Sparebank 1 Sor-norge Asa · OSL:SB1NO
Sparebank 1 Sor-norge Asa — SpareBank 1 SR-Bank — Q3 2014 Earnings Presentation
63 slides from Sparebank 1 Sor-norge Asa's earnings presentation, 2014
Slide 1: Investor Update 3rd quarter 2014
Investor Update 3rd quarter 2014 Page 1
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: Agenda
Agenda Presentation of SpareBank Introduction to SpareBank 11 SR-Bank SR-Bank ASA ASA Financials Solvency and liquidity position Appendix Page 3
Slide 4: A unique situation with a continuing budget surplus…
A unique situation with a continuing budget surplus… Economic Indicators (%) 2010 2011 2012 2013 2014P 2015P GDP growth - mainland 1.7 2.6 3.4 2.0 1.9 2.4 Household consumption growth 3.8 2.6 3.0 2.1 2.1 3.4 Investment growth – mainland* -4.5 6.3 4.5 4.7 0.9 2.5 Investment growth oil & gas -9.5 11.3
Slide 5: One of Norway's most prosperous regions
One of Norway’s most prosperous regions The third largest discovery ever on the NCS was made 140 km from our …and activity is expected to continue at high levels headquarter in 2011 250 Investments on NCS «Johan Svedrup» compared to existing oil fields on the Norwegian continental shelf 200 4000 300
Slide 6: 48 branch offices in one of Norway's most prosperous regions
48 branch offices in one of Norway’s most prosperous regions 1 Rogaland Population 452,000 Market share 37% Year of establishment 1839 Market strategy Market leader 2 Oil & Gas, Oil service, Important business segments Supply Unemployment rate 2.0% 2 Hordaland Population 498,000 Market share 6% Year
Slide 7: The SpareBank 1 Alliance – 2nd largest mortgage lender in Norway
The SpareBank 1 Alliance – 2nd largest mortgage lender in Norway Founded in 1996 based on efficiency and local market focus Geographic overview Ensure the independence and regional foothold of the individual member banks by maximizing their: - Competitiveness Purpose - Profitability - Capital streng
Slide 8: SR-Bank's activities
SRBANK’s activities Divisions of SpareBank 1 SR- Capital Markets Retail Market Corporate Market Administration & Support Bank ASA Number of man-years: 33 Number of man-years : 457 Number of man-years : 160 Number of man-years : 211 Fully owned companies Number of man-years : 212 Number of man-years
Slide 9: Increased international interest in SR-Bank
Increased international interest in SRBANK • Converted from Development in Price/Book Relative share price development equity certificates to 65 1,2 120 shares in 2012. OSEBX 1,1 115 60 SRBANK Index 100 = Jan. 1st 1 110 • «Top-20» company 0,9 105 55 based on market cap NOK p/B 0,8 100 of domestic li
Slide 10: 20 largest shareholders as at September 2014
20 largest shareholders as at September 2014 Investor Number Stake • International Sparebankstiftelsen SR-Bank 72.419.305 28,3% ownership Gjensidige Forsikring ASA 26.483.470 10,4% increased from Folketrygdfondet 9.895.706 3,9% 14.1% at the State Street Bank and Trust, U.S.A. 8.816.417 3,4% Nominee
Slide 11: Agenda
Agenda Introduction to SpareBank 1 SR-Bank ASA Financials Solvency and liquidity position Appendix Page Page 11 11
Slide 12: A good result and a stable continuous growth
A good result and a stable continuous growth Pre-tax profit for 3Q is NOK 577 million compared to NOK 661 million last year - Return on equity after tax 12.2% (15.6%) Pre-tax profit year-to-date increased to NOK 2.048 million from NOK 1.673 million last year - Return on equity after tax 15.0% (1
Slide 13: Key figures – quarterly development
Key figures – quarterly development Return on equity CET 1 capital ratio 18,4% 15,6% 16,2% 11,1% 11,2% 11,4% 11,3% 14,5% 10,5% 12,2% Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Cost/income ratio Earnings per share (NOK) 2,58 2,22 44,6% 2,02 2,09 42,4% 1,78 40,8% 40,9% 37,5% Q3 13 Q4
Slide 14: Key figures
Key figures 30.09 30.09 14 13 Q3 14 Q2 14 Q1 14 Q4 13 Q3 13 Return on equity after tax (%) 15,0 13,2 12,2 14,5 18,4 16,2 15,6 Net interest margin (%) 1,43 1,40 1,48 1,41 1,40 1,46 1,49 Impairment losses on loans and guarantees in % of gross loans 0,17 0,10 0,20 0,13 0,18 0,17 0,11 -incl. covered bon
