Sparebank 1 Sor-norge Asa · OSL:SB1NO
Sparebank 1 Sor-norge Asa — SpareBank 1 SR-Bank — Q2 2015 Earnings Presentation
65 slides from Sparebank 1 Sor-norge Asa's earnings presentation, 2015
Slide 1: Investor Update Second Quarter 2015
INVESTOR UPDATE SECOND QUARTER 2015
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although SpareBank 1 SR-Bank believes that the expectations reflected in such forward- looking statements are reasonable
Slide 3: Agenda
Agenda Presentation of SpareBank 1 SR-Bank ASA Introduction to SpareBank 1 SR-Bank ASA Financials Solvency and liquidity position Appendix 3
Slide 4: A unique situation with a continuing budget surplus
A unique situation with a continuing budget surplus… Economic Indicators (%) 2010 2011 2012 2013 2014 2015P GDP growth - mainland 1.7 2.6 3.4 2.0 2.2 1.3 Household consumption growth 3.8 2.6 3.0 2.1 2.0 2.0 Investment growth – mainland* -4.5 6.3 4.5 4.7 1.8 1.0 Investment growth oil & gas -9.5 11.3
Slide 5: One of Norway's most prosperous regions
One of Norway’s most prosperous regions The third largest discovery ever on the NCS was made 140 km …and activity is expected to continue at high levels from our headquarter in 2011 4000 Investments on NCS 250 “Johan Sverdrup” compared to existing 3000 oil fields on the Norwegian 200 continental she
Slide 6: The leading financial group in the southwest of Norway
The leading financial group in the southwest of Norway 1 Rogaland Population 467.000 Market share 37% 2 Year of establishment 1839 Market strategy Market leader Unemployment rate 3.1% 2 Hordaland Population 512.000 Market share 6% Year of establishment 2006 Market strategy Entry/growth Unemployment
Slide 7: The SpareBank 1 Alliance – 2nd largest mortgage lender in Norway
The SpareBank 1 Alliance – 2nd largest mortgage lender in Norway Founded in 1996 based on efficiency and local market focus Geographic overview Ensure the independence and regional foothold of the individual member banks by maximizing their: - Purpose Competitiveness - Profitability - Capital streng
Slide 8: SRBANK's activities
SRBANK’s activities Divisions of Capital Markets Retail Market Corporate Market Administration & Support SpareBank 1 SR-Bank ASA Number of man-years : 36 Number of man-years : 454 Number of man-years : 163 Number of man-years : 205 Fully owned companies Number of man-years : 200 Number of man-years
Slide 9: SRBANK
SRBANK Development in Price/Book Relative share price development • Converted from 125 equity certificates to 65 1,2 120 shares in 2012. 1,1 60 115 1,0 Index 100 = Jan. 1st 2014 110 0,9 55 • Total market value at 105 NOK p/B 0,8 100 2. quarter 2015 is 50 0,7 95 NOK 13,4 billion. 0,6 90 45 Price OSEB
Slide 10: 20 largest shareholders as at June 2015
20 largest shareholders as at June 2015 • International ownership is 19.3% per 2. Investor Number Stake quarter 2015. Sparebankstiftelsen SR-Bank 72.419.305 28,3% Gjensidige Forsikring ASA 26.748.416 10,5% State Street Bank and Trust Co, U.S.A. Nominee 9.763.859 3,8% SpareBank 1-stiftinga Kvinnherad
Slide 11: Agenda
Agenda Introduction to SpareBank 1 SR-Bank ASA Financials Financials Solvency and liquidity position Appendix 11
Slide 12: A good result distinguished by investment in new activities and modest losses
A good result distinguished by investment in new activities and modest losses Pre-tax profit for the quarter is NOK 552 million compared to NOK 684 million last year - Return on equity after tax 10.8% Pre-tax profit year-to-date is NOK 1.180 million compared to NOK 1.471 million last year - Retu
