Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q3 2023 Earnings Presentation
57 slides from Sparebank 1 Ostlandet's earnings presentation, 2023
Slide 1: Company Presentation 2023
2023 COMPANY PRESENTATION
Slide 2: 3rd quarter of 2023: High NII, increased loan losses, negative financials
3rd quarter of 2023: High NII, increased loan losses, negative financials Summary • Weaker return on equity than target: 8.3 % (11.4 % ytd.). Strong development in core banking operations from higher net interest income offset by reduced income from financial items and increased loan loss provisions
Slide 3: Financial targets and achievements per 3Q-23
Financial targets and achievements per 3Q-23 Long-term goals versus actual results Profitability Return on equity at least 12 % 11.4 % Dividends 50 % pay-out ratio1 50 % Solidity Regulatory requirement + 100 bps2 17.7 % Costs Max 5 % cost increase in parent bank 9.1 % 1. Out of profits after taxes t
Slide 4: A challenging macroeconomic background
A challenging macroeconomic background Low business expectations. Bankruptcies at pre-pandemic levels. Sustained low unemployment Norges Bank’s regional indicators Source: Norges Bank’s Regional Network report, no. 3 2023 4
Slide 5: Housing market remains relatively good, but lower credit growth expected
Housing market remains relatively good, but lower credit growth expected Weak development in the market for new homes also contributes to lower credit growth 5
Slide 6: Big picture: Norway's most attractive market area
Big picture: Norway’s most attractive market area Bank’s core area is expected to grow faster than the country average Population in market area, 1000’* Population, index = 100 in 2022* 120 140 1 757 115 Akershus CAGR: 0.77% 130 700 Oslo: 0.60% 110 National: 0.43% 120 105 Inland cities: 0.36% 313 10
Slide 7: Strong development in core operations
Strong development in core operations Solid growth in NII despite headwinds from higher money market rates Net interest income, net commission income and operating expenses (NOK mill.) 730 767 693 642 540 583 452 466 494 456 478 463 429 320 295 348 324 342 324 276 275 281 313 297 316 304 927 917 980
Slide 8: Market area provides diversification, with variations in loan growth
Market area provides diversification, with variations in loan growth Relatively low lending growth in Oslo and Inland region balanced by healthy growth in Viken Loan volume (NOK billion), retail Lending growth (12 months, %) 10.9 % 5.4 5.6 5.4 36.4 36.6 36.9 7.1 % 6.1 % 49.3 5.0 % 5.2 % 48.1 48.8 4.
Slide 9: A strong sales organisation, with high attention to non-mortgage products
A strong sales organisation, with high attention to non-mortgage products Higher number of capital light products contribute to improved customer profitability Number of products, per mortgage borrower Stock and sales commissions from non-life insurance products, % total assets* 8.6 8.4 8.1 1Q18 3Q1
Slide 10: Strategic ambition to be a clear driving force for sustainable transition
Strategic ambition to be a clear driving force for sustainable transition Higher green share of lending is important to reach our net zero emissions objective* Green loans per 30 September 2023, MNOK Share of green lending, % Residential mortages Commercial real estate 20.0 % 28 389 Residential mort
Slide 11: Pilot project for the green transition of the mortgage portfolio
Pilot project for the green transition of the mortgage portfolio Contributes to the sustainable transition and to reduce risks for customers and the bank - When I enter the house, I register its initial condition. Then we plan for which energy efficiency measures to implement and assess whether the
Slide 12: Challenging times are good times for the savings bank model
