Sparebank 1 Smn · OSL:MING
Sparebank 1 Smn — H1 2016 Earnings Presentation
48 slides from Sparebank 1 Smn's earnings presentation, Aug 11, 2016
Slide 1: 1st half 2016
1st half 2016 11. August 2016
Slide 2: SpareBank1 SMN, the region's most important financial institution
SpareBank1 SMN, the region’s most important financial institution Overview 211,000 retail customers and 13,000 corporates in three counties in Central Norway Norway’s second largest savings bank with total assets of NOK 176 billion including loans sold to SpareBank 1 Boligkreditt and SpareBank 1
Slide 3: Strong underlying operations, but increase in loan losses
Strong underlying operations, but increase in loan losses Core business is sound. Increased operating The bank is enhancing efficiency and the income and zero cost growth in parent bank number of FTEs is being reduced Increased losses on oil related activity. The bank is growing in terms of lending,
Slide 4: Trøndelag and Møre og Romsdal
Trøndelag and Møre og Romsdal High Growth in house prices and low unemployment 12-month growth in house prices Unemployment rate Per cent, July 14 – July 16 Monthly figures, June 14 – June 16 Norge jun.14 jun.15 jun.16 Sør-Trøndelag Nord-Trøndelag 8,8% Møre og Romsdal 2,9% 2,9% 2,7% 2,8% 2,6% 2,7% 7
Slide 5: Offshore service vessels, a portfolio under restructuring
Offshore service vessels, a portfolio under restructuring 1. halvår 2016 5
Slide 6: Offshore Service Vessels
Offshore Service Vessels Market segments PSV AHTS Standby Subsea Seismikk Barge Other EAD MNOK 1.955 543 143 2.076 494 272 841 Share 31% 9% 2% 33% 8% 4% 13% # vessels 36 7 3 11 9 15 Offshore Service Vessels amount to 4,3 % of total EAD 4,3% 95,7% 6
Slide 7: Offshore Service Vessels
Offshore Service Vessels Risk class distribution Impairments by risk class and share of EAD Q4 2015 – Q2 2016 (NOKm) 30. June 2016 Share of 3.443 3.236 NOKm EAD Individual Group Total EAD Q4 15 Low risk 1.498 0 4 4 0,3 % Q1 16 Medium risk 2.418 0 23 23 1,0 % 2.418 High risk 1.524 0 112 112 7,4 % Q2
Slide 8: Offshore Service Vessels
Offshore Service Vessels Development in total impairments Q2 2015 – Q2 2016 Comments (NOKm) 393 • Constitutes 4,3% of total credit portfolio • 5,5 bill. with collateral in vessels 140 • 0,8 bill. in other financing 303 Group Individual • Exposure reduced by 900 mill. (-12%) last 12 mnths • Sale of v
Slide 9: 1st half 2016
1st half 2016 Net profit NOK 771m (871m), CET 1 14.1 % (12.7 %) . return on equity 10.9 % (13.7 %) Result of core business NOK 487m Growth in lending RM 10.2 % (8.2 (718m) exclusive of loan losses. %) and CM 0.4 % (8.4 %), deposits Loan losses NOK 287m (NOK 56m) 1.3 % (11.4 %) last 12 months Booked
Slide 10: Strong profit growth among subsidiaries, strengthening their market position
Strong profit growth among subsidiaries, strengthening their market position SpareBank 1 Finans Midt-Norge EiendomsMegler 1 • Pre-tax profit of NOK 48.5m (43.4m) • Excellent pre-tax profit of NOK 43.3m (29.2m) • Solid market position • 40% market share, strong synergy with • Leasing NOK 2.2bn, car l
Slide 11: Strong capitalization and good profits. Increased problem loans, as expected
Strong capitalization and good profits. Increased problem loans, as expected Return on equity CET1 15,1% 13,3% 13,7% 13,6% 14,1% 12,7% 10,7% 10,9% 11,1% 11,2% 2013 2014 2015 Q2 15 Q2 16 2013 2014 2015 Q2 15 Q2 16 Earnings per ECC Loans in default and other problem loans as a percentage of total loan
Slide 12: Key figures, quarterly
