Sparebank 1 Smn · OSL:MING
Sparebank 1 Smn — Q4 2016 Earnings Presentation
57 slides from Sparebank 1 Smn's earnings presentation, Feb 7, 2017
Slide 1: 4th quarter 2016
4th quarter 2016 7. February 2017
Slide 2: SpareBank 1 SMN, the region’s most important financial institution
SpareBank 1 SMN, the region’s most important financial institution SpareBank 1 SMN History 215,000 retail customers Established in 1823 Has covered the entire mid-Norway region 15,000 corporate customers since 1985 Market leader in the region Listed on Oslo Børs since 1994 Loan volume NOK 134bn Spar
Slide 3: Continued population growth in the region, the towns in particular show a good trend
Continued population growth in the region, the towns in particular show a good trend Population growth North Trøndelag +7,6% +9,0% Population: 136,900, 127.223 136.889 149.253 Businesses: 16,199 Public sector, agriculture 2000 2016 2030 South Trøndelag +19,1% +12,7% Population : 314,000, 314.358 354
Slide 4: We expect economic growth in the international, Norwegian and regional economies
We expect economic growth in the international, Norwegian and regional economies in the next couple of years Estimated GDP growth in 2017 and 2018 Estimated regional growth in 2017 and 2018 Growth in Trøndelag 2017 3.4% – 3.7% Marked upturn in Møre and Romsdal 2018 3,3 1.5% – 1.8% 2,6 2,6 2,7 2,5 2.
Slide 5: House prices on a positive but controlled trend. Low unemployment in Trøndelag
House prices on a positive but controlled trend. Low unemployment in Trøndelag. Slight rise in unemployment in Møre and Romsdal, but continued low level overall House prices rising somewhat less than the average Low unemployment in the region for Norway Wholly unemployed in per cent of the labour fo
Slide 6: Good profit performance, strong growth, achieved capital target and increased dividend
Good profit performance, strong growth, achieved capital target and increased dividend The bank is gaining efficiency, zero Good profit in 2016 cost growth in parent bank sice 2014 The bank is growing in terms of Increased dividend, NOK 3,00 per EC lending, deposits, insurance, saving recommended. P
Slide 7: The bank reaches its targets
The bank reaches its targets Return on equity CET1 15,1% 14,9% 13,3% 13,6% 10,7% 11,3% 11,1% 11,2% 2013 2014 2015 2016 2013 2014 2015 2016 Earnings per ECC Loans in default and other problem loans 8,82 as a percentage of total loans 7,91 6,92 7,02 1,23% 0,48% 0,40% 0,44% 2013 2014 2015 2016 2013 201
Slide 8: SpareBank 1 SMN has carried out the capital plan and will achieve a target of 15% CET1
SpareBank 1 SMN has carried out the capital plan and will achieve a target of 15 % CET1 at end 2017 Capital a scarce factor The bank must balance Room for action 1. Curb expansion in corporate Regulatory Profit requirements market 2. Refine portfolio Growth Payout 3. Correct risk pricing Cost of cap
Slide 9: The offshore segment is still demanding, but good collaboration is producing results
The offshore segment is still demanding, but good collaboration with clients and other lenders is producing results Offshore segment Segment and volume Distribution (share of offshore in %) on risk categories 1. Loans to offshore total NOK 5.0bn Subsea 2,242 (38%) • Offshore makes up 3.9% of total v
Slide 10: Offshore Service Vessels
Offshore Service Vessels Risk class distribution Impairments by risk class and share of EAD Q4 2015 – Q4 2016 (NOKbn) 31. December 2016 3,4 Share of 3,2 NOKm EAD Individual Group Total EAD Q4 15 Q3 16 Q1 16 Q4 16 Low risk 1.256 0 2 2 0,2 % Medium risk 1.880 0 21 21 1,1 % Q2 16 2,4 High risk 1.243 0
Slide 11: Offshore Service Vessels
