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Financial Stability Report
June 2008
Financial stability in Sweden is satisfactory
Contingent risks have increased
Financial Stability Report 2008:1
Financial stability is satisfactory
The banks’ resilience is good The banks are financially sound
Profitability is high and loan losses are low
Borrowers are financially strong, both companies and households
Swedish financial markets have functioned well during turmoil
The banks have good profitability
Results before loan losses and loan losses, net, in the major banks
totalled over four quarters, SEK billion
Chart 3:1 Sources: The banks’ reports and the Riksbank
(IFRS: International Financial Reporting Standards)
-20
0
20
40
60
80
100
dec-90 dec-92 dec-94 dec-96 dec-98 dec-00 dec-02 dec-04 dec-06 dec-08
Resultat före kreditförlusterKreditförlusterResultat före kreditförluster med tillämpning av IFRS
Contingent risks have increased
Risks in the financial markets
Developments in the Baltic countries
The risk of larger price falls in the commercial property market
Risk that household debts will increase faster than incomes in the long term
High – but declining – credit spreads
Difference between corporate bonds and government bonds in the United States, per cent
Chart 1:3 Source: Reuters EcoWin
0
2
4
6
8
10
12
00 01 02 03 04 05 06 07 08 09
Aaa Baa High-yield
Interbank rate in relation to expected policy rate
3 month basis spread
0
20
40
60
80
100
120
jan-07 apr-07 jul-07 okt-07 jan-08 apr-080
20
40
60
80
100
120
USAEurolandStorbritannienSverige
Source: BloombergChart 1:2 Note: Interest rate spread between 3 month interbank rate and overnight index swap
Contingent risks have increased
Risks in the financial markets
Developments in the Baltic countries
The risk of larger price falls in the commercial property market
Risk that household debts will increase faster than incomes in the long term
Swedish banks in the Baltic countries
Lending SEB 11% Swedbank 16% Nordea 2.3%
Results SEB 20% Swedbank 32% Nordea 1.8%
47%
25% 27%
33%
18%
40%
10%
10%
8%
10%
48%
25%
0%
20%
40%
60%
80%
100%
Estland Lettland Litauen
Swedbank SEB Nordea Övriga
Total market according to Swedbank’s Fact Book 2007 Q4. SEB’s lending also includes credit exposures to off-balance sheet items.
Market shares for lending2007Q4
Baltics’ share of lending and results2008Q1
Growth slackening in the Baltic countries
GDP growth, annual percentage change
Source: Reuters EcoWinChart 2:27
0
2
4
6
8
10
12
14
dec-99 dec-00 dec-01 dec-02 dec-03 dec-04 dec-05 dec-06 dec-07 dec-08
Estland Lettland Litauen
Inflation increasing in the Baltic countries
Harmonised index for consumer prices, annual percentage change
Chart 2:30 Source: Reuters Ecowin
-3
0
3
6
9
12
15
18
00 01 02 03 04 05 06 07 08
Estland Lettland Litauen
Large current account deficit
Percentage of GDP, totalled over four quarters
Chart 2:29 Source: Reuters Ecowin
-30
-25
-20
-15
-10
-5
0
dec-00 dec-01 dec-02 dec-03 dec-04 dec-05 dec-06 dec-07 dec-08
Estland Lettland Litauen
The stress tests show…
…that the banks can manage a severe deterioration in the Baltic countries
…that resilience to a turnaround in the credit cycle remains good
Contingent risks have increased
Risks in the financial markets
Developments in the Baltic countries
The risk of larger price falls in the commercial property market
Risk that household debts will increase faster than incomes in the long term
Rising commercial property prices
Real prices for office premises in inner city locations, Index: 1981=100
Chart 2:21 Sources: Newsec AB and Reuters EcoWin
0
100
200
300
400
500
81 83 85 87 89 91 93 95 97 99 01 03 05 07
Stockholm Göteborg Malmö
Low earnings requirements Average direct earnings requirements for office property in city
centre locations, Per cent
Chart 2:23 Source: Newsec AB and EcoWin
0
2
4
6
8
10
12
14
82 84 86 88 90 92 94 96 98 00 02 04 06 08
Stockholm Göteborg Malmö Femårig statsobligation
Contingent risks have increased
Risks in the financial markets
Developments in the Baltic countries
The risk of larger price falls in the commercial property market
Risk that household debts will increase faster than incomes in the long term
Household debts increasing more slowly
Annual percentage change
Chart 2:3 Source: The Riksbank
-3
0
3
6
9
12
15
18
96 97 98 99 00 01 02 03 04 05 06 07 08 09
Totalt Bostadsinstitut
Debts increasing in relation to income
Household debts and interest expenditure in relation to disposable income, per cent
Sources: Statistics Sweden and the RiksbankChart 2:6
0
40
80
120
160
200
82 86 90 94 98 02 06 10
0
4
8
12
16
20
Skuldkvot (vänster skala) Räntekvot (höger skala)
Financial stability in Sweden is satisfactory
The banks’ resilience is good Contingent risks have increased
Financial Stability Report 2008:1