Slide 13: Key figures – quarterly development
Key figures – quarterly development Return on equity CET 1 capital ratio 12,1 % 12,3 % 14,5 % 11,4 % 11,3 % 11,5 % 12,2 % 12,7 % 11,7 % 10,8 % Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Cost/income ratio Earnings per share (NOK) 2,09 1,94 47,3 % 1,78 1,75 45,1 % 1,69 44,6 % 42,5 % 4
Slide 14: Key figures
Key figures 30.06 30.06 15 14 Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 Return on equity after tax (%) 11,7 16,5 10,8 12,7 11,7 12,2 14,5 Net interest margin (%) 1,44 1,40 1,44 1,45 1,51 1,48 1,41 Impairment losses on loans and guarantees in % of gross loans 0,18 0,15 0,12 0,25 0,27 0,20 0,13 -incl. covered bon
Slide 15: Income statement
Income statement 30.06 30.06 Group Income Statement (MNOK) 15 14 Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 Net interest income 1.266 1.128 639 627 655 621 581 Net commission and other income 807 924 399 408 405 403 444 Net income on investment securities 305 520 94 211 116 142 201 Total income 2.378 2.572 1.132
Slide 16: Change in profit 30.06.2014 – 30.06.2015
16 0 200 400 600 800 1.000 1.200 1.400 1.600 30.06.2014 1.471 Net interest income incl. commission 3 from covered bond companies 18 Other income Net income on investment securities - 215 Total operating expenses -60 Change in profit 30.06.2014 – 30.06.2015 Impairment losses on loans and - 37 guarant
Slide 17: Consolidated income profile
Consolidated income profile 1200 1.045 1.052 1.094 1.108 1.060 1000 315 324 324 310 333 800 34 28 73 20 22 90 93 84 66 120 MNOK 600 400 621 655 627 639 581 200 0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Net interest income Commission income from covered bond companies Profit before tax from covered bond compan
Slide 18: Lending and deposit margins
Lending and deposit margins Lending margins 2,88% 2,99% 2,93% 2,92% 2,90% 2,89% 2,80% 2,66% 2,58% 2,06% 2,21% 2,21% 2,20% 2,08% 1,97% 1,95% 1,95% 1,64% Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Corporate market Retail market Deposit margins -0,25% -0,43% -0,45% -0,44% -0,47% -0,45% -0,47
Slide 19: Lending volume and 12 months growth
Lending volume and 12 months growth Corporate Market (incl. Capital Markets) 60 000 50 000 12,8% 13,8% 15% 40 000 MNOK 10% 30 000 5,6% 20 000 4,0% 4,5% 4,6% 5% 10 000 1,4% 2,5% 0,7% 0 0% Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Volume Growth % Retail Market 120 000 100 000 15% 80 000 MN
Slide 20: Loan portfolio as at 30.06.2015
Loan portfolio as at 30.06.2015 • Gross loans as at 30 June 2015 amount 2,9% Agriculture / forestry / fishing 2,8% to NOK 181.4 billion compared with NOK 168.6 billion at the same time last year. Industry, Power/water supply and construction 3,6% 3,6% Retail trade, hotels and restaurants 1,7% 1,4% •
Slide 21: Loan to value ratio on home mortgage loans
Loan to value ratio on home mortgage loans • The proportion of loans with a loan-to- 100% value ratio of less than 85% is high and 90% stable. 80% 67,2% 67,8% 70% • 90.3% of the exposure is within 85% of 60% the assessed value of collateral. 50% 40% 30% 23,1% 23,7% 20% 10% 6,1% 5,2% 3,6% 3,4% 0% Bel
Slide 22: Lending to the corporate market – risk profile
Lending to the corporate market – risk profile • The quality of the corporate market Corporate lending portfolio distributed by risk class portfolio is good. 100% 26,4% 24,9% 26,7% 24,9% 22,7% 80% 60% • The share of customers with PD* 52,8% 56,7% 56,0% 55,8% 56,5% 40% below 2.5% has increased, mainl
Slide 23: Deposits volume and 12 month growth