Offshore Service Vessels Commentary • At the end of the fourth quarter 2016 total write-downs related to the offshore portfolio amount to 9.8 per cent. Exposure to the offshore segment has been reduced by NOK 1.2bn over the last 12 months. • The industry is undergoing a restructuring. The process is
Slide 12: We are creating the bank of the future
We are creating the bank of the future: • Growth capacity • Dividend capacity • Investment capacity • Value for the owners 4th quarter 2016 12
Slide 13: Together we make things happen
Together we make things happen
Slide 14: Customer growth and market shares
SpareBank 1 SMN is strengthening its position as the dominant finance house in the region, taking market shares, increasing its product breadth and strengthening its business platform SpareBank 1 SMN is strengthening its dominant position. The bank is taking customer and market shares and building a
Slide 15: Strong subsidiaries, strengthening their market position
Strong subsidiaries, strengthening their market position SpareBank 1 Finans Midt-Norge EiendomsMegler 1 • Pre-tax profit of NOK 103.4m (83.1m) • Excellent pre-tax profit of NOK 66.7m (47.0m) • Solid market position • 40% market share, strong synergy with • Leasing NOK 2.3bn, car loans 2.7bn the bank
Slide 16: The distribution model we have chosen makes it possible to achieve multi channel interaction
The distribution model vi have chosen makes it possible to achieve multi channel interaction More contact points towards new and 1 existing customers Increased relevance in contact with the 2 customer (what, where and when) through data and analytical models Develop digital purchase and service 3 pr
Slide 17: The bank has continuous focus on efficiency
The bank has continuous focus on efficiency FTEs at parent bank 763 • At end 2016 there were 130 fewer FTEs at the parent bank than at year-end 2012 730 720 • This is mainly natural departures 645 630 2012 2013 2014 2015 2016 4th quarter 2016 17
Slide 18: Clear planning and design of distribution model will ensure increased selling power
Clear planning and design of distribution model will ensure increased selling power and cost effectiveness Increased sales across all channels - from a total of 120,000 in 2016 to 170,000 to 200,000 in 2020 Increased share of digital sales plus cost efficiencies - from 20,000 in 2016 til 80,000–100,
Slide 19: Target of 12% stands firm and enhanced focus on profitability
Target of 12% stands firm and enhanced focus on profitability Return on equity 2015 Volume growth Growth in other incomes Increase capital efficiency Losses on loans Cost control Measure of return on equity > 12% 19
Slide 20: SMN intends to be among the best performing banks
SMN intends to be among the best performing banks Customer orientation Efficient Best on customer experience Zero growth in costs parent bank 2014 - 2018 Will continue to strengthen market position Profitable Dividend Among the best performing banks, ROE Pay-out ratio of 50%. 12 % annually Strong fo
Slide 21: Financial results
Financial results 4th quarter 2016 21
Slide 22: 4th quarter 2016
4 th quarter 2016 Net profit NOK 1.185m (1.119m), CET1 14.9 % (13.6 %) . return on equity 11.3 % (10.7 %) Result of core business NOK Growth in lending RM 10.7 % (9.0 1,039m (1.318m) exclusive of loan %) and CM 3.3 % (0.78 %), deposits losses. Loan losses NOK 516m (NOK 4.8 % (5.6 %) last 12 months 1
Slide 23: Key figures, quarterly
Key figures, quarterly Return on equity CET 1 14,1% 14,3% 14,9% 12,9% 12,2% 13,6% 13,6% 11,3% 8,4% 8,9% Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Earnings per ECC Loan losses 2,21 2,21 170 2,00 130 1,45 1,49 118 99 56 4th quarter 2016 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q4 15 Q1 16 Q2 16
