Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q4 2019 Earnings Presentation
64 slides from Sparebank 1 Ostlandet's earnings presentation, February 2020
Slide 1: Company Presentation: Fourth quarter 2019 and preliminary accounts 2019
Company Presentation Fourth quarter 2019 and preliminary accounts 2019
Slide 2: 2019 in perspective, Preliminary Financial Accounts, Revised Financial Targets
01 2019 in perspective Preliminary Financial Accounts 02 2019 03 Revised Financial Targets
Slide 3: SpareBank 1 Østlandet at a glance
SpareBank 1 Østlandet celebrates its 175th anniverary in 2020 SpareBank 1 Østlandet at a glance Highlights Return on Equity (ROE) (%) 13.5 % 13.6 % 12.8 % • Celebration: Established in 1845 – known as 10.4 % 10.2 % 10.5 % Sparebanken Hedmark (“SBHE”) until 1 April 2017. • Norway’s fourth largest sav
Slide 4: Highlights 2019
Highlights 2019 Summary • Entered into partnership with The Norwegian Confederation of Trade Unions (“LO”) becoming a preferred partner for providing housing mortgages to LO’s more than 900,000 members. • The customer growth continues. • Increased net interest income and stable lending growth. • Sol
Slide 5: High profitability – reduced growth in operating costs
High profitability – reduced growth in operating costs Financial targets 2019 and actual performance Profitability Return on equity at least 10 % √ 12.8 % Dividends 50 % pay-out ratio* √ 50 % Solidity CET 1 at 16 % √ 17.2 % Costs Growth in operating costs in parent bank within 2 %** (√) 2.5 % 5 * Pr
Slide 6: Solid and stable price development in the Capital Area in 2019
Solid and stable price development in the Capital Area in 2019 Housing price developments for relevant areas compared with Norway Housing prices, indexed (2015=100) 150.00 150.00 • A normal start of the new year for the Capital Region – strong 140.00 140.00 130.00 130.00 increase for the rest of the
Slide 7: Still high economic activity – but softer expectations on a national level
Still high economic activity – but softer expectations on a national level Decreasing production growth – but still low unemployment in the market area Growth in production, q/q and forecast for 6 months (per cent) • Solid economic growth in Norway and Eastern Norway ‒ Economic growth above trend –
Slide 8: Still good growth expectations in the market area
Still good growth expectations in the market area Business confidence and sub indicators for corporates in 2020 (a zero score is neutral) Eastern Norway Inland Region Capital Region 2019 2018 2017 Inland Region 2019 2018 2017 Capital Region 2018 2017 28 21 29 Business confidence 29 Business confiden
Slide 9: Employment growth the main driver behind economic growth
OK Employment growth the main driver behind economic growth New jobs and gross product growth «Two out of three new jobs in Norway, are in the Capital Area» • 40 % of the Norway’s mainland GDP is created within our market area 125.00 • Value creation in the region is 120.00 well above the national a
Slide 10: The agreement with LO is showing promising signs
The agreement with The Norwegian confederation of trade unions – LO – is showing promising signs LO customers • The agreement was signet 19 August 2019 • Marketing commenced in September • A strong increase in the number of LO customers under the Lending volume agreement • A solid contribution to le
Slide 11: Still steady customer growth
Still steady customer growth Numbers of customers in parent bank 360 354 40 352 350 350 344 346 348 38 • 2019 has been characterized by off- 342 343 338 339 340 341 36 boarding of some customers with low 340 336 337 331 332 334 329 34 account activity. 327 329 326 328 • During 2019 the Bank carried
Slide 12: High satisfaction with the customer dividend
High satisfaction with the customer dividend The first bank in Norway with customer dividend in 2017 The proposed customer dividend for 2020 is NOK 266 million for customers 8 out of 10 with loans and deposits during 2019*. who have (NOK 222 million in 2018, NOK 204 million in 2017) received custome
Slide 13: An important local contributor
