January-March 2019

(Compared to January-March 2018)

·         Net interest income Skr 395 million (3M18: Skr 382 million)

·         Operating profit Skr 352 million (3M18: Skr 180 million)

·         Net profit Skr 274 million (3M18: Skr 136 million)

·         New lending Skr 13.3 billion (3M18: Skr 13.0 billion)

·         Basic and diluted earnings per share Skr 69 (3M18: Skr 34)

·         After-tax return on equity 5.9 percent (3M18: 3.1 percent)

Equity and balances

(Compared to December 31, 2018)

·         Total capital ratio 19.8 percent (year-end 2018: 20.1 percent)

·         Total assets Skr 313.1 billion (year-end 2018: Skr 302.0 billion)

·         Loans, outstanding and undisbursed Skr 264.4 billion (year-end 2018: Skr 260.0 billion)

New clients and new client offering

The inflow of new medium-sized company clients remained healthy through the first quarter. Total new lending amounted to Skr 13.3 billion (3M18: Skr 13.0 billion).

In the first quarter, SEK launched its new simplified loan product “Enkla exportlånet,” which aims to help Swedish exporters grow globally and has generated considerable interest. Enkla exportlånet is aimed at export companies and their suppliers. Established and innovative companies with a turnover between Skr 200-1000 million can apply for loans up to Skr 65 million. Through SEK’s cooperation with the European Investment Fund, SEK can offer customers loans without posting additional collateral, at a favorable interest rate.

Access to financing remains healthy for exporters.

New lending

1               Of which Skr 0.4 billion (3M18: Skr 0.0 billion; year-end 2018: Skr 0.0 billion) had not been disbursed at period end.

2               Of which Skr 1.0 billion (3M18: Skr 1.3 billion; year-end 2018: Skr 5.1 billion) had not been disbursed at period end.

Lower borrowing cost

During the quarter, SEK achieved a borrowing cost below that contained in SEK’s financial plan. To a greater extent, the company has taken advantage of high market demand for floating interest rate notes in conjunction with reducing the tenors for borrowing. Moreover, SEK has increased diversification in terms of instruments and currencies, and increased the share of borrowing in the Japanese market. Through these measures, SEK was able to meet borrowing needs during the quarter without issuing any benchmark bonds. SEK continues to have high liquidity for new lending and is well prepared to meet the future financing needs of the Swedish export industry.

SEK’s borrowing

January-March 2019

Operating profit amounted to Skr 352 million (3M18: Skr 180 million). Net profit amounted to Skr 274 million (3M18: Skr 136 million).

Net interest income

Net interest income amounted to Skr 395 million (3M18: Skr 382 million), an increase of 3 percent compared to the same period in the previous year. Net interest income was affected positively by Skr 29 million due to a lower resolution fee of Skr 41 million (3M18: Skr 70 million), which SEK is required to pay to a fund to support the recovery of credit institutions. In 2019, the resolution fee amounts to 0.09 percent of the calculation basis (2018: 0.125 percent), which essentially corresponds to SEK’s debt-financed assets less the CIRR loans. In 2020, the resolution fee will be 0.05 percent.

Net interest income was affected negatively by a higher volume of liquidity coverage ratio (LCR) assets, which bear little or no interest, in the liquidity investments.

The table below shows average interest-bearing assets and liabilities.

1       Since 2019 SEK has chosen to exclude cash collateral under the security agreements for derivative contracts from liquidity investments. Comparative figures  have been adjusted.

Net results of financial transactions

Net results of financial transactions amounted to Skr 105 million (3M18: Skr -59 million). The result was mainly due to unrealized changes in fair value of assets in the liquidity portfolio and derivatives, and improvements in the method of valuation of derivatives.

Operating expenses

The operating expenses increased 2 percent compared to the same period in the previous year, due to increased personnel expenses and depreciation and impairment of non-financial assets. Due to IFRS 16, Leases all leases are to be recognized as assets subject to depreciation, and therefore, the operating lease expense has been replaced by an expense for depreciation of the lease asset.

Beginning in 2017, SEK introduced a system for individual variable remuneration for permanent employees with customer or business responsibility, with the exception of members of the executive management team. For the first quarter of 2019, a provision of Skr 3 million was made for the individual variable remuneration in the system (3M18: Skr - million).