Slide 24: Profits
Profits Profits 2015 and 2016 and five last quarters NOK mill 2016 2015 Change Q4 16 Q3 16 Q2 16 Q1 16 Q4 15 Net interest 1.883 1.872 11 493 449 472 469 473 Commission income and other income 1.674 1.545 129 414 412 448 401 378 Operating income 3.558 3.417 140 907 860 921 870 850 Total operating exp
Slide 25: Lending margins Retail and Corporate
Lending margins Retail and Corporate Per quarter from Q4 2012 Comments • Strong price competition on 3,00 3,05 3,05 3,00 2,93 mortgages, margins decreased 2,86 2,81 2,75 2,67 with 75 bp last 2 years 2,64 2,65 2,62 2,66 2,57 2,68 2,69 2,71 2,45 2,47 2,52 2,40 2,28 2,31 2,33 2,28 2,14 2,08 2,06 2,00 1
Slide 26: Total growth lending 8.0% last 12 months
Total growth lending 8.0 % last 12 months Lending RM +10.7 % last 12 months High growth in home mortgage lending 10,7% • Of the growth in home mortgage lending, 9,0% 2/3 refers to established customers and 89,4 1/3 to new customers 74,1 80,7 • Limited growth in lending to corporates, in keeping with
Slide 27: Loan to value mortgages
Loan to value mortgages Last two years LTV mortgages • 98.7 % of the exposure has an LTV of 93,1% 93,9% less than 85 % Q4 15 • Exposure with LTV higher than 85 Q4 16 points 1.3 % 5,4% 4,8% 0,9% 0,8% 0,7% 0,6% Under 70 % 70 - 85 % 85 - 100 % Over 100 % 4th quarter 2016 27
Slide 28: Deposit margins Retail and Corporate
Deposit margins Retail and Corporate Per quarter from Q4 2012 Comments Deposits RM • Margins improved due to Deposits CM repricing and reduced nibor in Q3 and Q4 0,36 0,24 0,17 0,30 0,05 -0,18 -0,26 -0,15 -0,10 -0,33 -0,39 -0,33 -0,34 -0,35 -0,48 -0,53 -0,46 -0,19 -0,25 -0,15 -0,18 -0,14 -0,10 -0,35
Slide 29: Total growth deposits 4.8% last 12 months
Total growth deposits 4.8 % last 12 months Deposits RM + 5.1 % +6,9% +5,1% 26,5 28,3 29,8 Share of deposits 31.12.14 31.12.15 31.12.16 45% RM Deposits CM + 4.6 % CM 55% +4,5% +4,6% 34,2 35,8 37,4 31.12.14 31.12.15 31.12.16 4th quarter 2016 29
Slide 30: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income Commissions 2015 and 2016 mill kr 2016 2015 Change 3.417 3.558 Payment transmission income 196 188 9 3.302 Creditcards 63 56 6 Commissions savings and asset management 97 82 15 Commissions 1.085 1.211 1.392 Commissi
Slide 31: Reduced use of resources and reduced costs at the parent bank
Reduced use of resources and reduced costs at the parent bank Low cost growth also in the group • FTE reduction and efficiency improvements at 1.990 2.043 parent bank • Cost growth in subsidiaries Subsidiaries 787 867 • Acquisitions by SMN Regnskapshuset expand cost base • Capacity increase at Eiend
Slide 32: Subsidiaries
Subsidiaries Pre tax profit subsidiaries 2015 and 2016 and five last quarters 2016 2015 Change Q4 16 Q3 16 Q2 16 Q1 16 Q4 15 EiendomsMegler 1 Midt-Norge (87 %) 67 47 20 7 16 33 10 8 SpareBank 1 Regnskapshuset SMN 43 35 8 10 7 22 4 9 SpareBank 1 Finans Midt-Norge (90 %) 103 83 20 29 26 25 23 20 Alleg
Slide 33: Associated companies
Associated companies Profit shares after tax 2015 and 2016 and and five last quarters 2016 2015 Change Q4 16 Q3 16 Q2 16 Q1 16 Q4 15 SpareBank 1 Gruppen (19,5 %) 317 251 66 97 79 80 61 68 SpareBank 1 Boligkreditt (18,4 %) -17 80 -97 -26 -13 -2 24 15 SpareBank 1 Næringskreditt (29,3 %) 29 30 -1 8 5 7
Slide 34: Return on financial investments
Return on financial investments 2015 and 2016 and five last quarters NOKm 2016 2015 Q4 16 Q3 16 Q2 16 Q1 16 Q4 15 Net gain and dividends on securities 149 62 39 45 62 3 -17 Net gain on bonds and derivatives 236 -154 78 80 53 25 -16 Forex and fixed income business 136 102 37 45 28 26 20 Net return on
