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 In H1, FIH has withdrawn DKK 9.2 billion of the DKK 15 billion credit facility agreed to with ATP in connection with the establishment of FIH Kapital Bank in Q1 2007.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.