Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q3 2018 Earnings Presentation
47 slides from Sparebank 1 Ostlandet's earnings presentation, Oct 26, 2018
Slide 1: Company presentation Third quarter 2018
Company presentation Third quarter 2018 26 October 2018 - Norway’s fastest growing region is our home market
Slide 2: Summary
Summary
Slide 3: Good profitability and continued strong lending growth
Good profitability and continued strong lending growth Summary third quarter 2018 • High activity levels in all business areas • Strong income and lending growth • Increased focus in real estate brokerage and accounting services • Good growth in numbers of retail and corporate customers • Good cost
Slide 4: The performance in third quarter is in line with ambitions
The performance in third quarter is in line with ambitions Financial targets 2018 and performance as of 3Q-2018 Profitability Return on equity at least 10 % 11.1 % Dividends 50 % pay-out ratio after tax* 50 % Solidity CET 1 at 16 % 15.9 % Costs 5 % cost reduction** -1.3 % 4 * Profit after tax before
Slide 5: The bank and the market area
The bank and the market area
Slide 6: SpareBank 1 Østlandet at a glance
SpareBank 1 Østlandet at a glance Norway's fourth largest savings bank with a broad and diversified customer base History from 1845 – known as Sparebanken Hedmark ("SBHE") until 1 April 2017. Norway's fourth largest savings bank * with total adjusted assets (incl. covered bonds) of NOK 161 billion.
Slide 7: High economic activity in our market area (1)
High economic activity in our market area (1) Increasing productivity and low unemployment Growth in production, q/q and forecast for 6 months (per cent) Registered unemployment rate, NAV (per cent) 5.00 4 4 4.50 3 3 4.00 2 2 3.50 1 1 3.00 0 0 2.50 2008 2002 2003 2004 2005 2006 2007 2009 2010 2011 2
Slide 8: High economic activity in our market area (2)
High economic activity in our market area (2) Investment leveling out on higher profitability Expected change in investments next 12 months (per cent) Change in profitability past 3 months compared to last year (per cent) 2.50 2.00 2.00 1.50 1.50 1.00 1.00 0.50 0.50 - - 2012 2013 2014 2015 2016 2017
Slide 9: Housing prices leveling out with high construction activity
Housing prices leveling out with high construction activity House price developments for relevant areas compared with Norway Housing prices by area, 12-month growth (per cent) House prices, indexed** 30.0% SEPTEMBER 201830.0% 150.00 150.00 • Nominal -1.1 %/seasonally adjusted +0.1 % 25.0% • Record h
Slide 10: 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 2,000,000 +19% (0.8% yearly) 1,750,000 Oppland Hedmark 1,500,000 1,250,000 Oslo 1,000,000 750,000 500,000 Akershus
Slide 11: The growth is expected in financially interesting demographic groups
The growth is expected in financially interesting demographic groups Population forecast per county and demographics 2018 2030 Oslo 759,000 • Expected population growth 2030: 673,000 694,000 • Norway: 8% 614,000 • Oslo: 13 % Akershus • Akershus: 13 % • Hedmark: 6% • Oppland: 5% Hedmark 197,000 208,0
Slide 12: Solid customer growth after the merger
Solid customer growth after the merger Numbers of customers in parent bank • In connection with the technical merger in October 2017, standardization of the product and 340 332 30 customer definitions were made. 331 326 327 329 • After the technical merger, the 330 324 29 321 322 customer growth has
Slide 13: Value creation above national average
Value creation above national average Industry index (quarterly) based on gross product per county Oslo 110 Hedmark • 40 % of Norway’s mainland GDP is Akershus created in our market area Oppland 108 Norway • Growth in value creation per county: • Norway +8.2 % 106 • Oslo: +10.5 % • Hedmark: +9.9 % •
Slide 14: Financial accounts 3Q-2018
Financial accounts 3Q-2018
Slide 15: Financial results for the third quarter of 2018
Financial results for the third quarter of 2018 (Last year's figures in brackets) Profit after tax in 3Q 18 isolated at NOK 362 million (NOK 377 million). Increased profitability Profit after tax as of 3Q 18 accumulated NOK 1,092 million (NOK 926 million). ROE in 3Q 18 at 10.8 % (12.0 %). Higher ret
Slide 16: Income statement 3Q 2018
Income statement 3Q 2018 Group 01.01.2018- 01.01.2017- 30.09.2018 30.09.2017 2017 Net interest income 1,530 1,454 1,956 Net commission income 841 810 1,095 Other income 132 140 168 Total operating expenses 1,375 1,348 1,898 Result bank operation before losses 1,128 1,056 1,321 Impairment losses on l
Slide 17: Special items 3Q 2018 – The insurance merger