Net credit losses

Net credit losses amounted to Skr 9 million (3M18: Skr 5 million). The positive result was mainly attributable to changed risk factors according to IFRS 9. Loss allowances as of March 31, 2019 amounted to Skr -134 million compared to Skr -139 million as of December 31, 2018 of which exposures in stage 3 amounted to Skr -89 million (year-end 2018: Skr -84 million).  The reserve was affected negatively by exchange rate effects.

Other comprehensive income (OCI)

Other comprehensive income before tax amounted to Skr -7 million (3M18: Skr 54 million), mainly due to positive changes in own credit risk, which were offset by the revaluation of defined benefit plans. The hedge reserve related to cash-flow hedges has been redeemed and reclassified to profit or loss during the first quarter of 2019, which had a negative effect on OCI.

Statement of Financial Position

Total assets and liquidity investments

Total assets increased compared to the end of 2018, mainly due to exchange rate effects.

1       Since 2019 SEK has chosen to exclude cash collateral under the security agreements for derivative contracts from liquidity investments. Comparative figures  have been adjusted.

Total exposures amounted to Skr 351.5 billion on March 31, 2019 (year-end 2018: Skr 337.4 billion). SEK’s exposures to all counterparties has increased since year-end 2018. See Note 10.

Liabilities and equity

As of March 31, 2019, the aggregate volume of available funds and shareholders’ equity exceeded the aggregate volume of loans outstanding and loans committed at all maturities. Accordingly, SEK considers all of its outstanding commitments to be covered through maturity.

In 2019, SEK has a credit facility in place with the Swedish National Debt Office of up to Skr 125 billion. To date, SEK has not utilized the credit facility. The credit facility can only be utilized for loans covered by the CIRR and should be a reserve when funding markets are not available to SEK.

Capital adequacy

As of March 31, 2019, the total capital ratio was 19.8 percent (year-end 2018: 20.1 percent). SEK maintains strong capitalization in relation to the capital target, with a total capital ratio that exceeds the total capital adequacy requirement of Finansinspektionen (the Swedish FSA) by 3.3 percentage points, and has healthy liquidity.

Rating

Other events

Hélène Westholm chose to leave the Board of Directors of SEK (the “Board”), as well as the Remuneration Committee and the Audit Committee, after approximately one year of service, effective January 31, 2019. Hanna Lagercrantz was elected to the Board as Director at the Annual General Meeting on March 28, 2019, at which time she also became a member of the Remuneration Committee and the Audit Committee.

As previously described, in order to increase the focus on customers, SEK has made certain organizational changes.  Three new roles were created: Executive Vice President, Strategic Partnerships and Relationships; Chief Financial Officer (CFO); and Head of Business Development, Business Support and Transformation. Per Åkerlind, previously Executive Vice President and Head of Treasury and Capital Management at SEK, has been appointed as Executive Vice President, Strategic Partnerships and Relationships. Stefan Friberg, formerly Chief Risk Officer at SEK, has been appointed CFO and Susanna ­Rystedt, who previously held the role of Chief Administrative Officer at SEK, has been appointed as Head of Business Development, Business Support and Transformation. In conjunction with the introduction of these roles, the roles of Head of Treasury and Capital Management and Chief Administrative Officer have been removed and the accounting and treasury units have been reorganized under the same manager, the CFO. The change also means that the Head of Sustainability will report to the Executive Vice President, Strategic Partnerships and Relationships instead of the CEO. Irina Slinko has been appointed as acting Chief Risk Officer. This stage of organizational changes became effective on January 1, 2019.

Risk factors and the macro environment

Various risks arise as part of SEK’s operations. SEK’s primary exposure is to credit risk, but the company is also exposed to market, liquidity, refinancing, operational and sustainability risks. For a more detailed description of SEK’s risk factors, refer to the Risk and Capital Management section in SEK’s 2018 Annual Report. Sweden’s GDP grew at a rate of 2.4 percent in the fourth quarter of 2018 on an annualized basis. Sweden’s unemployment rate was 6.2 percent in February 2019. The consumer price index rose 1.9 percent in February 2019 on an annualized basis and the repo rate was negative at 0.25 percent. According to Statistics Sweden (SCB), in the fourth quarter of 2018, Swedish exports increased 3.1 percent compared to the prior quarter. The Swedish economy has continued to post a healthy growth rate and public finances remained strong. However, some of the economic indicators point toward a slight slowdown. Growth in world trade has slowed during the year. Global macroeconomic indicators have weakened, even though the US economy still remains relatively strong. There is a growing expectation of a slowdown in global activity, and anxiety exists regarding trade and geopolitical risks. The negotiations for the UK’s withdrawal from the EU and the trade conflict between the US and China are two events that remain highly prominent on the global agenda.

