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)

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

Interbank rate in relation to expected policy rate 3 month basis spread 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% Nordea2.3% Results SEB 20% Swedbank 32% Nordea1.8% 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 lending 2007Q4 Baltics’ share of lending and results 2008Q1

Growth slackening in the Baltic countries GDP growth, annual percentage change Source: Reuters EcoWin Chart 2:27

Inflation increasing in the Baltic countries Harmonised index for consumer prices, annual percentage change Chart 2:30 Source: Reuters Ecowin

Large current account deficit Percentage of GDP, totalled over four quarters Chart 2:29 Source: Reuters Ecowin

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

Low earnings requirements Average direct earnings requirements for office property in city centre locations, Per cent Chart 2:23 Source: Newsec AB and EcoWin

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

Debts increasing in relation to income Household debts and interest expenditure in relation to disposable income, per cent Sources: Statistics Sweden and the Riksbank Chart 2:6

Financial stability in Sweden is satisfactory The banks’ resilience is good Contingent risks have increased Financial Stability Report 2008:1