financial stability report 2007:2 4 december 2007
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FinancialStabilityReport2007:2
4 December 2007
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CHAPTER 1Financial markets
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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
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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
Source: Reuters EcoWin
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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
Source: Reuters EcoWin
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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
Source: Reuters EcoWin
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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
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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
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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+
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T/N rate and repo ratePer cent
Chart 1:8 Source: Bloomberg
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
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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
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Stock market developmentsIndex, January 2006 = 100
Source: Reuters EcoWinChart 1:10
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
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Developments in the bank sector
in different stock marketsIndex, January 2006=100
Source: Reuters EcoWinChart 1:11
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
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Implied stock market volatility
Per cent
Chart 1:12 Source: Bloomberg
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
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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
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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
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Chapter 2The Swedish banks’
borrowers
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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%
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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)
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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
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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
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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
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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
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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
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Household debt and post-tax interest
expenditure in relation to disposable income
Per cent
Sources: Statistics Sweden and the RiksbankChart 2:8
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)
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House prices and household debt
Index 1986=100
Sources: Statistics Sweden and the RiksbankChart 2:9
0
100
200
300
400
500
86 89 92 95 98 01 04 07
House prices Household debt
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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
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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
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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
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House pricesAnnual percentage change
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
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House pricesAnnual percentage change
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
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House pricesAnnual percentage change
Chart R6 Source: Reuters Ecowin
-20
-10
0
10
20
30
40
50
60
87 90 93 96 99 02 05 08
Spain France
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US house pricesAnnual percentage change
Chart R7 Source: Reuters Ecowin
-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
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Companies’ borrowing from credit institutions
Annual percentage change
Chart 2:12 Source: The Riksbank
-10
-5
0
5
10
15
92 94 96 98 00 02 04 06 08
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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
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Debt/equity ratio in Swedish listed companies
Ratio
Chart 2:14 Sources: Bloomberg and the Riksbank
1.0
1.1
1.2
1.3
1.4
1.5
1.6
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
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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
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The average cost of capital for the public listed companies
Per cent
Chart 2:16 Sources: Bloomberg and the Riksbank
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
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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
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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
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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
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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
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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%
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House prices in the Nordic countries
Annual percentage change
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
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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
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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
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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
Estonia Latvia Lithuania
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Harmonised index for consumer pricesAnnual percentage change
Chart 2:26 Source: Reuters Ecowin
-3
0
3
6
9
12
15
00 01 02 03 04 05 06 07 08
Estonia Latvia Lithuania
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PopulationAnnual percentage change
Chart 2:27 Source: Reuters Ecowin
-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
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Household borrowing in the Baltic countries
Annual percentage change
Chart 2:28 Sources: National central banks
-20
0
20
40
60
80
100
120
140
01 02 03 04 05 06 07 08
Estonia Latvia Lithuania
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Household debts in relation to GDP
in Sweden and the Baltic countries
Per cent
Chart 2:29 Sources: National central banks
0
10
20
30
40
50
60
70
80
94 95 96 97 98 99 00 01 02 03 04 05 06 07
Sweden Estonia Latvia Lithuania
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Companies’ borrowing from credit
institutions in the Baltic countries
Annual percentage change
Chart 2:30 Sources: National central banks
-10
0
10
20
30
40
50
60
01 02 03 04 05 06 07 08
Estonia Latvia Lithuania
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Companies’ outstanding credit volumes in the
Baltic countries and in Sweden in relation to GDP
Per cent
Chart 2:31 Sources: National central banks
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
Sweden Estonia Latvia Lithuania
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Chapter 3Developments in the
banks
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Profit before loan losses and net
loan losses in the major banksTotalled over four quarters, SEK billion, 2007 prices
Chart 3:1 Sources: The banks’ reports and the Riksbank
-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
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Bank shares’ implied volatility
10-day moving average, per cent
Chart 3:2 Sources: Bloomberg and the Riksbank
0
20
40
60
80
100
99 00 01 02 03 04 05 06 07 08
SEB Handelsbanken Nordea Swedbank
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Share price development in the financial
sectors on various stock markets
Index: 1 July 2007 = 100
Chart 3:3 Source: Reuters Ecowin
80
90
100
110
Jul Aug Sep Oct Nov Dec
Sweden Europe USA
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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
SEB Handelsbanken Nordea Swedbank
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The major banks’ interest rate differential
on Swedish bank and mortgage lending
Four-quarter moving average, per cent
Chart 3:5 Sources: The banks’ reports and the Riksbank
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)
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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
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Cost efficiency at the major banksPer cent
Chart 3:7 Sources: The banks’ reports and the Riksbank
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
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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
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Provisions for incurred and probable loan losses
Totalled over four quarters, per cent
Chart 3:9 Sources: The banks’ reports and the Riksbank
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
SEB Handelsbanken Nordea Swedbank
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Tier 1 capital ratiosPer cent
Chart 3:10 Sources: The banks’ reports and the Riksbank
4
6
8
10
12
97 98 99 00 01 02 03 04 05 06 07
SEB Handelsbanken Nordea Swedbank
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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
SEB Handelsbanken Nordea Swedbank
Sources: The banks’ reports and the Riksbank
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The banks’ issued securities’
maturity structuresPer cent
Chart 3:12 Source: Bloomberg
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
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Share of issued securities in different
currencies, November 2007SEK billion
Chart 3:13 Source: Bloomberg
0
50
100
150
200
250
300
Handelsbanken Nordea Swedbank SEB
SEK EUR USD Other currencies
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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
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Banks interbank market net borrowing
as share of lending portfolioPer cent
Chart 3:15 Sources: The banks’ reports and the Riksbank
-10
0
10
20
30
00 01 02 03 04 05 06 07
SEB Handelsbanken Nordea Swedbank
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The major bank with the lowest Tier 1 capital ratio after another Swedish major
bank defaulted on paymentsPer cent
Chart 3:16 Source: The Riksbank
2
3
4
5
6
99 00 01 02 03 04 05 06 07
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Bank profits with the scenario for the Baltic countries
Expected profit minus change in expected loss, SEK million
Chart 3:17 Sources: The banks’ reports and the Riksbank
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
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Cover for credit risk with the scenario for the Baltic
countriesPer cent
Chart 3:18 Sources: The banks’ reports and the Riksbank
0
50
100
150
200
250
Year 0 Year 1 Year 2 Year 3 Year 0 Year 1 Year 2 Year 3
SEB Swedbank
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Bank profits in the scenario with a turn in the credit cycle
Expected profit minus change in expected loss, SEK million
Chart 3:19 Sources: The banks’ reports and the Riksbank
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
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Cover for credit risk in the scenario
with a turn in the credit cyclePer cent
Chart 3:20 Sources: The banks’ reports and the Riksbank
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
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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