Deposits volume and 12 month growth Corporate Market* • Last 12 months deposits increased by NOK 9.1 billion to 90.8 billion. 50000 24,1% 20,3% 26,1% 25% 40000 18,9% 17,7% • Corresponds to an increase in the 30000 12,6% MNOK 15% period of 11.1%. 20000 6,6% 1,7% 5% 10000 -2,1% 0 -5% Q2 13 Q3 13 Q4 13
Slide 24: Operating expenses
Operating expenses 30.06 30.06 MNOK 15 14 Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 Personnel expenses 603 580 300 303 303 304 293 Restructuring- and non-recurring costs 7 7 0 7 5 3 0 Total personnel expenses 610 587 300 310 308 307 293 IT expenses 145 133 73 72 75 69 67 Marketing 47 46 26 21 29 21 29 Other adm
Slide 25: Impairment losses on loans / Non-performing and doubtful commitments
Impairment losses on loans/ Non-performing and doubtful commitments Impairment losses on loans Non-performing and doubtful commitments 0,27% 0,25% 0,20% 0,13% 0,12% 0,22% 0,20% 0,16% 0,10% 0,10% 0,81% 0,77% 0,81% 0,78% 0,66% 20 0,66% 0,64% 0,65% 0,62% 0,54% 62 21 552 533 729 716 513 68 19 51 48 31 2
Slide 26: Agenda
Agenda Introduction to SpareBank 1 SR-Bank ASA Financials Financials liquidity position Solvency and liquidity position Appendix 26
Slide 27: Funding
Funding • Well diversified funding. – Higher deposit coverage. Deposits to loans ratio • Greater share of senior funding last year. 100,0 % ‒ 6 outstanding euro-benchmarks with due dates in each 80,0 % 63,6% of the years 2016- 2021. 60,6% 59,6% 61,2% 60,4% 59,1% 57,5% 59,4% 60,4% 60,0 % ‒ Issuance o
Slide 28: An established borrower in the Euromarket
An established borrower in the Euromarket SEB 2 02/19/2021 Corp DNBNO 3⅞ 06/29/2020 Corp POHBK 2 03/03/2021 Corp 100 NDASS 4 06/29/2020 Corp 100 100 100 SRBANK2 ⅛ 04/21 Corp SRBANK2 ⅛ 02/20 Corp 80 80 80 NDASS 2 02/17/2021 Corp 80 60 60 60 60 Bps. Bps. Bps. Bps. 40 40 40 40 20 20 20 20 0 0 0 0 Jun-1
Slide 29: Funding structure
Funding structure • LCR of 111% at the end of June 2015. Average maturity of long term funding (excl. covered bonds) Average LCR during Q1 2015 was 92%. 4,5 70,0 4,0 60,0 3,5 50,0 3,0 Volume NOK Billion Maturity (first call) 2,5 40,0 2,0 30,0 1,5 20,0 1,0 10,0 0,5 0,0 0,0 Q4 12 Q3 13 Q1 08 Q2 08 Q3
Slide 30: Stronger capital ratio
Stronger capital ratio • SpareBank 1 SR-Bank is compliant with 18% capital requirements per 30.06.2015. 16% • SpareBank 1 SR-Bank received IRB 14% 15,3% 14,6% Advanced approval for the corporate 12,9% 13,1% market portfolio in the first quarter of 12% 13,2% 12,0% 2015. 10% • The use of different ris
Slide 31: RWA home mortgages
RWA home mortgages • RWA on home mortgages reflects a solid and stable portfolio. 22,1 % 22,5 % • The shift that occurs from Q1 2015 is due to restrictions imposed by the 16,4 % 16,2 % 16,3 % Norwegian FSA. The restrictions implies new requirements on how to calculate PD and LGD. 30.06.2014 30.09.20
Slide 32: Strengthened common equity tier 1
Strengthened common equity tier 1 • New capital requirements entail a need to continue increasing common equity tier 1 16,00% 11,0 -13,5 % 16,00% ROE ROE capital going forward. ROE 11,7 % 14,00% 14,2 % 14,00% 14,0 % • Norges Bank has decided that the 12,00% ROE 2,0% SIFI 12,00% 12,4% countercyclical
Slide 33: 2015 - Outlook
2015 - Outlook Uncertainty, especially in the petroleum sector, has increased due to lower oil prices. From record high levels, oil investments are expected to be reduced with approximately 15% in 2015. Major infrastructure projects and high activity in house building are helping to ensure good
Slide 34: Agenda
