Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 SR-Bank — Q4 2017 Earnings Presentation
62 slides from Sparebank 1 Ostlandet's earnings presentation, 2018
Slide 1: Fourth Quarter 2017
FOURTH QUARTER 2017 Together we achieve the impossible HAND IN HAND WITH THE INCREDIBLE
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: The leading financial group in the southwest of Norway
Rogaland The leading Population 472.000 financial group Market share 36% Year of establishment 1839 in the Market strategy Market leader southwest of Unemployment rate 3.3%* Norway Hordaland Population 520.000 Market share 6% Year of establishment 2006 Market strategy Entry/growth Unemployment rate
Slide 4: Strong result with significant income growth, good cost control and lower losses
Strong result with significant income growth, good cost control and lower losses • Pre-tax profit for the quarter is NOK 700 million compared to NOK 525 million last year ‐ Return on equity after tax 11.4 % • Pre-tax profit year-to-date is NOK 2.610 million compared to NOK 2.158 million last year ‐
Slide 5: Key figures 2017 and financial targets and estimates for 2018
Key figures 2017 and financial targets and estimates for 2018 Return on equity CET 1 Growth in loans 11,0% 11,0% 11,0% 4,0% - 6,0% 15,0% 15,1% 15,0% 2,0% - 4,0% 2,6% Target 2017 2017 Target 2018 Target 2017 2017 Target 2018 Target 2017 2017 Target 2018 Normalised cost growth Cost growth Impairment l
Slide 6: Key figures – quarterly development
Key figures – quarterly development Return on equity CET 1 12,9% 14,7% 14,7% 14,7% 14,8% 15,1% 11,0% 11,4% 9,5% 8,7% Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Cost ratio Earnings per share 44,0% 43,3% 41,3% 41,0% 2,39 37,7% 2,18 2,01 1,68 1,58 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q4 16 Q1
Slide 7: Key figures – annual development
Key figures – annual development Return on equity CET 1 10,8% 11,0% 14,7% 15,1% 10,0% 13,3% 2015 2016 2017 2015 2016 2017 Cost ratio Earnings per share 42,1% 40,9% 40,7% 8,16 6,83 6,87 2015 2016 2017 2015 2016 2017 7
Slide 8: Income statement
Income statement Group Income Statement (MNOK) 31.12.2017 31.12.2016 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Net interest income 3.162 2.871 819 820 784 739 733 Net commission and other income 1.524 1.443 367 386 400 371 355 Net income on investment securities 634 654 204 198 143 89 139 Total income 5.320 4.9
Slide 9: Change in profit 31.12.2016 – 31.12.2017
Change in profit 31.12.2016 – 31.12.2017 3.000 235 2.610 81 -20 -135 2.500 291 2.158 2.000 1.500 1.000 500 0 31.12.2016 Net interest income incl. Other income Net income on investment Total operating expenses Impairment losses on 31.12.2017 commission from covered securities loans and guarantees bon
Slide 10: Key figures
Key figures 31.12.2017 31.12.2016 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Return on equity after tax (%) 11,0 10,0 11,4 12,9 11,0 8,7 9,5 Net interest margin (%) 1,52 1,48 1,50 1,54 1,52 1,53 1,50 Impairment losses on loans and guarantees in % of gross loans incl. 0,29 0,42 0,26 0,27 0,29 0,37 0,35 covered bo
Slide 11: Consolidated income profile
Consolidated income profile 1.088 1.110 1.184 1.206 1.186 347 331 361 325 335 39 36 39 30 36 784 820 819 733 739 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Net interest income Commission income from covered bond companies Net commission and other income 11
Slide 12: Lending and deposit margins
Lending and deposit margins Lending margins* Deposit margins 2,77% 2,79% 2,83% 2,68% 2,75% 2,73% 2,76% 2,72% 2,58% 0,34% 0,29% 0,24% 0,12% 0,13% 1,78% 1,79% 0,11% 1,69% 1,56% 1,55% 1,59% 0,03% 1,48% 1,45% 1,38% -0,03% 0,04% -0,01% -0,06% -0,05% -0,12% -0,08% -0,12% -0,09% -0,21% -0,15% Q4 15 Q1 16 Q
Slide 13: Lending volume and 12 months growth
