Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Debt Investor Presentation (February 2018)
59 slides from Sparebank 1 Ostlandet's debt investor presentation, February 2018
Slide 1: Investor presentation
Investor presentation February 2018 Geir-Egil Bolstad Cathrine Mordal Runar Hauge CFO Head of treasury Portfolio manager/IR
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 20.5 %, Leverage ratio 7.1 % SpareBank 1 Østlandet • Low risk bank book with a 74 % retail share, of which 96 % housing mortgages • Diversified income strea
Slide 3: Transaction rationale
Transaction rationale The Bank’s ambitions have consequences for the funding strategy SpareBank 1 Ostlandet rated A1 (outlook • The Bank’s revised business strategy has consequences for the funding strategy going forward neg.) by Moody's has mandated BNP Paribas, Commerzbank, Danske Bank • Deposits
Slide 4: Content
Content Introduction to SpareBank 1 Østlandet Asset quality, rating and funding plans Norway and regional outlook Appendix (financials 2017) 4
Slide 5: Introduction to SpareBank 1 Østlandet
Introduction to SpareBank 1 Østlandet © crazybutterflys.com © berkutschi.com
Slide 6: A long and solid history
A long and solid history Norway's fourth largest savings bank * with a broad, established 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 147 billion. Operations
Slide 7: 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 ~ 370 emplo
Slide 8: 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 • The SpareBank 1 Alliance «SpareBank 1 Alliance» = 14 cooperating independent savings banks SpareBank 1 Betaling AS
Slide 9: Long history of profits
Long history of profits Net profit and profit pre-financials and loan losses (MNOK) 2016 Acquisition of 1400 Bank 1 Oslo 1400 Akershus 1200 1200 2010 1000 Financial gains 1000 Low losses 2007 800 Business cycle 800 1988-91 peak. 7 bps loss. High loan 600 losses in 600 1993 banking crisis, Bond gains
Slide 10: Long history of low loan losses
Long history of low loan losses Lower and more stable than peer average Loan loss provisions, incl transfer to covered bond company (% of lending) 3.0 % 2.5 % 2.0 % 1.5 % 1.0 % 0.5 % 0.0 % -0.5 % 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 1987 1989 1991 1993 1995 1997 1999
Slide 11: Successful merger and IPO
Successful merger and IPO Targets for synergies achieved • Acquisition of Bank 1 Oslo Akershus AS • Technical merger ‒ Completed on 29 June 2016 ‒ Successful implementation weekend 13-15 October 2017 • Legal merger ‒ All banking systems integrated into a common platform ‒ Successful legal merger 1 A
Slide 12: 2017 was another solid year
2017 was another solid year (Last year's figures in brackets) Pre-tax profit in Q4-17 at NOK 422 million (NOK 294 million). Profitable Pre-tax profit in 2017 at NOK 1,618 million (NOK 1,371 million). ROE in Q4-17 at 10.4 % (9.4 %). Good return on equity ROE in 2017 at 10.2 % (10.5 %). CET 1 ratio 16
Slide 13: The Bank delivered on its financial targets
The Bank delivered on its financial targets Targets and performance 2017 Profitability Return on equity at least 10% 10.2 % Dividends 50% pay-out ratio 50 % Solidity CET 1 at 16 % 16.8 % 13
Slide 14: Region, strategy and ambitions
Region, strategy and ambitions
Slide 15: Continuous development of the Bank
Continuous development of the Bank Merger and IPO basis for future growth 2014 2015 2016 2017 2017 2017-> Decision to Evaluation, Equity issue to Merger IPO Revised evaluate conversion, and B1OA owners between B1OA strategy implementation and SH to Deliver on SpareBank 1 targets and Østlandet potent
Slide 16: Solid position and growth opportunities
Solid position and growth opportunities Market leader in Hedmark, market challenger in other counties Hedmark Oslo Population 197,000 Population 669,000 Market share* RM 49 % Market share RM 11 % Market share CM 45 % Market share CM 2% Position market leader Position growth market Unemployment 1.7 %