Slide 15: Income statement
Income statement 30.09 30.09 Group Income Statement (MNOK) 14 13 Q3 14 Q2 14 Q1 14 Q4 13 Q3 13 Net interest income 1.749 1.545 621 581 547 574 568 Net commission and other income 1.327 1.335 403 444 480 489 466 Net income on investment securities 662 360 142 201 319 195 137 Total income 3.738 3.240
Slide 16: Change in profit 30.09.2013 – 30.09.2014
Page Page 16 16 500 1.000 1.500 2.000 2.500 0 30.09.2013 1.673 Net interest income incl. commission from covered 138 bond companies 58 Other income Change in profit 30.09.2013 – 30.09.2014 Net income on investment 302 securities Total operating expenses -41 Impairment losses on - 82 loans and guaran
Slide 17: Consolidated income profile
Consolidated income profile 1200 1000 322 299 315 324 310 800 34 37 29 20 28 167 167 93 165 120 MNOK 600 400 621 568 574 547 581 200 0 3. kv. 13 4. kv. 13 1. kv. 14 2. kv. 14 3. kv. 14 Net interest income Commission income from covered bond companies Profit before tax from covered bond companies Net
Slide 18: Change in net interest income and commission income
Change in net interest income and commission income from covered bond companies; 30.09.2013 – 30.09.2014 1.742 2.400 48 - 58 249 - 35 - 66 2.127 2.200 1.989 2.000 378 1.800 444 1.600 1.400 1.545 1.749 1.200 1.000 800 600 400 Other Net fundingcost 30.09.2013 30.09.2014 Volume effect Margin effect Com
Slide 19: Lending and deposit margins
Lending and deposit margins Lending margins 2,88% 2,99% 2,93% 2,92% 2,90% 2,89% 2,57% 2,64% 2,33% 2,21% 2,21% 2,20% 2,06% 2,08% 1,97% 1,85% 1,88% 1,63% Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Corporate market Retail market Deposit margins -0,04% -0,15% -0,27% -0,32% -0,40% -0,43% -0,45
Slide 20: Lending volume and 12 months growth
Lending volume and 12 months growth Corporate Market 60 000 50 000 15 % 15% 40 000 10 % MNOK 10% 30 000 6,0 % 5,5 % 20 000 5,0 % 4,5 % 4,6 % 4,0 % 5%5 % 2,5 % 10 000 1,4 % 0,7 % 0 0%0 % Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Volume Growth % Retail Market 120 000 100 000 15 % 15% 80 00
Slide 21: Loan portfolio as at 30.09.2014
Loan portfolio as at 30.09.2014 • Gross loans as at 30 September 2014 amount to NOK 170.3 billion compared 2,9% Agriculture / forestry / fishing 2,9% with NOK 164.5 billion at the same time last year. Industry, Power/water supply and construction 3,8% 3,5% Retail trade, hotels and restaurants 1,8% 1
Slide 22: Loan to value ratio on home mortgage loans
Loan to value ratio on home mortgage loans Total-distributed • The proportion of loans with a loan-to- 100% value ratio of less than 85% is very high and stable at 91.5%. 80% 71,8% 67,6% 60% 40% • 98.2% of gross exposure is within 85% of 23,9% 20,1% the assessed value of collateral. This 20% 5,3% 4,
Slide 23: Lending to the corporate market – risk profile
Lending to the corporate market – risk profile Development in corporate market’s portfolio distributed by risk class • The quality of the corporate market portfolio is good. 100% 26,8% 24,4% 25,1% 26,4% 24,9% 80% • The average PD has improved. This trend 60% is particularly driven by an strengthened
Slide 24: Deposits volume and 12 month growth
Deposits volume and 12 month growth Corporate Market* • Last 12 months deposits increased by 50000 24,1% 25% 25% NOK 10.5 billion to 81.2 billion. 18,9% 20% 40000 20% – Corresponds to an increase in the period 12,6% 15% 15% of 14.9%. 30000 MNOK 10% 10% 6,6% 20000 4,9% 2,8% 1,7% 5%5 % • Deposits from
Slide 25: Operating expenses
Operating expenses 30.09 30.09 MNOK 14 13 Q3 14 Q2 14 Q1 14 Q4 13 Q3 13 Personnel expenses 884 862 304 293 287 297 283 Restructuring costs 3 11 3 0 0 26 1 Non-recurring effect, pension-related items 7 0 0 0 7 0 0 Total personnel expenses 894 873 307 293 294 323 284 IT expenses 202 185 69 67 66 65 63
Slide 26: 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 0,18% 0,20% 0,17% 0,11% 0,13% 0,16% 1,09% 1,06% 0,12% 0,13% 0,90% 0,08% 0,10% 0,77% 0,81% 0,77% 0,76% 0,66% 0,65% 0,62% 439 21 2 807 462 552 533 80 52 51 48 830 32 63
Slide 27: Agenda