Lending volume and 12 months growth Corporate Market (incl. Capital Markets) 60 000 50 000 15% 11,5 % 40 000 7,1 % 7,8 % 10% MNOK 5,3 % 6,4 % 30 000 3,0 % 2,4 % 5% 20 000 -0,5 % -2,3 % -1,9 % -0,7 % 0% 10 000 -3,5 % -2,8 % 0 -5% Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Volume Growth % G
Slide 14: Loan portfolio as at 31.12.2017
Loan portfolio as at 31.12.2017 • Gross loans (incl. covered bond companies) as at 2,9% 31 December 2017 amount to NOK 187.1 billion Agriculture / forestry / fishing 3,0% compared with NOK 182.3 billion at the same Industry, Power/water supply and construction 3,5% time the year before. 3,9% 1,6% •
Slide 15: Loan to value ratio on home mortgage loans
Loan to value ratio on home mortgage loans • The proportion of loans with a loan-to- value ratio 100% of less than 85% is high. ‐ 89.0% of the exposure is within 85% of the assessed value of collateral. 80% 62,6% 60,6% 60% 40% 27,0% 28,4% 20% 6,7% 7,2% 3,7% 3,8% 0% Below 70 % 70 - 85 % 85 - 100 % Ab
Slide 16: Deposits volume and 12 month growth
Deposits volume and 12 month growth • Last 12 months deposits increased by NOK 9.5 Corporate Market* billion to 95.4 billion. 50.000 24,7% 22,7% 20,7% 25% ‐ Corresponds to an increase in the period of 40.000 15,4% 14,0% 11.0%. 15% MNOK 30.000 20.000 5% • Increased deposit growth in the corporate mar
Slide 17: Net commission and other income
Net commission and other income MNOK 31.12.2017 31.12.2016 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Payment facilities 262 252 65 71 63 63 60 Savings/placements 198 185 47 51 49 51 45 Insurance products 208 198 52 52 52 52 50 Commission income real estate broking 389 348 94 90 112 93 85 Guarantee commission 10
Slide 18: Net income on investment securities
Net income on investment securities MNOK 31.12.2017 31.12.2016 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Dividends* 11 110 0 2 4 5 5 Investment income, associates 425 384 154 127 81 63 78 Securities gains/losses 127 53 24 46 32 25 50 - of which capital change in shares and certificates 136 51 44 57 28 7 42 - of
Slide 19: Subsidiaries
Subsidiaries Subsidiaries MNOK 31.12.2017 31.12.2016 EiendomsMegler 1 SR-Eiendom AS Number of sales 6.565 6.042 Operating profit before tax 27 16 SpareBank 1 SR-Finans AS* Total assets (BNOK) - 7 Operating profit before tax - 84 SR-Forvaltning AS Capital under management (BNOK) 11 10 Operating profi
Slide 20: Ownership interests
Ownership interests Ownership interests MNOK 31.12.2017 31.12.2016 SpareBank 1 Gruppen AS Interest ownership 19,5 % 19,5 % Profit after tax 353 312 Adjusted profit previous years -4 6 SpareBank 1 Boligkreditt AS Interest ownership 8,0 % 13,9 % Profit after tax -25 -18 Adjusted profit previous years
Slide 21: Operating expenses
Operating expenses MNOK 31.12.2017 31.12.2016 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Personnel expenses 1.214 1.161 314 303 302 295 288 Financial activity tax* 39 5 9 9 10 11 5 Restructuringcosts 10 0 10 0 0 0 0 Total personnel expenses 1.263 1.166 333 312 312 306 293 IT expenses 317 321 82 74 86 75 87 Marke
Slide 22: Operating expenses - normalised costs growth of 0.1 %
Operating expenses - normalised costs growth of 0.1 % Operating expenses MNOK Percentage points Operating expenses per 31.12.2016 2.032 Financial activity tax 34 1,7 % Increased costs Eiendomsmegler 1 30 1,5 % Increased costs Regnskapshuset SR 15 0,7 % Increased costs bonus provisions 31 1,5 % Restr
Slide 23: 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 1,21% 1,23% 1,21% 1,18% 1,13% 0,35% 0,37% 0,29% 0,27% 0,26% 1.141 1.514 1.393 1.352 1 20 1.562 1 2 167 142 130 126 1.070 118 830 824 739 555 -2 Q4 16 Q1 17 Q2 17 Q3
Slide 24: Impairment losses on loans
Impairment losses on loans Losses on loans in income statement (MNOK) 31.12.2017 31.12.2016 Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Corporate customers 482 581 89 116 115 162 131 Retail customers 59 39 29 10 15 5 11 Change in collective impairment losses on loans 2 158 2 -2 1 1 20 Net impairment losses on loa
Slide 25: Funding