SpareBank 1 Østlandet - an important local contributor Donations and sponsorships in 2019 Donations NOK 6 million Sponsorships NOK 17 million Scholarships «The Outdoor Lesson» The Foundation’s donations NOK 61 million Sparebankstiftelsen Hedmark Sponsorships Donations «The Sofa Supporter» Donations
Slide 14: An unique owner – the bank’s dividend is returned to the society
An unique owner – the bank’s dividend is returned to the society Sparebankstiftelsen Hedmark – «The Savings Banks Foundation» Donations per category 14
Slide 15: Fremtind - solid growth in market shares in 2019
Fremtind - solid growth in market shares in 2019 Fremtind – the non-life insurer Market shares as of 3Q-19 - Premiums Fremtind Insurance solutions for the future Aim to make «insurance in banking» attractive and normal for the customers • Fremtind is ranked number 3 in the market with a market share
Slide 16: High insurance premium growth in SpareBank 1 Østlandet
High insurance premium growth in SpareBank 1 Østlandet Insurance for SMEs and agriculture • Non-life insurance for the corporate and SpareBank 1 Corporate Non-Life Insurance advances The 2019 survey shows the best score for SpareBank 1 Corporate Non- agriculture market in SpareBank 1 Østlandet Life
Slide 17: High premium growth from private pension schemes in 2019
High premium growth from private pension schemes in 2019 Pension • SpareBank 1 Østlandet had a very strong year in private pension schemes in 2019, with a sale of above NOK 100 million. • This is equivalent to a premium growth of 21.5 % in Facts: 2019. • New deals: 3,250 • New members: 25,000 • Unde
Slide 18: ESG is even stronger on the agenda in 2019
ESG is even stronger on the agenda in 2019 ESG areas of focus in 2019 • Conducted overall ESG analyzes on risk and opportunities. • ESG due diligence in progress for almost all corporate customers. • Climate risk integrated in the credit process. • The second Norwegian bank to sign the ambitious UNE
Slide 19: A driver for ESG in the market area
SpareBank 1 Østlandet – a driver for ESG in the market area ESG areas of focus The Bank aims to be a driver for sustainable development in the market area • A market area with low physical climate risk. • A portfolio with a low CO2 footprint. • The Bank has established green mortgages and green agri
Slide 20: Special focus on the agricultural industry
SpareBank 1 Østlandet with special focus on the agricultural industry ESG focus towards the agricultural industry in 2019 Agriculture in SpareBank 1 Østlandet • Agriculture constitute 17 % of the Bank’s corporate lending book. • Largest sub-segment is livestock with 36 % of the agri portfolio • The
Slide 21: The development of digital solutions continues at full force
The development of digital solutions continues at full force New functionality in the digital bank in 2019 • PSD2 account information and payment from other bank’s accounts • Widget (balance without a log-in) • Notifications • Open architecture for «non-customers» • Transfer money from an other bank
Slide 22: The seniors are more digital
The seniors are more digital How digital are the active* customers? Digital Share as of September Digital Share as of September Age 2018 2019 18 92% 93% 20 95% 97% 30 96% 97% 40 95% 96% 50 94% 95% 60 89% 92% 70 77% 84% 80 51% 54% 90 17% 21% Bank cards* 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0%
Slide 23: 2019 in perspective, Preliminary Financial Accounts, Revised Financial Targets
01 2019 in perspective Preliminary Financial Accounts 02 2019 03 Revised Financial Targets
Slide 24: The financial accounts show significant improvements from last year
The financial accounts show significant improvements from last year Financial accounts 4Q-19 and for 2019 (last year’s figures in brackets) Pre-tax profit in 4Q-19 NOK 291 million (NOK 322 million). Strong profitability Pre-tax profit YTD NOK 1,928 million (NOK 1,414 million). ROE in 4Q-19 7.3% (9.1
Slide 25: Profit contributions from subsidiaries
Profit contributions from subsidiaries Profit contribution 2019 (2018) SpareBank 1 Finans Østlandet AS - Profit after tax NOK 118 million (NOK 139 million). - Still high lending growth and strong income stream. - Increased loan losses from retail customers. Last year saw a one-off gain from sale of
Slide 26: Contribution from joint ventures (1)
