Sparebank 1 Smn · OSL:MING
Sparebank 1 Smn — Q4 2017 Earnings Presentation
55 slides from Sparebank 1 Smn's earnings presentation, Feb 7, 2018
Slide 1: Fourth quarter 2017
Fourth quarter 2017 7. February 2018
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 218,000 retail customers Established in 1823 14,500 corporate customers Sparebanken Midt-Norge since 1985 Market leader in the region Listed on Oslo Børs since 1994 Loan volume NOK 149bn SpareBank 1 Alliance s
Slide 3: A good year for SpareBank 1 SMN
A good year for SpareBank 1 SMN • Excellent results in 2017, high return on equity and growing earnings per equity certificate (EC) • Payout ratio increased to 50%, dividend NOK 4.40 kroner per EC, capital build-up completed • Many more private individuals and firms have chosen SMN as their financia
Slide 4: High return, high payout ratio and good financial position
High return, high payout ratio and good financial position Return on equity *) CET1 15,1% 14,9% 14,9% 13,6% 10,7% 11,3% 11,5% 11,2% *) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as a liability 2014 2015 2016 2017 2014 2015 2016 2017 Earnings per ECC
Slide 5: SpareBank 1 SMN is fully focused on creating value for its owners
SpareBank 1 SMN is fully focused on creating value for its owners • Ambitious ROE targets Dividend per ECC and payout ratio • Dividend policy revised to permit Pay out ratio payouts above 50 per cent 4,40 Dividend per ECC 50% 3,00 • Substantial equity participation in the bank by the bank’s top 2,25
Slide 6: Strong economic growth estimates globally and nationally for the coming years
Strong economic growth estimates globally and nationally for the coming years GLOBAL GDP GROWTH OF 3.9% IN COMING YEARS POSITIVE PROSPECTS FOR NORWEGIAN ECONOMY Statistics Norway estimates 2.5% GDP growth in Norway in 2018 and 2.8% in IMF estimates global GDP growth of 2019. 3.9% in 2018 and 2019, a
Slide 7: Twelve-month house price growth is slowing, but prices are at a stable high level
Twelve-month house price growth is slowing, but prices are at a stable high level Unemployment in the region has fallen further in the past year and is below the average for Norway House prices 2005 – 2017 ; levelling out at a stable high level Registered unemployed in per cent of labour force Month
Slide 8: Developing good customer solutions has a high priority
Developing good customer solutions has a high priority and sets requirements on continuous organisational and technological development and adaption Digital bank with a Traditional bank digitalised personal and local signature 4th quarter 2017 8
Slide 9: Growing need for financial services, but distribution will change dramatically
There will be a growing need for financial services ahead, but the way these services are distributed will change dramatically Open banking is being present on whatever interface the customer happens to be on at any given time Today’s platform as an Separate interfaces opened for Banking as a Servic
Slide 10: A clearly planned and designed distribution model
A clearly planned and designed distribution model will ensure increased selling power and cost-effectiveness An effective distribution model… ...with forceful channel interation 8. Optimise 7. Effect measurement (ROI) Increased sales across all channels 6. Manual 1. Customer purchase/ data/digital I
Slide 11: 50% of overall sales on digital channels in 2020
50% of overall sales on digital channels in 2020 Targeted development of new effective digital solutions is a key tool for achieving this target Proactive development of new solutions promotes increased sales +26% increase in digital sales in 2017 on all channels 24% Development of new purchasing so
Slide 12: SpareBank 1 Betaling: Vipps + Bank ID + Bank Axept
SpareBank 1 Betaling: (Vipps + Bank ID + Bank Axept) Effective entity will ensure the development of tomorrow’s payment systems for banks Norway has one of the world's most efficient payment systems, but we see potentials for continued development and improvement • Bank ID and BankAxept to be merged
Slide 13: Strengthening its position as the leading finance house in the region
