Sparebank 1 Smn · OSL:MING
Sparebank 1 Smn — Q1 2016 Earnings Presentation
53 slides from Sparebank 1 Smn's earnings presentation, May 2, 2016
Slide 1: 1st quarter 2016
1st quarter 2016 2. May 2016 SpareBank 1 SMN
Slide 2: SpareBank1 SMN, the region's most important finance institution
SpareBank1 SMN, the region’s most important finance institution Core market Overview • 200.000 retail customers and 14.000 corporates in Trondelag and North-West Norway. Market leader in the region • Norway’s second largest savings bank with total assets of 168 billion *) • Co-owner of SpareBank 1 G
Slide 3: Strong underlying operations, but increase in collective write-downs
Strong underlying operations, but increase in collective write-downs Core business is sound. Increased operating income and lower costs The bank is growing in terms of lending, deposits, insurance, savings and investment, real estate agency and accounting services Strong financial position. The bank
Slide 4: Midt-Norge 31 March 2016: house prices and unemployment
Midt-Norge 31. March 2016: Growth in house prices below average. Increasing unemployment in Møre og Romsdal 12-month growth in house prices . Per cent. Unemployment rate (NAV). Monthly figures. Mar14 – Mar16 Mar14 - Mar16 Sources: Eiendom Norge, FINN og Eiendomsverdi AS Source: NAV (Norwegian Labour
Slide 5: Status for business and industry in the bank's market area
Status for business and industry in the bank’s market area Area Status Outlo Comments Consequences / measures ok Macro • Weaker Norwegian growth due to reduced oil investments and lower oil price – growing pessimism • Weak outlook calls for continued preparedness among firms • Growth prospects furth
Slide 6: Strong capitalization, good profits and low risk
Strong capitalization, good profits and low risk Return on equity CET 1 15,1% 14,1% 13,6% 13,6% 13,3% 12,3% 10,7% 11,1% 11,2% 8,9% 2013 2014 2015 Q1 15 Q1 16 2013 2014 2015 Q1 15 Q1 16 Earnings per ECC Loans in default and other problem loans as a percentage of total loans 8,82 6,92 7,02 0,48% 0,44%
Slide 7: FTEs crucial to achieving costs goal
FTEs crucial to achieving costs goal Considerable reduction in 2015 FTEs at parent bank • At end-Marc there were 79 fewer FTEs 763 at the parent bank than at year-end 730 2014 721 • This is mainly natural wastage • A further reduction of about 45 FTEs is 645 642 aimed for by the end of 2016 2012 201
Slide 8: An excellent effort across the organisation to develop tomorrow's bank
An excellent effort across the organisation to develop tomorrow’s bank New distribution model Technological developments provide new opportunities • SMN working on a new • New webpages will create better distribution model interplay between the channels • Changing customer behaviour • We are further
Slide 9: The subsidiaries predominate in their markets
The subsidiaries predominate in their markets and contribute to diversified and robust value creation SpareBank 1 Finans EiendomsMegler 1 • Solid market position • 40% market share, strong synergy with the • Leasing NOK 2.1bn, car loans 2.2bn bank • Pre-tax profit of NOK 23.4m (21.3m) • Pre-tax prof
Slide 10: The Offshore Segment in SpareBank1 SMN