Funding • Well diversified funding. Deposits to loans ratio • Net Stable Funding Ratio* is 119% on consolidated basis. 57,6% 58,3% 60,5% 59,0% 56,1% 57,2% 55,4% 54,5% 55,3% • Good liquidity – Net refinancing need over the next 12 months is NOK 10.9 billion. – Liquidity buffer is NOK 32.3 billion for
Slide 26: Solid capital ratio
Solid capital ratio ROE ROE ROE • SpareBank 1 SR-Bank is compliant with capital 10,8 % 10,0 % 11,0 % requirements as at 31.12.2017. CET 1 • The Pillar 2 requirement for SpareBank 1 SR-Bank 17,5% 17,9% 15,0 % is 2.0%. 16,7% 16,0% 15,6% Management buffer • SpareBank 1 SR-Bank is not defined as a 1,0 %
Slide 27: Outlook
Outlook • The market is expected to grow. The development in the group's market area was positively affected by the adaptability of companies and higher oil prices. • Oil investments on the Norwegian continental shelf are expected rise by up to 15% in 2019. • Declining unemployment in the group's ma
Slide 28: Customer growth and brighter outlook for the region
• Major customer growth and more attractive to small and medium-sized enterprises. • Significantly brighter outlook for the region. • Better customer services and greater efficiency thanks to new and innovative technological solutions. • First in Norway and the Nordic region to launch robot technolo
Slide 29: "We are going to grow big with fast food based on Norwegian salmon"
Geir Skeie “We are going to grow big with fast Entrepreneur and winner of Bocuse d`Or 2009 food based on Norwegian salmon" • In 2017, we gained 1,400 companies as new customers. • Around 50% of these became customers via our new digital "onboarding" solutions, which were launched in September 2017.
Slide 30: "The necessary steps were taken and have produced results"
"The necessary steps were taken and have produced results" 1 Companies are expecting growth in 2018 2 Oil and industrial companies are the most positive 3 Optimism in all of the counties 4 More people are in work and unemployment is even lower 5 Robust upturn – increased order reserves and profitabi
Slide 31: "We are introducing new technology, both to improve customer services and operating efficiency"
"We are introducing new technology, both to improve customer services and to increase Hi! Now I know who you operating efficiency" are and can perform tasks for you. I can understand, recognise and learn. • In the last few years we have invested in new systems that mean we can now introduce unique t
Slide 32: New ventures in the group
• Gründerhub established in Stavanger, Bergen and Kristiansand. The group continues to support entrepreneurs by offering free entrepreneur New ventures programmes and free office space. The goal is to create an exciting environment and processes where people with good ideas can get help to in the gr
Slide 33: Appendix
APPENDIX 1) Macro 2) Oil related portfolio 3) Risk 4) SpareBank 1 SR-Bank 33
Slide 34: Lower unemployment rate
Lower unemployment rate Marked reduction in Rogaland in 2017 Norwegian unemployment rate, %, registered (NAV), seasonal adj., monthly 6 5 4 3 2 1 0 Norway Rogaland Hordaland Vest-Agder Norway, SSB AKU-unempl. rate 34 Source: NAV og SSB
Slide 35: Housing prices slightly down in Norway due to decline in Oslo
Housing prices slightly down in Norway due to decline in Oslo Prices in many counties close to the same as last year House prices. NOK per sqm. Average all. Monthly 80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0 Rogaland Hordaland Vest-Agder Oslo Norway 35 Source: Finn.no, Eiendom Norge o
Slide 36: Petroleum activity slowed down in 2017 and is expected to increase coming years
Petroleum activity slowed down in 2017 and is expected to increase coming years Activity down 35% from top to bottom, but is expected to increase by 15% towards 2020 • After reaching record levels in 2013 and 2014, Petroleum activity on Norwegian Continental Shelf. BNOK (2018 NOK). Source: NPD petro
Slide 37: Retail trade increasing in Norway by 2-4%