Contribution from joint ventures (1) Profit contribution 2019 (2018) SpareBank 1 Gruppen - Profit after tax NOK 1,503 million (NOK 1,480 million). - Ownership 12.4 %. - A year characterized by major one-off effects. SpareBank 1 Boligkreditt AS - Profit after tax NOK 169 million (NOK 5 million). - Ow
Slide 27: Contribution from joint ventures (2)
Contribution from joint ventures (2) Profit contribution 2019 (2018) SpareBank 1 Kredittkort - Profit after tax NOK 75 million (NOK 131 million) - Ownership 20.85 % - Lower earnings based on reduced commission income and higher losses SpareBank 1 Betaling AS - Profit after tax NOK -35 million (NOK -
Slide 28: Income statement 4Q 2019 and 2019
Income statement 4Q 2019 and 2019 Group 4Q 2019 4Q 2018 2019 2018 Net interest income 584 544 2,166 2,074 Net commission income 296 265 1,152 1,106 Other income 37 48 236 181 Dividends 0 0 19 13 Net profit from ownership interest -1 57 519 198 Net income from financial assets/liabilities 12 -51 197
Slide 29: Special items 2019 - 1
Special items 2019 - 1 Description and effects 1. Fremtind Forsikring AS was established 1 January 2019 as a consequence of the merger between SpareBank 1 Skadeforsikring AS and DNB Skadeforsikring AS. DNB ASA increased its ownership 1 January 2019 to 35 % in Fremtind. DNB ASA owns a call option to
Slide 30: Special items 2019 - 2
Special items 2019 - 2 Description and effects • On January 28 January the Bank received a binding ruling from The Norwegian Tax Administration stating Tax deductibility of customer that the customer dividend paid by the bank is tax deductible. dividend • The Supervisory Board decided on 28 March 20
Slide 31: Special items 4Q-2019 - 3
Special items 4Q-2019 - 3 Description and effects • In the 4th quarter the life insurance subsidiary of SpareBank 1 Gruppen, SpareBank 1 Forsikring AS, Strengthening of administrative strengthened the administrative reserves on free policies in the company. reserves in SB1 Forsikring • This negative
Slide 32: Key financials – quarterly (1)
Key financials – quarterly (1) Pre-tax profit (NOK million) Net interest income and and commission fees from covered bond companies (NOK million) 810 633 638 667 585 592 602 526 406 347 4Q-18 1Q-19 2Q-19 3Q-19 4Q-19 4Q-18 1Q-19 2Q-19 3Q-19 4Q-19 Impairments on loans and guarantees (NOK million) Tota
Slide 33: Key financials – quarterly (2)
Key financials – quarterly (2) Return on equity CET 1 ratio 21.2 % 16.8 % 16.9 % 16.7 % 16.7 % 17.3 % 12.8 % 10.7 % 9.1 % 7.3 % 4Q-18 1Q-19 2Q-19 3Q-19 4Q-19 4Q-18 1Q-19 2Q-19 3Q-19 4Q-19 Lending growth (including mortgage transferred to Deposit growth last 12 months covered bond companies) last 12
Slide 34: Strong growth in net interest income
Strong growth in net interest income Net interest income incl. commissions from covered bond companies 1400 1.76% • Strong growth in net interest income in 1.80% 1.71% 1.70% 4Q-19, based on a combination of 1200 1.65% 1.64% 1.62% margins and volume. 1.60% 1000 • In the subsidiary SB1 Finans Østlande
Slide 35: Solid lending growth the last three quarters
Solid lending growth the last three quarters Lending volume (Group, NOK billion) 180.0 • Total lending in the Group, including 147 151 160.0 140 141 144 mortgages transferred to covered bond 140.0 companies, increased by NOK 3.4 billion 2.1 % 2.3 % 44 41 0.7 % 42 2.3 % 43 43 120.0 in the third quart
Slide 36: Lending margins
Lending margins Retail and corporate divisions (parent bank) 2.50% • The lending margins in the parent 2.48% 2.44% 2.43% 2.40% bank - both within the CM and the RM - saw a marginal reduction the last quarter. • The reduction is largely explained by the 22 bps increase in average 3M 1.55% 1.53% Nibor
Slide 37: Loan book dominated by retail and SME lending
Loan book dominated by retail and SME lending Lending to customers per sector (NOK million and %) Lending to customers per sector (volume/share in %) Changes last 12 months Private customers 67.641 /44.9% 6.4 % SB1 Boligkreditt 42.630 /28.3% 7.1 % Real estate (incl. SB1 17.314 /11.5% Næringskreditt)
Slide 38: Highest credit growth within real estate, building and primary industries