Key figures, quarterly Return on equity CET 1 13,4% 12,9% 14,1% 12,7% 13,2% 13,6% 13,6% 8,4% 8,9% 7,4% Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Earnings per ECC FTEs parent bank 2,13 2,21 672 1,45 1,49 660 1,26 645 642 632 1st half 2016 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q2 15 Q3 15 Q4
Slide 13: Lending margins Retail and Corporate
Lending margins Retail and Corporate Per quarter from Q2 2012 Comments • Strong price competition on 3,00 3,05 3,05 3,00 2,93 2,86 mortgages 2,81 2,75 2,67 2,62 2,66 2,57 2,68 2,47 2,44 2,64 2,65 2,45 2,47 2,52 2,40 • Interest rate changed six times 2,28 2,31 2,33 2,28 on best home loans since June
Slide 14: Total growth lending 6.5 % last 12 months
Total growth lending 6.5 % last 12 months Lending RM +10.2 % last 12 months, 1st half 5.5 % High growth in home mortgage lending 8,4% 10,2% • Of the growth in home mortgage lending, 2/3 refers to established 77,3 85,2 customers and 1/3 to new customers 71,3 • Limited growth in lending to corporates,
Slide 15: Tighter lending practices introduced in Q1
Tighter lending practices introduced in Q1 to counter increased demand, and to ensure that we only recruit customers who are consistent with our desired risk profile • SMN the only bank to introduce an absolute ceiling on debt to income • Increased requirement on collateral in the case of bids highe
Slide 16: Loan to value mortgages
Loan to value mortgages Last two years LTV mortgages • 98.4 % of the exposure has an LTV of 93,6% 93,0% less than 85 % Q2 15 • Exposure with LTV higher than 85 Q2 16 points 1.6 % 5,1% 5,4% 0,7% 0,9% 0,6% 0,7% Under 70 % 70 - 85 % 85 - 100 % Over 100 % 1st half 2016 16
Slide 17: Deposit margins Retail and Corporate
Deposit margins Retail and Corporate Per quarter from Q2 2012 Comments • Margins increased due to Deposits RM repricing Deposits CM • Deposit margins will be adjusted continuously 0,24 0,17 0,09 0,11 0,05 -0,18 -0,26 -0,15 -0,10 -0,33 -0,39 -0,33 -0,34 -0,35 -0,08 -0,13 -0,48 -0,53 -0,46 -0,19 -0,25
Slide 18: Total growth deposits 1.3 % last 12 months
Total growth deposits 1.3 % last 12 months Deposits RM + 5.3 %, 1st half 6.4 % +8,9% +5,3% 26,3 28,6 30,2 Share of deposits 30.6.14 30.6.15 30.6.16 44% RM Deposits CM - 1.8 %, 1st half + 3.1 % CM 56% +13,4% -1,8% 37,5 36,9 33,1 30.6.14 30.6.15 30.6.16 1st half 2016 18
Slide 19: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income Commissions 1st half 2015 and 1st half 2016 1. Half 1. Half mill kr 2016 2015 Change 1.724 1.791 Payment transmission income 94 94 0 1.622 Creditcards 30 27 3 616 700 Commissions savings and asset management 42 35 7
Slide 20: Costs, parent bank and subsidiaries
Costs, parent bank and subsidiaries Pro forma figures, Q1 15 includes costs SpareBank 1 Markets included in subsidiaries Costs 1st half 2015 and 1st half 2016 Group cost growth also low • Reduction in costs at the bank as a result of cost cutting programme and reduction in FTEs 1.009 1.016 • Cost gr
Slide 21: Tomorrow's bank being developed
Tomorrow’s bank being developed New distribution model Technology provides opportunities • SMN working on a new distribution model • New webpages will create better interplay between the channels • Changing customer behavior presents new opportunities • We are further developing the internet • Bank
Slide 22: Increased loan losses in 2016
Increased loan losses in 2016 Losses per quarter (grey bar = collective losses provisions) Distribution as of 30.6.2016 170 118 PM 8 150 56 57 34 35 31 228 15 24 22 26 20 SMN Finans 4 -110 NL 275 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Loan losses including collective losses provisions
