Financial Stability Report 2007:2

FinancialStabilityReport2007:2

4 December 2007

CHAPTER 1Financial markets

Three month treasury bills interest

Procent

Chart 1:1

0

1

2

3

4

5

6

7

00 01 02 03 04 05 06 07 08

Euro area USA

Source: Reuters EcoWin

Difference between interbank rates

and treasury bills in 2007 Basis points

Chart 1:2 Note. The differential is calculated as the difference between the three-month interbank rate and threemonth treasury bill

interest rate in respective countries.

0

50

100

150

200

250

jan feb mar apr maj jun jul aug sep okt nov dec

Sweden Euro area USA UK


10-year government bond yieldPer cent

Chart 1:3

2

3

4

5

6

7

00 01 02 03 04 05 06 07 08

Sweden Euro area USA


Corporate bond spreads in the United States

Percentage points

Chart 1:4

0

2

4

6

8

10

12

00 01 02 03 04 05 06 07 08

Aaa Baa High-yield


Corporate bond spreads in Europe

Percentage points

Chart 1:5 Source: Reuters EcoWin

0

2

4

6

8

10

12

14

16

18

00 01 02 03 04 05 06 07 08

AAA BBB High-yield

Global level of bankruptciesPercentage of all companies

Source: Reuters EcoWinChart 1:6

0

2

4

6

8

10

12

00 01 02 03 04 05 06 07 08

Credit spreads for bonds issued by

emerging market economiesPercentage points

Chart 1:7 Source: Bloomberg

0

2

4

6

8

10

12

01 02 03 04 05 06 07 08

Europe Asia EMBI+

T/N rate and repo ratePer cent


2.8

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

T/N rate Repo rate

Swedish government bond yieldsPer cent

Chart 1:9 Source: Reuters EcoWin

0

1

2

3

4

5

6

7

00 01 02 03 04 05 06 07 08

Duration 2 years Duration 5 years Duration 10 years

Stock market developmentsIndex, January 2006 = 100


80

90

100

110

120

130

140

Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08

Sweden - OMXS30 Europe - Stoxx USA - S&P 500

Developments in the bank sector

in different stock marketsIndex, January 2006=100


80

90

100

110

120

130

140

Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08

Sweden - OMX Europe - Stoxx USA - S&P 500

Implied stock market volatility

Per cent


0

10

20

30

40

50

60

00 01 02 03 04 05 06 07 08

Sweden - OMXS30 Europe - StoxxUSA - S&P 500 Historical average - OMXS30

Interest on US commercial papers and treasury bills

Per cent, duration 3 months

Chart B1 Source: Federal Reserve Bank

3

4

5

6

7

May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

Financial commercial papers Asset-backed commercial papersTreasury bills

Outstanding stock of UScommercial papersBillion dollars, seasonally-adjusted

Chart B2 Source: Federal Reserve Bank

700

800

900

1,000

1,100

1,200

Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07

Asset-backed commercial papers Non asset-backed commercial papers

Chapter 2The Swedish banks’

borrowers

The banks’ lending broken down into Swedish and foreign households and companies for the

second quarter of 2007Per cent

Chart 2:1 Source: the Riksbank

Swedish households 27%

Swedish companies 22%Foreign households

18%

Foreign companies 33%

Households’ real disposable income and saving ratioAnnual percentage change and per cent of

disposable income

Chart 2:2 Sources: Statistics Sweden and the Riksbank

-1

0

1

2

3

4

5

6

7

94 96 98 00 02 04 06 08 10

Ann

ual p

erce

ntag

e ch

ange

-2

0

2

4

6

8

10

12

14

Per cent of disposable incom

e

Disposable income (left scale) Saving ratio (right scale)