Highest credit growth within real estate, building and constructions and primary industries Corporate lending growth YoY – sector (NOK million) 52 35 67 -188 -5 -11 166 545 568 754 3.587 1.603 *Incl. SB1 Næringskreditt 38
Slide 39: The Bank’s lending growth is geographically diverse
The Bank’s lending growth is geographically diverse Lending to customers per geographic area and change last 12 months (NOK million and %) Lending to customers per sector (volume/share in %)* Changes last 12 months Hedmark 53.031 /35.2% 5.6 % Oslo 39.802 /26.4% 6.2 % Akershus 37.149 /24.7% 10.2 % Op
Slide 40: Retail lending growth is highest in new market areas
Retail lending growth is highest in new market areas Lending to customers per geographic area and change last 12 months (NOK million and %) – Retail market Lending to retail customers by geographic area (volume/share in %)* Changes last 12 months Hedmark 36.565 /33.2% 5.6 % Oslo 29.622 / 26.9% 3.5 %
Slide 41: The SME credit growth is highest in Akershus and Oslo
The SME credit growth is highest in Akershus and Oslo Lending to customers per geographic area and change last 12 months (NOK million and %) – Corporate market Lending to retail customers by geographic area (volume/share in %) CM Changes last 12 months Hedmark 16.467 /40.7% 5.2 % Oslo 10.180 /25.2%
Slide 42: The concentration risk is low
The concentration risk is low Retail and corporate loans by size (% share)* Retail market Corporate market 37.0% 36.1% 29.3% 23.6% 14.0% 17.2% 8.6% 11.5% 9.5% 8.9% 4.3% 42 * Including loans transferred to the covered bond companies
Slide 43: High quality credit process leads to low and stable LTV
High quality credit process leads to low and stable LTV Percentage of granted mortgages and average LTV per period and county Percentage of granted volume Average LTV at the time of grant 78% 73% 72% 70% 67% 69% 69% 70% 69% 69% 67% 65% 66% 66% 62% 62% 62% 62% 66% 63% 64% 64% 61% 62% 62% 60% 60% 60%
Slide 44: Mortgage regulation – targeted utilisation of the flexibility quota
Mortgage regulation – targeted utilisation of the flexibility quota Exposure per LTV bucket in the residential mortgage portfolio 94.9 % Mortgages - Utilisation of flexibility quota in 3Q-19: City of Oslo Other areas 6.4 % (8 % quota) 6.2 % (10 % quota) • The mortgage regulation* constrains housing
Slide 45: Deposit coverage ratio in line with ambitions
Deposit coverage ratio in line with ambitions Deposit volume and deposit growth (Group) Deposit volume (NOK billion) 71 72 77 77 78 • Deposits growth of 2.1% (- 0.6% in 3Q-19). 1.2 % 6.9 % -0.6 % 2.1 % • Deposit growth last 12 months: 9.8% (8.4 %). • Retail deposit growth +7.3 %. • Corporate deposit
Slide 46: Improving deposit margins
Improving deposit margins Retail and corporate divisions (parent bank) • Strong improvement in deposit 0.66% margins in the parent bank both within RM and CM. 0.52% • The improvement is largely explained 0.54% by the 22 bps increase in average 3M 0.42% Nibor from 3Q-19 to 4Q-19. 0.33% 0.32% 0.42% •
Slide 47: Stable development in other income
Stable development in other income - reclassification effects taken into account Net commissions and other income (NOK million) 350 • Reclassification from “Net Interest Income” to “Other Income” of certain 282 300 income items in SpareBank 1 Finans 16 266 Østlandet, had positive impact on this 256
Slide 48: Lower group operating costs in 4Q-19 compared 4Q-18
Lower group operating costs in 4Q-19 compared 4Q-18 Operating costs per quarter (NOK million) 600 600 • The operating costs in 4Q-19 was reduced by 3.2% compared with the 506 494 489 490 500 corresponding quarter last year. 500 457 70 38 44 45 36 40 • The operating costs for 2019 are 2.6 % 23 33 32
Slide 49: Declining operating cost growth in the Parent Bank
Declining operating cost growth in the Parent Bank Operating costs per quarter (NOK million) • The operating costs in the parent bank was NOK 11 million lower in 4Q-19 than for the corresponding period last year. This is equivalent with a reduction of 3.1 % • The operating costs in 2019 were NOK 37
Slide 50: Reduced headcount in the parent bank last year