Retail trade increasing in Norway by 2-4% In Rogaland, the level is somewhat higher than last year Retail sales (excl. auto), annual change from same 2-month period previous year 12% 10% 8% 6% 4% 2% 0% -2% -4% Norge Rogaland Hordaland Agder Oslo 37 Source: SSB
Slide 38: Appendix
APPENDIX 1) Macro 2) Oil related portfolio 3) Risk 4) SpareBank 1 SR-Bank 38
Slide 39: SpareBank 1 SR-Bank has a well diversified portfolio
SpareBank 1 SR-Bank has a well diversified portfolio 7.1% (8.1%) of total EAD is related to oil operations SpareBank 1 SR-Bank* has total BNOK 209.3 (200.1) EAD per 31.12.2017 BNOK 14.8 (16.2) EAD is related to oil operations Corporate market excl. oil operations; 26,6% (25,2%) Oil service; 2,1% (2,
Slide 40: Oil services - total NOK 4.3 billion
Oil services - total NOK 4.3 billion (NOK 4.8 billion as at 31.12.2016) • Exploration and concept studies Oil services ‐ EAD NOK 0.3 billion ‐ EAD NOK 4.3 billion, 2.1% of the bank's total EAD ‐ Average weighted probability of default 2.8% ‐ Average weighted probability of default for the oil servic
Slide 41: Oil and gas - total NOK 1.7 billion
Oil and gas - total NOK 1.7 billion (NOK 1.6 billion as at 31.12.2016) • Exploration financing Exploration and production companies ‐ EAD NOK 0.1 billion ‐ EAD NOK 1.7 billion, 0.8% of the bank's total EAD ‐ Average weighted probability of default 1.3% ‐ Average weighted probability of default for t
Slide 42: Offshore - total NOK 8.7 billion
Offshore - total NOK 8.7 billion (NOK 9.8 billion as at 31.12.2016) • Offshore Service Vessels Offshore ‐ EAD NOK 6.3 billion, average weighted probability of default is 3.3%, ‐ EAD NOK 8.7 billion, 4.2% of the bank's total EAD weighted average age is 9.6 years, average weighted contract ‐ Average w
Slide 43: Offshore Service Vessels – total NOK 6.3 billion
Offshore Service Vessels – total NOK 6.3 billion (NOK 6.9 billion as at 31.12.2016) Offshore Service Vessels EAD per age of OSV excl. accomodation • Most customers with long history as a borrower 2.500 in SpareBank 1 SR-Bank • Most of the companies are listed on stock exchange or family owned 2.000
Slide 44: Offshore Service Vessels – largest customer group
Offshore Service Vessels – largest customer group Number of vessels • Well diversified portfolio. One commitment of NOK 1 9 1.0 billion, rest of NOK 800 or lower. 2 8 • Total EAD for the portfolio is NOK 6.3 billion of 3 8 which; 4 11 • NOK 5.5 billion consists of 12 restructured 5 2 commitments 6 2
Slide 45: Lending to commercial property
Lending to commercial property Lending to commercial property Housing cooperative; 4,0% (4,7%) • NOK 27.0 billion, 14.5% of the bank’s total loans. Real estate management; 2,7% (2,0%) • The portfolio is characterised by lending to commercial Development properties for leasing with long-term contract
Slide 46: Appendix
APPENDIX 1) Macro 2) Oil related portfolio 3) Risk 4) SpareBank 1 SR-Bank 46
Slide 47: SpareBank 1 SR-Bank has a 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 47
Slide 48: Risk management principles and market areas
• The core purpose of the banking industry is to create value by assuming deliberate and acceptable risk ‐ SpareBank 1 SR-Bank therefore invests significant resources in developing risk management systems, processes and expertise that are in line with leading international practice • The bank's prim
Slide 49: Exposure limits and property financing requirements
• The bank sets specific limits for the size of commitments as well as requirements concerning industry diversification ‐ The maximum total exposure to an individual customer must be significantly lower than the regulatory requirements ‐ The maximum unsecured exposure to an individual customer must
Slide 50: Risk profile of the loan portfolio
Risk profile of the loan portfolio • SpareBank 1 SR-Bank has a solid loan portfolio. Distributed by risk class 100% • 60.3% of the bank’s loan exposure has a PD* 80% 60,5% 60,3% below 0.5%. 60% 40% 29,0% 28,7% • Single loan exposures less than NOK 10 million 10,5% 11,0% 20% aggregates 68.8% of total