The Offshore Segment in SpareBank1 SMN Share of gross exposure Number of vessels* Exposure Olje og Offshore 4,6% • 50% to PSV, 67 AHTS, seismic • 50% to barges, tugs, comstruction, standby and others Offshore 6,7 bill. - total 144,9 bill. *) Excluding barges and tugs incl. Boligkreditt/Næringskredit
Slide 11: The Offshore Segment in SpareBank 1 SMN – further details
The Offshore Segment i SpareBank 1 SMN – further details 1. Exposure to the Offshore Service Vessel segment (OSV) – capital intensive industry 2. Shipyards - OSV, fishing vessels, wellboats and RoRo 3. Exposure to other maritime industries – mainly producers of maritime equipment and engineering com
Slide 12: LTV per shipowner as of 30.06.15
LTV per shipowner as of 30.06.15 Only vessels financed wholly og partly by SMN LTV per shipowner Source: SpareBank1 SMN 12
Slide 13: Conclusion
Conclusion • SpareBank 1 SMN has a very well diversified corporate portfolio. 4.6 % of thje bank’s total loan exposure is to petroleum-related activitities. This is primarily funding of OSV vessels. • The quality of the portfolio is broadly good – however, risk in the OSV segment is high • SpareBank
Slide 14: SpareBank 1 SMN intends to be among the best performing banks
SpareBank 1 SMN intends to be among the best performing banks Customer Best on customer experience orientation Will continue to strengthen market position Profitable Among the best performing banks, ROE 12 % annually Solid CET1 14.5% by the end of 2016 Efficient Zero cost growth in parent bank 2014
Slide 15: Financial results 1st quarter 2016
Financial results 1st quarter 2016
Slide 16: Q1 2016 Net profit NOK 311m
Q1 2016 Net profit NOK 311m (441m) Return on equity 8.9 % (14.1 %) Result of core business NOK 211m (279m) Cost reduction parent bank 1.0 % (growth 0.7%) CET 1 13.6 % (12.3 %) Growth in lending RM 9.5 % (8.0%) and CM reduction 1.2 % (growth CET1 capital at 11.4% (10.3%) 13.2%), deposits 5.4 % (10.9
Slide 17: Key figures, quarterly
Key figures, quarterly Return on equity CET 1 14,1% 13,2% 13,6% 13,6% 13,4% 12,3% 12,7% 8,4% 8,9% 7,4% Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Earnings per ECC FTEs parent bank 2,18 2,13 686 672 660 645 642 1,45 1,49 1,26 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q1 15 Q2 15 Q3 15 Q4 15 Q1 1
Slide 18: Profit per quarter
Profits Profit per quarter NOK mill Q1 16 Q4 15 Q3 15 Q2 15 Q1 15 Net interest 469 473 466 467 467 Commission income and other income 401 378 378 413 377 Operating income 870 850 843 880 844 Total operating expenses 489 515 466 496 454 Pre-loss result of core business 381 335 377 384 391 Losses on l
Slide 19: Operating income
Commission income Operating income Commission income Boligkreditt - Næringskreditt Net interest income Last two years per quarter 856 880 870 825 823 844 843 850 798 273 286 330 299 297 327 262 285 265 96 98 91 83 79 81 74 123 110 430 463 485 467 467 466 473 469 412 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2
Slide 20: Change in net interest income
Change in net interest income From Q1 15 – Q1 16 Comments Net interest Q1 2015 467 Net interest Q1 2016 469 • Increased lending volume and deposit margins Change 2 strengthens net interest income Obtained as follows: • Lower lending margins weaken net interest Fees on lending 1 income Lending volume
Slide 21: Lending margins Retail and Corporate