Agenda Introduction to SpareBank 1 SR-Bank ASA Financials Solvency and liquidity position Appendix 34
Slide 35: Moderate risk profile
SpareBank 1 SR-Bank has a moderate risk profile in which no single event should be capable of seriously harming the bank's financial position • The core purpose of the banking industry is to create value by assuming deliberate and acceptable risk • SpareBank 1 SR-Bank therefore invests significant r
Slide 36: A well diversified portfolio
SpareBank 1 SR-Bank has a well diversified portfolio 8.9% (8.6%) of total EAD is related to oil operations SpareBank 1 SR-Bank* has total BNOK 207.1 (201.4) EAD per 31.05.2015 BNOK 18.3 (17.6) EAD is related to oil operations Oil service; 2.6% (2.6%) Corporate market excl. oil operations; 25.0% (24.
Slide 37: Oil services - total NOK 5.3 billion
Oil services - total NOK 5.3 billion NOK 5.2 billion as at 31.12.2014 Exploration and concept studies Oil services • EAD NOK 0.6 billion • EAD NOK 5.3 billion, 2.6% of the bank's total EAD • Average weighted probability of default 2.5% • Average weighted probability of default for the oil services p
Slide 38: Offshore - total NOK 10.4 billion
Offshore - total NOK 10.4 billion NOK 9.9 billion as at 31.12.2014 Offshore Service Vessels Offshore • EAD NOK 7.5 billion, average weighted • EAD NOK 10.4 billion, 5.0% of the bank's total EAD probability of default is 1.1%, weighted • Average weighted probability of default for the offshore portfo
Slide 39: Oil and gas - total NOK 2.6 billion
Oil and gas - total NOK 2.6 billion NOK 2.2 billion as at 31.12.2014 Exploration financing Exploration and production companies • EAD NOK 963 million • EAD NOK 2.6 billion, 1.3% of the bank's total EAD • Average weighted probability of default • Average weighted probability of default for the oil an
Slide 40: Lending to commercial property
Lending to commercial property Letting of real estate - oil operations Lending to commercial property • EAD NOK 3.5 billion 1.7% of total EAD, • EAD NOK 28.4 billion 15.6% of the bank’s total EAD which of; • The portfolio is characterised by lending to commercial properties for • Oil operations: EAD
Slide 41: Monitors and follows up pro-actively
SpareBank 1 SR-Bank monitors and follows up pro-actively • The bank continuously monitors portfolios • If special incidents occur, special portfolio reviews are conducted • The customer units continuously and pro-actively follow up the bank's credit customers • Commitments where the risk of poorer d
Slide 42: Our vision: Recommended by customers
Our vision: Recommended by customers Primary objective Financial targets • SpareBank 1 SR-Bank ASA is committed to value • Return on equity of 12% after tax in 2015. In the long- creation in the bank`s core market area term, under prevailing market conditions, the target is a minimum of 12%. • Susta
Slide 43: SpareBank 1 Alliance Banking Cooperation
SpareBank 1 Alliance Owners of the alliance • All credit decisions are made at the local banks • Economies of scale related to expenses, IT solutions, marketing and branding Samspar 19,5 % 19,5 % 19,5 % 19,5 % 11,0 % 9,6 % 1,4 % Products, commissions, dividends Sales, loan portfolios, capital Compan
Slide 44: Norwegian Economy - A unique situation with a continuing budget surplus
Norwegian Economy - A unique situation with a continuing budget surplus… GDP per capita, index, EU 27 = 100 2015 governments financial liabilities (in per cent of GDP) 150 100 50 0 -50 -100 -150 -200 -250 Gross Debt Net Debt 2014 government deficit/surplus (in per cent of GDP) The market view; 5 yea