SpareBank 1 SMN is strengthening its position as the leading finance house in the region, taking market shares, increasing product spectre and strengthening business platform Larger customer platform, increased volumes and increased incomes Number of customers Total loan volume Operating income +8%
Slide 14: FTEs reduced at the parent bank
FTEs reduced at the parent bank. Group FTEs rising in keeping with established strategy for the subsidiaries FTEs at parent bank 720 • No. of FTEs at the parent bank reduced substantially in recent years • Both distribution and internal processes have gained efficiency 645 630 • 65 new staff members
Slide 15: Substantial investments in important business areas
Substantial investments in important business areas Revenues NOKm Profits NOKm 4th quarter 2017 15
Slide 16: Lower losses in the offshore segment, further decline expected
Lower losses in the offshore segment, further decline expected Offshore risk still mainly related to the PSV segment The Offshore segment Segment and exposure Default risk class (share of offshore in %) distribution 1. Expsoure (EAD) to offshore is 5.6 bill (5.6) Subsea 2.186 (39%) • Offshore consti
Slide 17: SpareBank 1 Gruppen – substantial excess values
SpareBank 1 Gruppen – substantial excess values Booked value in SMN’s accounts at 1.6 NOKbn SpareBank 1 Gruppen 2017 2016 SpareBank 1 Forsikring AS 835,5 516,7 ODIN Forvaltning 105,7 84,6 SpareBank 1 Skadeforsikring konsern 1.311,4 1.447,1 Øvrige selskaper og korreksjoner 71,0 94,4 Total pre tax pro
Slide 18: #påsammelag
#påsammelag «caring adds competitive power, Og i tillegg tar vi et betydelig especially in a digital world» samfunnsansvar og blir godt likt av folk flest 4th quarter 2017 18
Slide 19: SpareBank 1 SMN intends to be one of the best performing banks
SpareBank 1 SMN intends to be one of the best performing banks Customer oriented Efficient Best for customer experience Nominal costs at the parent bank unchanged from 2014 to 2018 Continuing to strengthen market position Profitable Utbytte Return on equity among the best Payout ratio in the region
Slide 20: Financial information 4th quarter 2017
Financial information 4th quarter 2017 4th quarter 2017 20
Slide 21: Other issues
Other issues Reclassification hybrid bonds • As from the fourth quarter of 2017 SpareBank 1 SMN has reclassified two hybrid bonds from debt to equity. The bonds were reclassified since they do not meet the definition of financial liability under IAS 32. • The bonds are perpetual, and SpareBank 1 SMN
Slide 22: Very good profits 2017
Very good profits 2017 Net profit NOK 1,828m (1,681m), CET1 14.9 % (14.9 %). Leverage return on equity 11.5 % (11.3 %) ratio 7.2 % (7.4 %) Growth in lending RM 10.4 % (10.8 Pres loss result of core business %) and CM 4.1 % (minus 3.2 %), NOK 1,844m (1.600m). Loan losses deposits 13.9 % (4.8 %) last
Slide 23: Good profits and strong capitalization. Lower loan losses
Good profits and strong capitalization. Lower loan losses Return on equity CET 1 14,9% 14,8% 15,0% 14,7% 14,9% 12,5% 13,4% 12,2% 10,5% 9,4% Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Earnings per ECC Loan losses as a percentage of total loans 2,63 0,29% 2,41 0,26% 2,21 0,24% 0,24% 1
Slide 24: Board proposal for distribution of profit: dividend NOK 4.40
Board of directors’ proposal for distribution of profit provides a dividend of NOK 4.40 Dividend: 572 EC holders 1,152 (63.95 %) Equalisation fund: 580 Profit after tax 1,800 Non-profit causes: 70 Non-profit causes: 322 Ownerless capital EC foundation 252 649 (36.05 %) Ownerless capital: 327 Pay-out
Slide 25: Strengthened profits from core business
Strengthened profits from core business January to January to December December NOK mill 2017 2016 Change Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 Net interest 2.225 1.929 296 589 570 532 533 504 Commission income and other income 2.005 1.674 330 529 482 538 455 414 Operating income 4.229 3.603 626 1.118 1.052
Slide 26: Total growth lending 8.2% last 12 months
Total growth lending 8.2 % last 12 months Lending RM +10.4 % last 12 months High growth in home mortgage lending 10,4% • Residential mortgage market share of 10,8% about 6.3% (C2). Growth above this figure represents increased market share 89,4 98,7 80,7 • Share of loans to personal borrowers up fro
Slide 27: Loan to value mortgages