Lending margins Retail and Corporate Per quarter from Q1 2012 Comments Percent • Strong competition • Interest rate changed five times on best home 3,00 3,05 3,05 3,00 2,93 loans since June 2014, another reuction is 2,86 2,81 2,75 2,67 announced with effect fro June 2016, effect up 2,64 2,65 2,62 2,
Slide 22: Total growth lending 5.4% last 12 months
Total growth lending 5.4 % last 12 months Lending RM +9.5 % last 12 months +9.5% +8.0% Share of lending 69.6 75.2 82.3 31.3.14 31.3.15 31.3.16 36% CM Lending CM -1.2 % last 12 months 64% RM +13,2% -1,2% 42,2 47,8 47,2 31.3.14 31.3.15 31.3.16 22 Q1 2016
Slide 23: Deposit margins Retail and Corporate
Deposit margins Retail and Corporate Per quarter from Q1 2012 Comments Per cent • Margins increased due to repricing Deposits RM Deposits CM • Further repricing to be considered 0,41 0,24 0,11 0,05 -0,18 -0,15 0,18 -0,33 -0,34 -0,48 -0,46 -0,1333 -0,15 -0,32 -0,25 -0,4 -0,44 -0,58 -0,63 Q1 12 Q3 12
Slide 24: Total growth deposits
Total growth deposits 5.4 % in Q1 2016 Deposits RM + 6.9 % +9,5% +6,9% Share of deposits 24,2 26,5 28,3 31.3.14 31.3.15 31.3.16 44% RM Deposits CM + 4.2 % 56% CM +12,2% +4,2% 34,1 35,5 30,4 31.3.14 31.3.15 31.3.16 24 Q1 2016
Slide 25: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income Commission Q1 15 and Q1 16 NOKm 31 Mar. 31 Mar. mill kr 2016 2015 Change 844 870 Payment transmission income 47 47 0 798 Creditcards 14 13 1 Commissions savings 13 11 2 Commissions 262 286 327 Commissions insurance
Slide 26: Return on financial investments
Return on financial investments Per quarter NOKm Q1 16 Q4 15 Q3 15 Q2 15 Q1 15 Net gain and dividends on securities 3 -17 9 61 10 Net gain on bonds and derivatives 25 -16 -116 32 11 Change in discount factor in fair value model for fixed interest loans -64 Net gain on trading and derivatives Markets
Slide 27: Subsidiaries
Subsidiaries Profit subsidiaries pre tax per quarter Q1 16 Q4 15 Q3 15 Q2 15 Q1 15 EiendomsMegler 1 Midt-Norge (87 %) 10,0 7,5 10,3 21,3 7,8 SpareBank 1 Regnskapshuset SMN 4,3 8,8 5,7 12,4 7,9 SpareBank 1 Finans Midt-Norge (90 %) 23,4 19,5 20,1 22,2 21,3 Allegro Kapitalforvaltning (90 %) 0,6 -0,7 0,
Slide 28: Associated companies
Associated companies Profit shares after tax per quarter Q1 16 Q4 15 Q3 15 Q2 15 Q1 15 SpareBank 1 Gruppen (19,5 %) 61,0 68,0 55,8 68,2 59,4 SpareBank 1 Boligkreditt (18,4 %) 23,7 15,1 14,5 9,1 41,0 SpareBank 1 Næringskreditt (29,3 %) 8,0 8,0 6,6 7,3 8,1 BN Bank (33 %) 19,8 10,6 -4,1 16,5 18,3 Spare
Slide 29: Costs, parent bank and subsidiaries
Costs, parent bank and subsidiaries Pro forma figures, Q1 15 includes costs SpareBank 1 Markets included in subsidiaries Costs Q1 15 and Q1 16 Comments 500 489 • Reduced costs by 1 per cent at the bank are the result of the cost-cutting 207 199 Subsidiaries programme • Overall costs at the subsidiar
Slide 30: Low individual losses in Q1 16
Low individual losses in Q1 16 : 20 mNOK Collective losses provisions increased with 150 mNOK in Q1 16 Losses per quarter (grey bar = collective losses Distribution as of 31.3.2016 provisions) (ex. collective losses) NOK mill 170 RM 7 150 SMN Finans 2 57 56 34 35 31 CM 11 17 24 22 50 15 26 20 6 Q1 1
Slide 31: Collectively assessed write-downs