Agenda Introduction to SpareBank 1 SR-Bank ASA Financials Solvency and liquidity position Appendix Page Page 27 27
Slide 28: Deposits to loans ratio and market funding
Deposits to loans ratio and market funding • Development in deposits to loans ratio Deposits to loans ratio reflects our funding strategy with a greater 100,0 % share of senior funding and the reduced use of covered bond funding. 80,0 % 66,2% 61,7% 63,6% 61,1% 60,6% 59,6% 61,2% 60,4% 59,1% 60,0 % •
Slide 29: An established borrower in the Euromarket
An established borrower in the Euromarket SEB 2 02/19/2021 Corp DNBNO 3⅞ 06/29/2020 Corp 120 120 120 POHBK 2 03/03/2021 Corp 120 NDASS 4 06/29/2020 Corp SPAROG 2⅛ 04/14/2021 Corp SPAROG 2⅛ 02/03/2020 Corp 100 100 100 100 NDASS 2 02/17/2021 Corp 80 80 80 80 Bps. Bps. Bps. Bps. 60 60 60 60 40 40 40 40
Slide 30: Significantly improved funding structure since 2008
Significantly improved funding structure since 2008 Average maturity of long term funding (excl. covered bonds) • Funding indicator 1 (ratio of illiquid assets financed by issued securities with a duration of more than 1 year) is 106,5% 4,5 70,0 for the parent bank and 106,4% on consolidated basis.
Slide 31: Stronger capital ratio
Stronger capital ratio 18% • SpareBank 1 SR-Bank is compliant with all capital requirements per 30.09.2014. 16% • The use of different risk weights in the 14% 15,4% Nordic countries makes comparisons of 13,1% actual financial strength difficult. 13,1% 12% 12,0% – The Basel I floor is also practised
Slide 32: RWA home mortgages (incl. SpareBank 1 Boligkreditt)
RWA home mortgages (incl. SpareBank 1 Boligkreditt) • The shift that occurs from Q1 2014 is due 25,0 % to increased regulatory LGD from 10% to 20%. 20,0 % • FSA informed 1st July 2014 a further 17,0% 16,4% 16,2% tightening of risk weights for mortgages. This in combination with the so-called 15,0 %
Slide 33: Common equity tier 1 being strengthened in line with stricter regulatory requirements
Common equity tier 1 being strengthened in line with stricter regulatory requirements • New capital requirements entail a need to continue increasing common equity tier 1 16,00% 16,00% capital going forward. 10,0 -13,0% 14,00% ROE ROE 14,00% 15,0% 14,0% • SpareBank 1 SR-Bank is not defined as ROE sy
Slide 34: Strengthened core equity tier 1 capital ratio calculated on basis of total assets
Strengthened core equity tier 1 capital ratio calculated on basis of total assets 9% • Core equity tier 1 capital ratio calculated on 7,8% 7,9% basis of total assets as at 30 September 2014 8% 7,5% was 7.9%. 7% 6,6% • Measured according to this expression of 6,0% 6% financial strength, SpareBank SR-
Slide 35: Outlook
Outlook From record high levels, oil investments are expected to fall in 2015. A continued high level of investment involves strong activity in the petroleum sector, but uncertainty has increased somewhat due to lower oil prices. Major infrastructure projects and high activity in house buildin
Slide 36: Agenda
Agenda Introduction to SpareBank 1 SR-Bank ASA Financials Solvency and liquidity position Appendix Page Page 36 36
Slide 37: Our vision: Recommended by customers
Our vision: Recommended by customers Primary objective Financial targets • SpareBank 1 SR-Bank ASA is commited to value • ROE above 13% at a normalised level of interest rates creation in the bank`s core market area • Sustainable contribution to the value creation process • Top 50% ROE and cost/inco
Slide 38: SpareBank 1 Alliance
SpareBank 1 Alliance Owners of the Sparebanken alliance Samspar Hedmark • All credit decisions are made at the 19,5% 19,5% 19,5% 19,5% 11,0% 9,6% 1,4% local banks • Economies of scale related to expenses, Products, commissions, dividends IT solutions, marketing and branding Sales, loan portfolios, c
Slide 39: Norwegian Economy - A unique situation with a continuing budget surplus…
Norwegian Economy - A unique situation with a continuing budget surplus… GDP per capita in PPS, index, EU 27 = 100 2013 governments financial liabilities (in per cent of GDP) 200 150 180 100 160 50 140 0 120 -50 100 -100 1995 1997 1999 2001 2003 2005 2007 2009 2011 -150 Norway United States Denmark