Slide 51: Risk profile – Lending to the retail market
Risk profile – Lending to the retail market • The quality of the retail market portfolio is Retail market portfolio distributed by risk class considered to be good and has low potential 100% 2,4% 2,9% 2,6% 2,6% 2,7% 15,7% 18,8% 16,3% 16,4% 16,6% losses. 80% 60% • The proportion of loans with a PD* b
Slide 52: RWA home mortgages
RWA home mortgages • RWA on home mortgages reflects a solid and 22,3 % 22,5 % 21,7 % 21,6 % stable portfolio. 21,3 % 20,0 % 15,0 % RWA 10,0 % 5,0 % 0,0 % Home mortgages as defined in the Norwegian IRB framework; residential 31.12.16 31.03.17 30.06.17 30.09.17 31.12.17 property must make up at least
Slide 53: Risk profile – Corporate lending
Risk profile – Corporate lending • The quality of the corporate market portfolio is Corporate lending portfolio distributed by risk class good. There is a clearly defined framework that 100% 24,8% 23,3% 22,3% 24,4% 27,6% sets limit on what is funded and conditions for 80% particular funding purposes
Slide 54: Appendix
APPENDIX 1) Macro 2) Oil related portfolio 3) Risk 4) SpareBank 1 SR-Bank 54
Slide 55: SpareBank 1 SR-Bank ASA
SpareBank 1 SR-Bank ASA Divisions of SpareBank 1 SR-Bank ASA Fully owned companies Partly owned companies BN Bank SpareBank 1 Gruppen EiendomsMegler 1 SR-Boligkreditt Capital Markets (23.5%) (19.5%) Leading real estate broker Covered Bond Funding Number of man-years: 26 Commercial bank located in Ho
Slide 56: SpareBank 1 Alliance
SpareBank 1 Alliansen SpareBank 1 SpareBank 1 SpareBank 1 LO SpareBank 1 SMN Samspar SR-Bank Nord Norge Østlandet 19.5% 19.5% 9.6% 19.5% 19.5% 12.4% Products, commissions, dividends Sales, loan portfolios, capital Companies directly owned by SR-Bank SpareBank 1 Gruppen AS Selskaper hvor SR-Bank har
Slide 57: Our vision: the customer's first choice
Our vision: the customer's first choice Objectives Financial goals • SpareBank 1 SR-Bank's objectives are to stimulate growth • Return on equity of 11% after tax in 2018. The longer term and development (2020) target is a minimum of 12%. • To provide a sustainable contribution to the wealth creation
Slide 58: Balance sheet
Balance sheet Balance sheet (MNOK) 31.12.2017 31.12.2016 Cash and balances with central banks 207 1.079 Balances with credit institutions 1.608 4.334 Net loans to customers 171.237 156.372 Certificates, bonds and other fixed-income securities 31.909 21.024 Financial derivatives 5.541 4.315 Shares, o
Slide 59: SRBANK share
SRBANK share • International ownership is Development in Price/Book Relativ share price development 23.5% per 4. quarter 2017. 100 1,4 170 Price 90 P/B 150 1,2 Index 100 = dec. 31th • Total market value at 4. 80 130 quarter 2017 is NOK 22.3 70 1,0 NOK billion. 110 2016 p/B 60 0,8 90 50 0,6 OSEBX 40
Slide 60: 20 largest shareholders as at December 2017
20 largest shareholders as at December 2017 • Ownership interests: Investor Number Stake Sparebankstiftelsen SR-Bank 72.419.305 28,3% • From Rogaland, Agder-counties and Hordaland: 44.7 % Folketrygdfondet 16.987.715 6,6% (49.9 %) State Street Bank and Trust Co, U.S.A. Nominee 8.913.352 3,5% • Intern
Slide 61: SR-Bank pr 31.12.2017
SR-Bank pr 31.12.2017 2017 2016 2015 2014 2013 2012 Share price 87,00 60,75 39,30 52,50 60,25 37,20 Stock value (MNOK) 22.250 15.537 10.051 13.427 15.409 9.514 Book value per share, NOK (group) 77,24 71,54 66,14 60,28 55,00 49,48 Earnings per share 8,16 6,87 6,83 8,20 7,28 5,33 Dividend per share 4,
Slide 62: Contact Details
Contact Details Adress Bjergsted Terrasse 1 Tel: +47 915 02002 Postboks 250 www.sr-bank.no 4066 Stavanger Management Arne Austreid CEO Tel.: +47 900 77 334 E-post: arne.austreid@sr-bank.no Inge Reinertsen CFO Tel.: +47 909 95 033 E-post: inge.reinertsen@sr-bank.no Investor Relations Stian Helgøy Inv