Slide 45: Norwegian Economy – international context
Norwegian Economy – international context Unemployment rates 14% 12% 10% 8% 6% 4% 2% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Denmark Norway Sweden United States Euro area GDP growth rates 8% 6% 4% 2% 0% -2% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -4% -6% Denmark Norw
Slide 46: Norwegian Housing and Mortgage Market Key Characteristics
Norwegian Housing and Mortgage Market Key Characteristics Market • Total mortgage market approx NOK 2,300 billion (approx USD 290bn, Household Credit Growth Rate €265bn) (12 month growth rate) • Banks and credit institutions are the dominant supplier of mortgages with over 90% market share 8,0 % • T
Slide 47: Norwegian Housing and Mortgage Market
Norwegian Housing and Mortgage Market Population Change and Completed Housing Units Source: Statistics Norway 47
Slide 48: Nominal and real house price development
Norwegian Housing and Mortgage Market - Nominal and real house price development Index of House Prices, Norway, Monthly (Jan 2005 = 100) 200 187 180 160 140 124 120 100 80 jan.05 jan.06 jan.07 jan.08 jan.09 jan.10 jan.11 jan.12 jan.13 jan.14 jan.15 apr.05 jul.05 apr.06 jul.06 apr.07 jul.07 apr.08 ju
Slide 49: Aggregate Household Debt Burden
Aggregate Household Debt Burden Total Debt burden in per cent of household income (after tax) Norway: • All HH debts included in the statistic, question of int’l comparability • High home ownership (mortgage debt rather than rent commitments) • Generous benefits (pensions, healthcare, education, chi
Slide 50: Balance sheet
Balance sheet Balance sheet (MNOK) 30.06.2015 30.06.2014 Cash and balances with central banks 2.841 1.985 Balances with credit institutions 2.224 2.333 Net loans to customers 149.472 134.680 Certificates, bonds and other fixed-income securities 16.116 16.610 Financial derivatives 4.878 4.653 Shares,
Slide 51: Net commission and other income
Net commission and other income 30.06 30.06 MNOK 15 14 Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 Payment facilities 114 113 56 58 57 66 56 Savings/placements 97 85 48 49 42 45 40 Insurance products 94 86 47 47 46 45 44 Commission income real estate broking 217 228 113 104 101 105 128 Guarantee commission 67 53
Slide 52: Net income on investment securities
Net income on investment securities 30.06 30.06 MNOK 15 14 Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 Dividends 15 25 8 7 1 10 7 Investment income, associates 234 218 101 133 138 150 137 Securities gains/losses -95 229 -50 -45 -37 -52 24 - of which capital change in shares and certificates 0 230 -4 4 24 -22 10 -
Slide 53: Subsidiaries
Subsidiaries MNOK 30.06.15 30.06.14 EiendomsMegler 1 SR-Eiendom AS Number of sales 3.723 3.976 Operating profit before tax 30 36 SpareBank 1 SR-Finans AS Total assets (BNOK) 7 6 Operating profit before tax 75 74 SR-Forvaltning AS Total assets under management (BNOK) 9 7 Operating profit before tax 1
Slide 54: Ownership interests
Ownership interests MNOK 30.06.15 30.06.14 SpareBank 1 Gruppen AS Interest ownership 19,5 % 19,5 % Profit after tax 128 153 Adjusted profit previous years 0 -4 SpareBank 1 Boligkreditt AS Interest ownership 20,1 % 20,4 % Profit after tax 57 18 Adjusted profit previous years 0 2 SpareBank 1 Næringskr
Slide 55: Impairment losses on loans and guarantees
