Sparebank 1 Sor-norge Asa · OSL:SB1NO
Sparebank 1 Sor-norge Asa — SpareBank 1 SR-Bank — Q2 2014 Earnings Presentation
63 slides from Sparebank 1 Sor-norge Asa's earnings presentation, 2014
Slide 1: Investor Update 2nd quarter 2014
Investor Update 2nd quarter 2014 Page 1
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 Introduction to SpareBank 11 SR-Bank SR-Bank ASA ASA Financials Solvency and liquidity position Appendix Page 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 2014P 2015P GDP growth - mainland 1.7 2.6 3.4 2.0 1.9 2.4 Household consumption growth 3.8 2.6 3.0 2.1 2.1 3.4 Investment growth – mainland* -4.5 6.3 4.5 4.7 0.9 2.5 Investment growth oil & gas -9.5 11.3
Slide 5: Stavanger is the oil capital in Norway
Stavanger is the oil capital in Norway …and the third largest discovery ever on the NCS was made 140 km from our Major oil companies are located in Stavanger… headquarter in 2011 Employees in Norway Reserves pr 2014 (MBOE) The new discovery Johan Svedrup compared to existing oil fields on Norwegian
Slide 6: 48 branch offices in one of Norway's most prosperous regions
48 branch offices in one of Norway’s most prosperous regions 1 Rogaland Population 452,000 Market share 35% Year of establishment 1839 Market strategy Market leader 2 Oil & Gas, Oil service, Important business segments Supply Unemployment rate 2.0% 2 Hordaland Population 498,000 Market share 4% Year
Slide 7: One of Norway's most prosperous regions
One of Norway’s most prosperous regions Strong growth prospects in the region Planned infrastructure project total 100-150BNOK • Norway’s most rapidly growing population – currently 24 % of the country’s • New infrastructure projects creating business opportunities in Rogaland, total population Hord
Slide 8: 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: - Competitiveness Purpose - Profitability - Capital streng
Slide 9: SRBANK's activities
SRBANK’s activities Divisions of SpareBank 1 SR- Capital Markets Retail Market Corporate Market Administration & Support Bank ASA Number of man-years: 36 Number of man-years : 457 Number of man-years : 162 Number of man-years : 214 Fully owned companies Number of man-years : 213 Number of man-years
Slide 10: Increased international interest in SRBANK
Increased international interest in SRBANK Development in Price/Book Relative share price development • Converted from 180 equity certificates to 70 1,2 170 shares in 2012. 65 160 OSEBX 1,1 Indeks 100 = 1. jan 60 SRBANK 1 150 55 0,9 140 • «Top-20» company 50 130 NOK p/B 45 0,8 based on market cap 40
Slide 11: 20 largest shareholders as at June 2014
20 largest shareholders as at June 2014 • International Investor Number Stake ownership Sparebankstiftelsen SR-Bank 72.419.305 28,3% Gjensidige Forsikring ASA 26.483.470 10,4% increased from Folketrygdfondet 9.895.706 3,9% 14.1% at the Morgan Stanley & Co, U.S.A. Nominee 9.562.005 3,7% end of 2013 t
Slide 12: Agenda
Agenda Introduction to SpareBank 1 SR-Bank ASA Financials Solvency and liquidity position Appendix Page Page 12 12
Slide 13: Greater efficiency, low losses and moderate growth produce a good result
Greater efficiency, low losses and moderate growth produce a good result Pre-tax profit for 2Q increased to NOK 684 million from NOK 511 million last year - Return on equity after tax 14.5% (11.8%) Pre-tax profit year-to-date increased to NOK 1.471 million from NOK 1.012 million last year - Retu
Slide 14: Key figures – quarterly development
Key figures – quarterly development Return on equity CET 1 capital ratio 18,4 % 15,6 % 16,2 % 14,5 % 11,1 % 11,2 % 11,4 % 10,3 % 10,5 % 11,8 % Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Cost ratio Earnings per share (NOK) 2,58 49,1 % 2,22 2,02 2,09 42,4 % 40,8 % 40,9 % 1,50 37,5 % Q
Slide 15: Key figures
Key figures 30.06 30.06 14 13 Q2 14 Q1 14 Q4 13 Q3 13 Q2 13 Return on equity after tax (%) 16,5 12,1 14,5 18,4 16,2 15,6 11,8 Net interest margin (%) 1,40 1,35 1,41 1,40 1,46 1,49 1,43 Impairment losses on loans and guarantees in % of gross loans 0,15 0,09 0,13 0,18 0,17 0,11 0,09 - incl. covered bo