Slide 40: Norwegian Economy – international context
Norwegian Economy – international context Unemployment rates 14 12 10 8 6 4 2 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Norway Sweden Denmark UK US Euro area GDP growth rates 6 4 2 - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (2) (4) (6) Norway (mainlan
Slide 41: Norwegian Housing and Mortgage Market Key Characteristics
Norwegian Housing and Mortgage Market Key Characteristics Market • Total mortgage market approx NOK 2,300 billion (approx USD Household Credit Growth Rate 380bn, €280bn) (12 month growth rate) • Banks and credit institutions are the dominant supplier of mortgages with over 90% market share 14% • Typ
Slide 42: Norwegian Housing and Mortgage Market
Norwegian Housing and Mortgage Market Population Change and Completed Housing Units Page Page 42 42 Source: Statistics Norway and Norwegian Central Bank
Slide 43: Nominal and real house price development
Norwegian Housing and Mortgage Market - Nominal and real house price development Index of House Prices, Norway, Monthly (Jan 2003 = 100) 220 210 200 180 160 140 128 120 100 80 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 House price index (nominal) House price index adjusted with aver
Slide 44: Aggregate Household Debt Burden
Aggregate Household Debt Burden Total Debt burden in per cent of household income (after tax) Norway: 250 • All HH debts included in the statistic, question of int’l 200 comparability • High home ownership (mortgage 150 debt rather than rent commitments) • Generous benefits (pensions, healthcare, ed
Slide 45: Balance sheet
Balance sheet Balance sheet (MNOK) 30.09.2014 30.09.2013 Cash and balances with central banks 336 588 Balances with credit institutions 2.216 1.732 Net loans to customers 136.685 115.992 Certificates, bonds and other fixed-income securities 16.802 22.408 Financial derivatives 4.023 4.887 Shares, own
Slide 46: Net commission and other income
Net commission and other income 30.09 30.09 MNOK 14 13 Q3 14 Q2 14 Q1 14 Q4 13 Q3 13 Payment facilities 179 174 66 56 57 59 66 Savings/placements 130 112 45 40 45 39 40 Insurance products 131 45 44 42 41 41 123 Commission income real estate broking 333 325 105 128 100 108 101 Guarantee commission 77
Slide 47: Net income on investment securities
Net income on investment securities 30.09 30.09 MNOK 14 13 Q3 14 Q2 14 Q1 14 Q4 13 Q3 13 Dividends 35 35 10 7 18 -2 3 Investment income, associates 368 260 150 137 81 95 130 Securities gains/losses 177 -94 -52 24 205 13 -38 - of which capital change in shares and certificates* 208 4 -22 10 220 42 11
Slide 48: Subsidiaries
Subsidiaries MNOK 30.09.14 30.09.13 EiendomsMegler 1 SR-Eiendom AS Number of sales 5.793 5.618 Operating profit before tax 46,6 37,8 SpareBank 1 SR-Finans AS Total assets (BNOK) 6,7 6,3 Operating profit before tax 110,2 120,7 SR-Forvaltning AS Total assets under management (BNOK) 9,0 7,2 Operating p
Slide 49: Ownership interests
Ownership interests MNOK 30.09.14 30.09.13 SpareBank 1 Gruppen AS (19,5 % interest ownership) Profit after tax 261,9 159,7 Adjusted profit previous years -4,2 -1,6 SpareBank 1 Boligkreditt AS (20,4 % interest ownership) Profit after tax 29,9 40,6 Adjusted profit previous years 1,9 1,8 SpareBank 1 Næ
Slide 50: Impairment losses on loans and guarantees
Impairment losses on loans and guarantees 30.09 30.09 Losses on loans in income statement (MNOK) 14 13 Q3 14 Q2 14 Q1 14 Q4 13 Q3 13 Corporate customers 140 58 39 48 53 87 9 Retail customers 11 24 9 3 -1 -7 23 Change in collective impairment losses on loans 13 0 21 -10 2 -30 0 Net impairment losses
Slide 51: Risk profile of the loan portfolio
Risk profile of the loan portfolio Distributed by risk class • 56.1% of the loan portfolio has a 100% probability of default (PD)* below 0.5 %. 80% 56,1% 56,5% 60% • The proportion of loans with a PD above 40% 33,2% 32,1% 2.5% has been reduced to 10.7 % of the 10,7% 11,5% total portfolio. 20% 0% 0.0
