Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q2 2018 Earnings Presentation
42 slides from Sparebank 1 Ostlandet's earnings presentation, Aug 8, 2018
Slide 1: Company presentation Second quarter 2018
Company presentation Second quarter 2018 8 August 2018 - Norway’s fastest growing region is our home market
Slide 2: Summary
Summary
Slide 3: Solid performance in all business areas
Solid performance in all business areas Introduction • A high activity levels in all business areas • Strong regional growth • High income and lending growth • Reduction in operating costs en route to meeting target • The restructurings of EiendomsMegler 1 OA and SpareBank 1 Regnskapshuset Østlandet
Slide 4: The financial targets are met in 1H-2018
The financial targets are met in 1H-2018 Financial targets 2018 and performance as of 1Q-2018 Profitability Return on equity at least 10 % 11.4 % Dividends 50 % pay-out ratio after tax* 50 % Solidity CET 1 at 16 % 16.1 % Costs 5 % cost reduction** -3.1 % 4 * Profit after tax before minority interest
Slide 5: The bank and the market area
The bank and the market area
Slide 6: SpareBank 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 159 billion.
Slide 7: High economic activity in our market area (1)
High economic activity in our market area (1) Increasing productivity and falling, low unemployment Growth in production, last 3 months and forecast for 6 months (per cent) Registered unemployment rate, NAV (per cent) 5.0 5.0 4.0 4.0 4.5 4.5 3.0 3.0 4.0 4.0 2.0 2.0 3.5 3.5 1.0 1.0 3.0 3.0 2.5 2.5 0.
Slide 8: High economic activity in our market area (2)
High economic activity in our market area (2) Investment trending up with stable profitability Expected change in investment 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: Moderate housing price growth and high construction activity
Moderate housing price growth and 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% 30.0% 150.00 150.00 JULY 2018 • Nominal 0.0 %/seasonally adjusted +0.4 % 25.0% 25.0% • Highes
Slide 10: Øvre Romerike – national champion in job creation
Øvre Romerike – national champion in job creation Job creation in the region • Øvre Romerike has for a long time www.konjunkturbarometer1.no been the national champion in population growth. Index job creation • The region is now also the national champion in job creation. • From 2015-2017 businesses
Slide 11: 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 1,000,000 Oslo 750,000 500,000 Akershus
Slide 12: Strong customer relations are maintained throughout the merger
Strong customer relations are maintained throughout the merger Customer relations survey 2018 (index) 2016 2018 • Throughout a demanding merger 67 66 66 68 process focus has been kept on serving customers according to their needs. • According to an updated survey the customers rate the bank just as
Slide 13: The customer dividend has been well received
The customer dividend has been well received Survey on the customer dividend 2018 (score from «1 – very good» to «7 – very poor», per cent share 6 "Very poor 7" Undecided 0% 2% 5% • The Bank paid 204 MNOK in customer dividend in 5 April, as the first bank in Norway. 1% "Medium 2" 6% • The dividend c
Slide 14: Financial accounts 2Q-2018
Financial accounts 2Q-2018
Slide 15: Financial results for the second quarter of 2018
Financial results for the second quarter of 2018 (Last year's figures in brackets) Pre-tax profit in Q2-18 isolated at NOK 416 million (NOK 274 million). Higher profitability Pre-tax profit in 1H-18 at NOK 730 million (NOK 548 million). ROE in Q2-18 at 12.9 % (9.0 %). Good return on equity ROE in 1H
Slide 16: Income statement 1H-2018
Income statement 1H-2018 Group 1H 2018 1H-2017 2017 Net interest income 1,006 956 1,956 Net commission income 564 526 1,095 Other income 93 98 168 Total operating expenses 918 915 1,898 Result bank operation before losses 745 665 1,321 Impairment losses on loans and guarantees 12 -21 -20 Result bank
