Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q1 2020 Earnings Presentation
53 slides from Sparebank 1 Ostlandet's earnings presentation, May 2020
Slide 1: Company Presentation First quarter 2020
Company Presentation First quarter 2020
Slide 2: 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 3: Highlights 1Q-2020
Highlights 1Q-2020 Summary • Solid underlying operations with increased net interest income and good cost control • Stable customer growth and very high customer satisfaction • Significant unrealized losses on other financial assets and liabilities • Reduced contribution from SpareBank 1 Gruppen • F
Slide 4: The Bank and the Market Area
The Bank and the Market Area
Slide 5: 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 6: Sharp GDP downturn due to Covid-19 also affects Eastern Norway
Sharp GDP downturn due to Covid-19 also affects Eastern Norway Economic Activity • The coronavirus measures has lead to a sharp downturn in the Norwegian Change in GDP– selected industries March 20202 economy. ‒ Norwegian mainland GDP shows a 6.4 % decline in March 20201. Accommodation and food serv
Slide 7: Reduction in housing transactions due to Covid-19 – but stable prices
Reduction in housing transactions due to Covid-19 – but stable prices Housing price developments for relevant areas compared with Norway Housing prices, indexed (2015=100) 150.00 150.00 • Lower activity due to Covid-19 in April, but regional diversity 140.00 140.00 130.00 130.00 ‒ High activity YTD
Slide 8: 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 9: 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 10: Only 5 percent of the businesses have a substantial fear of bankruptcy
Only 5 percent of the businesses have a substantial fear of bankruptcy Question: To what degree does the business fear bankruptcy within the next 12 months? 1 0 1 1 2 2 2 1 2 3 3 0 1 1 3 2 3 6 2 4 13 5 4 9 7 9 7 10 5 17 18 15 17 14 25 15 Uncertain To a very large degree 16 To a large degree 86 85 Ne
Slide 11: Decreasing demand for installment deferral among retail customers
Decreasing demand for installment deferral among retail customers Personal Banking and the coronavirus pandemic Application for installment deferrals – share of retail portfolio* • Retail customers were quick to apply for installment deferrals in March, but demand has been declining strongly through
Slide 12: The corporate division has a steady flow of customer inquiries
The corporate division has a steady flow of customer inquiries Corporate Banking and the coronavirus pandemic • Corporate 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 for temporary
Slide 13: The underlying customer growth continues
The underlying customer growth continues Numbers of customers in parent bank 360 40 • Additional customers were off- 354 352 boarded during 1Q-20 in retail 348 350 38 banking (RM) 343 337 340 36 • A total of 6,143 customers were 340 332 off-boarded. 34 • Customers with very limited 329 327 327 330 3
Slide 14: Increased market share among members of LO
Increased market share among members of LO* LO Favør mortgages – number of mortgages and grated volume (NOK million) Housing mortgage volume (NOK million) and number Aug 2019- Apr 2020 6,200 • The Bank experiences strong customer growth among members of LO*. 3,300 3,900 • The agreement between Spare
Slide 15: The customer dividend very welcome by customers this year
The customer dividend very welcome by customers this year Customer dividend 2019 The Supervisory Board decided a customer dividend of NOK 208 million. • To meet the authorities' recommendations on reduced dividend payments and at the same time balance out the desire to meet the needs of customers an
Slide 16: The focus on savings and life insurance is increasing
The focus on savings and life insurance is increasing Cross sales 1Q-2020 (increase compared to same period in 2019) Mutual Funds + 104 % Savings Plans + 44 % Granted Mortgages + 18 % Personal Insurance + 10 % 16
Slide 17: 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 18: Financial Accounts 1Q 2020
Financial Accounts 1Q 2020 SpareBank a @STLANDET
Slide 19: 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 20: Profit contributions from subsidiaries (1)
Profit contributions from subsidiaries (1) Profit contribution 1Q 2020 (1Q 2019) SpareBank 1 Finans Østlandet AS • Profit after tax NOK 29 million (NOK 29 million). • Lending growth 7.6 % (12.7 %) last 12 months. • Strong income development. • Increased loans loss provision related to the coronaviru
Slide 21: Profit contributions from subsidiaries (2)
Profit contributions from subsidiaries (2) Profit contribution 1Q 2020 (1Q 2019) EiendomsMegler 1 Innlandet AS • Profit after tax NOK 0 million (NOK -2 million). • Income NOK 28 million (NOK 25 million). • Marginally negative effect of the coronavirus pandemic so far. Commission and sales volume on
Slide 22: Contribution from joint ventures (1)
Contribution from joint ventures (1) Profit contribution 1Q 2020 (1Q 2019) SpareBank 1 Gruppen AS • Profit after tax NOK -780 million (NOK 240 million). • The controlling interest’s share of profit NOK -591 (193) million. Ownership 12.4 %. • SpareBank 1 Østlandet’s share of this amounted to NOK -73
Slide 23: Contribution from joint ventures (2)
Contribution from joint ventures (2) Profit contribution 1Q 2020 (1Q 2019) SpareBank 1 Kredittkort AS • Profit after tax NOK 2 million (NOK 18 million). • Ownership 20.87 %. • Lower earnings from transaction fees, commission income and income from banking services. SpareBank 1 Betaling AS • Profit a
