Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Investor Presentation (March 2019)
54 slides from Sparebank 1 Ostlandet's investor presentation, March 2019
Slide 1: Investor Presentation March 2019
Investor Presentation March 2019
Slide 2: Executive summary
Executive summary • Norway’s fourth largest savings bank • The best capitalised regional savings bank in Norway - CET1 16.8 %, Capital ratio of 19.6 %, Leverage ratio 7.5 % SpareBank 1 Østlandet • Low risk bank book with a 74% retail share, of which 96% housing mortgages • Diversified income stream
Slide 3: Content
Content Introduction to SpareBank 1 Østlandet Region, strategy and ambitions Asset quality, rating and funding plans Appendix: 1. Economic outlook 2. Financial accounts 4Q 2018 3
Slide 4: Introduction to SpareBank 1 Østlandet
Introduction to SpareBank 1 Østlandet
Slide 5: Business overview
Business overview SpareBank 1 Østlandet at a glance Highlights Net loans* (NOKm) & Growth (YoY, %) 10.5% • Established in 1845 – known as Sparebanken Hedmark (“SBHE”) until 1 April 9.4% 140 ,000 9.4% 9.8% 10.0% 9.2% 98,606 120 ,000 2017. 92,450 95,681 97,896 100 ,000 90,098 8.0% • Norway’s fourth la
Slide 6: 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 Retail EiendomsMegler 1 Totens Sparebank Hedmark Eiendom AS ~25% Segment 100% Savings bank ~ 367 employe
Slide 7: 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 8: 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 9: Long history of low loan losses
Long history of low loan losses Lower and more stable than peer average in Norway Loan loss provisions, (% of lending*) 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2002 2006 2010 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2003 2004 2005 2007 2008 2009 2011 2012 2013 2014 2015
Slide 10: High capitalization and solid returns versus peers
10 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 7.7 % SpareBank 1 SR-Bank 7.5 % SpareBank 1 Østlandet 7.5 % DNB 7.4 % Norwegian Peers Source: Bank reports/Bloomberg 7.4 % SpareBank 1 SMN 7.1 % Sparebanken Vest 6.8 % Sydbank 5.3 % Jyske Bank LeverageRatio 5.2 % Nordic Peers 5.1 %
Slide 11: Financial results for the fourth quarter of 2018
Financial results for the fourth quarter of 2018 (Last year's figures in brackets) Profit after tax in 4Q 18 isolated at NOK 322 million (NOK 337 million). Increased profitability Profit after tax in 2018 accumulated NOK 1,414 million (NOK 1,263 million). ROE in 4Q 18 at 9.1 % (10.4 %). Higher retur
Slide 12: 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 13: 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 14: The performance in 2018 was in line with ambitions
The performance in 2018 was in line with ambitions Financial targets 2018 and actual performance Profitability Return on equity at least 10 % √ 10.5 % Dividends 50 % pay-out ratio after tax* 50 % √ Solidity CET 1 at 16 % √ 16.8 % Costs 5 % cost reduction** √ 5.3 % 14 * Profit after tax before minori
Slide 15: Solid position and growth opportunities
Solid position and growth opportunities Market leader in Hedmark, market challenger in other counties Hedmark Oslo Population 197,406 Population 681,067 Market share* RM 49 % Market share RM 11 % Market share CM 45 % Market share CM 2% Position market leader Position challenger Unemployment 2.4 % Un
Slide 16: 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 17: 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 day-to-day operations Nations Global Compact • The bank is since 2017
Slide 18: 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 19: Loan book dominated by retail and SME lending
Loan book dominated by retail and SME lending Lending to customers per sector (% and NOK million) Lending to customers per sector Changes last 12 months Public sector 63,544 / 45.3 % 7.9 % Loans transferred to Boligkreditt 39,792 / 28.4 % 6.3 % Real estate 14,277 / 10.2 % 11.0 % Industries/power and
Slide 20: The concentration risk is low
The concentration risk is low Retail and corporate loans by size (% share)* Retail market Corporate market 38.6% 34.5% 26.0% 23.4% 18.7% 13.5% 11.8% 9.4% 10.3% 9.9% 4.0% 20 * Including loans transferred to the covered bond companies
Slide 21: 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% 72% 69% 70% 69% 70% 66% 66% 66% 69% 67% 67% 64% 62% 66% 60% 59% 63% 63% 60% 61% 61% 61% 62% 61% 61% 61% 61% 59% 33%
Slide 22: Low LTV in the residential mortgage lending
Low LTV in the residential mortgage lending Exposure per LTV bucket in the residential mortgage portfolio 95.0 % Mortgages - Utilisation of flexibility quota in 4Q-2018: City of Oslo Other areas 7.7 % (8 % quota) 5.9 % (10 % quota) • The mortgage regulation* constrains the lending: • Debt servicing
