January-December 2019

(Compared to January-December 2018)

·           Net interest income Skr 1,717 million (2018: Skr 1,442 million)

·           Operating profit Skr 1,304 million (2018: Skr 852 million)

·           Net profit Skr 1,027 million (2018: Skr 648 million)

·           New lending Skr 74.5 billion (2018: Skr 57.0 billion)

·           Basic and diluted earnings per share Skr 257 (2018: Skr 162)

·           After-tax return on equity 5.5 percent (2018: 3.6 percent)

Fourth quarter of 2019

(Compared to the fourth quarter of 2018)

·           Net interest income Skr 431 million (4Q18: Skr 378 million)

·           Operating profit Skr 371 million (4Q18: Skr 255 million)

·           Net profit Skr 294 million (4Q18: Skr 194 million)

·           New lending Skr 12.9 billion (4Q18: Skr 17.7 billion)

·           Basic and diluted earnings per share Skr 74 (4Q18: Skr 49)

·           After-tax return on equity 6.2 percent (4Q18: 4.3 percent)

Equity and balances

(Compared to December 31, 2018)

·           Total capital ratio 20.6 percent (year-end 2018: 20.1 percent)

·           Total assets Skr 317.3 billion (year-end 2018: Skr 302.0 billion)

·           Loans, outstanding and undisbursed Skr 269.7 billion (year-end 2018: Skr 260.0 billion)

·           Proposed ordinary dividend Skr 308 million (year-end 2018: Skr 194 million)

SEK launches new products

In 2019, SEK met considerable success in attracting new clients and expanding its business with existing clients. Since the year-end 2018, the client base has increased 20 percent, which means SEK now has more clients than ever before. SEK experienced an increased demand for green financing, and in the fall of 2019 launched two new product offerings; green loans and financing for the transition to fossil free energy.

SEK’s leasing and installment plans were successful during the fourth quarter, where the largest markets were the US, Mexico and France. Moreover, the simplified loan product “Enkla exportlånet” aimed at medium-sized companies also performed strongly and is an efficient means for SEK’s clients to finance their export transactions. New lending was down on a quarterly basis for the fourth quarter but up on an annual basis, which was attributable, in part, to an increased demand for working capital and export credits.

New lending

1    Of which Skr 1.8 billion (year-end 2018: Skr 0.0 billion) had not been disbursed at period end.

2    Of which Skr 16.3 billion (year-end 2018: Skr 5.1 billion) had not been disbursed at period end.

Lowered borrowing cost

SEK remains active in the public sector USD market. Issuances during the fourth quarter included a USD 1.25 billion three-year fixed-rate benchmark bond as well as a USD 500 million four-year fixed-rate bond. The company continues to maintain a strong presence in the Japanese market and has retained its increased borrowing diversification in terms of financial instruments and currencies. At the end of the fourth quarter, the borrowing cost of debt outstanding was slightly lower than at year-end 2018. 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-December 2019

Operating profit amounted to Skr 1,304 million (2018: Skr 852 million). Net profit amounted to Skr 1,027 million (2018: Skr 648 million). The increase compared to the previous year was due to higher net interest income and net results of financial transactions.

Net interest income

Net interest income amounted to Skr 1,717 million (2018: Skr 1,442 million), an increase of 19 percent compared to the ­previous year. A weak Swedish krona and a higher market interest rate in Swedish krona, together with increased lending volumes, have positively impacted the net interest income. Net interest income also increased by Skr 97 million due to a lower resolution fee that amounted to a total of Skr 169 ­million (2018: Skr 266 million), which SEK is required to pay to a fund to support the recovery of credit institutions. In 2019, the ­resolution fee amounts to 0.090 percent of the calculation basis (2018: 0.125 percent), which essentially corresponds to SEK’s debt financed assets less the officially supported export credit (CIRR) loans. In 2020, the resolution fee will be 0.05 percent.

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

1            Since 2019, SEK has excluded cash collateral under the security agreements for derivative contracts from the definition of liquidity investments. Comparative figures have been adjusted.

Net results of financial transactions

Net results of financial transactions amounted to Skr 226 ­million (2018: Skr 19 million). The result was mainly due to unrealized changes in fair value of derivatives as well as ­realized gains related to repurchase of SEK’s own debt and early ­repayment of loans.

Operating expenses

Operating expenses increased 2 percent compared to the previous year, which is mainly due to an increase in personnel expenses. In 2019, a provision of Skr 10 million was made for the individual variable remuneration program (2018:  Skr - million).