Slide 16: Income statement
Income statement 30.06 30.06 Group Income Statement (MNOK) 14 13 Q2 14 Q1 14 Q4 13 Q3 13 Q2 13 Net interest income 1.128 977 581 547 574 568 526 Net commission and other income 924 869 444 480 489 466 465 Net income on investment securities 520 223 201 319 195 137 62 Total income 2.572 2.069 1.226 1
Slide 17: Change in profit 30.06.2013 – 30.06.2014
Page Page 17 17 200 400 800 600 0 1.000 1.200 1.400 1.600 30.06.2013 1.012 Net interest income incl. commission from covered 151 159 bond companies 8 47 Other income Change in profit 30.06.2013 – 30.06.2014 Net income on investment 297 securities 1 Total operating expenses Impairment losses on - 45
Slide 18: Consolidated income profile
Consolidated income profile 1200 1000 322 299 315 324 314 800 34 37 29 20 2 167 167 120 165 MNOK 600 151 400 568 574 547 581 526 200 0 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Net interest income Commission income from covered bond companies Profit before tax from covered bond companies Net commission and othe
Slide 19: Change in net interest income and commission income
Change in net interest income and commission income from covered bond companies; 30.06.2013 – 30.06.2014 1.742 1.600 89 - 20 - 47 167 - 40 1.413 2 8 1.400 1.254 285 1.200 277 1.000 1.128 977 800 600 400 Commission income from covered bond Other Net fundingcost Lending volume Lending margin 30.06.201
Slide 20: Lending and deposit margins
Lending and deposit margins Lending margins 2,88% 2,99% 2,93% 2,92% 2,90% 2,57% 2,64% 2,28% 2,33% 2,21% 2,21% 2,20% 2,06% 2,08% 1,85% 1,88% 1,61% 1,63% Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Corporate market Retail market Deposit margins -0,03% -0,04% -0,27% -0,15% -0,15% -0,40% -0,43
Slide 21: Lending volume and 12 months growth
Lending volume and 12 months growth Corporate Market 60 000 50 000 15 % 15% 40 000 10 % MNOK 7,6% 10% 30 000 6,0% 5,5% 5,0% 4,5% 4,6% 20 000 4,0% 5% 5% 10 000 0,7% 1,4% 0 0% 0% Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Volume Growth % Retail Market 120 000 100 000 15 % 15% 80 000 10,0% 9
Slide 22: Loan portfolio as at 30.06.2014
Loan portfolio as at 30.06.2014 • Gross loans as at 30 June 2014 amount to 3,0% NOK 168.6 billion compared with NOK Agriculture / forestry / fishing 2,9% 162.7 billion at the same time last year. Industry, Power/water supply and construction 3,9% 3,6% 1,9% Retail trade, hotels and restaurants • 12-m
Slide 23: Loan to value ratio on home mortgage loans
Loan to value ratio on home mortgage loans Total-distributed • The proportion of loans with a loan-to- 100% value ratio of less than 85% is very high and stable at 91.5%. 80% 71,5% 67,8% 60% • 98.1% of gross exposure is within 85% of the assessed value of collateral. This 40% 23,7% 20,0% means that
Slide 24: Lending to the corporate market – risk profile
Lending to the corporate market – risk profile Development in corporate market’s portfolio distributed by risk class • The quality of the corporate market 100% portfolio is good. 29,5% 26,8% 24,4% 25,1% 26,4% 80% • PD has improved since Q2 2013. This 60% 54,5% trend is particularly driven by an 40%
Slide 25: Deposits volume and 12 month growth
Deposits volume and 12 month growth Corporate Market* • Last 12 months the volume of deposits increased by NOK 8.4 billion to 81.7 billion. 40000 18,9% 20% 20% – Corresponds to an increase in the period 12,6% 15% 15% 30000 MNOK of 11.5%. 7,3% 6,6% 10% 10% 20000 4,9% 2,8% 1,7% 5% 5% 10000 -2,2% -2,1%
Slide 26: Operating expenses
Operating expenses 30.06 30.06 MNOK 14 13 Q2 14 Q1 14 Q4 13 Q3 13 Q2 13 Personnel expenses 580 579 293 287 297 283 294 Restructuring costs 0 10 0 0 26 1 3 Non-recurring effect, pension-related items 7 0 0 7 0 0 0 Total personnel expenses 587 589 293 294 323 284 297 IT expenses 133 122 67 66 65 63 63