Special items 3Q 2018 – The insurance merger Description and effects • The SpareBank 1 Group (SB1G) and DNB agreed 24 September 2018 on the merger of SpareBank 1 Forsikring and DNB Forsikring • Ownership ratio will be 65/35 between SB1G and DNB • DNB with call option to increase ownership to 40 % •
Slide 18: Key financials – quarterly (1)
Key financials – quarterly (1) Pre-tax profit (NOK million) Net interes income and and commision fees from 518 covered bond companies (NOK million) 476 461 422 409 611 606 602 598 599 3Q-17 4Q-17 1Q-18 2Q-18 3Q-18 3Q-17 4Q-17 1Q-18 2Q-18 3Q-18 Impairments on loans and guarantees (NOK million) Total
Slide 19: Key financials – quarterly (2)
Key financials – quarterly (2) Return on equity CET 1 ratio 12.9 % 12.0 % 10.4 % 10.8 % 16.9 % 16.8 % 16.2 % 16.1 % 15.9 % 9.9 % 3Q-17 4Q-17 1Q-18 2Q-18 3Q-18 3Q-17 4Q-17 1Q-18 2Q-18 3Q-18 Lending growth (including loans transferred to covered Deposit growth last 12 months bond companies) last 12 mo
Slide 20: Profit contributions from subsidiaries
Profit contributions from subsidiaries 3Q 2018 (3Q 2017) SpareBank 1 Finans Østlandet - Profit before tax NOK 142.1 million (NOK 121.2 million). - Strong growth, cost control and increasing profitability. - Increased focus on innovation and business development. EiendomsMegler 1 Hedmark - Profit bef
Slide 21: Contribution from joint ventures
Contribution from joint ventures 3Q 2018 (3Q 2017) SpareBank 1 Gruppen - Profit before tax NOK 1,244 million (NOK 1,437 million) - Ownership 12.4 % SpareBank 1 Boligkreditt AS - Profit before tax NOK 52.3 million (NOK -183.9 million) - Ownership 21.1 % SpareBank 1 Næringskreditt - Profit before tax
Slide 22: Net interest income
Net interest income Net interest income incl. commissions from covered bond companies 1400 2.00% 1.86% 1.86% 1.90% • Higher NII last quarter due to 1200 1.81% 1.78% 1.77% 1.80% strong lending growth 1000 1.70% • Flat NII in per cent of average 1.60% 800 assets 1.50% 598 611 602 599 606 600 100 109 1
Slide 23: Continued strong lending growth
Continued strong lending growth Lending volume (Group, NOK billion) 160.0 135 138 129 132 127 140.0 39 39 40 120.0 • Total lending in the Group, including 38 39 100.0 loans transferred to covered bond companies, increased last quarter with 80.0 NOK 2.2 bn 60.0 89 90 93 96 98 40.0 • This is equivalen
Slide 24: Lending margins
Lending margins Retail and corporate markets (parent bank) 2.76% 2.68% • A continued stabilizing of lending 2.53% 2.53% margins during 3Q 18, but shows a 2.49% marginal increase in RM. • Marginal increase in corporate lending margins. This is a result of targeted repricing of individual 1.92% 1.93%
Slide 25: Loan book dominated by retail and SME lending
Loan book dominated by retail and SME lending Lending to customers per sector (% and NOK millions) Primary Commercial industries 4,425 services 4,497 Wholesale and retail trade Other 1,290 5,524 Real estate Corporate 13,874 Building and lending construction Private 26% 4,733 customers 63,917 Transfe
Slide 26: The concentration risk is low
The concentration risk is low Retail and corporate loans by size (% share)* Retail market Corporate market 39.0% 26.0% 34.0% 22.3% 18.8% 12.0% 10.6% 10.4% 13.2% 9.6% 4.2% <1 M 1-2.5 M 2.5-5 M 5-10 M >10 M <5 M 5-10 M 10-50 M 50-100 M 100-200 M > 200 M 26 * Including loans transferred to the covered
Slide 27: Well diversified growth in corporate loan portfolio last quarter
27 Building and constructions 167 57 Primary industries 21 Commercial services From 2Q 2018 to 3Q 2018 Other industry 245 Hotel and 40 restaurants 64 Real estate Power and water 49 supply Wholesale and retail 24 trade Transport and 139 communication Paper and pulp -12 industries -11 Public sector Gr
Slide 28: Well diversified corporate lending growth last year
28 Building and constructions 1,654 Paper and pulp 987 industries Commercial services 723 From 3Q 2017to 3Q 2018 Public sector 278 Other industry 242 Transport and 134 communication Hotel and restaurants 117 Power and water - 44 supply Wholesale and retail -89 trade Other - 164 Well diversified corp
Slide 29: Utilisation of flexibility quota in mortgages
Utilisation of flexibility quota in mortgages Daily follow-up ensures optimal utilisation of the permitted quota Utilisation of flexibility quota in 3Q-2018: • The mortgage regulation* constrains the lending: • Debt servicing capacity • Stress: 5 % interest rate increase City of Oslo • Maximum loan
Slide 30: 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 county Percentage of granted volume Average LTV at the time of grant 78% 73% 69% 70% 69% 69% 70% 66% 66% 66% 66% 67% 67% 62% 60% 61% 61% 63% 64% 61% 61% 61% 61% 59% 59% 33% 32% 32% 33% 31% 30%
Slide 31: Low LTV in the residential mortgage lending