Reduced headcount in the parent bank last year Headcount (FTE) 1.139 1.141 • Reduced headcount in the Group with 1.130 1.119 1.127 12 FTEs last year. • Increased staffing in the subsidiaries in 442 450 446 440 455 line with growth ambitions – a net increase of 13 FTEs. • Reduced staffing in the pare
Slide 51: The contribution from financial items has increased
The contribution from financial items has increased Net income from financial assets and liabilities (NOK millions) • Increased net profit from ownership interests 117 of NOK 321 million. • This is specified in “Contribution from joint ventures” • The increase includes effects of NOK 291 million fro
Slide 52: Still very low impairments on loans and guarantees
Still very low impairments on loans and guarantees Impairments on loans and guarantees (NOK million) • Impairments on loans and guarantees in 4Q-19 33 were NOK 33 million. 24 • Parent bank NOK 18 million 11 8 • SB1 Finans Østlandet NOK 15 million • Impairments on loans and guarantees was NOK 32 (35)
Slide 53: The proportion of problem loans has stabilized on low levels
The proportion of problem loans has stabilized on low levels Non-performing and other doubtful commitments (NOK million and %) 600 1.12% 1.20% 500 1.00% • The proportion of problem loans 400 0.80% 0.80% 0.61% levelled out in 4Q-19. 0.59% 300 234 233 0.60% 287 0.45% 0.46% • The levels must be charact
Slide 54: Low impairments and low net exposure in Stage 3
Low impairments and low net exposure in Stage 3 Specification of impairments and net exposure (NOK million) Impairments per segment - quarterly 4Q-19 3Q-19 2Q-19 1Q-19 4Q-18 • Gross loans and receivables Personal customers 8.8 1.2 -0.2 -8.6 0.2 defined as Stage 3 amounted to Corporate customers 9.0
Slide 55: Stable CET 1
Stable CET 1 Common Equity Tier 1 ratio (Group) 16.8 % 16.9 % 16.7 % 16.7 % 17.2 % • The Group’s CET 1-target is revised to 16.8 %. • The CET 1 ratio was 17.2 % by the end of 2019. • See next slide for specifications. • The leverage ratio was 7.2 %. 4Q-18 1Q-19 2Q-19 3Q-19 4Q-19 55
Slide 56: Capital adequacy assumptions have changed during the 4th quarter
Capital adequacy assumptions have changed during the 4. quarter Group CET 1 (per cent) – and estimated consequences of changes to capital requirements • Regulatory changes negative in sum for the bank • Implementation of CRD4 positive in isolation. ILLUSTRATION • The NFSA compensated by adding a saf
Slide 57: SPOL
SPOL 31.12.2019 • Higher market price of SPOL during Market price (NOK) 92.50 2019. • Return 4Q-19 10.8 % Market capitalisation (NOK million ) 10,714 • Return 2019 5) 17.1 % Book equity per EC 1) 93.67 • Increased liquidity in SPOL in 2019, with a turnover of 9.5 million equity Earnings per EC, NOK
Slide 58: Record high dividends for owners and customers
Record high dividends for owners and customers The Board of Directors proposed allocation of profit ILLUSTRATION* Profit after tax for controlling interest 69.4%1) 30.6%1) 70.1%2) NOK 1,909 million 29.9%2) Donations Foundation OWNERS Primary capital NOK 346 million 52.2% Dividends Dividend equalisat
Slide 59: 2019 in perspective, Preliminary Financial Accounts, Revised Financial Targets
01 2019 in perspective Preliminary Financial Accounts 02 2019 03 Revised Financial Targets
Slide 60: Ambitious financial targets going forward
Ambitious financial targets going forward Financial targets effective from FY 2020 • The bank increases targeted ROE to at least 11 % • The banking operation is fully integrated following the merger and efficiency gains are showing – the bank increases ambitions. • Exploiting a solid market position
Slide 61: An ambitious bank in the most interesting market area in Norway
An ambitious bank in the most interesting market area in Norway Summary 61
Slide 62: Contact details
Richard Heiberg CEO Tel.: +47 902 06 018 richard.heiberg@sb1ostlandet.no Geir-Egil Bolstad Contact details CFO Tel.: +47 918 82 071 geir-egil.bolstad@sb1ostlandet.no Runar Hauge Investor relations Tel.: +47 482 95 659 runar.hauge@sb1ostlandet.no 62
Slide 63: 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 Østlandet believes that the expectations reflected in such forward-looking statements are reasonable, no a
Slide 64: Together to create
Together to create @STLANDET
SpareBank 1 Østlandet — Q4 2019 Earnings Presentation on 6ix