Slide 35: Increased loan losses in 2016
Increased loan losses in 2016 Losses per quarter, NOKm Distribution 2016 170 130 PM 21 118 99 Leasing 5 56 56 34 35 22 NL 490 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Loan losses including collective losses provisions 0.39 % (0.14 %) of gross lending as of 30.12.2016 4th quarter 2016 35
Slide 36: Very low levels on loans in default, but problem loans have increased
Very low levels on loans in default (0,16 %), but problem loans have increased in the offshore segment Last two years, per quarter Problem loans Loans in default Loans in default % of total loans 1.474 1.360 1.198 368 448 234 399 411 0,22 0,23 0,19 0,17 0,16 0,16 0,16 0,16 262 287 255 218 205 205 22
Slide 37: Balance sheet
Balance sheet Last three years 2016 2015 2014 Funds available 21,8 21,4 20,1 Net loans 101,4 93,4 89,9 Securities 1,5 1,5 0,7 Investment in related companies 5,7 5,5 5,1 Goodwill 0,6 0,6 0,5 Other assets 7,1 9,5 9,7 Total Assets 138,1 131,9 126,0 Capital market funding 46,8 43,3 40,2 Deposits 67,2 6
Slide 38: High share mortgages and diversified portfolio SMEs
High share mortgages and diversified portfolio SMEs Lending by sector in NOK billion and change last 12 months Wage earners 56,3 7,5 SB1 Boligkreditt 33,1 1,2 Commercial real estate 13,7 -0,6 Agriculture/forestry/fisheries 10,5 1,8 Transport and other services 5,8 0,8 Maritime sector and offshore 5,
Slide 39: Strong development in CET 1. New Target: 15.0%
Strong development in CET 1 (capital and ratio). New Target : 15.0 % 14,9% 15,0% CET 1 Ratio 0,9% Other buffers +9% 13,6% 2,0% Countercyclical 11,1% 11,2% 2,1% Pilar 2 9,5% 10,0% 9,0% 8,0% 2,5% Conservation Buffer 3,0% Systemic Risk 4,5% Equity Capital 2009 2010 2011 2012 2013 2014 2015 2016 RenNew
Slide 40: Satisfying access to capital market funding
Satisfying access to capital market funding Funding maturity 31. December 2016 Comments 14,3 • SpareBank 1 Boligkreditt is the main 10,2 funding source through covered bonds. NOK 33 billion transferred as of 30. 5,9 4,8 5,0 December 2016 2017 2018 2019 2020 2021 -> • In June the bank raised a new fi
Slide 41: Board of directors’ proposal for distribution of profit provides a dividend of NOK 3.00
Board of directors’ proposal for distribution of profit provides a dividend of NOK 3.00 Dividend: 389 EC holders 1,119 (63.95 %) Equalisation fund: 730 Profit after tax Provides capacity for 1,750 growth Non-profit causes: 60 Non-profit causes: 220 Ownerless capital EC foundation 160 631 (36.05 %) B
Slide 42: Targeted effort to ensure long-term return on equity above 12%
Targeted and focused effort to ensure long-term return on equity above 12% is being made along several dimensions Capital 2 Net interest 1 allocation Incomes Commissions Volume, margins 3 Financial 2 and incomes assets Net profit Expenses Return on 4 Cost control Losses 3 equity 1 Equity capital Nor
Slide 43: SpareBank 1 SMN
SpareBank 1 SMN 7467 TRONDHEIM CEO Finn Haugan CFO Kjell Fordal Switchboard Tel +47 900 41 002 Tel +47 905 41 672 Tel +47 07300 E-mail finn.haugan@smn.no E-mail kjell.fordal@smn.no Internet adresses: SMN homepage og internet bank: www.smn.no HuginOnline: www.huginonline.no Equity capital certificate
Slide 44: Appendix
Appendix 4th quarter 2016 44
Slide 45: Operating income
Operating income Commission income Commission income Boligkreditt - Næringskreditt Operating income per quarter last two years Net interest income 922 907 880 869 860 844 843 850 330 374 350 286 299 297 327 342 91 83 79 81 74 75 64 70 467 467 466 473 469 472 449 493 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2