Collectively assesses write-downs Last 10 years, NOKm and as a percentage og gross lending 526 376 0,41% 0,37% 0,35% 0,34% 0,33% 289 290 290 295 295 295 0,30% 0,30% 0,30% 245 0,28% 0,26% 0,25% 184 185 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 16 2006 2007 2008 2009 2010 2011 2012 2013 201
Slide 32: Collectively assessed write-downs, Corporate (parent bank)
Collectively assessed write-downs, Corporate (parent bank) Comment By sector Offshore 249 • Collective write-downs related to offshore are estimated with a basis in Commercial property 71 stressed PDs and sharp falls in boat values, based on value-fall matrices Services 33 • Where the bank considers
Slide 33: Defaults and other problem loans
Defaults and other problem loans Low levels Last two years, per quarter 1.400 1,50 1.200 1,30 Problem loans 1.000 1,10 Loans in default Loans in default % of total loans 800 0,90 600 368 448 0,70 399 411 206 206 231 216 400 226 0,50 334 338 270 287 200 263 0,30 237 218 205 205 0,29 0,29 0,24 0,22 0,
Slide 34: High share mortgages and diversified portfolio SMEs
High share mortgages and diversified portfolio SMEs Lending and change last 12 months by sector in mNOK Wage earners 48,1 37,2 % SB1 Boligkreditt 34,2 26,4 % Commercial real estate 14,4 11,1 % Agriculture/forestry/fisheries 9,2 7,1 % Transport and other services 5,3 4,3 % Maritime sector and offshor
Slide 35: Balance sheet
Balance sheet Last three years 31 Mar. 2016 31 Mar. 2015 31. Mar. 2014 Funds available 19,5 16,5 20,0 Net loans 94,6 91,9 79,1 Securities 1,6 0,7 1,1 Investment in related companies 6,0 5,2 4,8 Goodwill 0,5 0,5 0,5 Other assets 12,1 8,9 6,0 TOTAL ASSETS 134,3 123,7 111,6 Capital market funding 44,4
Slide 36: Development in common equity Tier 1 and ROE
Development in common equity Tier 1 (capital and ratio), and ROE from 2009 to Q1 2016 CET 1 Ratio 14,5% 13,6% 13,6% 1,0% Other buffers +8% 1,5% Countercyclical 11,1% 11,2% 2,0% SIFI Buffer 10,0% 9,5% 9,0% 8,0% 2,5% Conservation Buffer 3,0% Systemic Risk 4,5% Equity Capital 2009 2010 2011 2012 2013 2
Slide 37: CET1 capital adequacy unchanged from 31 December 2015
CET1 capital adequacy unchanged from 31 December 2015 13,6 0,0 0,2 0,2 0,0 13,6 Comment 0,1 • Increased capital requirements under the standardised approach • Little change in capital from operations q4 15 IRB Standardised Floor Result Regulatory q1 16 37 approach filters 1. kvartal 2016
Slide 38: Strong capitalization
Strong capitalization Development CET1 Development CET 1 without transitional arrangements (Basel III) 15,0% 15,0% 13,6% 13,6% 11,1% 11,2% 11,6% 10,4% 2013 2014 2015 Q1 16 2013 2014 2015 Q1 16 38 Q1 2016
Slide 39: Satisfying access to capital market funding
Satisfying access to capital market funding Funding maturity 31. March 2016 Comments In NOK bn 14,1 10,0 • SpareBank 1 Boligkreditt is the main funding source through covered 5,4 6,2 bonds. NOK 34 billion transferred as 3,8 of 31. March 2016 2016 2017 2018 2019 2020 -> • Maturities next two years NO
Slide 40: SpareBank 1 SMN contacts and financial calendar
SpareBank 1 SMN 7467 TRONDHEIM CEO Switchboard Finn Haugan Tel +47 900 41 002 Tel +47 07300 E-mail: finn.haugan@smn.no CFO Kjell Fordal Tel +47 905 41 672 E-mail: kjell.fordal@smn.no Internett adresses: Financial calender 2016 SMN home page and internet bank: www.smn.no 1. Quarter: 29. April 2015 Hu
Slide 41: Appendix
Appendix 41 Qi 2016 SpareBank @)
Slide 42: Earnings per ECC