Challenging times are good times for the savings bank model • The Norwegian savings bank model has stood the test of challenging times. • Good advice and local knowledge support a solid lending portfolio. • We will contribute with good solutions for existing customers, also for those that face chall
Slide 13: Financial Accounts
2023 FINANCIAL ACCOUNTS
Slide 14: Weaker quarter, but good development in core operations
Weaker quarter, but good development in core operations Financial accounts 3Q 2023 and year to date (same period last year in brackets) • Profit after tax in 3Q23 of NOK 417 million (NOK 441 million) Profit after tax • Profit after tax ytd of NOK 1 649 million (NOK 1 326 million) • ROE in 3Q-23 of 8
Slide 15: Income statement
Income statement Group 3Q23 2Q23 3Q22 Y TD 2023 Y TD 2022 2022 Net interest income 941 852 684 2 651 1 903 2 693 Net commission income 318 363 351 997 1 048 1 375 Other income 40 49 44 139 170 213 Dividends 0 10 1 28 30 43 Net profit from ownership interest -46 22 37 36 73 186 Net income from financ
Slide 16: Net interest income
Net interest income Increased net interest income despite rising money market rates Net interest income incl. commissions from covered bond companies (MNOK and %) 2.13% 1300 2.04% 1.98% 2.00% 1.83% 1100 1.60% 6.9 % 980 927 917 39 900 835 70 64 Commission fees from covered bond 1.50% 756 46 companies
Slide 17: Lending volume growth remains healthy
Lending volume growth remains healthy Expected lower growth going forward, but still good demand among personal and business customers Gross lending (NOK billion) Lending growth (12 months, %) Last national** Households: 3.7% Non-fin corp.: 4.0% 196.9 3Q22; 16.6 % 188.7 0.8 % 190.3 2.0 % 194.1 1.4 %
Slide 18: Lending margins
Lending margins Lending margins, parent bank (%)* 2.49% 2.37% 2.09% 2.03% 2.00% 1.88% 1.76% 0.88% 0.30% 0.50% 0.40% 0.37% 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q21 3Q21 1Q22 3Q22 1Q23 3Q23 Lending margin RM, incl. covered bond companies Lending margin CM, incl. covered bond companies * Based on allocation
Slide 19: Seasonally lower deposits
Seasonally lower deposits High and rising growth rate for retail deposits Deposits (NOK billion) Deposit growth (12 months, %) 105.9 -1.9 % 103.9 98.9 98.8 100.4 5.5 % -0.1 % 1.6 % 46.4 44.8 44.5 44.1 0.8 % 44.4 10.5 % -1.0 % 4.4 % -3.4 % 8.6 % 2Q23; 7.5 % 3Q22; 6.7 % 54.4 0.7 % 54.7 2.3 % 56.0 6.3
Slide 20: Deposit margins
Deposit margins Deposit margins, parent bank (%)* 2.18% 1.95% 1.87% 1.65% 1.52% 1.34% 1.20% 1.13% 1.02% 0.95% 0.23% 0.08% 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q21 3Q21 1Q22 3Q22 1Q23 3Q23 Deposit margin Retail customers Deposit margin Corporate customers * Based on allocation of customer deposits between
Slide 21: Commission income
Commission income Commission income levels similar to last year. Demerger last year affects accounting services provisions Commision income and other income, excluding covered bond companies (NOK million) 348 324 324 320 295 16 18 18 34 15 31 28 26 18 Commission income from credit cards 36 95 66 Inc
Slide 22: Profits in subsidiaries
Profits in subsidiaries Profit after taxes (NOK million) 3Q23 3Q22 Sparebank 1 Finans Østlandet AS - Group - 52.7 25.7 EiendomsMegler 1 Innlandet AS - 3.6 0.3 EiendomsMegler 1 Oslo Akershus AS - Group - 1.1 1.0 SpareBank 1 ForretningsPartner Østlandet AS - Group * - 1.5 - 0.7 Subsidiaries - 58.9 26.
Slide 23: Profits in joint ventures
Profits in joint ventures Profit after taxes (NOK million) 3Q23 Ownership 3Q22 Ownership SpareBank 1 Gruppen AS - Group* - 63.7 12.40 % 443.5 12.40 % SpareBank 1 Forvaltning AS 31.0 6.26 % 48.8 5.24 % SpareBank 1 Boligkreditt AS 65.9 22.42 % 58.6 23.15 % SpareBank 1 Næringskreditt AS 20.1 15.66 % 0.
