Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q4 2018 Earnings Presentation
51 slides from Sparebank 1 Ostlandet's earnings presentation, Feb 8, 2019
Slide 1: Company presentation Fourth quarter 2018
Company presentation Fourth quarter 2018 8 February 2018
Slide 2: Summary
Summary Companies in the Hedmark county are top notch in Europe in social media utilization. Tretopphyttene AS in Ringsaker gives social media much of the credit for the company's success.
Slide 3: Good profitability and continued strong lending growth
Good profitability and continued strong lending growth Summary fourth quarter 2018 • Strong income and customer growth • Still low loan losses • Higher market shares in real estate brokerage • Restructuring of accounting services • The merger between SpareBank 1 Skadeforsikring and DNB Forsikring ha
Slide 4: 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 % 4 * Profit after tax before minorit
Slide 5: The bank and the market area
The bank and the market area Lillestrøm and Romerike is a region in strong growth, both when it comes to population and creation of new jobs. SpareBank 1 Østlandet has a strong presence.
Slide 6: SpareBank 1 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 165 billion.
Slide 7: 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 8: 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 9: Positive business expectation in Eastern Norway
Positive business expectation in Eastern Norway Business confidence indicator Eastern Norway Total 2018 Total 2018 40 Total 2017 Total 2017 35 Total 29 Business confidence Tourism 20 29 44 Oppland & Hedmark 31 30 29 29 29 29 Oslo & Akershus 45 Private services Turnover 30 47 25 25 24 23 Industry 34
Slide 10: Housing prices levelling out on record high turnover
Housing prices levelling out 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% JANUARY 2019 30% 150 150 • Nominal +2.7 %/seasonally adjusted +0.5 % 25% • Record high sales 25% acti
Slide 11: Positive consumer expectations for 2019 in Eastern Norway
Positive consumer expectations for 2019 in Eastern Norway Consumer confidence in Eastern Norway Total 2018 Total 2018 Total Total 2017 Total 2017 Oppland & Hedmark Consumer confidence 13 Total 13 13 20 13 Oslo & Akershus 18 Man 17 18 16 16 Woman 7 9 15 14 Own economy this year 21 13 13 17 18-29 year
Slide 12: 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 Oslo 1,000,000 750,000 500,000 Akershus
Slide 13: Steady customer growth after the merger
Steady customer growth after the merger Numbers of customers in parent bank • In connection with the technical 350 30 merger in October 2017, a standardization of the product and 340 336 337 331 332 334 29 customer definitions were 327 329 330 324 326 implemented. 322 28 317 318 319 320 321 • After
Slide 14: A larger bank more relevant for larger customers
A larger bank more relevant for larger customers Increased focus on public sector • SpareBank 1 Østlandet is more competitive and relevant in municipal and public tenders for banking services. • Skedsmo municipality chose SpareBank 1 Østlandet as its new main bank after having had the same bank for
Slide 15: ESG in SpareBank 1 Østlandet
ESG in SpareBank 1 Østlandet - more important than ever. • ESG has always been embedded in our raison d’être to participate in societal development as a committed and responsible contributor to society. • One of the six main pillars in our corporate strategy: “By the end of 2021 we have established
Slide 16: 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 17: 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 18: Profit contributions from subsidiaries
Profit contributions from subsidiaries 4Q 2018 (4Q 2017) SpareBank 1 Finans Østlandet - Profit before tax NOK 185.9 million (NOK 157.8 million) - Strong growth, cost control and increasing profitability - Increased focus on innovation and business development with focus on the sharing economy Eiendo
Slide 19: Contribution from joint ventures
Contribution from joint ventures Contributions in 2018 (2017) SpareBank 1 Gruppen - Profit before tax NOK 1,385million (NOK 2,210 million) - Ownership 12.4 % SpareBank 1 Boligkreditt AS - Profit before tax NOK 6.5 million (NOK -238 million) - Ownership 21.6 % SpareBank 1 Næringskreditt - Profit befo
Slide 20: 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 21: Special items 4Q 2018 - 1
Special items 4Q 2018 - 1 Description and effects • The bank received 28 January 2019 a binding ruling from The Norwegian Tax Administration stating that the customer dividend paid by the bank is tax Tax deductibility of customer deductible. This will impact the profits positively from and including
Slide 22: Special items 4Q 2018 – 2
Special items 4Q 2018 – 2 Description and effects • The NFSA has approved the merger between SpareBank 1 Skadeforsikring and DNB Merger between SpareBank 1 Forsikring. Skadeforsikring and DNB Forsikring* • The part of the transaction that concerns the life insurance products is planned to be complet