Slide 17: A market area with long term growth potential
A market area with long term growth potential Expected long-term population growth Population projection 2016-2040 Population projection, municipalities 2016-2040 2 250 000 2 000 000 +26% (0.9% yearly) 1 750 000 Oppland 1 500 000 Hedmark 1 250 000 1 000 000 Oslo 750 000 500 000 Akershus 250 000 0 20
Slide 18: Financial targets 2018
Financial targets 2018 Remaining solid and continue the focus on profitability Profitability Return on equity at least 10% Dividends 50% pay-out ratio Solidity CET1 at 16% Costs 5 % cost reduction* 18 *Nominal costs pro-forma parent bank compared with 2017
Slide 19: 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 i
Slide 20: Asset quality, rating and funding plans
Asset quality, rating and funding plans 20
Slide 21: Loan portfolio with a high proportion of retail market customers and SMEs
Loan portfolio with a high proportion of retail market customers and SMEs Lending to customers per sector (NOK millions) Business services Primary Others 4,942 4,368 industries 4,179 Wholesale and retail trade 1,316 Corporate lending CRE 12,860 26% Building and construction Retail customers 3,923 58
Slide 22: Diversified portfolio
Diversified portfolio Mortgages and corporate loans by size (% share)* Residential mortgages Corporate lending 41.0% 24.3% 33.3% 22.2% 17.5% 14.1% 11.7% 10.2% 12.7% 9.4% 3.7% <1 M 1-2.5 M 2.5-5 M 5-10 M >10 M <5 M 5-10 M 10-50 M 50-100 M 100-200 M >200 M 22 * Including mortgages transferred to the c
Slide 23: A stricter mortgage regulation was introduced in 2017
A stricter mortgage regulation* was introduced in 2017 The Bank uses the flexibility quota to service existing and desirable new customers • The banks have a limited flexibility quota to allow Utilisation of flexibility quota in the fourth quarter of 2017 exceptions to defined criteria. Criteria are
Slide 24: The Bank has reduced its LTVs during 2017…
The Bank has reduced its LTVs during 2017… Percentage of granted mortgages per county and average LTV per quarter 2017 Proportion of granted volume per quarter Average LTV on granted loans per quarter 76% 72% 73% 72% 71% 69% 70% 71% 65% 65% 66% 66% 66% 65% 66% 67% 65% 62% 62% 60% 33% 32% 32% 31% 31%
Slide 25: …compared to previous years
…compared to previous years Percentage of granted mortgages and average LTV per county in 2015 and 2016 Proportion of granted volume per quarter in 2015 Average granted LTV on granted loans in 2015 81% 71% 72% 72% 74% 33% 30% 28% 4% 5% Oslo Akershus Hedmark Oppland Other Proportion of granted volume
Slide 26: High quality retail portfolio
High quality retail portfolio Loan to Value by exposure in the mortgage portfolio 100% 95.3% 80% 60% 40% 20% 3.9% 0.4% 0.4% 0% Under 70% 70-85% 85-100% Over 100% 26
Slide 27: Low levels of problem loans
Low levels of problem loans Non-performing and other doubtful commitments* 1.64% 700 1.8 0% 1.6 0% • The proportion of problem 600 1.37% 1.4 0% 500 271 1.12% 1.2 0% loans is stable at low levels 209 400 1.17% 254 1.0 0% 257 272 0.98% 0.8 0% 300 0.61% 0.59% 0.80% 0.6 0% 200 0.4 0% 100 0.42% 0.41% 0.2
Slide 28: Net reversals on losses in 2017
Net reversals on losses in 2017 Net loan loss provisions (NOK millions) • Net reversals on losses NOK 13 million 100 72 75 66 56 in the fourth quarter 50 • Equal to - 0.1 % of gross lending*. 0 • Reversal of collective provisions by -20 NOK 23 million in the corporate -50 2013 2014 2015 2016 2017 di
Slide 29: A1 Moody's Senior Unsecured rating
A1 Moody’s Senior Unsecured rating Provisional as of rating action 22 January 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 b
Slide 30: The Bank's ambitions have consequences for the funding strategy
