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Financial Stability Report June 2008

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

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Financial Stability Report June 2008

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  1. Financial Stability Report June 2008

  2. Financial Stability Report 2008:1 • Financial stability in Sweden is satisfactory • Contingent risks have increased

  3. 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

  4. The banks have good profitabilityResults before loan losses and loan losses, net, in the major bankstotalled over four quarters, SEK billion (IFRS: International Financial Reporting Standards) Chart 3:1 Sources: The banks’ reports and the Riksbank

  5. 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

  6. High – but declining – credit spreadsDifference between corporate bonds and government bonds in the United States, per cent Chart 1:3 Source: Reuters EcoWin

  7. Interbank rate in relation to expected policy rate 3 month basis spread Note: Interest rate spread between 3 month interbank rate and overnight index swap Chart 1:2 Source: Bloomberg

  8. 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

  9. Lending SEB 11% Swedbank 16% Nordea 2.3% Results SEB 20% Swedbank 32% Nordea 1.8% Swedish banks in the Baltic countries Market shares for lending 2007Q4 Baltics’ share of lending and results 2008Q1 Total market according to Swedbank’s Fact Book 2007 Q4. SEB’s lending also includes credit exposures to off-balance sheet items.

  10. Growth slackening in the Baltic countriesGDP growth, annual percentage change Chart 2:27 Source: Reuters EcoWin

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

  12. Large current account deficitPercentage of GDP, totalled over four quarters Chart 2:29 Source: Reuters Ecowin

  13. 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

  14. 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

  15. Rising commercial property prices Real prices for office premises in inner city locations, Index: 1981=100 Sources: Newsec AB and Reuters EcoWin Chart 2:21

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

  17. 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

  18. Household debts increasing more slowlyAnnual percentage change Chart 2:3 Source: The Riksbank

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

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

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