Slide 24: 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 25: Special items 1Q-2020 - 1
Special items 1Q-2020 - 1 Description and effects 1. Transfer of the personal risk area from SpareBank 1 Forsikring AS to Fremtind Forsikring AS with accounting effect from 1 January 2020. 1. In the agreement between SpareBank 1 Gruppen AS and DNB ASA of 24 September 2019, the total value of the per
Slide 26: Special items 1Q-2020 - 2
Special items 1Q-2020 - 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 26 March
Slide 27: 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) 810 638 667 673 585 592 602 526 406 251 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 28: Key financials – quarterly (2)
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 29: 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 30: 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 31: 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 32: 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 %) Lending to customers per sector (volume/share in %)* Change last 12 months Private customers 68,440 /44.5% 7.8 % SB1 Boligkreditt 44,020 /28.6% 7.6 % R
Slide 33: 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% 33 * Including loans transferred to the covered bond companies
Slide 34: Lending growth is geographically diverse within the market area
The Bank’s lending growth is geographically diverse within the market area Lending to customers per geographic area and change last 12 months (NOK million and %) Lending to customers per county (volume/share in %)* Change last 12 months Former 53,901 /35.0% 7.1 % Hedmark Oslo 40,592 /26.4% 7.9 % For
Slide 35: Corporate lending growth is highest in the area surrounding Oslo
The corporate lending growth is highest in the area surrounding Oslo Lending to corporate customers per geographic area and change last 12 months (NOK million and %) Lending to retail customers by county (volume/share in %) CM Change last 12 months Former 9.1 % 16,917 /40.9% Hedmark Oslo 10,457 /25.
Slide 36: Corporate lending growth is spread among different sectors
Corporate lending growth is spread among different sectors Corporate lending growth YoY – sector (NOK million) 154 21 4 1 -5 -14 326 495 584 758 4.733 1.003 1.406 36 *Incl. SB1 Næringskreditt
Slide 37: Retail lending growth is highest in the area surrounding Oslo
Retail lending growth is highest in the area surrounding Oslo Lending to customers per geographic area and change last 12 months (NOK million and %) – Retail market Lending to retail customers by county(volume/share in %)* Change last 12 months Former 36,984 /32.9% 5.7 % Hedmark Oslo 30,135 / 26.8%
Slide 38: High quality credit processes lead to low and stable LTV
High quality credit processes lead to low and stable LTV Percentage of granted mortgages and average LTV per period and county 90% Percentage of granted volume 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% 60% 60% 60%
Slide 39: 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 40: 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 41: 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 42: Increased commissions from mutual funds and life insurance
Increased commissions from mutual funds and life insurance Net commissions and other income (NOK million) 350 • Increase in net commissions and other 282 300 266 264 income compared to last quarter and 256 16 15 250 corresponding quarter last year. 16 15 42 250 Total 15 35 35 38 Commission income fr
Slide 43: Lower operating costs at group level
Lower operating costs at group level Operating costs per quarter (NOK million) 600 600 494 489 490 487 • Lower operating costs compared to 500 500 457 4Q-2019. 38 44 45 47 36 33 40 32 34 400 Total • The operating costs in 1Q-20 lowered 400 30 by 1.5% compared with same period Other operating 130 137
Slide 44: Lower operating cost growth in the parent Bank
Lower operating cost growth in the parent Bank Operating costs per quarter (NOK million) • The operating costs in the parent bank was NOK 7 million lower in 1Q-20 than for the corresponding period last year. • This is equivalent with a reduction of 2.1 % from last year. 343 345 339 336 320 1Q-19 2Q-
Slide 45: Increased headcount in 1Q-2020
Increased headcount in 1Q-2020 Headcount (FTE) • Increased headcount at group level of 8 1,141 1,130 1,119 1,127 1,148 FTEs last 12 months. • A net increase of 10 FTEs in subsidiaries 450 446 440 455 460 line with growth ambitions. • Reduction of 2 FTE in parent bank last 12 months, but increased la
Slide 46: Negative contribution from financial items in 1Q 2020
Negative contribution from financial items in 1Q 2020 Net income from financial assets and liabilities (NOK millions) • Net income from financial assets and liabilities was NOK - 48 million. 423 • Dividends from other than Group companies was NOK 12 million (Totens Sparebank). • Net profit from owne
Slide 47: 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 48: 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 49: 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 50: 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 51: SPOL
SPOL 31.03.2020 • SPOL rate of return: Market price (NOK) 75.00 • Return 1Q-20 5 -13.7 % • Return YoY5 - 3.1 % Market capitalisation (NOK million ) 8,687 • The positive development in liquidity Book equity per EC 1) 91.82 continues in 1Q-20. • Average daily transaction volume Earnings per EC, NOK 2)
Slide 52: 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 52
Slide 53: 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
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