Slide 24: Net income from financial assets and liabilities
Net income from financial assets and liabilities Weak contribution from associates and JVs Net income from financial assets and liabilities, NOK million Selected valuation changes: • Liquidity portfolio incl. hedges: 172 14 NOK 33 mill. Dividends from shares and 117 other equity instruments • Debt s
Slide 25: Operating expenses
Operating expenses Costs appr. unchanged from 2Q-23. Increase from 2022 due to wage growth and more FTEs in the parent bank Operating expenses by item (NOK million) Operating expenses, by unit (NOK mill.) 600 529 534 533 517 534 533 517 529 496 500 496 65 75 71 66 85 22 19 16 135 140 137 25 27 21 40
Slide 26: Loan loss provisions
Loan loss provisions Increased model-based and individual provisions. Still low write-offs 3Q22 4Q22 1Q23 2Q23 3Q23 Parent bank 16 58 42 77 87 SB1FØ 3 6 7 9 46 Group 19 63 49 86 134 Losses as a percentage of total lending 0.1 % 0.2 % 0.2 % 0.3 % 0.4 % Loan loss provisions (NOK million) 3Q22 4Q22 1Q2
Slide 27: Exposures per stage and credit loss provision ratio in stage 3
Exposures per stage and credit loss provision ratio in stage 3 Exposure by stages (% of gross loans*) Loans in Stage 3 (NOK mill.) 86.3 % 2 500 0.18 85.8 % 85.7 % 85.2 % 15.8 % 0.16 15.2 % 2 032 83.8 % 2 000 0.14 13.7 % 9.0 % 9.0 % 9.0 % 8.5 % 10.0 % 1 470 12.5 % 0.12 1 500 11.3 % 0.1 0.08 1 000 812
Slide 28: Credit quality in the portfolio is very strong
Credit quality in the portfolio is very strong No systematic challenges in the retail or corporate loan portfolios Retail customers with interest-only mortgage, share Use of corporate credit facilities* 12 12 42% 44% 41% 40% 34% 32% 9 9 6 6 3 3 Use of operating credit facility Annual average 0 0 201
Slide 29: CET-1 ratio
CET-1 ratio Well above regulatory requirements 16.8 % * 17.8 % 18.0 % 17.7 % 17.7 % 16.8 % 17.2 % 1.0 % 9.5 % 1.8 % 4.5 % 2018 2019 2020 2021 2022 3Q23 Requirement per 3Q23 Common equity Tier 1 capital ratio Pilar 1 Pilar 2 Buffer requirements Management buffer *If anticipated changes to regulatory
Slide 30: 3rd quarter of 2023: High NII, increased loan losses, negative financials
3rd quarter of 2023: High NII, increased loan losses, negative financials Summary • Weaker return on equity than target: 8.3 % (11.4 % ytd.). Strong development in core banking operations from higher net interest income offset by reduced income from financial items and increased loan loss provisions
Slide 31: Creating together
Creating together Proficient Near Engaged We have worked for more than 175 years for people and businesses to succeed Our work continues
Slide 32: Appendix Financials/ECC
2023 APPENDIX Financials/ECC
Slide 33: Profit after tax and return on equity
Profit after tax and return on equity Profit after tax (NOK mill.) Return on equity (%) 13.9% 652 622 12.9% 579 12.2% 441 9.4% 417 8.3% 3Q22 4Q22 1Q23 2Q23 3Q23 3Q22 4Q22 1Q23 2Q23 3Q23 33
Slide 34: Key financials - quarterly (1)
Key financials - quarterly (1) Pre-tax profit (NOK million) Net interest income and commission fees from covered 751 747 760 bond companies (NOK million) 575 570 927 917 980 756 835 3Q22 4Q22 1Q23 2Q23 3Q23 3Q22 4Q22 1Q23 2Q23 3Q23 Net commission income excl. covered bond companies Operating expense
Slide 35: Key financials - quarterly (2)
Key financials - quarterly (2) Impairments on loans and guarantees (NOK million) CET-1 ratio 134 18.2 % 17.7 % 17.7 % 17.9 % 17.7 % 86 63 49 19 3Q22 4Q22 1Q23 2Q23 3Q23 3Q22 4Q22 1Q23 2Q23 3Q23 Lending growth last 12 months, inc. transferred loans Deposit growth last 12 months 8.4 % 9.6 % 7.2 % 8.7