Households’ new saving in deposit accounts

SEK billion

Chart 2:3 Source: Statistics Sweden

0

5

10

15

20

25

30

35

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

Household borrowingAnnual percentage change

Chart 2:4 Source: the Riksbank

-3

0

3

6

9

12

15

18

96 97 98 99 00 01 02 03 04 05 06 07 08

Total Mortgage institutions

Households’ loan-to-value ratioPer cent

Sources: Statistics Sweden and the RiksbankChart 2:5

0

20

40

60

80

100

2000 2005

First-time house buyers Other house owners

SBAB 3-month variable rate, 3-month

interbank rate and the repo ratePer cent

Source: Reuters EcowinChart 2:6

0

1

2

3

4

5

6

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Repo rate SBAB 3-month rate 3-month interbank rate

Duration of fixed interest periods

for new house mortgage loansPer cent of new loan stock

Chart 2:7 Source: The Riksbank

0%

20%

40%

60%

80%

100%

97 98 99 00 01 02 03 04 05 06 07

Variable rate Fixed rate > 3 month Fixed rate > 5 years

Household debt and post-tax interest

expenditure in relation to disposable income

Per cent


0

40

80

120

160

200

82 86 90 94 98 02 06 10

0

4

8

12

16

20

Debt ratio (left scale) Interest expenditure ratio (right scale)

House prices and household debt

Index 1986=100


0

100

200

300

400

500

86 89 92 95 98 01 04 07

House prices Household debt

House mortgage debt and house prices

Annual percentage change

Sources: Statistics Sweden and the Riksbank

Chart 2:10

0

3

6

9

12

15

18

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

Loans from mortgage institutions House price

Tenant-owned apartment prices

SEK per square metre

Sources: Statistics Sweden and the Riksbank

Chart 2:11

0

10,000

20,000

30,000

40,000

02 03 04 05 06 07 08

Sweden Sweden excluding metropolitan areasStockholm region Göteborg regionMalmö region

House pricesAnnual percentage change

Chart B3 Source: Reuters Ecowin

-20

-10

0

10

20

30

40

50

60

87 90 93 96 99 02 05 08

Sweden Netherlands Germany


Chart B4 Source: Reuters Ecowin

-20

-10

0

10

20

30

40

50

60

87 90 93 96 99 02 05 08

Australia New Zealand United Kingdom


Chart R5 Source: Reuters Ecowin

-20

-10

0

10

20

30

40

50

60

87 90 93 96 99 02 05 08

USA Ireland Denmark



-20

-10

0

10

20

30

40

50

60

87 90 93 96 99 02 05 08

Spain France

US house pricesAnnual percentage change


-20

-10

0

10

20

30

40

50

60

88 90 92 94 96 98 00 02 04 06 08

Composite index Min/Max Min

Companies’ borrowing from credit institutions



-10

-5

0

5

10

15

92 94 96 98 00 02 04 06 08

Profitability in Swedish listed companies

Per cent

Chart 2:13 Sources: Bloomberg and the Riksbank

0

1

2

3

4

5

6

7

8

9

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Debt/equity ratio in Swedish listed companies

Ratio


1.0

1.1

1.2

1.3

1.4

1.5

1.6

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Number of company defaults broken down by company size