Slide 17: Special items 2Q-2018
Special items 2Q-2018 Description and effects • The merger of BankAxept, BankID and Vipps led to a write-up of book values. Vipps • Net gain of NOK 59 million. • The bank sold 50 % of the shares in Torggata 22 AS in Hamar. Torggata 22 AS • Net gain of NOK 9 million. • Restructuring of the company wi
Slide 18: Key financials – quarterly
Key financials – quarterly (1) Net interest income and commision fees from Pre-tax profit (NOK million) covered bond companies (NOK million) 518 476 611 422 409 602 358 598 599 573 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Impairments on loans and guarantees (NOK million) Total ope
Slide 19: Key financials – quarterly (2)
Key financials – quarterly (2) Return on equity CET 1 ratio 12.9 % 12.0 % 16.7 % 16.9 % 16.8 % 16.2 % 16.1 % 10.4 % 9.9 % 9.0 % Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Lending growth (including loans transferred to Deposit growth last 12 months covered bond companies) last 12 mon
Slide 20: Profit contributions from subsidiaries
Profit contributions from subsidiaries 1H-2018 (1H-2017) SpareBank 1 Finans Østlandet - Profit before tax NOK 96.9 million (NOK 87.8 million). - Good growth and increasing profitability. - Increased focus on innovation and business development. EiendomsMegler 1 Hedmark - Profit before tax NOK 9.9 mi
Slide 21: Contribution from joint ventures
Contribution from joint ventures 1H-2018 (1H-2017) SpareBank 1 Gruppen - Profit before tax NOK 773 million (NOK 904 million) - Ownership 12.4 % SpareBank 1 Boligkreditt AS - Profit before tax NOK -6.9 million (NOK -259.9 million) - Ownership 21.1 % SpareBank 1 Næringskreditt - Profit before tax NOK
Slide 22: Net interest income
Net interest income Net interest income incl. commissions from covered bond companies 1400 2.00% 1.84% 1.86% 1.86% 1.90% 1200 1.81% 1.78% 1.80% • Higher NII last quarter due to 1000 1.70% strong lending growth 1.60% 800 611 1.50% • Reduction in NII in per cent of 573 598 602 599 600 average assets m
Slide 23: Continued strong lending growth
Continued strong lending growth Lending volume (Group, NOK billion) 160.0 132 135 127 129 140.0 124 120.0 38 39 39 39 • Total lending in the Group, including 37 100.0 loans transferred to covered bond 80.0 companies, increased by NOK 3.5 billion during the quarter. 60.0 96 87 89 90 93 40.0 • This is
Slide 24: Lending margins
Lending margins Retail and corporate markets (parent bank) 2.76% 2.66% 2.68% • Decreasing retail lending margins 2.53% 2.49% last quarter, due mainly to the increase in Nibor, but also competitive pressure for low risk customers. • Increased corporate lending 1.92% 1.93% 1.85% margins last quarter a
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 million) Commercial services 4,476 Primary industries 4,367 Other 5,090 Wholesale and retail trade 1,263 Corporate Real estate lending 13,809 Building and 26% construction Private customers 4,553 62,481 Retail T
Slide 26: The typical mortgage is small or moderate in size
The typical mortgage is small or moderate in size Retail and corporate loans by size (% share)* Retail market Corporate market 23.0 % 23.2 % 39.5 % 33.4 % 19.0 % 12.0 % 11.6 % 11.1 % 13.2 % 9.9 % 4.0 % <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 lo
Slide 27: Well within the quotas of the mortgage regulation
Well within the quotas of the mortgage regulation* Daily follow-up ensures optimal utilisation of the permitted quota Utilisation of flexibility quota in 2Q-2018: • The mortgage regulation constrains the lending: • Debt servicing capacity • Stress: 5 % interest rate increase City of Oslo • Maximum l
Slide 28: High quality credit process – falling LTV
High quality credit process – falling LTV Percentage of granted mortgages and average LTV per county Percentage of granted volume Average LTV at the time of grant 81% 78% 74% 72% 72% 73% 71% 69% 70% 69% 70% 67% 67% 66% 66% 66% 62% 66% 63% 61% 61% 61% 60% 61% 59% 33% 33% 32% 32% 31% 30% 29% 30% 30% 3