Slide 36: Very strong development in income relative to costs
Very strong development in income relative to costs Costs and income (excl. net financial items and dividends), Group 1 299 1 264 1 223 1 159 1 060 1 079 958 965 987 982 937 928 955 905 917 913 857 884 818 845 840 848 798 505 504 531 504 520 517 529 534 533 468 494 489 490 487 465 485 492 473 496 44
Slide 37: Bank has adjusted interest rates following Norges Bank's rate hikes
Bank has adjusted interest rates following Norges Bank’s rate hikes Loans and deposits, NOK bill. Norges 4 May-23 22 June-23 17 Aug-23 21 Sep-23 Bank (0.25%) (0.50%) (0.25%) (0.25%) 11 12 12 30 31 33 Effective dates Loans in subsidiaries new loans and 15 May-23 10 Aug-23 21 Sep-23 28 Nov-23 51 52 52
Slide 38: Structure and rate fixings of funding and security holdings
Structure and rate fixings of funding and security holdings Net rate fixings per month, share of quarter, %** Securities, NOK bill.* 5.0 66.3 % 57.3 % 53.9 % 4.5 4.0 28 30 28 3.5 -11.2 % 3.0 apr.23 mai.23 jun.23 jul.23 aug.23 sep.23 okt.23 nov.23 des.23 -40 -40 -41 Per Mar-23 Per Jun-23 Per Sep-23 3
Slide 39: Headcount
Headcount Increased staffing in parent bank Full-time equivalents in parent bank and subsidiaries 1 142 1 147 1 151 1 120 1 121 120 114 114 123 115 SpareBank 1 ForretningsPartner 55 59 62 Østlandet * 58 57 84 82 82 84 84 SpareBank 1 Finans Østlandet AS 138 143 138 138 140 EiendomsMegler 1 Innlandet
Slide 40: Impairment charges
Impairment charges Impairment charges (NOK million) 151 130 134 86 63 47 49 33 28 24 19 8 11 1 4 -18 -16 -33 -59 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 41
Slide 41: Diversified loan portfolio
Diversified loan portfolio Lending to customers per sector (% and NOK million) Private customers 38.9 %/76 496 Retail market 70.9 %/139 558 SB1 Boligkreditt 32.0 %/63 062 Real estate (incl. SB1 Næringskreditt) 14.9 %/29 295 Primary industries 3.9 %/7 633 Commercial services/Public sector 3.5 %/6 971
Slide 42: The Group's lending by geography
The Group’s lending by geography Lending to customers per geographic area and change last 12 months (% and NOK million) Lending to customers per county (share in %/NOK million) Change last 12 months Innlandet 37.1 %/ 73 057 4.9 % Viken 30.2 %/ 59 438 5.3 % Oslo 29.0 %/ 57 170 7.8 % Other areas 3.7 %
Slide 43: Mortgage loans by geography
Mortgage loans by geography Retail lending per geographic area and change last 12 months (% and NOK million) Retail lending by county (share in %/NOK million) Change last 12 months Innlandet 34.3 %/ 47 884 2.9 % Viken 35.3 %/ 49 289 5.2 % Oslo 26.5 %/ 36 944 2.1 % Other areas 3.9 %/ 5 442 Trøndelag
Slide 44: Corporate market lending by geography
Corporate market lending by geography Corporate lending per geographic area and change last 12 months (% and NOK million) Corporate lending by county (share in %/NOK million) Change last 12 months Innlandet 43,9 %/ 25 173 8.7 % Viken 17,7 %/ 10 149 5.9 % Oslo 35,3 %/ 20 227 19.8 % Øvrige 3,1 %/ 1 75
Slide 45: Retail: Interest-only mortgages and arrears
Retail: Interest-only mortgages and arrears Bank closely follows up payment problems, but far fewer customers than expected have problems Share of retail customers with interest-only Arrears retail market, MNOK* mortgage, % 1 348 12 12 151 1 111 1 117 1 089 10 10 183 255 898 209 8 8 139 6 6 1 196 88
Slide 46: Retail: Mortgage collateral