Slide 46: Change in net interest income
Change in net interest income 2016 compared with 2015 Substantial gross movements • Increased lending volume and deposit Net interest at Q4 2015 1.883 margins strengthens net interest income Net interest at Q4 2016 1.872 Change -11 • Lower lending margins weaken net interest Obtained as follows: inc
Slide 47: Earnings per ECC
Earnings per ECC Last two years per quarter 2,18 2,21 2,21 2,13 2,00 1,45 1,49 1,26 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 4th quarter 2016 47
Slide 48: SpareBank 1 SMN will come across as cost-efficient also as a group
SpareBank 1 SMN will come across as cost-efficient not just on an individual basis but also as a group High operating margins in EM1 and Profitable and non-capital-intensive Regnskapshuset SMN subsidiaries: • Both EM1 and Regnskapshuset SMN are 0,85 0,82 companies making a sound profit – and requiri
Slide 49: Stable credit risk
Stable credit risk SpareBank 1 SMN’s loans distributed on risk class and SpareBank 1 SMN’s loans distributed on size of customer share of Exposure At Default engagement and share of Exposure At Default 83,2% 84,0% Share of EAD Q4 2015 67,7% 68,9% Share of EAD Q4 2015 Share of EAD Q4 2016 Share of EA
Slide 50: Strengthened capital adequacy
Strengthened capital adequacy As at Q4 2016 and Q4 2015 NOKm 31.12.16 31.12.15 Core capital exclusive hybrid capital 13.229 12.192 Hybrid capital 1.841 1.796 Core capital 15.069 13.988 Supplementary capital 2.116 2.390 Total capital 17.185 16.378 Total credit risk IRB 4.153 4.082 Debt risk, Equity r
Slide 51: Strong capitalization
Strong capitalization Development CET1 Development CET 1 without transitional arrangements (Basel III) 16,2 14,9 15,0 13,6 11,6 11,1 11,2 10,4 2013 2014 2015 2016 2013 2014 2015 2016 4th quarter 2016 51
Slide 52: CET 1 ratio improves by 132 basis points in 2016
CET 1 ratio improves by 132 basis points in 2016 1,6 0,4 14,9 13,6 0,1 0,1 0,1 • Growth in retail exposures is compensated by reduced corporate exposures in BN Bank • Changes in pension schemes and dividends from SpareBank 1 group reduce prudential filters, and counter significant increase in divide
Slide 53: Key figures
Key figures Last three years 2016 2015 2014 CET 1 ratio 14,9 % 13,6 % 11,2 % Core capital ratio 17,0 % 15,6 % 13,0 % Capital adequacy 19,4 % 18,3 % 15,7 % Leverage ratio 7,0 % 6,7 % Growth in loans incl.Boligkreditt 8,0 % 5,8 % 7,3 % Growth in deposits 4,8 % 5,6 % 8,5 % Deposit-to-loan ratio 65,6 %
Slide 54: Key figures ECC
Key figures ECC Last five years (including effects of issues) 2016 2015 2014 2013 2012 ECC ratio 64,0 % 64,0 % 64,6 % 64,6 % 64,6 % Total issued ECCs (mill) 129,83 129,83 129,83 129,83 129,83 ECC price 64,75 50,50 58,50 55,00 34,80 Market value (NOKm) 8.407 6.556 7.595 7.141 4.518 Booked equity capi
Slide 55: SpareBank 1 Alliance companies
SpareBank 1 Alliance Members SpareBank 1 SpareBank 1 SpareBank 1 Sparebanken Samspar LO SMN SR-Bank Nord-Norge Hedmark Products, commissions, dividends Sales, loan portfolios, capital SpareBank 1 BN Bank Covered Bonds, SpareBank 1 Gruppen AS residential SpareBank 1 Alliance companies SpareBank 1 Spa
Slide 56: Organisational set-up SpareBank 1 SMN
Organisational set-up SpareBank 1 SMN Group CEO Legal Finn Haugan Risk Retail Market Organisation and Corporate Corporate Group Finance Svein Tore Development Communications Vegard Helland Kjell Fordal Rolf Jarle Brøske Samdal Nelly S Maske 4th quarter 2016 56
Slide 57: Overall organisation
Overall organisation 4th quarter 2016 57