Slide 23: Very low levels on loans in default, but problem loans have increased
Very low levels on loans in default (0,19 %), but problem loans have increased Last two years, per quarter Problem loans Loans in default Loans in default % of total loans 1.198 206 368 448 206 399 411 0,29 0,29 216 234 0,22 0,21 0,23 0,19 0,17 0,16 0,16 334 338 287 270 262 218 205 205 255 Q2 14 Q3
Slide 24: Development in CET 1 and ROE from 2009 to Q2 2016
Development in CET 1 (capital and ratio), and ROE from 2009 to Q2 2016 14,5% CET 1 Ratio 13,6% 14,1% 1,0% Other buffers +8% 1,5% Countercyclical 11,1% 11,2% 2,0% SIFI Buffer 10,0% 9,0% 9,5% 2,5% Conservation Buffer 8,0% 3,0% Systemic Risk 4,5% Equity Capital 2009 2010 2011 2012 2013 2014 2015 Q2 16
Slide 25: Satisfying access to capital market funding
Satisfying access to capital market funding Funding maturity 30. June 2016 Comments 18,8 • SpareBank 1 Boligkreditt is the main funding source through covered bonds. 9,8 NOK 33 billion transferred as of 30. 5,1 6,1 June 2016 2,0 • In June the bank raised a new five-year loan in the Euro market of EU
Slide 26: 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 cost growth in parent bank 2014 – 2016 Will continue to strengthen market position Profitable Dividend Among the best performing banks, ROE Real-terms payout ratio of 25% to 35%. 12 % an
Slide 27: 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 Internett adresses: SMN homepage og internet bank: www.smn.no HuginOnline: www.huginonline.no Equity capital certficate
Slide 28: Appendix
Appendix 1. halvår 2016 28
Slide 29: Profits
Profits Profits 1st half and five last quarters 1. Half 1. Half NOK mill 2016 2015 Change Q2 16 Q1 16 Q4 15 Q3 15 Q2 15 Net interest 942 934 8 472 469 473 466 467 Commission income and other income 849 790 59 448 401 378 378 413 Operating income 1.791 1.724 67 921 870 850 843 880 Total operating exp
Slide 30: Increased operating income in 2016
Increased operating income in 2016 Commission income Commission income Boligkreditt - Næringskreditt Operating income per quarter last two years Net interest income 921 856 880 870 825 844 843 850 823 273 330 327 374 285 265 286 299 297 96 98 91 83 81 74 75 110 79 463 485 467 467 466 473 469 472 430
Slide 31: Return on financial investments
Return on financial investments 1st half and five last quarters NOKm 1st half 1st half 2016 2015 Q2 16 Q1 16 Q4 15 Q3 15 Q2 15 Net gain and dividends on securities 65 70 62 3 -17 9 61 Net gain on bonds and derivatives 78 -21 53 25 -16 -116 -32 Forex and fixed income business 54 64 28 26 20 18 16 Net
Slide 32: Subsidiaries
Subsidiaries Pre tax profit subsidiaries 1st half and five last quarters 30 June 30 June 2016 2015 Change Q2 16 Q1 16 Q4 15 Q3 15 Q2 15 EiendomsMegler 1 Midt-Norge (87 %) 43,3 29,2 14,1 33,3 10,0 7,5 10,3 21,3 SpareBank 1 Regnskapshuset SMN 25,9 20,3 5,6 21,6 4,3 8,8 5,7 12,4 SpareBank 1 Finans Midt
Slide 33: Associated companies
Associated companies Profit shares after tax, 1st half and five last quarters 30 June 30 June 2016 2015 Change Q2 16 Q1 16 Q4 15 Q3 15 Q2 15 SpareBank 1 Gruppen (19,5 %) 140,9 127,6 13,3 79,9 61,0 68,0 55,8 68,2 SpareBank 1 Boligkreditt (18,4 %) 21,8 50,1 -28,3 -1,9 23,7 15,1 14,5 9,1 SpareBank 1 Næ
Slide 34: Change in net interest income