Loan to value mortgages Last two years LTV mortgages • 98.6 % of the exposure has an LTV of 93,9% 93,8% less than 85 % Q4 16 • Exposure with LTV higher than 85 % Q4 17 points 1.4 % 4,8% 4,8% 0,8% 0,8% 0,6% 0,6% Under 70 % 70 - 85 % 85 - 100 % Over 100 % 4th quarter 2017 27
Slide 28: Lending margins
Lending margins Increased lending margins Retail and Corporate Comments • Reduced Nibor in 2017 3,05 3,00 2,93 2,86 2,81 2,75 2,71 2,71 2,70 2,71 2,81 2,80 2,75 2,67 2,62 2,66 2,47 2,52 2,40 2,56 2,31 2,33 2,28 2,06 2,00 1,99 1,96 1,92 1,84 1,85 1,81 1,91 1,70 1,59 Loans RM Loans CM Q4 13 Q2 14 Q4 1
Slide 29: Total growth deposits 13.9% in 2017
Total growth deposits 13.9 % in 2017 Deposits RM + 6.8 % +5,1% +6,8% 28,3 29,8 31,8 Share of deposits 31.12.15 31.12.16 31.12.17 42% RM Deposits CM + 19.5 % 58% CM +19,5% +4,6% 44,7 35,8 37,4 31.12.15 31.12.16 31.12.17 4th quarter 2017 29
Slide 30: Deposit margins Retail and Corporate
Deposit margins Retail and Corporate Comments Deposits RM • Decreased Nibor has Deposits CM weakened the margins in 2017 0,31 0,37 0,24 0,19 0,14 0,13 0,05 0,03 0,03 -0,15 -0,10 -0,33 -0,34 -0,35 -0,48 -0,53 -0,46 -0,06 -0,03 -0,06 -0,11 -0,14 -0,13 -0,19 -0,25 -0,11 -0,14 -0,48 -0,44 -0,41 -0,32 -0
Slide 31: Change in net interest income
Change in net interest income 2017 compared with 2016 Comments • Increased lending volume and lending Net interest 2017 2.225 margins the main reason for higher net Net interest 2016 1.929 interest income Change 296 Obtained as follows: Fees on lending -8 Lending volume 161 Deposit volume 6 Lending
Slide 32: Banking operations made more efficient, increased activity in subsidiaries
Banking operations made more efficient, increased activity in the subsidiaries Parent bank target of zero growth in costs stands firm Kostnader i konsernet i 2016 og 2017 Cost growth due to focus on subsidiaries • Cost growth in the subsidiaries 2.369 • Acquisitions by SMN Regnskapshuset 2.003 • Str
Slide 33: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income Commissions 2017 and 2016 mill kr 2017 2016 Change 4.229 Payment transmission income 207 196 11 3.603 Creditcards 59 63 -3 3.417 1.635 Commissions savings and asset management 117 97 20 Commissions insurance 172 159
Slide 34: Subsidiaries
Subsidiaries Pre tax profit subsidiaries January to January to December December mNOK, SMN's share in parentheses 2017 2016 Change Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 EiendomsMegler 1 Midt-Norge (87 %) 3 67 -64 -10 -11 19 4 7 SpareBank 1 Regnskapshuset SMN (95 %) 60 43 17 15 9 20 15 10 SpareBank 1 Finans
Slide 35: Lower loan losses
Lower loan losses Losses per quarter, NOKm Distribution 2017 170 130 PM 18 118 99 89 86 88 78 56 Leasing 5 NL 318 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Loan losses including collective losses provisions 0.23 % (0.39 %) of gross lending as of 31.12.2017 4th quarter 2017 35
Slide 36: Very low levels on loans in default (0,19 %)
Very low levels on loans in default (0,19 %) Last two years, per quarter Problem loans Loans in default Loans in default % of total loans 1.474 1.360 1.215 1.184 1.198 1.151 1.078 411 0,19 0,16 0,18 0,18 0,19 0,16 0,16 0,15 205 255 221 214 211 258 263 284 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4
Slide 37: High share mortgages and diversified portfolio SMEs
High share mortgages and diversified portfolio SMEs Lending by sector as a share of total lending and change last 12 months, per cent Mortages 42,9 % 7,6 Mortages funded by cov. bonds 23,4 % 1,7 Commercial real estate 9,6 % 0,6 Agriculture/forestry/fisheries 7,8 % 1,1 Transport and other services 4,
Slide 38: Strong capitalization
Strong capitalization Development CET1 14,9 14,9 13,6 11,2 Development leverage ratio 6,7 7,4 7,2 6,0 2014 2015 2016 2017 Development CET 1 without transitional arrangements (Basel III) 16,2 16,7 2014 2015 2016 2017 15,0 11,2 2014 2015 2016 2017 38 4th quarter 2017
Slide 39: Strong development in CET 1 (capital and ratio)
Strong development in CET 1 (capital and ratio) CET 1 Ratio +8% 14,9% 14,9% 15,0% 13,6% 0,9% Other buffers 2,0% 11,1% 11,2% Countercyclical 9,5% 10,0% 2,1% Pilar 2 9,0% 8,0% 2,5% Conservation Buffer 3,0% Systemic Risk 4,5% Equity Capital 2009 2010 2011 2012 2013 2014 2015 2016 2017 New Goal CET 1 Ca
Slide 40: 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 +47 915 07 300 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 certif