Slide 23: 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 • The proportion of problem 272 134 1.00% 257 loans decreases further. 0.98% 300 0.80% 0.80% 0.61% 0.59% 0.60% 200 0.45% 0.40% 0.42% 0.41% 100 0.32% 0.20% 339 234 233 287 314 0
Slide 24: 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 Covered banks bonds 1% Senior NOK • The Bank’s revised business strategy leads to 25% 12% higher funding activity going forward Senior EUR Deposits 7% • Deposits are and will continue t
Slide 25: Minimum Requirement for Own Funds and Eligible Liabilities
Minimum Requirement for Own Funds and Eligible Liabilities MREL – The Norwegian legislation 40.0% • Legislation SIFI - 37.1 % ‒ Loss absorbing amount to be covered 35.0% Base case - 33.1 % 4.0% by Pillar 1 and Pillar 2 requirements and combined buffer requirement 30.0% ‒ Recapitalization amount to b
Slide 26: MREL and moving regulatory parts
MREL and moving regulatory parts Two main funding scenarios based on regulatory uncertainty (EUR million) DISCUSSION • Scenario 1: Senior funding ‒ The Norwegian legislation as of today (previous slide) Senior Preferred Scenario 1 Senior Non Preferred 2 ‒ The NFSA delivered a proposal to the Ministr
Slide 27: Changes to capital requirements are expected to reduce the management buffer
Changes to capital requirements are expected to reduce the management buffer Group CET 1 (per cent) – and expected consequences of changes to capital requirements 0.3% ILLUSTRATION • The government has proposed several changes to the bank’s capital -0,8% requirements. 1.9% Management • Implementatio
Slide 28: A1 Moody's Senior Unsecured rating
A1 Moody’s Senior Unsecured rating Based on Credit Opinion as of 11 December 2018 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 improve post acquisition, on the ba
Slide 29: Well positioned to serve a growing region
Well positioned to serve a growing region Summary 29
Slide 30: 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 30
Slide 31: Appendix
Appendix 72.75 SpareBank SpareBank 4 @STLANDET
Slide 32: Norwegian and regional outlook
Norwegian and regional outlook
Slide 33: Norwegian economy at a glance
Norwegian economy at a glance Balanced growth and strong public finances Economic Indicators 2013 2014 2015 2016 2017 2018E 2019F (real growth or level in per. cent) GDP growth - mainland 2.3 2.2 1.4 1 1.8 2.1 2.5 Household consumption growth 2.7 1.9 2.6 1.5 2.3 2.5 2.8 Investment growth (mainland*)
Slide 34: 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 34 Source: Thompson Re
Slide 35: Norges Bank: First interest rate hike since 2011
Norges Bank: First interest rate hike since 2011 Expected gradual rise the coming years 5.00 • First hike since 2011 in 4.50 Norges Bank deposit rate NIBOR 3m September 2018 4.00 Swap NOK 5yrs Swap NOK 10yrs 3.50 • The Central Bank’s interest 3.00 rate path indicates two hikes per year until the end
Slide 36: Higher interest rates?
Higher interest rates? Government benchmark bonds 10 years Source: Thompson Reuters Datastream
Slide 37: Strong Public sector finances
Strong Public sector finances The Sovereign Wealth Fund • The sovereign wealth fund is almost 3 times GDP 10,000,000 350% • All petroleum related income – oil taxes and direct 9,000,000 The Sovereign Wealth Fund 300% revenue flows into the fund Sovereign Wealth Fund/GDP (RHS) 8,000,000 • 3 % of the
Slide 38: Value creation in the market area above national average
Value creation in the market area above national average Industry index (quarterly) based on gross product per county 112.00 Oslo • 40 % of Norway’s mainland GDP is Akershus Oslo Hedmark Oppland Norway Akershus created in our market area 110.00 Hedmark Norway • Growth in gross product per county: 10
Slide 39: High economic activity in our market area
High economic activity in our market area Increasing output in the Capital Region and low unemployment throughout Growth in production, q/q and forecast for 6 months (per cent) Registered unemployment rate, NAV (per cent) 5.00 5.00 4 4 4.50 4.50 3 3 4.00 4.00 2 2 3.50 3.50 1 1 3.00 3.00 2.50 2.50 0
Slide 40: 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 41: Housing prices picking up on record high turnover
Housing prices picking up on record high turnover Housing price developments for relevant areas compared with Norway Housing prices by area, 12-month growth (per cent) House prices, indexed** 30.0% FEBRUARY 2019 30.0% 150.00 150.00 • Nominal +0.5 %/seasonally adjusted +0.0 % 25.0% • Record high25.0%
Slide 42: Financial Accounts 4Q-2018
Financial Accounts 4Q-2018 «North towards zero»: Environmental protection advisors in Lillehammer municipality are working to realize the ambition that Lillehammer will become Norway's first climate-neutral city.