Impairment losses on loans and guarantees 30.06 30.06 Losses on loans in income statement (MNOK) 15 14 Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 Corporate customers 81 101 19 62 27 39 48 Retail customers 12 2 6 6 4 9 3 Change in collective impairment losses on loans 39 -8 19 20 62 21 -10 Net impairment losses o
Slide 56: Risk profile of the loan portfolio
Risk profile of the loan portfolio • SpareBank 1 SR-Bank has a stable and Distributed by risk class low risk portfolio. 100% 80% 58,0% 56,4% 60% • More than half of the bank’s loan 40% 31,8% 31,9% exposure has a PD* below 0.5 %. 20% 10,3% 11,6% 0% 0.00 - 0.50 0.50 - 2.50 2.50 - 99.9 • Single loan ex
Slide 57: Low concentration of individual LGRs in the lending portfolio
Low concentration of individual LGRs in the lending portfolio • At the end of Q2 2015, SpareBank 1 Distributed by loss given realisation (LGR) SR-Bank had a total of 29 100% commitments with a loss potential exceeding NOK 100 million. 83,4% 81,3% 80% • These commitments represent 5.1% of the loan ex
Slide 58: Risk profile – Lending to the retail market
Risk profile – Lending to the retail market Retail market portfolio distributed by risk class • The quality of the retail market portfolio is considered to be good and 100% 3,2% 3,1% 3,2% 2,9% 2,6% 20,5% 20,1% 20,2% 18,6% 17,2% 80% has low potential losses. 60% 40% 76,4% 76,8% 76,6% 78,5% 80,2% • Th
Slide 59: Historical LTV development for home mortgage loans
Historical LTV development for home mortgage loans Total home mortgages incl. loans in cover pool SpareBank 1 SR-Bank ASA 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 30.06.2013 31.12.2013 30.06.2014 31.12.2014 30.06.2015 30.06.2013 31.12.2013 30.06.2014 31
Slide 60: Liquidity portfolio
Liquidity portfolio Liquidity buffer – survival period Liquidity portfolio Of which, 20 securities 18 classified to 16 NOK amortised 14 Category million Share % cost, MNOK BNOK 12 10 Norwegian government/municipal 778 5% 0 8 SSA/Foreign guaranteed 5.037 32 % 0 6 Covered bonds 4 2 (Norwegian/foreign)
Slide 61: Investments in bonds and certificates
Investments in bonds and certificates Risk category Rating NOK Million Share Very low risk AAA, AA+, AA og AA- 15.025 93,3 % Low risk A+, A og A- 111 0,7 % Moderate risk BBB+, BBB og BBB- 524 3,3 % High risk BB+, BB og BB- 77 0,5 % Very high risk B+ and lower 367 2,3 % Total portfolio 16.103 100,0 %
Slide 62: Rating
Rating Moody’s Fitch Long-term debt A1 Long-term IDR A- Outlook Stable Outlook Stable Updated 19 May 2015 Updated 19 November 2014 Ratinghistory AAA/Aaa AA+/Aa1 AA/Aa2 AA-/Aa3 A+/A1 Moody's A/A2 A-/A3 Fitch BBB/Baa BB/Ba B 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 31.03.15 30.
Slide 63: SRBANK as at June 2015
SRBANK as at June 2015 • Ownership interests: 30.06.2015 2014 2013 2012 2011 – From Rogaland, Agder-counties and Hordaland: 49.1% Share price 52,25 52,50 60,25 37,20 40,70 – International: 19.3% – 10 largest: 54.5% – 20 largest: 62.4% Stock value (MNOK) 13.363 13.427 15.409 9.514 5.182 • Number of s
Slide 64: Dividend policy
Dividend policy “The financial objective of SpareBank 1 SR-Bank ASA is to achieve earnings that yield adequate, stable returns on the bank’s equity, thereby creating value for owners through competitive returns in the form of dividends and share appreciation. In determining the level of the annual d
Slide 65: Contact Details
Management Contact Details Arne Austreid CEO Tel.: +47 900 77 334 E-mail: arne.austreid@sr-bank.no Inge Reinertsen CFO Tel.: +47 909 95 033 E-mail: inge.reinertsen@sr-bank.no Adress Investor Relations Stian Helgøy Bjergsted Terrasse 1 Investor Relations Postboks 250 4066 Stavanger Tel.: +47 906 52 1