Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Debt Investor Presentation (September 2019)
55 slides from Sparebank 1 Ostlandet's debt investor presentation, September 2019
Slide 1: Investor Presentation Second quarter 2019
Investor Presentation Second quarter 2019
Slide 2: SpareBank 1 Østlandet – Where we are
SpareBank 1 Østlandet – Where we are Norway • Population 5.3 million • One of the highest GDP per capita in the world SpareBank 1 Østlandet’s home • Excellent financial position market • GDP growth above international trend • Population 1.7 million • Low unemployment • The fastest growing region of
Slide 3: Executive summary
Executive summary • Norway’s fourth largest savings bank • The best capitalised regional savings bank in Norway - CET1 16.9 %, Capital ratio of 19.1 %, Leverage ratio 7.3 % SpareBank 1 Østlandet • Low risk bank book with a 74% retail share • Diversified income stream • Long history of solid returns
Slide 4: Transaction rationale
Transaction rationale The Bank’s ambitions have implications for our funding strategy SpareBank 1 Østlandet" (SPOLNO) has • The Bank’s revised business strategy has implications for the mandated BayernLB, Commerzbank, funding strategy going forward Goldman Sachs International and Nordea to organize
Slide 5: Content
Content Introduction to SpareBank 1 Østlandet Region, strategy and ambitions Asset quality, rating and funding plans Appendix: 1. Economic outlook 2. Financial accounts 2Q 2019 5
Slide 6: Introduction to SpareBank 1 Østlandet
Introduction to SpareBank 1 Østlandet
Slide 7: Business overview
Business overview SpareBank 1 Østlandet at a glance Highlights Return on Equity (ROE) (%) 16.9 % • Established in 1845 – known as Sparebanken Hedmark (“SBHE”) until 1 April 13.5 % 13.6 % 2017. 10.4 % 10.2 % 10.5 % • Norway’s fourth largest savings bank – total adjusted assets (incl. cov. bonds) of a
Slide 8: 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 9: 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 10: The Bank has a history of increasing profits
The Bank has a history of increasing profits Nov 2018 Private Net profit and profit pre-financials and loan losses (NOK million) placement of 700 MNOK 2017 1600 IPO and 1600 listing on OSE 1400 1400 2016 No fiscal year Acquisition of 1200 with a financial Bank 1 Oslo 1200 deficit since the Akershus.
Slide 11: Long history of low loan losses
Long history of low loan losses Net loan losses as percentage of total lending* 3.0 % 2.5 % 2.0 % 1.5 % 1.0 % 0.5 % 0.0 % -0.5 % -1.0 % SpareBank 1 Østlandet Peer Group Source: Bank reports and SpareBank 1 Markets 2Q 2019. Peers: NONG, SRBANK, MING, MORG, SVEG 11 (*) Included loans transferred to co
Slide 12: Higher capitalization and solid returns
Higher capitalization and solid returns SpareBank 1 Østlandet versus Norwegian and Nordic peers 18.00% 16.7%16.5% 16.00% 15.2%15.0% 14.7%14.4% 15.1% 14.00% 13.2%13.0% 12.2%12.1%12.1%12.0%11.9% 11.6%11.4% 12.00% 11.2%11.0% 9.9% 9.5% 10.00% 7.6% 7.5% 7.3% 7.3% 8.00% 7.1% 7.0% 6.0% 6.00% 5.3% 5.0% 5.0%
Slide 13: The financial accounts show significant improvements from last year
The financial accounts show significant improvements from last year (Last year’s figures in brackets) Pre-tax profit in 2Q-19 isolated NOK 471 million (NOK 416 million). Extraordinary high profit Pre-tax profit in 1H-19 NOK 1,227 million (NOK 730 million). ROE in 2Q-19 at 12.8% (12.9%). Return on eq
Slide 14: The bank and the market area
The bank and the market area Lillestrøm and Romerike is a region of strong growth, both when it comes to population and creation of new jobs. SpareBank 1 Østlandet has a strong presence.
