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Government puts off sale of SBAB

The Swedish government announced on Friday it was postponing the sale of state-owned mortgage lender SBAB because of the financial crisis.

Published: 30 January 2009 14:16 CET

Sweden’s centre-right coalition government had planned to sell the mortgage lender as part of the country’s biggest ever privatization programme aimed at raising about 200 billion kronor ($24.7 billion).

But with the deepening of the global financial crisis in recent months, a sale was not on the cards for now, the Swedish finance ministry said.

“SBAB is a company that the government intends to sell. In light of the financial turmoil, a sale is not on the agenda at the moment,” it said in a statement.

The government had already sold Absolut Vodka maker Vin & Sprit, real estate firm Vasakronan, holdings in bourse operator OMX and a stake in telecom operator TeliaSonera before the financial crisis hit with full force about four months ago.

The ministry also said the government would put forward a bill under which the mortgage lender could expand its operations into the banking field.

“I welcome that more players can join and contribute to improvements in the financial sphere while at the same time safeguarding the value of SBAB ahead of a future sale,” Financial Markets Minister Mats Odell said in the statement.

Earlier on Friday, SBAB posted an operating profit of 585 million kronor for full-year 2008, up from 258 million a year earlier, and said it had had “healthy access” to funding at every phase of the financial crisis last year.

The mortgage lender said the value of its liquidity portfolio, which the bank holds to manage liquidity refinancing risks, stood at 31.5 billion kronor at the end of last year, up from 31.0 billion at the end of 2007.

Can you really get paid for borrowing money in Denmark?

File photo: Kasper Palsnov / Ritzau Scanpix

Negative interest results in the customer effectively being paid by the lender to borrow money, or that they pay back less than they have loaned.

On Monday, the phenomenon was showing signs of spreading elsewhere in the country’s financial sector.

Homeowners who have taken out a certain type of loan known as an F5 loan, with which up to 40 percent of the house’s value can be borrowed, can, with Monday’s interest levels, find themselves paying minus 6 kroner per month to borrow 1 million kroner.

Interest on F5 loans is currently at -0.56 percent, with the repayment rate 0.55 percent. Those terms mean homeowners can be given money for borrowing money.

While last week’s negative interest mortgages were the result of a specific set of contributory circumstances, a larger group of borrowers could benefit this time, according to Christian Helligsøe Heinig, Realkredit Denmark’s head economist.

READ ALSO: Lender to launch Denmark's cheapest ever mortgage

“It will typically be homeowners in the senior age group, who think they have repaid enough and want to make their daily lives sweeter, who will be looking towards flexible repayment and F5 loans,” Heinig said.

Around 1 in 4 of homeowners borrowing from Realkredit Denmark have a loan-to-value ration of a maximum of 40 percent, he said.

But the situation is an “absurdity” that breaks with economic wisdom, he added.

It is partly caused by a flooding on the market of money available for investment, he said.

That is related to attempts made by central banks to stimulate the economy by increasing the amount that can be borrowed for investment in projects that can benefit society in an economic sense.

Another reason is the growing size of private savings, he said.

“In all cases, it is important to be clear that the opportunity to make money by borrowing money should not tempt ordinary members of the public to throw themselves into investments using borrowed money,” the economist said.

“There’s no such thing as a ‘free lunch’ in the current financial climate,” he said.

READ ALSO: What you need to know when buying a home as a foreigner in Denmark

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