Slide 27: 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 0,17% 0,18% 0,11% 0,13% 0,09% 1,09% 1,06% 0,12% 0,13% 0,87% 0,90% 0,08% 0,10% 0,81% 0,06% 0,77% 0,76% 0,66% 0,65% 0,62% 439 2 807 462 552 579 80 52 51 830 32 630 25 4
Slide 28: Agenda
Agenda Introduction to SpareBank 1 SR-Bank ASA Financials Solvency and liquidity position Appendix Page Page 28 28
Slide 29: Deposits to loans ratio and market funding
Deposits to loans ratio and market funding • Development in deposits to loans ratio Deposits to loans ratio reflects our funding strategy with a greater 100,0 % share of senior funding and the reduced use of covered bond funding. 80,0 % 67,6% 66,2% 63,6% 61,7% 61,1% 60,6% 59,6% 61,2% 60,4% 60,0 % •
Slide 30: Significantly improved funding structure since 2008
Significantly improved funding structure since 2008 Average life of long term funding (excl. covered bonds) • Funding indicator 1 (ratio of illiquid assets financed by issued securities with a duration of more than 1 year) is 109,4% for the parent bank and 107,9% on 4,0 60 consolidated basis. – Seve
Slide 31: An established borrower in the Euromarket
An established borrower in the Euromarket SEB 2 03/18/19 Corp DNBNO 3⅞ 06/29/2020 Corp 120 SWEDA 1½ 03/18/2019 Corp 120 120 NDASS 4 06/29/2020 Corp 120 SPAROG 2⅛ 02/27/2019 Corp SPAROG 2⅛ 02/03/2020 Corp 100 100 100 100 NDASS 4 07/11/2019 Corp 80 80 80 80 Bps. Bps. Bps. Bps. 60 60 60 60 40 40 40 40
Slide 32: Stronger capital ratio - Basel I floor taken into account
Stronger capital ratio - Basel I floor taken into account • SpareBank 1 SR-Bank meets all capital 16% requirement with good margin per 30.06.2014. 14% 14,6% 12,9% 13,2% • The use of different risk weights in the 12% 11,9% Nordic countries makes comparisons of 12,0% 11,4% actual financial strength di
Slide 33: Common equity tier 1 being strengthened in line with stricter requirements
Common equity tier 1 being strengthened in line with stricter regulatory requirements • New capital requirements entail a need to continue increasing common equity tier 1 16,00% 16,00% capital going forward. 10,0 -13,0% 14,00% 14,00% ROE ROE 16,5% 14,0% • SpareBank 1 SR-Bank is not defined as 12,00%
Slide 34: Core equity tier 1 capital ratio calculated on basis of total assets
Core equity tier 1 capital ratio calculated on basis of total assets 9% • Core equity tier 1 capital ratio calculated on 8% 7,8% 7,7% basis of total assets as at 30 June 2014 was 7,2% 7.7%. 7% 6,5% 5,9% • Measured according to this expression of 6% 5,4% financial strength, SpareBank SR-Bank is very
Slide 35: Outlook
Outlook Norwegian economic growth has slowed somewhat in the last year and a half, but is expected to still be moderate going forward. Expect some reduction in oil investments in 2015, but still a very high level involves strong activity in the petroleum sector. Major infrastructure projects and
Slide 36: Agenda
Agenda Introduction to SpareBank 1 SR-Bank ASA Financials Solvency and liquidity position Appendix Page Page 36 36
Slide 37: Our vision: Recommended by customers
Our vision: Recommended by customers Primary objective Financial targets • SpareBank 1 SR-Bank ASA is commited to value • ROE above 13% at a normalised level of interest rates creation in the bank`s core market area • Sustainable contribution to the value creation process • Top 50% ROE and cost/inco
Slide 38: SpareBank 1 Alliance
SpareBank 1 Alliance Owners of the Sparebanken alliance Samspar Hedmark • All credit decisions are made at the 19,5 % 19,5 % 19,5 % 19,5 % 11,0 % 9,6 % 1,4 % local banks • Economies of scale related to expenses, Products, commissions, dividends IT solutions, marketing and branding Sales, loan portfo
Slide 39: Norwegian Economy - A unique situation with a continuing budget surplus
Norwegian Economy - A unique situation with a continuing budget surplus… GDP per capita in PPS, index, EU 27 = 100 2013 governments financial liabilities (in per cent of GDP) 200 150 180 100 160 50 140 0 120 -50 100 -100 1995 1997 1999 2001 2003 2005 2007 2009 2011 -150 Norway United States Denmark
