INTERIM REPORT 1 January - 30 June 2009
(Thomson Reuters ONE) - The Swedish Covered Bond Corporation, (SCBC) * The Swedish covered bond market continued to operate relatively well despite the prevailing global financial crisis. * The rating agency Standard & Poor's declared its intention to change its general rating methodology for covered bonds. The impact of this on SCBC is not yet known.Summary June 2009 June 2008Net interest income, SEK million 203 454Operating profit/loss, SEK million (405) 211Net profit/loss for the period, SEK million (298) 152Lending, SEK million 157,383 157,722Capital adequacy ratio, % 12.3 9.9Primary capital ratio, % 12.3 9.9Volume of international borrowing,SEK million 68,145 53,863Rating, long-term borrowing Standard & Poor's AAA AAA Moody's Aaa AaaAll income-statement figures in parentheses pertain to theyear-earlier period. For balance-sheet items, the comparative periodcorresponds to the immediately preceding year-end.This is a translation of the Swedish interim report. The auditor hasnot signed the translation for approval.OrganisationThe Swedish Covered Bond Corporation, SCBC, is a wholly ownedsubsidiary of The Swedish Housing Finance Corporation, SBAB.SCBC is a credit-market company whose operations focus primarily onissuing covered bonds in Swedish and international capital markets.For this purpose, the company currently uses two funding programmes,the mortgage bond programme in Sweden and the EMTCN programmeprimarily in the international market.SCBC's operations are conducted by personnel employed by the ParentCompany SBAB. These services are regulated by an outsourcingagreement between the parties under which SBAB performs the serviceson behalf of SCBC and receives outsourcing revenue.The loans that are not funded by issuing covered bonds are financedby a subordinated loan from the Parent Company SBAB. The subordinatedloan and SBAB's claims on SCBC under the outsourcing agreement aresubordinate to liabilities to all non-covered creditors in the eventof SCBC's bankruptcy, liquidation or company restructuring. SCBC thusminimises the risk of conflicts between creditors.To hedge currency and interest rate risks that arise as a naturalpart of operations, SCBC regularly enters into derivativetransactions with SBAB and external counterparties. SCBC must conductits operations in such a manner that they comply with therequirements specified in the Covered Bonds Act (2003:1223) and theSwedish Financial Supervisory Authority's regulations FFFS 2004:11.Operating profitSCBC reported an operating loss of SEK 405 million (profit: 211) forthe first six months.Net interest income amounted to SEK 203 million (454), down 55% onthe year-earlier period. The change was primarily due to fallingmarket interest rates. Fierce competition in recent years hasresulted in a distinct downward trend for margins in the Swedishresidential mortgage market.SCBC's total operating income has fallen to negative SEK 188 million(positive: 414) since the year-earlier period. This was mainlyattributable to unrealised changes in the market value of derivativeinstruments and to hedged items.Expenses for the period totalled SEK 221 million (188), pertainingmainly to the outsourcing agreement between SCBC and SBAB.Net loan losses declined compared with the year-earlier period andamounted to a recovery of SEK 4 million (loss: 15). This decrease wasprimarily attributable to the change in the provision forcollectively measured loan receivables, which in turn reflected aslight improvement in the credit quality of SCBC's portfolio.LendingSCBC does not conduct any new lending itself; instead it continuouslyor when necessary acquires loans from SBAB and loans originated bySBAB's business partners. The intention of the acquisitions is forthese loans to be wholly or partly included in the cover pool thatserves as collateral for investors with holdings of SCBC's coveredbonds. Loans were continuously acquired or divested between SBAB andSCBC during the period. Information regarding SCBC's cover pool ispresented every month on the company's website, www.scbc.se.Lending to the public totalled SEK 157,383 million (157,792).The table below shoes the distribution of the loan portfolio betweenthe retail and corporate markets.Based on the agreement between SBAB and SCBC, SBAB undertakes torepurchase loans that become past due by 30 days or more.FundingSCBC's operations focus primarily on issuing covered bonds in Swedishand international capital markets. For this purpose, the companycurrently uses two funding programmes: the mortgage bond programme inSweden for issuing covered bonds and SCBC's EUR 10,000,000,000 EuroMedium Term Covered Note Programme. Both programmes received thehighest possible long-term ratings of Aaa/AAA from the ratingagencies Moody's and Standard & Poor's. During the period, Standard &Poor's announced its intention to change its general ratingmethodology for covered bonds. The impact of this on SCBC is not yetknown.SCBC's funding takes place predominantly by issuing covered bonds,and, to a certain extent, through repo transactions. In addition,SCBC receives funding in the