The Bank’s ambitions have consequences for the funding strategy Today’s funding mix and thoughts on funding going forward Senior EUR Subordinated • Deposits are, and will be the 1% 1% Equity most important funding source Senior NOK 9% 15 % • Will continue to use SPABOL for covered bond funding Loans
Slide 31: The merger has lead to higher funding activity
The merger has lead to higher funding activity Funding profile as of 4Q-2017 (MNOK) 5092 • Well diversified funding profile 4598 4432 4244 • Average time to maturity 3.6 years 3400 2947 • Total maturities of NOK 27.2 bn • Mortgages of NOK 39 bn transferred to SPABOL as of year 820 895 761 end 2017 0
Slide 32: Solidity and capital adequacy
Solidity and capital adequacy Core equity tier 1 ratio, Group (%) • The Bank’s target core equity tier 1 ratio is 16.0 % • As of 31 December 2017, the core equity tier 1 ratio was 16.8 % • The regulatory requirement is 13.7 %, including a Pillar 2 requirement of 1.7% 17.2% • The Financial Supervisor
Slide 33: Norway and regional outlook
Norway and regional outlook OPPLAND SpareBank 1. @STLANDET
Slide 34: Norwegian economy at a glance
Norwegian economy at a glance Economic Indicators 2013 2014 2015 2016 2017P 2018E (real growth or level in per. cent) GDP growth - mainland 2.3 2.2 1.4 1 1.9 2.5 Household consumption growth 2.7 1.9 2.6 1.5 2.5 2.5 Investment growth (mainland*) 2.9 0.4 -0.2 6.1 6.7 1.6 Investment growth offshore oil
Slide 35: 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 35 Source: Thompson Re
Slide 36: Norway: Strong Public sector finances
Norway: Strong Public sector finances The Norwegian oil fund is currently 300 % of GDP The sovereign wealth fund relative to GDP Government gross debt and financial net worth (% of GDP) 10 000 000 350% 400 The Government Pension Fund Global Gross Debt Pension Fund Global/GDP 300% Financial Net worth
Slide 37: Stable activity and low unemployment regionally
Stable activity and low unemployment regionally Home market with low spillover from oil downturn Growth in production, last 3 months and forecast for 6 months Registered unemployment rate 4 5.00 4.50 3 4.00 2 3.50 3.00 1 2.50 0 2.00 2005 2009 2013 2017 2002 2003 2004 2006 2007 2008 2010 2011 2012 20
Slide 38: Mortgage market: key characteristics
Mortgage market: key characteristics Mortgage Market • Total size approximately NOK 3,000 billion (USD 375bn, €330bn) • Private banks (incl. savings banks) are the dominant suppliers of Household credit growth mortgages with over 95% market share (12 months growth rate) • Scheduled repayment mortgag
Slide 39: Diversified housing market in the region
Diversified housing market in the region 12-month price growth – by county as of 31 December 2017 • Growth in all counties surrounding Oslo ‒ Oslo - 6.2 % ‒ Hedmark + 5.7 % ‒ Akershus + 0.8 % ‒ Oppland + 4.4 % • Sales records in Hedmark, Akershus and Oppland in 2017 • Turnover time up in Oslo and Ak
Slide 40: Housing prices levelling off
Housing prices levelling off House price developments outside Oslo has seen moderate and stable growth House prices by area, 12-month growth House prices, indexed** 30.0% JANUARY 2018 150.00 • Nominal + 2.0 %/seasonally adjusted -0.4 % 25.0% • 12-month: -2.2 % 140.00 • High activity and drop in inve
Slide 41: 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 41
Slide 42: Appendix
Appendix SpareBank © @STLANDET
Slide 43: Key financials – quarterly
Key financials – quarterly (1) Net interest income and commission fees from Pre-tax profit (NOK millions) the covered bond companies (NOK millions) 476 422 361 358 598 611 294 521 540 573 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Losses on loans and guarantees (NOK millions) Total
Slide 44: Key financials – quarterly
Key financials – quarterly (2) Return on equity (%) Core equity tier 1 capital ratio (%) 16.9 16.9 16.8 16.7 16.7 12.0 10.4 9.4 9.2 9.0 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Lending growth 12 months (incl. covered bond Deposit growth 12 months companies) 10.7% 9.3% 8.0% 7.9% 8.