Retail: Mortgage collateral Share of LTV by exposure* Share of lending according to LTV* Retail mortgages Retail mortgages 96.1 % 54.2 % 33.3 % 10.4 % 3.3 % 2.1 % 0.3 % 0.3 % Under 70% LTV 70-85% LTV 85-100% LTV Over 100% LTV < 60% 60 - 80 % 80 - 90 % > 90% * Including loans transferred to SpareBank
Slide 47: Commercial real estate is the bank's 2nd largest customer segment
Commercial real estate is the bank’s 2nd largest customer segment Gross loans to commercially-related real estate, including building and construction • Financing of commercially related real CRE-related, share of gross lending* Housing coop; estate is the bank’s largest corporate Construction; 1% m
Slide 48: CRE for lease: Attractive location, diversified rental type
CRE for lease: Attractive location, diversified rental type 97 % of tenants have contracts that are 100 % indexed (to CPI) * Location* Normal; 11% Acceptable; Share of lending according to type* Hotel, tourism; 7% 0.3 % Residential; 1% Industry; 8% Best; 42% Office; 34% Storage; Central; 21% 47% Ret
Slide 49: CRE: Solid collateral
CRE: Solid collateral Loan portfolio is well positioned for higher yields in the commercial real estate market Share of LTV by exposure Share of lending according to LTV Commercial real estate* Commercial real estate* 96.3 % 65 % 27 % 5% 3% 1% 3.6 % 0.1 % < 30% 30 - 50% 50 - 70% 70 -80% > 80% < 70%
Slide 50: Development projects: More building projects are nearing completion
Development projects: More building projects are nearing completion Required pre-sales normally 60 %, depending for example on equity, experience and complexity Loans to real estate projects, building and Draw on construction loans, volume-weighted, construction, NOK bill. * share in %* 5 933 33% 33
Slide 51: Stable low LTVs in new mortgage approvals
Stable low LTVs in new mortgage approvals Share of new mortgage approvals and average LTV per period and county Percentage of new mortgage appovals (volume) Average LTV at the time of approval 63% 62% 60% 57% 56% Former Former Former Oslo Other Akershus Hedmark Oppland 32% 27% 26% 9.4 % 5% 53
Slide 52: 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 39.6 % 23.0 % 23.0 % 20.0 % 29.3 % 15.1 % 18.5 % 10.7 % 8.2 % 6.0 % 6.6 % < 1 MNOK 1 - 2,5 MNOK 2,5-5 MNOK 5 - 10 MNOK > 10 MNOK * Including loans transferred to the covere
Slide 53: Capital structure and allocation of 2022 profit
Capital structure and allocation of 2022 profit In line with dividend policy, for owners and society (through primary capital) ILLUSTRATION Profit after controlling Gifts and interest donations NOK 1 880 million 70.0 % 30.0 % Foundation Owners Primary capital NOK 411 million 52.1% Dividends Dividend
Slide 54: SPOL
SPOL Metrics for the equity capital certificate 31.06.2023 31.06.2022 • SPOL return: Market price (NOK) 133.40 107.20 • Return 3Q235 2.6 % • Return y/y5 31.9 % Market capitalisation (NOK million ) 15 452 12 417 Book equity per ECC 1) 114.42 110.21 • Liquidity in 3Q23 compared to same period in 2022.
Slide 55: Why invest in SpareBank 1 Østlandet (SPOL)?
Why invest in SpareBank 1 Østlandet (SPOL)? 57
Slide 56: Contact details
Richard Heiberg CEO +47 902 06 018 richard.heiberg@sb1ostlandet.no Contact details Geir-Egil Bolstad CFO +47 918 82 071 geir-egil.bolstad@sb1ostlandet.no investor@sb1ostlandet.no Bjørn-Erik R. Orskaug Head of Investor Relations +47 922 39 185 bjorn-erik.orskaug@sb1ostlandet.no 58
Slide 57: 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 Østlandet believes that the expectations reflected in such forward-looking statements are reasonabl
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