Slide 15: 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 16: High profitability in 1H-19, but also high growth in operating costs
High profitability in 1H-19, but also high growth in operating costs Financial targets 2019 and actual performance Profitability Return on equity at least 10 % √ 16.9 % Dividends 50 % pay-out ratio* √ 50 % Solidity CET 1 at 16 % √ 16.7 % Costs Growth in operating costs in parent bank within 2 %** 6.
Slide 17: Solid position and growth opportunities
Solid position and growth opportunities Market leader in Hedmark, market challenger in other counties Hedmark Oslo Population 197, 571 Population 685,811 Market share* RM 49 % Market share RM 11 % Market share CM 45 % Market share CM 2% Position market leader Position challenger Unemployment 2.1 % U
Slide 18: 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 19: The bank is strengthening its ESG focus
The bank is strengthening its ESG focus Obtaining a distinct ESG profile is a cornerstone of our business strategy SpareBank 1 Østlandet has • Ensures all 10 principles of sustainability are integrated in signed up for the United Nations day-to-day operations Global Compact • The bank is since 2017
Slide 20: The strategic focus on ESG bears fruit
The strategic focus on ESG bears fruit SpareBank 1 Østlandet receives solid ESG ratings • In the survey “Sustainable Brand Index 2019”, customers named SpareBank 1 Norway’s most sustainable banks. • In 1Q-19, the Bank received its first ESG rating from Sustainalytics. Sustainalytics rates SpareBank
Slide 21: Asset quality, rating and funding plans
Asset quality, rating and funding plans Lillestrøm and Romerike is a region in strong growth, both when it comes to population and creation of new jobs. SpareBank 1 Oslo Airport, centrally located in the bank’s market area, is one of Østlandet has a strong presence. several large infrastructure inve
Slide 22: Loan book dominated by retail and SME lending
Loan book dominated by retail and SME lending Lending to customers per sector (NOK million and %) 22
Slide 23: The concentration risk is low
The concentration risk is low Retail and corporate loans by size (% share)* Retail market Corporate market 37.9 % 35.0 % 26.9 % 23.5 % 13.7 % 18.1 % 9.0 % 11.7 % 11.0 % 8.8 % 4.4 % 23 * Including loans transferred to the covered bond companies
Slide 24: 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 period and county Percentage of granted volume Average LTV at the time of grant 78% 73% 72% 69% 70% 67% 70% 66% 66% 62% 62% 66% 69% 67% 63% 64% 62% 61% 62% 60% 61% 60% 64% 60% 58% 33% 34% 31%
Slide 25: Mortgage regulation – The Bank is utilising the flexibility quota
Mortgage regulation – The Bank is utilising the flexibility quota Exposure per LTV bucket in the residential mortgage portfolio 94.8 % Mortgages - Utilisation of flexibility quota in 2Q-2019: City of Oslo Other areas 7.4 % (8 % quota) 6.5 % (10 % quota) • The mortgage regulation* constrains housing
Slide 26: Still very low impairments on loans and guarantees
Still very low impairments on loans and guarantees Net losses* and stage exposure Impairments per segment - quarterly 80 0.30% 2Q-19 1Q-19 4Q-18 3Q-18 2Q-18 0.25% Personal customers -0,2 -8,6 0,2 3,6 1,1 60 Corporate customers 2,8 -36,0 4,6 0,3 5,4 0.20% SB 1 Finans Østlandet 5,4 11,6 6,7 8,0 0,8 40
Slide 27: Minimum Requirement for Own Funds and Eligible Liabilities
Minimum Requirement for Own Funds and Eligible Liabilities MREL – The Norwegian legislation 40.0 % High scenario 36.1 % • Legislation 35.0 % ‒ Loss absorbing amount equal to Pillar 1 Base scenario 33.1 % 3.0 % and Pillar 2 requirements and combined buffer requirement 30.0 % ‒ Covered by AT1 and Tier
Slide 28: MREL and moving regulatory parts
MREL and moving regulatory parts Two main funding scenarios based on regulatory uncertainty (EUR million) Scenario • Base scenario: Senior funding Base High Senior Preferred ‒ The Norwegian legislation as of today (previous slide) Senior Non Preferred ‒ App. EUR 1 bn SNP debt by YE2022 1,000 1,300 •