Slide 43: Income statement 4Q 2018
Income statement 4Q 2018 Group 4Q 2018 4Q 2017 2018 2017 Net interest income 544 501 2,074 1.956 Net commission income 265 285 1,106 1.095 Other income 48 29 181 168 Total operating expenses 506 550 1,881 1.898 Result bank operation before losses 351 265 1,480 1.321 Impairment losses on loans and gu
Slide 44: Key financials – quarterly (1)
Key financials – quarterly (1) Net interes income and and commision fees from Pre-tax profit (NOK million) 518 covered bond companies (NOK million) 461 422 409 633 347 611 606 602 599 4Q-17 1Q-18 2Q-18 3Q-18 4Q-18 4Q-17 1Q-18 2Q-18 3Q-18 4Q-18 Impairments on loans and guarantees (NOK million) Total
Slide 45: Key financials – quarterly (2)
Key financials – quarterly (2) Return on equity CET 1 ratio 12.9 % 10.4 % 10.8 % 16.8 % 16.2 % 16.1 % 15.9 % 16.8 % 9.9 % 9.1 % 4Q-17 1Q-18 2Q-18 3Q-18 4Q-18 4Q-17 1Q-18 2Q-18 3Q-18 4Q-18 Lending growth (including loans transferred to Deposit growth last 12 months covered bond companies) last 12 mon
Slide 46: Net interest income
Net interest income Net interest income incl. commissions from covered bond companies 1400 2.00% 1.86% • Increased NII last quarter due to 1.90% 1200 1.81% 1.78% lending growth. 1.77% 1.77% 1.80% 1000 1.70% • Flat NII in per cent of average total 1.60% assets. 800 611 602 606 633 1.50% 600 599 • Com
Slide 47: Continued strong lending growth
Continued strong lending growth Lending volume (Group, NOK billion) 160.0 132 135 138 140 • Total lending in the Group, including 129 140.0 loans transferred to covered bond 39 40 41 120.0 companies, increased last quarter with 39 39 100.0 NOK 2.0 bn. • This is equivalent to a 1.5 % growth last 80.0
Slide 48: Well diversified growth in corporate loan portfolio
Well diversified growth in corporate loan portfolio Corporate lending growth YoY – sector (NOK million) 117 - 44 - 89 134 - 164 242 - 368 278 - 565 723 987 2,908 1,654 48
Slide 49: Lending margins
Lending margins* Retail and corporate divisions (parent bank) 2.68% • Stable corporate lending margins 2.53% 2.51% 2.49% 2.50% the last quarters, after a repricing at the start of 2018. Increased interest rates to customers counterweighed by a higher Nibor. 1.93% • Reduced lending margin in retail m
Slide 50: Satisfactory deposit coverage and higher deposit growth
Satisfactory deposit coverage and higher deposit growth Deposit volume, Group (NOK billion) 71 70 71 66 66 • Deposit growth of 1.8 % from 3Q 18. • Deposit growth last 12 months 8.4% (4.6 %) • Deposit growth - retail 5.7 %. • Deposit growth - corporates 12.1 %. • Deposit coverage ratio 72.3 %. • Depo
Slide 51: Deposit margins
Deposit margins Retail and corporate divisions (parent bank) 0.33% 0.30% 0.28% • Increased deposit margins in the 0.23% 0.22% 0.22% 0.28% parent bank in fourth quarter. • Increasing margins in the quarter for both retail and corporate 0.11% markets. 0.08% • Interest rate increase with effect from 11
Slide 52: CET 1 close to target
CET 1 close to target Core equity tier 1 ratio (Group) • The target for CET 1 is 16.0 %. • Private placement in fourth quarter ensures solidity in line with financial target and provide a basis for future growth. 17.2 % 16.9 % 16.8 % 16.8 % • The Group’s common equity tier 1 ratio 14.8 % was 16.8 %
Slide 53: 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 54: Together – to create
Together — to create @STLANDET
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