Due to International Financial Reporting Standards (IFRS) 16 Leases, all leases are to be recognized as assets subject to depreciation, and therefore, operating lease expense has been replaced by an expense for depreciation of the lease asset. Due to this change, Skr 32 million is now reported as a depreciation of the lease asset instead of a lease expense under other administrative expenses. See note 1 for more information.

Net credit losses

Net credit losses amounted to Skr -10 million (2018: Skr 7 ­million). The net credit losses were attributable to increased individual impairments, which were offset by the reversal of the excess of previously recorded reserves for established losses above the realized loss. Loss allowances as of December 31, 2019 amounted to Skr -128 million compared to Skr -139 million as of December 31, 2018 of which exposures in stage 3 amounted to Skr -64 million (year-end 2018: Skr -84 million). The reserve was affected negatively by exchange rate effects.

Taxes

Tax costs amounted to Skr -277 million (2018: Skr -204 ­million), and the effective tax rate amounted to 21.2 percent (2018: 24.0 percent). The decrease in the effective tax rate was due to a redemption in November 2018 of subordinated debt which had non-deductible interest expenses. The nominal tax rate for 2019 is 21.4 percent (2018: 22.0 percent).

Other comprehensive income (OCI)

Other comprehensive income before tax amounted to Skr 12 million (2018: Skr 301 million), mainly due to a positive result related to changes in own credit risk, which was offset by a ­negative result related to the revaluation of defined benefit plans and dissolution of cash-flow hedges.

The hedge reserve related to cash-flow hedges has been redeemed and reclassified to profit or loss during the first half of 2019, which had a negative effect on OCI of Skr -8 million (2018: Skr -25 million).

Fourth quarter 2019

Operating profit for the fourth quarter amounted to Skr 371 million (4Q18: Skr 255 million). Net profit amounted to Skr 294 million (4Q18: Skr 194 million). The increase compared to the same period in the previous year was mainly due to increased net interest income and net results of financial transactions.

Net interest income

Net interest income for the fourth quarter amounted to Skr 431 million (4Q18: Skr 378 million), an increase of 14 percent compared to the same period in the previous year. An increase in lending together with a weak Swedish krona and a higher market interest rate in Swedish krona have also positively impacted net interest income. Net interest income increased by Skr 24 million due to a lower resolution fee that amounted to a total of Skr 42 million (4Q18: Skr 66 million).

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

1              Since 2019, SEK has excluded cash collateral under the security agreements for derivative contracts from the definition of liquidity investments. Comparative figures have been adjusted.

Net results of financial transactions

Net results of financial transactions for the fourth ­quarter ­amounted to Skr 113 million (4Q18: Skr 56 million). The result was mainly due to unrealized changes in fair value of ­derivatives.

Operating expenses

Operating expenses decreased 1 percent compared to the same period in the previous year, due to decreased administrative expenses and depreciation and impairment of non-financial assets, mainly related to intangible assets. During the fourth quarter of 2019, a provision of Skr 3 million was made for the individual variable remuneration ­program (4Q18: Skr - million).

Net credit losses

Net credit losses for the fourth quarter amounted to Skr -2 million (4Q18: Skr -1 million). The net credit losses during the quarter were mainly attributable to increased lending. Loss allowances as of December 31, 2019 amounted to Skr -128 ­million compared to Skr -139 million as of December 31, 2018 of which exposures in stage 3 amounted to Skr -64 million (year-end 2018: Skr -84 million).  The reserve was affected by positive exchange rate effects during the fourth quarter.

Taxes

Tax costs amounted to Skr -77 million (4Q18: Skr -61 million), and the effective tax rate amounted to 20.8 percent (4Q18: 23.9 percent). The nominal tax rate for 2019 is 21.4 percent (2018: 22.0 percent).

Other comprehensive income (OCI)

Other comprehensive income before tax amounted to Skr 19 million (4Q18: Skr 41 million), mainly due to a gain resulting from the revaluation of defined benefit plans, offset by a ­loss from changes in own credit risk.

Statement of Financial Position

Total assets and liquidity investments

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

1              Since 2019, SEK has excluded cash collateral under the security agreements for derivative contracts from the definition of liquidity investments. Comparative figures have been adjusted.

Total net exposures amounted to Skr 347.5 billion on December 31, 2019 (year-end 2018: Skr 337.4 billion). SEK’s exposures to most counterparties have increased, but exposures to central governments and corporates have decreased since year-end 2018. See Note 10.