Slide 52: Low concentration of individual LGRs in the lending portfolio
Low concentration of individual LGRs in the lending portfolio Distributed by loss given realisation (LGR) • At the end of Q3 2014, SpareBank 1 SR-Bank had a total of 23 commitments 100% with a loss potential exceeding NOK 100 million. 80,6% 81,5% • These commitments represent 5.2% of the 80% loan ex
Slide 53: Lending to the retail market – risk profile
Lending to the retail market – risk profile Retail market portfolio distributed by risk class • The quality of the retail market portfolio is considered very good and 100% 3,2% 3,4% 3,4% 3,2% 3,1% with low potential losses. 80% 20,9% 21,6% 21,6% 20,5% 20,1% 60% • The proportion of loans with a PD be
Slide 54: Loan to value ratio on home mortgage loans (excl loans in cover pool)
Loan to value ratio on home mortgage loans (excl loans in cover pool) Total-distributed • There is an increasing proportion of loans within 70% LTV as well within 85% 100% LTV. 80% 60,6% 58,8% 60% • 97.5% of the exposure is within 85% of the collateral’s value, and 2.5% of the 40% 27,8% 28,0% exposu
Slide 55: Historical LTV development for home mortgage loans
Historical LTV development for home mortgage loans Total home mortgages incl. loans in cover pool SpareBank 1 SR-Bank ASA 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 30.09.2012 31.03.2013 30.09.2013 31.03.2014 30.09.2014 30.09.2012 31.03.2013 30.09.2013 31
Slide 56: Low exposure to the shipping segment
Low exposure to the shipping segment • Lending to conventional shipping is low Dry cargo and represents 1.4% of total loans Product-/chemicalt 5,4% (7,1%) anks 9,8% (8,3%) Gas 2,6% (3,1%) • Lending to the offshore sector Seismic Other represents 5.9% of total loans 5,4% (6,7%) 1,2% (2,8%) • Lending,
Slide 57: Lending to commercial property
Lending to commercial property • Lending to commercial property Housing constitutes 15.9% of total loans, which is cooperative Real estate 4,5% (4,9%) an increase of 0.4% compared with the management 4,1% (4,2%) same time last year. • The portfolio is characterised by lending to commercial propertie
Slide 58: Liquidity portfolio
Liquidity portfolio Liquidity buffer – survival period Liquidity portfolio 18 Of which, securities 16 Market classified to 14 value, amortised Category MNOK Share % cost, MNOK 12 10 Norwegian government/municipal 635 4% 0 SSA/Foreign guaranteed 3.834 24 % 0 BNOK 8 Covered bonds (Norwegian/foreign) 1
Slide 59: Investments in bonds and certificates
Investments in bonds and certificates Risk category Rating Market value Share Very low risk AAA, AA+, AA og AA- 15.600 93,5 % • Most of the bond portfolio is managed as Low risk A+, A og A- 163 1,0 % part of the liquidity management M oderate risk BBB+, BBB og BBB- 543 3,3 % activities. Bonds held f
Slide 60: Rating
Rating Moody’s Fitch Long-term debt A2 Long-term IDR A- Outlook Negative Outlook Stable Updated 30 May 2014 Updated 9 April 2014 Ratinghistory AAA/Aaa AA+/Aa1 AA/Aa2 AA-/Aa3 A+/A1 A/A2 Moody's A-/A3 Fitch BBB/Baa BB/Ba B 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 30.09.2014 Page Pag
Slide 61: SR-Bank as at 30 September 2014
SRBANK as at 30 September 2014 • Ownership interests: 30.09.14 2013 2012 2011 2010 –From Rogaland, Agder-counties and Hordaland: 48.6% –International: 23.1% Share price 61,00 60,25 37,20 40,70 57,00 –10 largest: 57.7% –20 largest: 64.7% Stock value (MNOK) 15.601 15.409 9.514 5.182 7.257 • Number of
Slide 62: Dividend policy
Dividend policy “The financial objective of SpareBank 1 SR-Bank ASA is to achieve earnings that yield adequate, stable returns on the bank’s equity, thereby creating value for owners through competitive returns in the form of dividends and share appreciation. In determining the level of the annual d
Slide 63: Contact Details
Contact Details Address Management Investor Relations Arne Austreid Vidar Torsøe Bjergsted Terrasse 1 CEO VP Investor Relations Postboks 250 4066 Stavanger Tel. Tel. +47 900 77 334 +47 970 80 656 Tel. E-mail. E-mail. arne.austreid@sr-bank.no vidar.torsoe@sr-bank.no +47 915 02002 Inge Reinertsen Shor