Slide 29: 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 29
Slide 30: Satisfactory deposit coverage
Satisfactory deposit coverage Deposit volume (Group, NOK billion) 71 67 65 66 66 • Deposit growth last 12 months 6.0 % • Deposit growth - retail 8.1 % • Deposit growth - corporates 3.2 % • Deposit coverage ratio 73.6 % • Deposit coverage ratio, including mortgages transferred to the covered bond com
Slide 31: Deposit margins
Deposit margins Retail and corporate markets (parent bank) 0.30% • Increasing deposits margins in parent bank last quarter. 0.23% 0.22% • The higher margins are mainly explained by the increased Nibor. 0.13% 0.08% 0.06% 0.11% 0.09% -0.04% -0.05% Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Deposit margin
Slide 32: Increased income in subsidiaries
Increased income in subsidiaries 300 Commissions and other operating income (NOK million) 246 250 233 225 217 12 • Commissions and other operating 10 18 15 17 207 income increased with 14 % from 0 9 Other income 16 15 16 200 last quarter, and 6 % from last year. 45 Commission income from credit 41 2
Slide 33: Group operating costs
Group operating costs Operating costs per quarter (NOK millions) 700 600 550 Other operating expenses • The operating costs are down 1.9 % 478 88 449 469 500 compared to last year. 433 Depreciation 80 22 55 27 47 21 20 23 32 400 Admin. and other operating • Personnel expenses have increased 132 cost
Slide 34: Increased staffing in subsidiaries
Increased staffing in subsidiaries Headcount (FTE) 1,114 1,137 1,102 1,109 1,111 • Stable level of staffing in the Parent Bank after the merger downsizing has been completed 400 397 404 418 444 • Increased staffing in the subsidiaries due to higher ambitions and activity levels in real estate broker
Slide 35: Expenses Parent Bank (adjusted)
Expenses Parent Bank (adjusted*) Operating costs per quarter (NOK million) • The operating costs in the first half year of 2018 were NOK 21 million lower than in the same period in 2017. • This is equivalent to a -3.1 % cost reduction in the pro-forma parent bank compared with last year. 411 • The a
Slide 36: The contribution from financial items has increased
The contribution from financial items has increased Net result from financial assets and liabilities (NOK million) • Issued debt securities were in 1H-2017 generally assessed at fair value (IAS 39) and showed, mainly due to lower credit -15 spreads, a loss of NOK 83 million. 2 • Issued debt securiti
Slide 37: Still low losses on loans
Still low losses on loans Net loan loss provisions (NOK millions) 66 75 56 12 • Impairment losses on loans and guaruantees were NOK 7 million in the second quarter • Equals an annualised loss rate of 0.03% of -20 gross lending. 2014 2015 2016 2017 1H-2018 14 7 5 5 -13 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 3
Slide 38: 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% 209 400 254 218 • The proportion of problem 257 272 1.00% 0.98% loans decreases further 300 0.80% 0.61% 0.59% 0.80% 0.55% 0.60% 200 0.40% 100 0.42% 0.41% 0.39% 0.20% 339 234 233 287 314 0
Slide 39: Low losses and reduced net exposure in stage 3
Low losses and reduced net exposure in stage 3 Specification of impairment losses and net exposure per stage (NOK million) Maximum exposure (on and off-balance sheet items), Impairment losses per segment net of accumulated impairment 2Q-18 1Q-18 Net exposure Stage 1 Stage 2 Stage 3 Total 1Q-18 87,35
Slide 40: CET 1 close to target
CET 1 close to target Core equity tier 1 ratio (Group) • The Group’s common equity tier 1 ratio was 16.1 % . • The target for CET 1 is 16.0 %. • The reduction in CET 1 is due to strong 17.2 % lending growth in the period. 16.9 % 16.8 % 16.1 % 14.8 % • The leverage ratio was 7.3 %. 2014 2015 2016 201
Slide 41: 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 41
Slide 42: 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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