Earnings per ECC Last two years per quarter 2,48 2,29 2,19 2,18 2,13 1,85 1,45 1,49 1,26 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 42 Q1 2016
Slide 43: Profit trend in core business
Profit trend in core business Per quarter last 2 years Commentary 398 391 • Good income trend, both 382 377 384 377 381 356 net interest income and 335 commission income • Cost development in line with plan Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 43 Q1 2016
Slide 44: Cost development
Cost development Total costs per quarter last 2 years Comments 496 515 • Stable costs quarter by 489 479 466 quarter 441 443 454 425 • High costs in Q4 15, but largely of a one-time nature Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 44 Q1 2016
Slide 45: SpareBank 1 SMN will come across as cost-efficient
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 Regnskapshuset SMN Profitable and non-capital- intensive subsidiaries: 0,89 0,92 Both EM1 and Regnskapshuset 1 SMN are companies making a sound profit – and requir
Slide 46: Loan to value mortgages
Loan to value mortgages Last two years Comments Q1 16 Q1 15 93,1 % 93,8 % • 98.5 % of the exposure has an LTV of less than 85 % • Exposure with LTV higher than 85 points 1.5 % 5,4 % 5,1 % 0,9 % 0,7 % 0,7 % 0,4 % Under 70 % 70 - 85 % 85 - 100 % Over 100 % 46 Q1 2016
Slide 47: Stable credit risk
Stable credit risk SpareBank 1 SMN’s loans distributed on SpareBank 1 SMN’s loans distributed on size of risk class and share of Exposure At Default customer engagement and share of Exposure At Default Share of EAD Q1 2016 Share of EAD Q1 2015 Share of EAD Q1 2016 Share of EAD Q1 2015 85% 81% 83% 82
Slide 48: Capital adequacy
Capital adequacy Last two years NOKm 31.3.16 31.3.15 Core capital exclusive hybrid capital 12.440 11.008 Hybrid capital 1.797 1.705 Core capital 14.237 12.713 Supplementary capital 2.279 2.435 Total capital 16.516 15.147 Total credit risk IRB 4.135 4.194 Debt risk, Equity risk 39 202 Operational ris
Slide 49: Key figures
Key figures Last three years 31 Mar. 2016 31 Mar. 2015 31 Mar. 2014 Net interest 1,41 1,50 1,45 Comm. income and net retur on fin. inv. 1,72 1,84 2,27 Operating expenses 1,47 1,45 1,56 Net profit as a percentage of ATA 1,66 1,88 2,16 CET 1 ratio 13,6 % 12,3 % 11,1 % Core capital ratio 15,6 % 14,3 %
Slide 50: Key figures ECC
Key figures ECC Including effects of issues Last five years Q1 16 Q1 15 2015 2014 2013 2012 ECC ratio 64,0 % 64,6 % 64,0 % 64,6 % 64,6 % 64,6 % Total issued ECCs (mill) 129,83 129,83 129,83 129,83 129,83 129,83 ECC price 52,75 59,50 50,50 58,50 55,00 34,80 Market value (NOKm) 6.849 7.725 6.556 7.595
Slide 51: 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 SpareBank 1 SpareBank 1 O
Slide 52: Organisational set-up SpareBank 1 SMN
Organisational set-up SpareBank 1 SMN Group CEO Legal Finn Haugan Risk Organisation and Retail Market Corporate Group Finance development Svein Tore Samdal Vegard Helland Kjell Fordal Nelly S Maske
Slide 53: Overall organisation
Overall organisation Supervisory Board Chair Randi Dyrnes ECC holders County Council | Employees 40 % % 17,5 % 25 % External audit Election Comitee Deloitte Lars B Tvete Board of Directors Chair: Kjell Bjordal Deputy chair: Bard Benum Paul E. Hjelm-Hansen, Aud Skrudland, Morten Loktu, Amhild Holstad