Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q1 2020 Earnings Presentation
59 slides from Sparebank 1 Ostlandet's earnings presentation, 2020
Slide 1: Investor Presentation First quarter 2020
Investor Presentation First quarter 2020
Slide 2: SpareBank 1 Østlandet – Where we are
SpareBank 1 Østlandet – Where we are SpareBank 1 Østlandet’s home market • Population 1.7 million • The fastest growing region of Norway for both population and job creation • Cyclical stable region • Normally low unemployment and high economic activity – affected as the country in the coronavirus p
Slide 3: Executive summary
Executive summary • Norway’s fourth largest savings bank • One of the best capitalised regional savings bank in Norway - CET1 17.0 %, Capital adequacy ratio of 19.6 %, Leverage ratio 7.0 % SpareBank 1 Østlandet • Low risk bank book with a 73 % retail share • Diversified income stream • Long history
Slide 4: Aa3 Moody’s Senior Unsecured rating with stable outlook
Aa3 Moody’s Senior Unsecured rating with stable outlook Based on Credit Action as of 5 March 2020 Main take aways ‒ “Consistently stronger financial performance compared to peers” ‒ “Particularly resilient asset quality and strong capital metrics throughout the credit cycle” ‒ “Despite sizable expos
Slide 5: Introduction to SpareBank 1 Østlandet
Introduction to SpareBank 1 Østlandet Region, strategy and ambitions Asset quality, rating and funding plans Appendix
Slide 6: SpareBank 1 Østlandet celebrates its 175th anniversary in 2020
SpareBank 1 Østlandet celebrates its 175th anniversary in 2020 SpareBank 1 Østlandet at a glance Highlights Return on Equity (ROE) (%) • Celebration: Established in 1845 – known as 13.6 % Sparebanken Hedmark (“SBHE”) until 1 April 2017. 12.8 % 10.4 % 10.2 % 10.5 % • Norway’s fourth largest savings b
Slide 7: Diversified main activities
Diversified main activities Several sources of income - parent bank, subsidiaries and other ownership interests Operational divisions* Selected key subsidiaries Selected other ownership interests EiendomsMegler 1 Totens Sparebank Retail Innlandet AS ~25% 100% Savings bank Segment Real estate agent K
Slide 8: Part of the SpareBank 1 Alliance
Part of the SpareBank 1 Alliance Provides operational and financial economies of scale as well as diversified product offering Key comments Key joint ventures Key associated companies • Total number of branches: 301 «SpareBank 1 Alliance» = 14 cooperating independent savings banks • Total number of
Slide 9: The Bank has a history of increasing profits
The Bank has a history of increasing profits Net profit and profit pre-financials and loan losses (NOK million) 2019 Strong result, strengthened banking operations and good customer growth Nov 2018 No fiscal year Private with a financial placement of deficit since the 700 MNOK mid 1940-ies 2016 Acqu
Slide 10: Long history of low loan losses – still at moderate level
Long history of low loan losses – still at moderate level Impairments on loans as a percentage of gross loans* 3.0 % 2.5 % 2.0 % 1.5 % 1.0 % 0.5 % 0.0 % -0.5 % -1.0 % SpareBank 1 Østlandet Peers Source: Bank reports and SpareBank 1 Markets 1Q 2020. Peers: NONG, SRBANK, MING, MORG, SVEG 10 (*) Includ
Slide 11: High and stable capitalization
High and stable capitalization Common Equity Tier 1 ratio (Group) 16.9 % 17.2 % 16.9 % 17.2 % 17.0 % 16.8 % 16.8 % 16.2 % 15.1 % 15.2 % 14.8 % 14.1 % 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q 2020 11
Slide 12: The financial accounts show impact from the coronavirus pandemic
The financial accounts show impact from the coronavirus pandemic Financial accounts 1Q 2020 (last year’s figures in brackets) Reduced profitability Pre-tax profit in 1Q-20 NOK 266 million (NOK 757 million). Lower eturn on equity ROE in 1Q-20 6.9% (21.2%). CET 1 ratio 17.0 % (16.9 %). Very solid capi
Slide 13: Region, strategy and ambitions
Introduction to SpareBank 1 Østlandet Region, strategy and ambitions Asset quality, rating and funding plans Appendix
Slide 14: Our market position gives ample opportunities to grow the bank
Our market position gives ample opportunities to grow the bank By the end of 2021 – our strategy pillars We are the third largest savings bank in Norway. We have one of the most attractive equity certificates on Oslo Stock Exchange. We have differentiated ourselves from the main competition and have
Slide 15: Solid position and growth opportunities
Solid position and growth opportunities Market leader in former Hedmark county - market challenger in other counties Former Hedmark county Oslo Population 197, 920 Population 694,657 Market share* RM 45 % Market share RM 4% Market share CM 46 % Market share CM 4% Position market leader Position chal
Slide 16: A market area with long term growth potential
A market area with long term growth potential Considerable population growth in the Greater Capital Area Population projection 2018-2040 Population projection, municipalities 2018-2040 2000,000 +19% (0.8% yearly) 1750,000 Oppland Hedmark 1500,000 1250,000 1000,000 Oslo 750,000 500,000 Akershus 250,0
Slide 17: Applications for payment holidays on housing mortgages declining to a normal level