Slide 29: The bank's ambitions for the funding strategy
The bank’s ambitions for the funding strategy Today’s funding mix and thoughts on funding going forward Loans from banks Covered bonds 26% 2% • The Bank’s revised business strategy leads to higher funding activity going forward Senior NOK 11% • Deposits are and will continue to be the Senior EUR Ban
Slide 30: A1 Moody's Senior Unsecured rating
A1 Moody’s Senior Unsecured rating Based on Credit Opinion as of 12 June 2019 Main take aways ‒ “SpareBank 1 Østlandet's ratings are supported by its Very Strong Macro Profile” ‒ “Solid capital levels, which are the strongest among peers” ‒ “Asset risk metrics are strong on the back of a low credit
Slide 31: Solid performance and a strengthened regional footprint
Solid performance and a strengthened regional footprint Summary 31
Slide 32: 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 32
Slide 33: Appendix
APPENDIX SpareBank 1 @STLANDET
Slide 34: Norwegian and regional outlook
Norwegian and regional outlook
Slide 35: Norway: Positive economic conditions and outlook
Norway: Positive economic conditions and outlook Turnaround in oil, growth on trend and falling unemployment Major improvement in GDP/capita – low global correlation NOK normally moves with oil – but divergence this time Low and falling unemployment PMI – Positive expectations 35 Source: Thompson Re
Slide 36: Strong Norwegian economic momentum
Strong Norwegian economic momentum Macro outlook • Base Case: Strong economic momentum ‒ GDP growth above trend short term ‒ Stable low unemployment – but could end up tight ‒ Inflation higher than expected • For SpareBank 1 Østlandet’s market area ‒ Diverse and cyclical stable Growth in production
Slide 37: Robust and diverse market area counterweight worst case scenarios
Robust and diverse market area NOK (I-44) vs Brent Crude counterweight worst case scenarios Macro outlook • Lower oil prices ‒ Indirectly affected by the lower oil prices in 2014-2015 ‒ Weaker currency and government stimulus turned positive for the area • Sharper real estate downturn ‒ Will affect
Slide 38: Moderate housing price growth on record high turnover
Moderate housing price growth on record Housing prices, indexed (2015=100) high turnover 150.00 150.00 Housing prices, indexed and YoY 140.00 140.00 130.00 130.00 • Moderate growth in housing prices after a corrective period 120.00 120.00 110.00 110.00 ‒ August: +2.6 % in Norway YoY (Oslo +3.8 %/Inl
Slide 39: Norges Bank: Hawkish central bank
Norges Bank: Hawkish central bank Hiking mode 5.00 • First hike since 2011 in Norges Bank deposit rate NIBOR 3m September 2018 – followed up in 4.50 Swap NOK 5yrs Swap NOK 10yrs March and June 2019 4.00 3.50 • The Central Bank’s interest rate 3.00 path indicates one more hike this year 2.50 ‒ Septem
Slide 40: Pressure down on interest rates after dovish central banks
Pressure down on interest rates after dovish central banks Government benchmark bonds 10 years Source: Thompson Reuters Datastream 40
Slide 41: Strong Public sector finances
Strong Public sector finances The Sovereign Wealth Fund • The sovereign wealth fund is almost 3 times GDP • All petroleum related income – oil taxes and direct revenue flows into the fund • 3 % of the fund’s size may be spent in the National Budget ‒ Could be used as a countercyclical buffer through
Slide 42: Mortgage market: key characteristics
Mortgage market: key characteristics Mortgage Market • Total size approximately NOK 3,000 billion (USD 375 billion, €330 billion) Household credit growth • Private banks (incl. savings banks) are the dominant suppliers of (12 months growth rate) mortgages with over 95% market share • Scheduled repay
Slide 43: Financial Accounts 2Q-2019