Twelve-month moving average

Chart 2:15 Source: Statistics Sweden

0

100

200

300

400

500

600

700

800

82 84 86 88 90 92 94 96 98 00 02 04 06 08

All companies 1-9 employees 10-49 employees

The average cost of capital for the public listed companies

Per cent


0

2

4

6

8

10

12

Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Capital cost Forecast

Expected default frequency, historical outcome and forecasts according to the

Riksbank’s main scenarioPer cent

Chart 2:17 Sources: Moody´s KMV and the Riksbank

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Dec-97

Dec-98

Dec-99

Dec-00

Dec-01

Dec-02

Dec-03

Dec-04

Dec-05

Dec-06

Dec-07

Dec-08

Dec-09

Dec-10

Real prices for office premises in city centres

Index 1981 = 100

Chart 2:18 Sources: Newsec AB and the Riksbank

0

100

200

300

400

500

81 83 85 87 89 91 93 95 97 99 01 03 05 07

Stockholm Göteborg Malmö

Vacancy rate for office premises in city centres

Per cent

Chart 2:19 Sources: NewSec AB and the Riksbank

0

5

10

15

20

25

90 92 94 96 98 00 02 04 06

Stockholm Göteborg Malmö

Average direct earnings requirements

on office properties in city centres

Per cent

Chart 2:20 Sources: Newsec AB and EcoWin

0

2

4

6

8

10

12

14

81 83 85 87 89 91 93 95 97 99 01 03 05 07

Stockholm Göteborg Malmö Five-year government bond

Geographical breakdown of the major banks’ lending

2006

Chart 2:21 Sources: The banks’ reports and the Riksbank

Sweden 50%

Other Nordic countries 30%

Rest of the world 10%

Germany 4%

Baltic countries 5%

House prices in the Nordic countries


Chart 2:22 Sources: Statistics Sweden, the BIS and Reuters EcoWin

-5

0

5

10

15

20

25

30

Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07

Sweden Finland Denmark Norway

Expected default frequency for listed non-financial companies in the Nordic

countries and GermanyPer cent

Chart 2:23 Source: Moody’s KMV

0.01

0.1

1

10

Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07

Sweden Norway Denmark Finland Germany

Proportions of lending to the private sector in foreign currency and domestic

currency respectivelyPer cent, September 2007

Chart 2:24 Sources: National central banks

0%

20%

40%

60%

80%

100%

Estonia Latvia Lithuania

Foreign currency Domestic currency

Current accountPer cent of GDP, totalled over four quarters

Chart 2:25 Source: Reuters Ecowin

-30

-25

-20

-15

-10

-5

0

00 01 02 03 04 05 06 07


Harmonised index for consumer pricesAnnual percentage change


-3

0

3

6

9

12

15

00 01 02 03 04 05 06 07 08


PopulationAnnual percentage change


-3

-2

-1

0

1

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

Sweden Estonia Latvia Lithuania

Household borrowing in the Baltic countries



-20

0

20

40

60

80

100

120

140

01 02 03 04 05 06 07 08


Household debts in relation to GDP

in Sweden and the Baltic countries

Per cent


0

10

20

30

40

50

60

70

80

94 95 96 97 98 99 00 01 02 03 04 05 06 07


Companies’ borrowing from credit

institutions in the Baltic countries



-10

0

10

20

30

40

50

60

01 02 03 04 05 06 07 08


Companies’ outstanding credit volumes in the

Baltic countries and in Sweden in relation to GDP

Per cent


0

10

20

30

40

50

60

Dec-93

Dec-94

Dec-95

Dec-96

Dec-97

Dec-98

Dec-99

Dec-00

Dec-01

Dec-02

Dec-03

Dec-04

Dec-05

Dec-06

Dec-07


Chapter 3Developments in the

banks

Profit before loan losses and net

loan losses in the major banksTotalled over four quarters, SEK billion, 2007 prices


-20

0

20

40

60

80

100

De

c-9

0

De

c-9

2

De

c-9

4

De

c-9

6

De

c-9

8

De

c-0

0

De

c-0

2

De

c-0

4

De

c-0

6

De

c-0

8

Profit before loan losses Loan losses Profit before loan losses according to IFRS

Bank shares’ implied volatility

10-day moving average, per cent


0

20

40

60

80

100

99 00 01 02 03 04 05 06 07 08

SEB Handelsbanken Nordea Swedbank

Share price development in the financial

sectors on various stock markets

Index: 1 July 2007 = 100


80

90

100

110

Jul Aug Sep Oct Nov Dec

Sweden Europe USA

Swedish major banks’ share price developments

Index: 1 July 2007 = 100

Chart 3:4 Source: OMX

70

80

90

100

110

Jul Aug Sep Oct Nov Dec


The major banks’ interest rate differential

on Swedish bank and mortgage lending

Four-quarter moving average, per cent


0.0

0.5

1.0

1.5

2.0

2.5

3.0

97 98 99 00 01 02 03 04 05 06 07

Bank lending Mortgage lending (new lending)