Applications for payment holidays on housing mortgages declining to a normal level Personal Banking and the coronavirus pandemic • Retail customers were quick to apply for installment deferrals in March, but demand has been declining strongly through April and May. ‒ 3,360 applications in March (aft
Slide 18: Applications for liquidity loans among corporate customers are decreasing
Applications for liquidity loans among corporate customers are decreasing Corporate Banking and the coronavirus pandemic • Corporates are pro-active in seeking dialogue with the Bank. • Customers in vulnerable industries are monitored and followed up more closely. • The Bank offers several options f
Slide 19: The Bank’s ESG work gains further recognition
The Bank’s ESG work gains further recognition ESG news 1Q-2020 • In March, SpareBank 1 again was named the financial industry winner by the Sustainable Brand Index. The consumers verdict: We are the • The Bank is climate neutral as of 1Q- ESG industry winners Carbon related credit exposure – by indu
Slide 20: Asset quality, rating and funding plans
Introduction to SpareBank 1 Østlandet Region, strategy and ambitions Asset quality, rating and funding plans Appendix
Slide 21: Low direct Covid-19 exposure in the lending portfolio
Low direct Covid-19 exposure in the lending portfolio due to governmental fiscal policy measures Lending to customers per sector (NOK million and %) Private customers 68,440 /44.5% Retail market 112,460/73.1% SB1 Boligkreditt 44,020 /28.6% Real estate (incl. SB1 Næringskreditt) 17,274 /11.2% Corpora
Slide 22: Loan book specification
Loan book specification Lending to customers per sector (NOK million and %) Primary industries* Real Estate* (NOK 4,724 million/3.1 %) (NOK 16,103 million/10.5 %) Industry/Mechani Warehouse cal workshop 13% 11% Hotels and Livestock tourism 46% Combined livestock and 7% cultivation 15% Trade/mall Pur
Slide 23: Size concentration risk in the lending book is low
Size concentration risk in the lending book is low Retail and corporate loans by size (% share)* Retail market Corporate market 37.0% 36.1% 30.5% 23.6% 14.0% 16.6% 8.6% 10.9% 10.0% 8.3% 4.3% 23 * Including loans transferred to the covered bond companies
Slide 24: High quality credit processes lead to low and stable LTV
High quality credit processes lead to low and stable LTV Percentage of new mortgage approvals and average LTV per period and county 90% Percentage of new mortgage appovals Average LTV at the time of grant 80% 78% 73% 72% 70% 70% 70% 70% 69% 68% 66% 69% 67% 66% 66% 62% 62% 61% 63% 64% 62% 61% 61% 61%
Slide 25: Temporary changes in the Mortgage Regulation due to Covid-19
Temporary changes in the Mortgage Regulation due to Covid-19 with effect from 2Q-20 1) Exposure per LTV bucket in the residential mortgage portfolio 94.6 % Mortgages - Utilisation of flexibility quota in 1Q-201 City of Oslo Other areas 7.2 % (8 % quota) 8.2 % (10 % quota) • The mortgage regulation*
Slide 26: Covid-19 measures and assumed consequences drive loss provisions
Covid-19 measures and assumed consequences drive loss provisions Impairments on loans and guarantees (NOK million) • Impairments on loans and guarantees in 1Q-20 were NOK 151 million. 151 • Parent bank NOK 130 million • SB1 Finans Østlandet NOK 21 million 33 • Model based provisions related to Covid
Slide 27: The bank’s funding ambitions
The bank’s funding ambitions Today’s funding mix and thoughts on funding going forward Covered bonds Loans from banks 2% • Deposits are and will continue to be the 25% Bank’s most important funding source. Senior NOK 9% Senior EUR • The Bank exclusively uses SPABOL for 10% Deposits covered bond fund
Slide 28: Minimum Requirement for Own Funds and Eligible Liabilities
Minimum Requirement for Own Funds and Eligible Liabilities MREL – The Norwegian legislation ‒ Loss absorbing amount equal to Pillar 1 and Pillar 2 requirements and combined buffer requirement: ‒ Covered by AT1 and Tier 2 16.8 % ‒ Recapitalization amount equal to Pillar 1 and Pillar 2 requirements an
Slide 29: MREL needs going forward
MREL needs going forward Still some regulatory uncertainty • Base scenario: ‒ The Norwegian legislation with increased systemic risk buffer and countercyclical 1,400 buffer. 1,300 ‒ App. EUR 1.3 bn SNP debt by YE2023. 900 100 500 ‒ Depending on lending growth. • Uncertainty: 4,079 ‒ BRRD2 into Norwe
Slide 30: An ambitious bank in the most interesting market area in Norway
An ambitious bank in the most interesting market area in Norway Summary Intercity construction development 30
Slide 31: Contact details
Geir-Egil Bolstad CFO Phone: +47 918 82 071 geir-egil.bolstad@sb1ostlandet.no Contact Cathrine Mordal Head of Treasury Phone: +47 62 51 09 10 details cathrine.mordal@sb1ostlandet.no Runar Hauge Portfolio Manager/IR Phone: +47 482 95 659 runar.hauge@sb1ostlandet.no 31
Slide 32: Appendix
Introduction to SpareBank 1 Østlandet Region, strategy and ambitions Asset quality, rating and funding plans Appendix
Slide 33: Norwegian and regional outlook
APPENDIX Norwegian and regional outlook Financial Accounts 1Q 2020
Slide 34: Sharp GDP downturn due to Covid-19 also affects Eastern Norway
Sharp GDP downturn due to Covid-19 also affects Eastern Norway – but trending back in May Economic Activity • The coronavirus measures has lead to a sharp downturn in the Norwegian Change in GDP– selected industries April 20202 economy. ‒ Norwegian mainland GDP shows a 4.7 % decline in April 20201.