Low LTV in the residential mortgage lending Exposure per LTV bucket in the residential mortgage portfolio 100% 95.0 % 80% 60% 40% 20% 4.0 % 0.5 % 0.5 % 0% Below 70% LTV 70-85% LTV 85-100% LTV Over 100% LTV 31
Slide 32: Satisfactory deposit coverage and higher deposit growth
Satisfactory deposit coverage and higher deposit growth Deposit volume, Group (NOK billion) 71 70 65 66 66 • Deposit growth last 12 months 7.6 % (5.1 %) • Deposit growth - retail 7.5 % • Deposit growth - corporates 7.9 % • Deposit coverage ratio 71.5 % • Deposit coverage ratio - including mortgages
Slide 33: Deposit margins
Deposit margins Retail market and corporate market (parent bank)* 0.26% • Marginally reduced deposit margins 0.30% in last quarter 0.23% 0.22% • The margins are stabilizing after two 0.20% quarters with strong growth. 0.08% • Interest rate increase with effect 0.11% 0.09% from 11 October in CM and 8
Slide 34: Increased income in subsidiaries
Increased income in subsidiaries Net commissions and other income (NOK millions) 300 246 234 250 Other income • Commissions and other operating 225 12 217 18 8 income was reduced with 5.1 % 207 17 0 9 16 Commission income from credit from last quarter. 16 15 16 200 cards 45 39 29 33 37 Income from a
Slide 35: Group operating costs
Group operating costs Operating costs per quarter (NOK millions) 600 600 550 88 469 500 Other operating expenses • The operating costs have increased with 457 500 433 449 5.6 % compared to last year. 22 54 Depreciation 47 45 400 27 400 20 23 32 24 • Personnel expenses have increased due to 132 Admin
Slide 36: Increased staffing in subsidiaries
Increased staffing in subsidiaries Headcount (FTE) 1,146 • Stable level of staffing in the Parent 1,102 1,109 1,111 1,126 Bank after the merger downsizing has been completed 404 433 453 397 418 • Increased staffing in the subsidiaries due to higher ambitions and activity levels in real estate broker
Slide 37: Expenses Parent Bank (adjusted)
Expenses Parent Bank (adjusted*) Operating Costs per quarter (NOK million) • The operating costs as of 3Q 2018 were NOK 12 million lower than in the same period in 2017. • This is equivalent to a 1.3 % cost reduction compared with last year. 411 • The ambition of a 5 % cost reduction in 310 318 322
Slide 38: The contribution from financial items has increased
The contribution from financial items has increased Net income from financial assets and liabilities (NOK millions) • Net income from financial assets and liabilities has increased with NOK 23 million. See previous slides. 38 • Issued debt securities were in 2017 generally assessed at fair value and
Slide 39: Still low impairments on loans and guarantees
Still low impairments on loans and guarantees Impairments on loans and guarantees (NOK million) 75 66 56 24 • Impairments on loans and guarantees was NOK 24 million, equal to 0.02 % of gross loans • Parent bank NOK 12 million -20 • SB1 Finans Østlandet NOK 12 million 2014 2015 2016 2017 3Q-2018 • Im
Slide 40: Low levels of problem loans
Low levels of problem loans Non-performing and other doubtful commitments* 600 1.60% 1.37% 1.40% 500 1.12% 1.20% 209 400 254 151 • The proportion of problem 272 1.00% 257 loans decreases further 0.98% 300 0.80% 0.61% 0.59% 0.80% 0.51% 0.60% 200 0.40% 100 0.42% 0.41% 0.36% 0.20% 339 234 233 287 351 0
Slide 41: 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) Maximum exposure (on and off-balance sheet items), Impairments per segment - quarterly net of accumulated impairments 3Q18 2Q-18 1Q-18 Personal customers 4 1 3 Corporate customers 0 5 -2 SB 1
Slide 42: CET 1 close to target
CET 1 close to target Core equity tier 1 ratio (Group) • The target for CET 1 is 16.0 %. • The Group’s common equity tier 1 ratio was 15.9 %. • The reduction in CET 1 was due to strong lending growth in the period. 17.2 % 16.9 % 16.8 % 15.9 % 14.8 % • The leverage ratio was 7.2 %. 2014 2015 2016 201
Slide 43: Changes to capital requirements are expected to leave little impact on the bank
Changes to capital requirements are expected to leave little impact on the bank Group CET 1 (per cent) – exclusive and inclusive the Basel 1-floor 20.0 % • The group’s CET 1, exclusive the Basel 1-floor, is approximately 2 percentage point above the CET 1 inclusive Basel 1. 19.0 % 19.00% • The Basel
Slide 44: Well positioned to serve a growth region
Well positioned to serve a growth region Summary 44
Slide 45: 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 45
Slide 46: 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 47: Together – to create
Together – to create Proficient | Nearby | Engaged
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