Liabilities and equity

As of December 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-system and is intended as a reserve when funding markets are not available to SEK. In December 2019, the Swedish Parliament confirmed that the credit facility will continue to be available in 2020 in an amount up to Skr 125 billion.

Capital adequacy

As of December 31, 2019, SEK’s total own funds amounted to Skr 18.3 billion (year-end 2018: Skr 17.5 billion). The total capital ratio was 20.6 percent (year-end 2018: 20.1 percent), representing a margin of 3.8 percentage points above the requirement of 16.8 percent from Finansinspektionen (the Swedish FSA). The corresponding Common Equity Tier 1 ­capital­ requirement was 12.0 percent. Given that SEK’s own funds are ­comprised solely of Common Equity Tier 1 capital, this represents a margin of 8.6 percentage points above the requirement. Overall, SEK is strongly capitalized and has healthy liquidity.

1              In the second quarter of 2019, SEK has changed its methodology for calculating NSFR as an adaptation to future regulatory requirements.

Rating

Dividend

The Board of Directors has resolved to propose the payment of a dividend of Skr 308 million (2018: Skr 194 million) at the company’s annual general meeting, corresponding to the company´s dividend policy of 30 percent of the profit for the year.

Other events

The company held an extraordinary general meeting on June 17, 2019, at which the meeting approved the Board of Director’s proposal to set SEK’s total capital ratio to exceed the Swedish FSA’s requirement by 2 to 4 percentage points and to exceed the requirement for Common Equity Tier 1 capital ratio by at least 4 percentage points.

Peter Svensén assumed the position as Chief Risk Officer on October 28, 2019, joining SEK from SBAB Bank AB (publ), the state mortgage bank, where he held the same position.

Risk factors and the macro environment

Various risks arise as part of SEK’s operations, which primarily consist of credit risks, but also include market, liquidity, re­financing, operational and sustainability risks. For a more detailed description of these risks, refer to the separate risk report Capital Adequacy and Risk Management Report — Pillar 3 2018 and Note 30 to the annual financial statements included in SEK’s 2018 Annual Report on Form 20-F.

According to Statistics Sweden, the annualized rate of ­Swedish GDP growth was 1.6 percent in the third quarter of 2019 and the unemployment rate was 7.3 percent as of November 2019. The consumer price index rose 1.8 percent on an ­annualized basis in November and the Riksbank (Sweden’s central bank) decided in December 2019 to raise the repo rate to zero percent. In the third quarter of 2019, ­Swedish exports increased 1.4 percent compared with the previous ­quarter. The Swedish economy remained relatively soft during the quarter. Public finances however remain extremely strong.

Growth in world trade has slowed in 2019. Following the downward revision of the World Bank’s growth project­ions for a number of countries in June 2019, the global economy has ­continued to lose impetus and a further downward revision took place in January 2020. Global growth has weakened even though the US continues to post a stable upward trend. Moreover, expectations are rising of a global economic slowdown and there is a general concern regarding trade conflicts and geopolitical risks. The trade conflict between the US and China together with the UK’s withdrawal from the EU are two issues that continue to ­generate global uncertainty. A large portion of SEK’s borrowings are arranged through banks in the UK. SEK has ensured that all agreements and limits at the banks the company has business with continue to apply, even after the UK leaves the EU.

This condensed year-end report is presented in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting. The Consolidated 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 changes described below. This condensed year-end 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 June 15, 2019, FFFS 2008:25 was amended to include new disclosure requirements for annual and interim reports related to capital requirements and Own funds. The new disclosure requirements are included in Note 9 Capital adequacy.

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 are to be 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. In the statement of cash flows payments for the principal portion of the lease liability are presented within financing activities and payments for the interest portion are presented within operating activities.

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. The standard imposes new disclosure requirements for lessees, which will be presented in the 2019 annual financial statements. 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.

SEK has elected early adoption of the amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform issued by IASB in September 2019 (IBOR reform). The amendments have been adopted retrospectively to hedging relationships that

existed at the start of the reporting period or were designated thereafter. The amendments provide temporary relief for hedge accounting requirements for hedging relationships directly affected by IBOR reform and allow hedge accounting to continue as before during the relief period. The changes are not expected to have any material impact on SEK’s financial statements,

capital adequacy or large exposure ratios. 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 Interpretations Committee 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.