Slide 35: Norges Bank: Responds quickly to dampen the economic downturn
Norges Bank: Responds quickly to dampen the economic downturn Macro outlook - Norwegian reference interest rates 5.00 • A sharp downturn in both Norges Bank deposit rate global and Norwegian 4.50 NIBOR 3m economic activity and very Swap NOK 5yrs 4.00 Swap NOK 10yrs low oil prices, lead to quick 3.50
Slide 36: Lower overall expectations – but still positive in own finances
Lower overall expectations – but still positive in own finances Consumer confidence with sub-indicators for Eastern Norway Consumer confidence for Eastern Norway 25 25 21 21 21 • Largest reduction in consumer confidence for 17 12 16 11 9 the national economy. 4 13 9 10 8 6 8 13 2017 2018 2019 -9 Q2
Slide 37: No fear for bankruptcy despite lower confidence
No fear for bankruptcy despite lower confidence Business confidence in Eastern Norway • Still positive expectations for demand 50 and labor (FTE). 47 45 45 • Lowest confidence for tourism, 38 37 38 industry and commercial services. 34 33 31 • Manufacturing and primary industries 30 29 29 28 have the
Slide 38: Employment
Employment Unemployment Unemployment and labour force, weekly trend Sector employment • SSBs forecast for the unemployment rate • The unemployment rate (registered • The public sector is a large employer and (unemployment survey) shows a 6.3% employment seekers fully unemployed) went absorbs employm
Slide 39: Which measures have been introduced to mitigate impact?
Which measures have been introduced to mitigate impact? Unemployment: extended salary payments for 20 days ; afterwards unemployment benefits at 60% of pay (capped) Cost covering payments for companies that had to closed or lost revenue + Banks granting instalment deferrals on mortgages on request f
Slide 40: Record one month housing price increase in May
Record one month housing price increase in May Housing price developments for relevant areas compared with Norway Housing prices, indexed (2015=100) • High price increase but still low transaction volumes 150.00 150.00 ‒ Highest one month price increase in history 140.00 140.00 ‒ 5.5 % lower transac
Slide 41: Norway has a good starting point for a crisis
Norway has a good starting point for a crisis Sound public finances Low unemployment Floating exchange rate Public debt, 2018/2019 NOK / USD Index of industry wage unit costs 41
Slide 42: Sovereign Wealth Fund
Sovereign Wealth Fund Sovereign wealth fund Withdrawals from the fund PMI during the 2008-09 crisis 42
Slide 43: Dovish international sentiment sends interest rates down
Dovish international sentiment sends interest rates down – as well as the Norwegian long end International government benchmark bonds 43 Source: Refinitiv Datastream
Slide 44: Mortgage market: key characteristics
Mortgage market: key characteristics Mortgage Market • Total size approximately NOK 3,000 billion (USD 375 billion, €330 billion) • Private banks (incl. savings banks) are the dominant suppliers of mortgages with over 95% market share • Scheduled repayment mortgages: 83.4%, flexible: 16.6% • Typical
Slide 45: Financial Accounts Q1 2020
APPENDIX Norwegian and regional outlook Financial Accounts 1Q 2020
Slide 46: Covid-19 will affect profitability and dividend in 2020
Covid-19 will affect profitability and dividend in 2020 Long term financial targets and actual performance as of 1Q-2020 Profitability Return on equity at least 11 % ! 6.9 % Dividends 50 % pay-out ratio1 TBD ! Solidity Regulatory requirement + 100 bps2 √ 17.0 % Costs Growth in operating costs in par
Slide 47: Income statement 1Q 2020 (1Q 2019)
Income statement 1Q 2020 (1Q 2019) Group 1Q 2020 1Q 2019 2019 Net interest income 594 508 2,166 Net commission income 279 273 1,152 Other income 64 67 236 Dividends 12 12 19 Net profit from ownership interest 115 346 519 Net income from financial assets/liabilities -175 65 197 Total operating expens