Change in net interest income From 1st half 2015 – 1st half 2016 Substantial gross movements Net interest 1. Half 2015 934 • Increased lending volume and deposit Net interest 1. Half 2016 942 margins strengthens net interest income Change 8 Obtained as follows: • Lower lending margins weaken net int
Slide 35: Earnings per ECC
Earnings per ECC Last two years per quarter 2,29 2,19 2,18 2,21 2,13 1,85 1,45 1,49 1,26 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 1st half 2016 35
Slide 36: FTEs crucial to achieving costs goal
FTEs crucial to achieving costs goal Considerable reduction in 2015 FTEs at parent bank 763 • At end-June there were 88 fewer FTEs at the parent bank than at year-end 2014 730 720 • This is mainly natural wastage • A further decline to 600 FTEs is targeted by year-end 2016 645 632 2012 2013 2014 201
Slide 37: 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 Profitable and non-capital-intensive Regnskapshuset SMN subsidiaries: • Both EM1 and Regnskapshuset SMN are 0,81 0,80 companies making a sound profit – and requiri
Slide 38: High share mortgages and diversified portfolio SMEs
High share mortgages and diversified portfolio SMEs Lending by sector in NOK billion and share of total loans Wage earners 52,2 39,4 % SB1 Boligkreditt 33,0 24,9 % Commercial real estate 14,1 10,6 % Agriculture/forestry/fisheries 9,4 7,1 % Transport and other services 5,5 4,2 % Maritime sector and o
Slide 39: Balance sheet
Balance sheet Last three years 30 June 2016 30 June 2015 30 June 2014 Funds available 27,1 21,5 19,8 Net loans 97,0 93,7 85,0 Securities 1,5 1,3 1,1 Investment in related companies 5,7 5,0 4,8 Goodwill 0,6 0,6 0,5 Other assets 9,3 8,7 7,4 TOTAL ASSETS 141,1 130,9 118,8 Capital market funding 48,4 41
Slide 40: 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 82,4% 84,4% 68,5% 68,4% Share of EAD Q2 2015 Share of EAD Q2 2015 Share of EAD Q2 2016 Share of EA
Slide 41: Strengthened capital adequacy
Strengthened capital adequacy As at Q2 2016 and Q2 2015 NOKm 30.6.16 30.6.15 Core capital exclusive hybrid capital 12.757 11.443 Hybrid capital 1.846 1.699 Core capital 14.604 13.142 Supplementary capital 2.278 2.435 Total capital 16.882 15.577 Total credit risk IRB 4.123 4.068 Debt risk, Equity ris
Slide 42: CET1 capital strengthened in second quarter 2016
CET1 capital strengthened in second quarter 2016 Comment 0,4 0,0 14,1 0,0 0,1 0,2 • Financial position strengthened by 13,6 good profit for the quarter and by dividend received from SpareBank 1 Gruppen • In addition, capital need related to transitional measures (floor) reduced in 2nd quarter q1 16
Slide 43: Strong capitalization
Strong capitalization Development CET1 Development CET 1 without transitional arrangements (Basel III) 15,0 15,3 13,6 14,1 11,6 11,1 11,2 10,4 2013 2014 2015 Q2 16 2013 2014 2015 Q2 16 1st half 2016 43
Slide 44: Key figures
Key figures Last three years 30 June 2016 30 June 2015 30 June 2014 CET 1 ratio 14,1 % 12,7 % 11,4 % Core capital ratio 16,1 % 14,6 % 13,3 % Capital adequacy 18,7 % 17,3 % 15,0 % Growth in loans incl.Boligkreditt 6,5 % 8,4 % 5,1 % Growth in deposits 1,3 % 11,4 % 8,5 % Deposit-to-loan ratio 69 % 70 %
Slide 45: Key figures ECC
Key figures ECC Last five years (including effects of issues) Q2 16 Q2 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 46,70 65,50 50,50 58,50 55,00 34,80 Market value (NOKm) 6.063 8.504 6.556 7.5
Slide 46: 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 47: 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 1st half 2016 47
Slide 48: Overall organisation
Overall organisation 1st half 2016 48