Slide 40: Norwegian Economy – international context
Norwegian Economy – international context Unemployment rates 14 12 10 8 6 4 2 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Norway Sweden Denmark UK US Euro area GDP growth rates 6 4 2 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (2) (4) (6) Norway (mainlan
Slide 41: 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 Household Credit Growth Rate 380bn, €280bn) (12 month growth rate) • Banks and credit institutions are the dominant supplier of mortgages with over 90% market share 14% • Typ
Slide 42: Norwegian Housing and Mortgage Market
Norwegian Housing and Mortgage Market Population Change and Completed Housing Units Page Page 42 42 Source: Statistics Norway and Norwegian Central Bank
Slide 43: Nominal and real house price development
Norwegian Housing and Mortgage Market - Nominal and real house price development Index of House Prices, Norway, Monthly (Jan 2003 = 100) 220 210 200 180 160 140 128 120 100 80 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 House price index (nominal) House price index adjusted with aver
Slide 44: Aggregate Household Debt Burden
Aggregate Household Debt Burden Total Debt burden in per cent of household income (after tax) Norway: 250 • All HH debts included in the statistic, question of int’l 200 comparability • High home ownership (mortgage 150 debt rather than rent commitments) • Generous benefits (pensions, healthcare, ed
Slide 45: Balance sheet
Balance sheet Balance sheet (MNOK) 30.06.2014 30.06.2013 Cash and balances with central banks 1.985 1.762 Balances with credit institutions 2.333 2.612 Net loans to customers 134.680 114.493 Certificates, bonds and other fixed-income securities 16.610 19.852 Financial derivatives 4.653 4.936 Shares,
Slide 46: Net commission and other income
Net commission and other income 30.06 30.06 MNOK 14 13 Q2 14 Q1 14 Q4 13 Q3 13 Q2 13 Payment facilities 113 108 56 57 59 66 56 Savings/placements 85 72 40 45 39 40 37 Insurance products 86 82 44 42 41 41 42 Commission income from real estate broking 228 224 128 100 108 101 127 Guarantee commission 5
Slide 47: Net income on investment securities
Net income on investment securities 30.06 30.06 MNOK 14 13 Q2 14 Q1 14 Q4 13 Q3 13 Q2 13 Dividends 25 32 7 18 -2 3 32 Investment income, associates 218 130 137 81 95 130 31 Securities gains/losses 229 -56 24 205 13 -38 -55 - of which capital change in shares and certificates* 230 -7 10 220 42 11 -28
Slide 48: Subsidiaries
Subsidiaries MNOK 30.06.14 30.06.13 EiendomsMegler 1 SR-Eiendom AS Number of sales 3.976 3.863 Operating profit before tax 36,1 30,9 SpareBank 1 SR-Finans AS Total assets (BNOK) 6,4 6,2 Operating profit before tax 74,0 81,7 SR-Forvaltning AS Portfolio (BNOK) 7,1 6,8 Operating profit before tax 14,1
Slide 49: Ownership interests
Ownership interests MNOK 30.06.14 30.06.13 SpareBank 1 Gruppen AS (19,5 % interest ownership) Profit after tax 153,0 78,4 Adjusted profit previous years -4,2 -1,6 SpareBank 1 Boligkreditt AS (20,4 % interest ownership) Profit after tax 18,0 20,7 Adjusted profit previous years 1,9 0,0 SpareBank 1 Nær
Slide 50: Impairment losses on loans and guarantees
Impairment losses on loans and guarantees 30.06 30.06 Losses on loans in income statement (MNOK) 14 13 Q2 14 Q1 14 Q4 13 Q3 13 Q2 13 Corporate customers 101 49 48 53 87 9 22 Retail customers 2 1 3 -1 -7 23 3 Change in collective impairment losses on loans -8 0 -10 2 -30 0 0 Net impairment losses on
Slide 51: Risk profile of the loan portfolio
Risk profile of the loan portfolio Distributed by risk class • 57% of the loan portfolio has a probability 100% of default (PD)* below 0.5%, which is an 80% increase from last year. 57,0% 56,2% 60% 40% 31,9% 31,4% • The proportion of loans with a PD above 20% 11,1% 12,4% 2.5% has been reduced to 11.