This condensed interim report is presented in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting. The Group’s consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) together with the interpretations from IFRS Interpretations Committee (IFRS IC). The IFRS standards applied by SEK are all endorsed by the European Union (EU). The accounting also follows the additional standards imposed by the Annual Accounts Act for Credit Institutions and Securities Companies (1995:1559) (ÅRKL) and the regulation and general guidelines issued by Finansinspektionen (the Swedish FSA), “Annual Reports in Credit Institutions and Securities Companies” (FFFS 2008:25). In addition to this, the supplementary accounting rules for groups (RFR 1) issued by the Swedish Financial Reporting Board have been applied. SEK also follows the state’s general guidelines regarding external reporting in accordance with its corporate governance policy and guidelines for state-owned companies.

The accounting policies, methods of computation and presentation of the Consolidated Group and the Parent Company are, in all material aspects, the same as those used for the 2018 annual financial statements except for the application of the new and amended standards from IASB that entered into force beginning January 1, 2019. This interim report does not include all the disclosures required in the annual financial statements, and should be read in conjunction with the company’s annual financial statements as of December 31, 2018.

As of January 1, 2019, SEK began applying IFRS 16 Leases to the Consolidated Group and the Parent Company. The standard replaces IAS 17 and related interpretations, with changes for lessees. The standard became applicable January 1, 2019. All leases (with the exception of short-term and low-value leases) are to be recognized as right-of-use assets subject to depreciation with corresponding liabilities in the lessee’s balance sheet, and the lease payments recognized as repayments and interest expenses. As a result, the straight-line operating lease expense is replaced by an expense for depreciation of the right-of-use lease assets and an interest expense on the lease liability.

Lessor accounting remains essentially unchanged. IFRS 16 has primarily affected SEK’s recognition of operational leases for rental premises, as the lease definition and lease criteria have not resulted in other agreements being regarded as leases as compared to IAS 17. SEK has also decided to apply the exceptions for short-term and low-value leases. The right-of-use asset is accounted for under Tangible and intangible assets and the leasing liability is accounted for under Other liabilities. The lease term is determined as the non-cancellable period of a lease, together with any extension or termination options when SEK is reasonably certain to exercise them. The future cash flows are discounted using SEK’s incremental borrowing rate.

SEK applied the simplified approach during the transition to IFRS 16, and measured the right-of-use asset at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to the lease. Right-of-use assets, leasing liabilities, depreciations and interest expenses are not expected to have any material impact on SEK’s financial statements or capital adequacy or large exposure ratios.

The table shows the transition effect of IFRS 16 reconciling the closing balances under IAS 17 as of December 31, 2018, with the opening balances under IFRS 16 as of January 1, 2019.

Other changes from IASB have not had any material impact on SEK’s financial reporting for 2019 and there are no other IFRS or IFRS IC interpretations that are not yet applicable that are expected to have a material impact on SEK’s financial statements, capital adequacy or large exposure ratios.

Transition effect on Consolidated Statement of Financial Position

SEK’s general business model is to hold financial instruments measured at fair value to maturity. The net market value changes are mainly attributable to changes in credit spread on own debt, which are reported in other comprehensive income, and basis spreads, which are reported in net results of financial transactions. The changes could be significant in a single reporting period, but will not affect earnings over time since the lifetime cumulative changes in the instrument’s market value will net to zero if it is held to maturity and is a performing instrument. When financial instruments are not held to maturity, realized gains and losses can occur, as in cases where SEK

repurchases its own debt, or where lending is repaid early and the related hedging instruments are terminated prematurely. These effects are presented in the following line items of net results of financial transactions in the table above: “Derecognition of financial instruments not measured at fair value through profit or loss”, “Financial assets or liabilities at fair value through profit or loss” and “Financial instruments under fair-value hedge accounting”. “Financial assets or liabilities at fair value through profit or loss” and “Financial instruments under fair-value hedge accounting” include realized as well as unrealized changes in fair value.