Financial Accounts 2Q-2019 SpareBank a @STLANDET
Slide 44: Income statement 2Q 2019 and 1H 2019
Income statement 2Q 2019 and 1H 2019 Group 2Q 2019 2Q 2018 1H 2019 1H 2018 2018 Net interest income 520 511 1,027 1,006 2,074 Net commission income 287 283 560 564 1,106 Other income 78 51 145 93 181 Total operating expenses 489 468 983 918 1,881 Operating profit before losses on loans and guarantee
Slide 45: Key financials – quarterly (1)
Key financials – quarterly (1) Pre-tax profit (NOK million) Net interest income and and commision fees from 810 covered bond companies (NOK million) 585 599 606 633 592 602 518 461 347 2Q-18 3Q-18 4Q-18 1Q-19 2Q-19 2Q-18 3Q-18 4Q-18 1Q-19 2Q-19 Impairments on loans and guarantees (NOK million) Total
Slide 46: Key financials – quarterly (2)
Key financials – quarterly (2) Return on equity CET 1 ratio 21.2 % 16.9 % 16.1 % 15.9 % 16.8 % 16.7 % 12.9 % 12.8 % 10.8 % 9.1 % 2Q-18 3Q-18 4Q-18 1Q-19 2Q-19 2Q-18 3Q-18 4Q-18 1Q-19 2Q-19 Lending growth (including loans transferred to Deposit growth last 12 months covered bond companies) last 12 mo
Slide 47: Net interest income – influenced by reclassification effects
Net interest income – influenced by reclassification effects Net interest income incl. commissions from covered bond companies 1400 1.75% 1.76% 1.80% 1.73% 1.65% 1.70% • In the subsidiary SB1 Finans Østlandet 1200 1.62% there has been a reclassification of 1000 1.60% certain items from net interest
Slide 48: Dampened lending growth – above market growth last 12 months
Dampened lending growth – above market growth last 12 months Lending volume (Group, NOK billion) 160.0 141 144 135 138 140 140.0 • Total lending in the Group, including loans transferred to covered bond 39 40 41 42 43 120.0 companies, increased by NOK 3.3 billion in the second quarter. 100.0 80.0 •
Slide 49: Reduced lending towards retail and wholesale trade, hotels and restaurants
Reduced lending towards retail and wholesale trade, hotels and restaurants Corporate lending growth YoY – sector (NOK million) 56 41 -66 95 -94 180 -278 320 345 393 412 2.805 1.400 49
Slide 50: Lending margins
Lending margins Retail and corporate divisions (parent bank) • The lending margins saw a reduction in the second quarter, both within the CM and the RM of the parent bank. 2.53% 2.51% 2.50% 2.48% 2.44% • The reduction is largely explained by the 18 bps increase of the 3M Nibor in the second quarter.
Slide 51: Satisfactory deposit coverage and strong deposit growth
Satisfactory deposit coverage and strong deposit growth Deposit volume and deposit growth (Group) Deposit volume (NOK billion) 77 71 70 71 72 • Deposit growth of 6.9 % in the second quarter. • Seasonality (tax settlements, holiday pay) • Deposit growth last 12 months: 9.5% (5.3 %). 2Q-18 3Q-18 4Q-18
Slide 52: Deposit margins
Deposit margins Retail and corporate divisions (parent bank) • Strong increase in deposit margins in the parent bank both for RM and CM. 0.42% • The increase is largely explained by the 18 bps increase of the 3M Nibor in the second 0.36% quarter. 0.33% 0.32% • The customers were notified of interest
Slide 53: Stable capitalization
Stable capitalization Common Equity Tier 1 ratio (Group) 16.8 % 16.9 % 16.7 % 16.1 % 15.9 % • The Group’s CET 1-target is 16 %. • The CET 1 ratio was 16.7 % by the end of 2Q-19. The leverage ratio was 7.3 %. • An increase in the LGD-buffers in the IRB capital requirement calculations was implemented
Slide 54: Disclaimer
Disclaimer THIS PRESENTATION AND ANY MATERIALS DISTRIBUTED IN CONNECTION WITH THIS PRESENTATION ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN THE UNITED STATES. IMPORTANT: You must read the following before continuing. The following applies to the presentation following this page, and you are
Slide 55: Together – to create
Together — to create @STLANDET
SpareBank 1 Østlandet — Debt Investor Presentation (September 2019) on 6ix