Slide 23: 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 24: 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 25: 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 26: 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 27: 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 28: 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 29: Most significant lending growth in Akershus, Hedmark and Oppland
Most significant lending growth in Akershus, Hedmark and Oppland Lending to customers per geographic area and change last 12 months (% and NOK million) Lending to customers by geographic area Changes last 12 months Hedmark 36,792 /37.2% 12.5 % Oslo 25,078 /25.3% -0.7 % Akershus 21,998 /22.2% 13.6 %
Slide 30: 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 30
Slide 31: 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% 31 * Including loans transferred to the covered bond companies
Slide 32: 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 33: 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 34: 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 35: 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 36: Increased commissions and other income compared to last year
Increased commissions and other income compared to last year Net commissions and other income (NOK millions) 300 246 234 250 • Commissions and other operating 12 224 217 18 8 income was reduced with 4.0 % 207 16 10 0 9 16 Total from last quarter. 15 • Reduction in income from real 200 16 45 Other in
Slide 37: Group operating costs
Group operating costs Operating costs per quarter (NOK millions) 600 600 550 506 88 468 457 500 • The operating costs have increased 0.9 % 500 449 70 compared to last year. 22 54 47 45 23 400 400 32 24 Total • The increase in other operating expenses 23 Other operating 132 in 4. quarter is explained
Slide 38: Stable development in staff levels
Stable development in staff levels Headcount (FTE) • Stable level of staffing in the Parent 1,146 1,139 Bank after the merger was completed. 1,109 1,111 1,126 • Reduced staffing in subsidiaries is 404 418 433 453 442 mainly related to normal departure in TheVIT. 705 693 693 693 697 4Q-17 1Q-18 2Q-18
Slide 39: Operating costs in the Parent Bank according to plan
Operating costs in the Parent Bank according to plan Operating Costs per quarter (NOK million) • The operating costs in 2018 were NOK 17.2 million lower than in 2017. • This is equivalent with a 5.3 % cost reduction compared with last year. • The cost reduction is in line with the 411 ambition for 2
Slide 40: The contribution from financial items has increased
The contribution from financial items has increased Net income from financial assets and liabilities (NOK millions) • Net profit from ownership interests of NOK 4 million is specified above (“Contribution from joint ventures”). 75 -68 2 4 • Issued debt was reclassified 1 January 2018, after earlier
Slide 41: Still very low impairments on loans and guarantees
Still very low impairments on loans and guarantees Impairments on loans and guarantees (NOK million) 12 11 7 5 • Impairments on loans and guarantees was NOK 11 million in the fourth quarter. • Parent bank NOK 5 million • SB1 Finans Østlandet NOK 6 million -13 4Q-17 1Q-18 2Q-18 3Q-18 4Q-18 • Impairme
Slide 42: 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 43: Low impairments and low net exposure in Stage 3
Low impairments and low net exposure in Stage 3 Specification of impairments and net exposure (NOK million) Maximum exposure (on and off-balance sheet items), Impairments per segment - quarterly net of accumulated impairments 100.0% 90.0% 80.0% 70.0% • Stage 1 – Initial recognition and no significan
Slide 44: 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 45: 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 46: SPOL and dividend
SPOL and dividend 31.12.18 • The Board will propose to the Market price (NOK) 83.00 Supervisory Board payment of a dividend of : Market capitalization (NOK million ) 9,572 NOK 4.12 per equity certificate Book equity per EC 1) 85.83 • The Supervisory Board will meet on 28 March (approval date) Earnin
Slide 47: Solid dividends for owners and customers
Solid dividends for owners and customers Allocation of profit ILLUSTRATION* Profit after tax in the Group 67.5%1) NOK 1,414 million 32.5%1) 69.4%2) 30.6%2) Donations Foundation OWNERS Primary capital NOK 249 million 52.4% Dividends Dividend equalisation Customer dividends/gifts Primary capital provi
Slide 48: Well positioned to serve a growth region
Well positioned to serve a growth region Summary 48
Slide 49: 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 49
Slide 50: 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 51: Together to create
Together to create Proficient | Nearby | Engaged “We protect our drinking water. More than 10,000 voluntaries contributed in collecting 15 tons of plastic in the Inland waterways last year”
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