing market risks. The application
is expected be approved shortly. The changes in methods are not expected to
affect the solvency ratios. 

As FIH Erhvervsbank is owned by Kaupthing Bank in Iceland the formal approval
of the use of internal models for assessing credit risks and market risks lies
with the Icelandic FSA. FIH Erhvervsbank is currently negotiating with the
Danish FSA, managing the actual evaluation of the bank's models for credit
ratings on behalf of the Icelandic FSA. 

Under Pillar II, the bank continues to work intensively with the development of
the ICAAP. Especially in the light of last year's turbulence in the financial
markets, the bank is highly focused on holding the adequate capital amount to
accommodate potential current and future risk elements. 
	
Credit risk
At least twice a year, individual credit facilities are reviewed. As part of
this review, new financial information is examined and ratings are updated,
among other things. 

Monitoring of credit facilities is undertaken centrally using FIH's credit
system, con-taining all material information on the size and utilisation of
facilities, collateral security provided and estimated realisable value, etc. 

The Risk & Legal department continuously monitors the scope, diversification
and quality of the loan portfolio, reporting its findings on an ongoing basis
to the Execu-tive Board and periodically to the Board of Directors. 

Rating models are used, along with individual customer credit ratings.

Financial institutions are rated using a separate model, while the largest
customer segment, corporate customers, is rated using the internally developed
Corporate model. 

The Corporate model categorises customers into 12 rating classifications, 12
being the best. The model also calculates the probability that, within the next
12 months, the individual customer will be unable to meet his financial
obligations towards FIH.  Public institutions and similar organisations are
assigned rating 13 with a probabil-ity of default of 0 per cent. 

Loan portfolio diversification by rating class exclusive of loans to the public
sector is shown below. 

Rating classes 8-12 correspond to investment grade as defined by the credit
rating agencies, while rating classes 4-7 are below investment grade, although
being of acceptable credit quality. Rating classes 1-3 comprise customers with
increased risk, corresponding to the single B segment defined by the rating
agencies. Rating 0 comprises the weakest and most risky customers,
corresponding to the C segment as defined by the rating agencies. 

As shown in the table below the loan portfolio's average rating is increasing.

As stated in the stock exchange announcement of 16 July 2008, FIH's exposures
to the property sector amount to 23.5 per cent of which half is placed in
Denmark and the other half in Germany, primarily in Hamburg and Berlin, and
Sweden. At the regular portfolio assessments, FIH has obtained assurance that
the current portfolio is sound, and furthermore a large part of the exposures
are covered by first priority pledge on the properties. 
	
Market risk
Market risk is the risk of a loss as a result of changes in market value of
FIH's as-sets and liabilities and off-balance sheet transactions due to changes
in market conditions, Market risk includes interest rate and exchange rate
risks and risk re-lated to equity trading. 

The market risk related to the bank's total balance sheet (inclusive of the
risk not related to the trading book), stated as Value at Risk for interest
rate, exchange rate and equity trading amounted to DKK 15 million at the end of
June 2008. 

The Value at Risk method looks at the whole portfolio in the calculation of
market risks associated with financial assets, As a result, not only the
standard deviation, but also the correlation between the portfolio assets is
taken into account, Conse-quently, the Value at Risk method summarises the
total risk related to the bank's balance sheet by one figure and expressed in
Danish kroner. 
	
Funding and liquidity
FIH continues to hold substantial liquidity resources. The holding of bonds,
short-term deposits with other banks and undrawn committed loan facilities came
to DKK 20 billion at the end of June. 

The diversification of funding resources initiated last year is still being
pursued. The most recent initiative being the launch of FIH Netbank Privat. To
date, customers have deposited DKK 868 million as at the end of June 2008. 

To meet its funding objectives, in pursuance of the diversified funding
strategy, ac-tivities are focused on several markets, debt instruments and
various investor groups. FIH has not applied its EMTN programme in 2008, but
instead has obtained funding by using other instruments on the international
capital markets, private placements, bilateral loans and committed loan
facilities. This policy will also be pursued in the third quarter of 2008. 
	
Return on equity
At the end of June 2008 return on equity before tax amounted to 10.6 per cent
p.a. compared to 21.9 per cent p.a. at the end of June 2007. Return on equity
after tax was 9.2 per cent p.a. at the end of June 2008 compared to 17.8 per
cent p.a. at the end of June 2007. 
	
Other remarks
The half-year financial report is unaudited.

No particular uncertainty has affected the recognition and measurement in the
preparation of the interim report for the first half-year of 2008. 
	
Expectations for FIH result 2008
Business line performance continues to develop satisfactorily. FIH Netbank
Privat has come off to a good start and contributes positively to the bank's
funding potential. 

The expectations for the 2008 full-year profit are maintained in the range of
DKK 800 million to DKK 1,000 million, as announced at the end of March 2008. 
	
Copenhagen, 31 July 2008 at 8:40 am

For the Board of Directors

Hans Skov Christensen
Chairman


For additional information please contact
Lars Johansen, tel +45 7222 5004


Statement by the Executive Board

We have today discussed and adopted the interim report for FIH Erhvervsbank A/S
for January - June 2008. 

The interim report have been prepared in accordance with IAS 34, Presentation
of interim reports as regards the Group's financial statements, the
International Financial Reporting Standards as adopted by the EU as regards the
parent financial statements and the interim report has been prepared in
accordance with additional Danish disclosure requirements for interim reports
of financial companies that are listed. 

We consider the applied accounting policies appropriate for the annual report
to provide a true and fair view of the Group's and the Parent's financial
position at 30 June 2008 as well as of the results of their operations and the
consolidated cash flows for the first half-year of 2008. 

Copenhagen, 31 June 2008

EXECUTIVE BOARD			
			
Lars Johansen
Managing director and CEO
Henrik Sjøgreen
Director		
			
BOARD OF DIRECTORS		
			
Hans Skov Christensen 
(chairman)
Sigurdur Einarsson
(vice-chairman)		
			
			
Per Erlandsen Brun 	Jørgen Bruun-Toft	Hans Ejvind Hansen
Randi Holm Franke
		
Hreiðar Már Sigurðsson	Svend-Aage Nielsen 	Jørgen Vorsholt	
			

See the complete stock exchange announcement with graphs and tables on enclosed
pdf file and can be downloaded from www.fih.com.

Attachments

08-2008uk_final_stock exchange announcement.pdf