form of a subordinated loan from SBAB.Ongoing issuing and repurchasing occurred during the period,principally in the Swedish covered bond market.The value of outstanding debt securities in issue totalled SEK140,735 million (126,578).Programme utilisation on 30 June 2009 was as follows: Swedish coveredbonds SEK 69.8 billion (61.9) and Euro Medium Term Covered NoteProgramme EUR 6,118 million (5,818).The period was marked by continued credit turmoil in capital markets.The international public market for issuing covered bonds remainedpractically closed for most of the period, although the marketstarted functioning sporadically towards the end of the period.Although the Swedish mortgage bond market functioned relatively wellcompared with the international market, funding levels remainedrelatively high.Capital adequacy and riskSCBC reports credit risk mainly in accordance with the InternalRatings-Based (IRB) approach, and reports operational risk and marketrisk in accordance with the standardised approach . SCBC's capitalratio, taking the transitional regulations into account, amounted to1.54% (1.25) on 30 June 2009 and the capital adequacy ratio as wellas the primary capital ratio amounted to 12.3% (10.0). After fullimplementation of Basel II, without taking into account thetransitional regulations, the capital adequacy ratio and primarycapital ratio under Pillar 1 were 34.2% (21.8). Figures for June 2009included earnings for the first half of the 2009 financial year.There are no ongoing or anticipated material obstacles or legalbarriers to a rapid transfer of funds from the capital base otherthan those that ensue from the terms applying for the subordinateddebentures (see Note 6) or from what generally applies pursuant tothe Companies Act (2005:551).Interest-rate riskInterest-rate risk arises as a natural part of SCBC's activities andoriginates primarily when the interest-rate structure between thecompany's deposits and lending (ALM risk) is not fully matched. Themain principle is that SCBC's interest-rate risk is hedged, either inrelation to the Parent Company SBAB or to external counterparties.Accordingly, SCBC is subject to only a limited interest-rate risk.SCBC does not conduct trading operations. An account of other risksin SCBC can be found in the 2008 Annual Report.Current events * No events of material importance to the assessment of the company's financial position occurred after the end of the reporting period. * SCBC joined the Swedish Government's guarantee scheme on 29 June 2009.Accounting policiesSCBC applies statutory IFRS, which means that the interim report hasbeen prepared in compliance with IFRS subject to the additions andexceptions that ensue from the Swedish Financial Reporting Board'srecommendation RFR 2.2, Accounting for Legal Entities, andFinansinspektionen's (The Swedish Financial Supervisory Authority's)regulations and general guidelines on annual reports in creditinstitutions and securities companies undertakings (FFFS 2008:25).This interim report has been prepared in accordance with IAS 34Interim Financial Reporting and the new amendment to IAS 1Presentation of Financial Statements.Following the amendment to IAS 1, income and expenses are recognisedin a single statement known as the statement of comprehensive income.This statement includes "Other comprehensive income" which comprisesincome and expenses from transactions recognised under shareholders'equity until the closing of the 2008 accounts. SCBC's transactionsare solely with the company's shareholders, which are reported in thestatement of changes in equity.The accounting policies and calculation methods remain unchangedcompared with the 2008 Annual Report, with the exception that SCBCnow applies the new standard IFRS 8 Operating Segments, instead ofIAS 14 Segment Reporting.According to IFRS 8, a segment is a component of a company that canearn revenues and incur expenses. Discrete financial information mustbe available and operating profit/loss must be regularly reviewed andmonitored by the company's chief operating executive. SCBC'soperations are monitored at the comprehensive level, since thecompany primarily comprises loan receivables at a risk level thatenables the issuance of covered bonds. As a result, only oneoperating segment is recognised, comprehensive SCBC, which conformswith the previous application of IAS 14.All amounts are stated in millions of Swedish kronor (SEK million).Financial informationThe next financial statement scheduled for publication is the AnnualReport for the 2009 financial year.The Board of Directors and Managing Director certify that the interimreport provides a fair view of the company's operations, position andearnings, and describes the significant risks and uncertainties towhich the company is exposed.Stockholm, 12 August 2009 Per Balazsi Chairman of the Board Bo Andersson Johanna Clason Bengt-Olof Nilsson Lalér Board Member Board Member Board Member Per Tunestam Managing Directorhttp://hugin.info/141447/R/1334838/317065.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 14.08.2009 - 11:18 Uhr
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