The major banks’ securities-related commission

income and Stockholm Stock Exchange turnover

SEK million and index: 1997= 100

Chart 3:6 Sources: The banks’ reports, Reuters EcoWin and the Riksbank

0

1000

2000

3000

4000

5000

6000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

0

100

200

300

400

500

600

Brokerage incomeAsset management-related incomeTurnover Stockholm stock exchange (index, right scale)

2003 2004 2005 2006 2007

Cost efficiency at the major banksPer cent


40

50

60

70

95 96 97 98 99 00 01 02 03 04 05 06 07

C/I ratio C/I ratio according to IFRS

Lending to the general public

in Sweden and abroadAnnual percentage change up to end of September 2007

Sources: The banks’ reports and the RiksbankChart 3:8

0

5

10

15

20

25

30

35

40

Swedbank Handelsbanken Nordea SEB

Total Sweden Abroad

Provisions for incurred and probable loan losses

Totalled over four quarters, per cent


0,0

0,2

0,4

0,6

0,8

1,0

1,2

97 98 99 00 01 02 03 04 05 06 07


Tier 1 capital ratiosPer cent


4

6

8

10

12

97 98 99 00 01 02 03 04 05 06 07


The banks’ issued securitiesPer cent of lending

Chart 3:11

20

30

40

50

60

70

97 98 99 00 01 02 03 04 05 06 07


Sources: The banks’ reports and the Riksbank

The banks’ issued securities’

maturity structuresPer cent


0%

20%

40%

60%

80%

100%

00 01 02 03 04 05 06 07 08

0-6 months 6-12 months 1-3 years >3 years

Share of issued securities in different

currencies, November 2007SEK billion


0

50

100

150

200

250

300

Handelsbanken Nordea Swedbank SEB

SEK EUR USD Other currencies

European banks’ issued securities in relation to

lending and average time to maturity, October 2007Per cent and year

Chart 3:14 Sources: The banks’ reports and Bloomberg

Handelsbanken

Swedbank

Dexia

Intesa Sanpaolo

Natixis

Nordea

Danske Bank

DnB Nor

BBVA

SEB

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 2 4 6 8 10 12 14

Year

Dresdner Bank

Banks interbank market net borrowing

as share of lending portfolioPer cent


-10

0

10

20

30

00 01 02 03 04 05 06 07


The major bank with the lowest Tier 1 capital ratio after another Swedish major

bank defaulted on paymentsPer cent


2

3

4

5

6

99 00 01 02 03 04 05 06 07

Bank profits with the scenario for the Baltic countries

Expected profit minus change in expected loss, SEK million


0

2000

4000

6000

8000

10000

12000

Year 0 Year 1 Year 2 Year 3 Year 0 Year 1 Year 2 Year 3

SEB Swedbank

Cover for credit risk with the scenario for the Baltic

countriesPer cent


0

50

100

150

200

250

Year 0 Year 1 Year 2 Year 3 Year 0 Year 1 Year 2 Year 3

SEB Swedbank

Bank profits in the scenario with a turn in the credit cycle

Expected profit minus change in expected loss, SEK million


0

5,000

10,000

15,000

20,000

25,000

30,000

Year 0 Year 0 Year 0 Year0 Year 0

SEB SwedbankNordeaHandelsbanken Danske Bank

Year1 2 30 1 2 30 1 2 30 1 2 30 1 2 30

Cover for credit risk in the scenario

with a turn in the credit cyclePer cent


0

50

100

150

200

250

300

jan/00 jan/00 jan/00 jan/00 jan/00

SEB SwedbankNordeaHandelsbanken Danske Bank

Year1 2 30 1 2 30 1 2 30 1 2 30 1 2 30

Increased funding costs in a 3-month liquidity crisis

SEK million

Chart 3:21 Sources: The banks’ reports and Bloomberg

0

150

300

450

600

750

900

Nordea SEB SHB Swedbank

Documents

Financial Stability Report 2007:2