Slide 41: Appendix
Appendix 4th quarter 2017 41
Slide 42: Operating income
Operating income Commission income Commission income covered bonds Operating income per quarter last two years Net interest income 1.118 1.052 988 932 918 862 881 872 426 382 379 297 327 373 350 342 100 104 76 81 74 75 64 70 533 570 589 484 481 483 460 504 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q
Slide 43: Good lending margins on mortgages at a low risk
Good lending margins on mortgages at a low risk Mortgages Lending margins EAD RWA 105 1,99 1,96 96 1,91 89 1,81 1,59 19 20 21 2015 2016 2017 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 4th quarter 2017 43
Slide 44: Earnings per ECC
Earnings per ECC Last two years per quarter 2,63 2,42 2,22 2,21 2,00 1,92 1,74 1,50 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 4th quarter 2017 44
Slide 45: Associated companies
Associated companies Profit shares after tax January to January to December December 2017 2016 Change Q4 17 Q3 17 Q2 17 Q1 17 Q4 16 SpareBank 1 Gruppen (19,5 %) 349 317 32 134 80 68 66 97 SpareBank 1 Boligkreditt (19,0 %) -41 -17 -24 -15 11 -13 -24 -26 SpareBank 1 Næringskreditt (36,5 %) 19 29 -10 1
Slide 46: Return on financial investments
Return on financial investments Januar - Januar - Desember Desember NOKm 2017 2016 Endring Q4 17 Q3 17 Q2 17 Q1 17 Capital gains shares 62 76 -14 53 0 1 8 Gain/(loss) on derivatives 148 280 -131 55 72 25 -3 of which basis-swap -50 -8 -42 6 37 -39 -55 Gain/(loss) on other financial instruments at fai
Slide 47: SpareBank 1 SMN will come across as cost-efficient 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 0,91 0,96 companies making a sound profit – and 0,84 re
Slide 48: Balance sheet
Balance sheet Last three years 31.12.17 31.12.16 31.12.15 Funds available 27,3 21,8 21,4 Net loans 111,0 101,4 93,4 Securities 1,8 1,5 1,5 Investment in related companies 6,4 5,7 5,5 Goodwill 0,8 0,6 0,5 Other assets 6,0 7,1 9,5 Total Assets 153,3 138,1 131,9 Capital market funding 51,8 46,8 43,3 De
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 84,0% 85,6% Share of EAD 31.12.2017 Share of EAD 31.12.2017 68,9% 70,0% Share of EAD 31.12.2016 Sh
Slide 50: High impairment share for problem exposures
High impairment share for problem exposures Default risk class distribution Impairments per default rick class and share of EAD 4rd quarter 2016 – 4rd quarter 2017 (bill NOK) 31 December 2017 Total Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Indi- impair- Share of mill kr EAD vidual Group ments EAD 2,7 Low risk 1
Slide 51: Financial restructuring implemented for most shipowners
Financial restructuring implemented for most shipowners Offshore Service Vessels – Largest customer groups EAD - MNOK 0 200 400 600 800 1.000 1.200 1.400 1.600 No. of vessels LTV Impariment 11 87 % * 36 80 % * 9 65 % 2 118 % * 4 92 % * 3 43 % 2 67 % 1 57 % 3 44 % 2 56 % 1 70 % 2 26 % 1 71 % Restruct
Slide 52: Strengthened capital adequacy
Strengthened capital adequacy As at 31. December 2017 and 2016 NOKm 31.12.17 31.12.16 Core capital exclusive hybrid capital 13.938 13.233 Hybrid capital 1.886 1.841 Core capital 15.824 15.073 Supplementary capital 1.922 2.116 Total capital 17.746 17.189 Total credit risk IRB 4.205 4.153 Exposures ca
Slide 53: Satisfying access to capital market funding
Satisfying access to capital market funding Funding maturity 31. December 2017 Comments 12,9 • SpareBank 1 Boligkreditt is the main 9,3 9,6 funding source through covered bonds. 7,6 6,1 NOK 35 billion transferred as of 31. December 2017 2018 2019 2020 2021 2022 -> • Maturities next two years NOK 15.
Slide 54: Key figures ECC
Key figures ECC Last five years 2017 2016 2015 2014 2013 ECC ratio 64,0 % 64,0 % 64,0 % 64,6 % 64,6 % Total issued ECCs (mill) 129,38 129,64 129,43 129,83 129,83 ECC price 82,25 64,75 50,50 58,50 55,00 Market value (NOKm) 10.679 8.407 6.556 7.595 7.141 Booked equity capital per ECC 78,81 73,35 67,39
Slide 55: Key figures
Key figures Last three years 31.12.17 31.12.16 31.12.15 CET 1 ratio 14,9 % 14,9 % 13,6 % Core capital ratio 16,9 % 17,0 % 15,6 % Capital adequacy 19,0 % 19,4 % 18,3 % Leverage ratio 7,2 % 7,4 % 6,7 % Growth in loans (incl.Boligkreditt and Næringskreditt) 8,2 % 8,0 % 5,8 % Growth in deposits 13,9 % 4