Slide 45: Solid growth in net interest income
Solid growth in net interest income Net interest income incl. commissions from covered bond companies • Strong development in net 140 0 1.8 8% 1.86% 1.86% 1.85% 120 0 1.84% 1.8 6% interest income in the last year 100 0 1.8 4% • Increase of NOK 90 million 1.79% 800 1.8 2% 573 598 611 from Q4-16 to Q4
Slide 46: Solid lending growth in 2017 as well
Solid lending growth in 2017 as well Lending volume, Group, incl. transferred to the covered bond companies (NOK billions) 127 129 122 124 119 • Lending growth in the Group in the last 38 39 37 37 37 12 months was 8.4 % • Lending growth retail 8.7 % • Lending growth corporates 7.7 % 83 85 88 89 90 Q
Slide 47: Lending margins
Lending margins Retail market and corporate market (parent bank) 2.76% 2.68% 2.66% 2.68% 2.56% 1.92% 1.93% 1.85% 1.71% 1.58% Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Lending margin, RM, incl. covered bond companies Lending margin, CM, incl. covered bond companies 47
Slide 48: Satisfactory deposit coverage
Satisfactory deposit coverage Deposit volume, Group (NOK billions) 680 0.00% 670 0.00% • Deposit growth last 12 months 4.6 % 660 0.00% • Deposit growth - retail 0.6 % 650 0.00% • Deposit growth - corporates 10.9 % 640 0.00% • Deposit coverage ratio 72.9 % 67 66 • Deposit coverage ratio - including 6
Slide 49: Deposit margins
Deposit margins Retail market and corporate market (parent bank) 0.30% 0.27% 0.23% 0.16% 0.11% 0.13% 0.06% 0.09% -0.05% -0.04% Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Deposit margin RM Deposit margin CM 49
Slide 50: Net commissions and other income
Net commissions and other income Commissions and other operating income by type (NOK millions) 232 233 226 225 • Stable development in 15 15 207 commissions 17 10 16 14 16 17 15 Commission income from credit 41 cards 36 46 29 33 • Revenues from accounting Other income services and estate agency 73 s
Slide 51: Fourth quarter - marked by restructuring costs
Fourth quarter - marked by restructuring costs Operating costs per quarter (NOK millions) • The merger was completed in the fourth quarter (see next page). NOK 47 million was charged in costs in connection with the merger in the quarter. • Costs in EM1 rose by NOK 27 million compared with the previo
Slide 52: The merger project has been completed
The merger project has been completed Greater synergies identified and realised slightly ahead of schedule Synergies • Expected synergies of NOK 82 million in 2018 – Synergies operating costs compared with target of NOK 75 million 100.0 96 • Annual synergies are expected to rise to NOK 96 NOK millio
Slide 53: The contribution from financial items has increased
The contribution from financial items has increased Net result from financial assets and liabilities (NOK millions) 42 88 35 46 312.0 266.0 277.0 277 220 220.0 Net result from financial Net result from financial Valuation of debt Net result from ownership Dividends from long-term Net result from fin
Slide 54: Regulations
Regulations IFRS 9 and Pillar 2 • The new loss model based on IFRS 9 has no significant effect on capital adequacy. Total loss provisions for the Group as of 1 January 2018 are estimated at NOK 389 million, NOK 22 million higher than the loss provisions as IFRS 9 of 31 December 2017. NOK 22 million
Slide 55: Net reversals on losses
Net reversals on losses Net loan loss provisions (NOK millions) • Net reversals on losses NOK 13 million 100 72 75 66 56 in the fourth quarter 50 • Equal to - 0.1 % of gross lending*. 0 • Reversal of collective provisions by -20 NOK 23 million in the corporate -50 2013 2014 2015 2016 2017 division d
Slide 56: Low levels of problem loans
Low levels of problem loans Non-performing and other doubtful commitments* 1.64% 700 1.8 0% 1.6 0% • The proportion of problem 600 1.37% 1.4 0% 500 271 1.12% 1.2 0% loans is stable at low levels 209 400 1.17% 254 1.0 0% 257 272 0.98% 0.8 0% 300 0.61% 0.59% 0.80% 0.6 0% 200 0.4 0% 100 0.42% 0.41% 0.2
Slide 57: Solidity and capital adequacy
Solidity and capital adequacy Core equity tier 1 ratio, Group (%) • The Bank’s target core equity tier 1 ratio is 16.0 % • As of 31 December 2017, the core equity tier 1 ratio was 16.8 % • The regulatory requirement is 13.7 %, including a Pillar 2 requirement of 1.7% 17.2% • The Financial Supervisor
Slide 58: 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 59: End
End SpareBank a @STLANDET
SpareBank 1 Østlandet — Debt Investor Presentation (February 2018) on 6ix