Slide 52: Low concentration of individual LGRs in the lending portfolio
Low concentration of individual LGRs in the lending portfolio Distributed by loss given realisation (LGR) • At the end of Q2, SpareBank 1 SR-Bank had a total of 24 commitments with a 100% loss potential exceeding NOK 100 million. 81,7% 81,8% • These commitments represent 4.5% of 80% the loan exposur
Slide 53: Lending to the retail market – risk profile
Lending to the retail market – risk profile Retail market portfolio distributed by risk class • The quality of the retail market portfolio is considered very good and with low 100% 3,0% 3,2% 3,4% 3,4% 3,2% potential losses. 80% 21,3% 20,9% 21,6% 21,6% 20,5% 60% • The proportion of loans with a PD be
Slide 54: Loan to value ratio on home mortgage loans (excl loans in cover pool)
Loan to value ratio on home mortgage loans (excl loans in cover pool) Total-distributed • SpareBank 1 SR-Bank has in the last year introduced restrictions to reduce 100% the risk associated with new 80% mortgages. These include stricter 61,3% 56,9% equity requirements and liquidity 60% assessments w
Slide 55: 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% 30.06.2012 31.12.2012 30.06.2013 31.12.2013 30.06.2014 30.06.2012 31.12.2012 30.06.2013 31
Slide 56: Low exposure to the shipping segment
Low exposure to the shipping segment Product- Dry cargo; • Lending to conventional shipping is low /chemicaltanks; 5,8% (4,6%) Gas; 2,8% (3,3%) and represents 1.2% of total loans 8,7% (8,5%) Seismic; Other; 5,9% (6,9%) 1,2% (3,5%) • Lending to the offshore sector represents 5.4% of total loans • Len
Slide 57: Lending to commercial property
Lending to commercial property • Lending to commercial property Housing cooperative; constitutes 15.8% of total loans, which is 4,6% (4,9%) Real estate an increase of 0.2% compared with the management; 4,1% (4,0%) same time last year. • The portfolio is characterised by lending to commercial propert
Slide 58: Liquidity portfolio
Liquidity portfolio Liquidity buffer – survival period Liquidity portfolio 20 Of which, 18 securities Market classified to 16 value, amortised 14 Category MNOK Share % cost, MNOK 12 Norwegian government/municipal 275 2% 0 10 SSA/Foreign guaranteed 3.362 21 % 0 BNOK 8 Covered bonds (Norwegian/foreign
Slide 59: Investments in bonds and certificates
Investments in bonds and certificates Risk category Rating Market value Share Very low risk AAA, AA+, AA og AA- 15.051 91,3 % • Most of the bond portfolio is managed as Low risk A+, A og A- 518 3,1 % part of the liquidity management M oderate risk BBB+, BBB og BBB- 577 3,5 % activities. Bonds held f
Slide 60: Rating
Rating Moody’s Fitch Long-term debt A2 Long-term IDR A- Outlook Negative Outlook Stable Updated 30 May 2014 Updated 9 April 2014 Ratinghistory AAA/Aaa AA+/Aa1 AA/Aa2 AA-/Aa3 A+/A1 A/A2 Moody's A-/A3 Fitch BBB/Baa BB/Ba B 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 30.06.2014 Page Pag
Slide 61: SRBANK as at 30 June 2014
SRBANK as at 30 June 2014 30.06.2014 2013 2012 2011 2010 • Ownership interests: –From Rogaland, Agder-counties and Hordaland: 49.0% Share price 59,75 60,25 37,20 40,70 57,00 –International: 21.7% –10 largest: 57.9% –20 largest: 64.9% Stock value (MNOK) 15.281 15.409 9.514 5.182 7.257 • Number of sha
Slide 62: 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 63: Contact Details
Contact Details Address Management Investor Relations Arne Austreid Vidar Torsøe Bjergsted Terrasse 1 CEO VP Investor Relations Postboks 250 4066 Stavanger Tel. Tel. +47 900 77 334 +47 970 80 656 Tel. E-mail. E-mail. arne.austreid@sr-bank.no vidar.torsoe@sr-bank.no +47 915 02002 Inge Reinertsen Shor