Slide 48: Key financials – quarterly
Key financials – quarterly (1) Pre-tax profit (NOK million) Net interest income and and commission fees from covered bond companies (NOK million) 810 638 667 673 585 592 602 526 406 251 1Q-19 2Q-19 3Q-19 4Q-19 1Q-20 1Q-19 2Q-19 3Q-19 4Q-19 1Q-20 Impairments on loans and guarantees (NOK million) Tota
Slide 49: Key financials – quarterly
Key financials – quarterly (2) Return on equity CET 1 ratio 21.2 % 16.9 % 16.7 % 16.7 % 17.2 % 17.0 % 12.8 % 10.7 % 7.3 % 6.9 % 1Q-19 2Q-19 3Q-19 4Q-19 1Q-20 1Q-19 2Q-19 3Q-19 4Q-19 1Q-20 Lending growth (including mortgage transferred to Growth in deposits last 12 months 10.4 % covered bond companie
Slide 50: Continued growth in net interest income
Continued growth in net interest income Net interest income incl. commissions from covered bond companies 1600 1.80% 1.71% 1.72% 1400 1.65% 1.64% 1.70% • Growth in net interest income in 1Q-20, 1.62% as a combination of margins and volume 1200 1.60% 1000 1.50% • Reduced commission income from 800 1.
Slide 51: Continued strong lending growth
Continued strong lending growth Lending volume (Group, NOK billion) 180.0 151 154 • Total lending in the Group, including 144 147 160.0 141 mortgages transferred to covered bond companies, increased by NOK 3.2 billion 140.0 44 45 43 43 42 120.0 in 1Q-20. 100.0 2.3 % 2.1 % 2.3 % 2.1 % 80.0 • This is
Slide 52: Increased lending margins
Increased lending margins Retail and corporate divisions (parent bank) 2.66% • Lending margins in the parent bank - 2.48% 2.44% 2.43% both within the CM and the RM – 2.40% increased in 1Q-2020. • Average 3M Nibor was 1.66 % in 1Q-20 – a reduction of 18 bps from 4Q-2019. 1.53% 1.49% • Due to the coro
Slide 53: Deposit coverage ratio in line with targets
Deposit coverage ratio in line with targets Deposit volume and deposit growth (Group – NOK billion) • Deposits growth of 1.8 % (2.1 % in 4Q-19). 78 80 77 77 72 2.1 % 1.8 % • Deposit growth last 12 months: 10.4 % (9.5 6.9 % -0.6 % %). • Retail deposit growth + 9.4 %. • Corporate deposit growth + 11.7
Slide 54: Reduced deposit margins last quarter
Reduced deposit margins last quarter Retail and corporate divisions (parent bank) • Reduced deposit margins in the parent bank both within RM and CM. 0.66% • Average 3M Nibor was 1.66 % for 1Q- 20. A reduction of 18 bps from 4Q-19. 0.52% 0.46% 0.54% • Customers are given noticed of 0.42% deposit rat
Slide 55: Increased proportion of problem loans – but still at low levels
Increased proportion of problem loans – but still at low levels Non-performing and other doubtful commitments (NOK million and %) 700 0.70% 0.61% 0.60% 0.59% 600 0.60% • The proportion of problem loans 500 0.45% 0.46% 0.50% increased in 1Q-20. 400 0.40% 0.42% 0.42% 0.41% • The proportion of problem
Slide 56: Continued low impairments and net exposure in stages 2 and 3
Continued low impairments and net exposure in stages 2 and 3 Specification of impairments and net exposure (NOK million) Impairments per segment - quarterly 1Q-20 4Q-19 3Q-19 2Q-19 1Q-19 • Gross loans and receivables Personal customers 16.0 8.8 1.2 -0.2 -8.6 defined as Stage 3 amounted to Corporate
Slide 57: Stable CET 1 with significant buffer over regulatory requirement
Stable CET 1 with significant buffer over regulatory requirement Common Equity Tier 1 ratio (Group) • The Group’s long term CET 1-target is the regulatory requirement with an added management buffer of 100 bps. • March 13 the countercyclical buffer was reduced to 1 %. The regulatory requirement, inc
Slide 58: 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 59: Together – to create
Together — to create @STLANDET
SpareBank 1 Østlandet — Q1 2020 Earnings Presentation on 6ix