SpareBank 1 SMN · OSL:MING
SpareBank 1 SMN — Q1 2020 Earnings Presentation
58 slides from SpareBank 1 SMN's earnings presentation, May 8, 2020
Slide 1: 1st quarter 2020
1st quarter 2020 8. May 2020
Slide 2: Profits Q1 2020
Profits Q1 2020 Pre loss result of core business NOK 564m (496) Loan losses NOK 308 m (67) Net profit NOK 290m (1,046) Gain Fremtind NOK 340m (460) Leverage ratio 6.9 % (7.4) ROE 5.7 % (23.3) Growth in lending RM 7.6 % (8.3) CM 2.7% (3.4) Growth in deposits 9.2 % (6.3) CET1 16.3 % (14.8) Booked equi
Slide 3: Always there for people, businesses and local communities
Always there for people, businesses and local communities – in upturns and downturns SMN is the region’s leading finance house – this imposes an obligation In Q1 we have been extra visible and present in our dialogue with a community and business sector in crisis SMN is solvent and solidly capitalis
Slide 4: 2020 will be a challenging year, but our long-term financial ambition is retained
2020 will be a challenging year, but our long-term financial ambition is retained 12% Profitable Return on equity 12% Financially sound 15.4% CET1 ratio 15.4% Payout ratio approx. 50% Strategy 2020-2023 Efficient SpareBank 1 SMN to be the leading < 2% Annual cost growth in the group to be limited to
Slide 5: Number 1 in financial services in Central Norway
Number 1 in financial services in Central Norway Market shares Parent bank retail Parent bank SMB Collateral, residential mortgages 25 % 25 % 23 % Accounts Estate agency Vendor’s liens 25 % 37 % 17 % 1st quarter 2020 5
Slide 6: Impact on the core business
Corona crisis and oil crisis Impact on the core business • A business model featuring a local presence is appreciated in times of crisis Business • Close dialogue with customers throughout the crisis – SMN contributes capital and competence model • Changed customer behaviour and increased activity o
Slide 7: Other effects
Corona crisis and oil crisis Other effects • Capital losses on shares Financial investments • Wider credit margins on the liquidity portfolio bring substantial capital losses in Q1 • The group’s funding situation is sound and SMN has ample access to funding via Funding and liquidity SpareBank 1 Boli
Slide 8: Strong increase in share of digital sales in Q1 2020
Strong increase in share of digital sales in Q1 2020 Share of digital sales % 57% 51% 51% 47% 44% 41% 38% 31% 27% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 1st quarter 2020 8
Slide 9: SpareBank 1 SMN contributing capital and competence
SpareBank 1 SMN contributing capital and competence We will help people and • Task force established to businesses through the crisis support corporate clients The consequences of coronavirus can be serious. It is a matter of health and of finances. And it is still too early to • Advice provided on
Slide 10: Crisis package of NOK 100m for the voluntary sector
Crisis package of NOK 100m for the voluntary sector As a savings bank it is in our heart to care about people and the place we hail from A large portion of SpareBank 1 SMN’s net profit is returned to the local communities. That is because the community is our largest owner. Rarely has there been a g
Slide 11: Five strategic priorities for 2020-2023
Five strategic priorities for 2020-2023 Increase Head up the Integrate sustainability Exploit the power in Create ‘One SMN’ digitalisation and development of into the business our ownership model use of insight Norway’s savings bank system • Strengthen the customer • Ensure relevance • Collaboration
Slide 12: 'One SMN' will strengthen the Group's market position and profitability
‘One SMN’ will strengthen the Group’s market position and profitability • The profitability enhancement programme One SMN was initiated prior to the corona crisis, and is an extra factor strengthening the group’s market position • A targeted profit improvement of at minimum NOK 300m through increase
Slide 13: Credit risk
Credit risk Vegard Helland, Executive director – Corporate Banking
Slide 14: Situation in the housing market during and after the corona pandemic
Situation in the housing market during and after the corona pandemic in three phases Phase 1: Shock • Reduction in no. of house sales and no. of houses placed on the market from 12 March up to Easter • Price correction on houses sold estimated at 0 to -2% Phase 2: Economic contraction (ongoing) • Go
Slide 15: House prices levelling out, significant increase in unemployment
House prices levelling out Significant increase in unemployment House prices 2005 – 31. March 2020 Monthly figures April 2019 and April 2020 2,0 Apr 19 Apr 20 Norway Trondheim 10,2% 1,5 9,1% 9,1% 1,0 2,3% 1,9% 2,2% 0,5 Norge Trøndelag Møre og Romsdal 0,0 2005 2007 2009 2011 2013 2015 2018 2020 1st q
Slide 16: A high proportion of our retail customers are employed in the public sector
A high proportion of our retail About 50% of our retail customers are employed in the public sector, and are thus considered customers are employed in the relatively unlikely to be laid off or to become public sector unemployed as a result of COVID-19 Largest employers in terms of number of customer
Slide 17: Payment holidays, retail market
Payment holidays, retail market No. of applications for payment holiday Retail market • Strong growth in applications for payment holidays as a result of lay-offs in March • No. of applications normalised in the course of April • Applications relate in all essentials to exposures in the lowest risk
Slide 18: «Task Force»
«Task Force» Skilled and experienced 18
Slide 19: Crisis impacts – sectoral overview
Crisis impacts – sectoral overview Strong impact Moderate impact Mild impact Positive impact Tourist industry Carriage of passengers Freight transport Grocery trade Hotels Retail trade Construction Pharmacies Culture Building industry Agriculture Streaming services Civil aviation Serving establishme
Slide 20: Retail trade heavily impacted by the crisis, but grocery trade and e-commerce growing
Retail trade heavily impacted by the crisis, but grocery trade, e-commerce and some other categories are experiencing growth. Offshore impacted by oil price fall Retail Construction Fishery Maritime industry Positive - strong impact Mild-moderate impact Mild-moderate impact Mild–moderate impact Offs
Slide 21: Payment deferments, corporates
Payment deferments, corporates No. of payment deferments Corporates 400 • Strong growth in the number of payment deferments in March, and a relatively high number in April • SpareBank 1 SMN has utilised NOK 175m of a loan ceiling of NOK 1.5bn (11.7%), of which 96% is 200 government-guaranteed (figur
Slide 22: Robust loan portfolio of which 69 per cent of loans are to wage earners
Robust loan portfolio of which 69 per cent of loans are to wage earners. Retail trade, hotels and business services are vulnerable industries, while oil- related sectors are affected by the oil price fall Total loans NOK 170.8bn 3% 2% Mortages 75,0 10% Mortages funded by cov. bonds 42,0 Commercial r
Slide 23: Offshore constitutes a small share of total credit risk (2.6 per cent)
Offshore constitutes a small share of total credit risk (2.6 per cent) Impairment level corresponds to 13.5 per cent of the offshore portfolio Oil and offshore Default risc class distribution** 2,6 % * Q1 19 Q1 20 2,7 2,3 Subsea and PSV largest segments 1,5 (EAD MNOK) 1,4 Other Seismic 124 482 3% 10
Slide 24: Increased losses in Q1 2020, largely as a result of the corona crisis
Increased losses in Q1 2020, largely as a result of the corona crisis NOK 143m of the losses in Q1 refer to a single exposure Losses per quarter, NOKm Distribution loan losses 1st quarter 2020 Retail parent bank 44 308 Corporate parent bank 258 103 78 69 67 67 59 71 Retail SB1 Finans 5 Q2 18 Q3 18 Q
Slide 25: Increased losses in the first quarter, mainly as a result of a single exposure
Increased losses in the first quarter, mainly as a result of a single exposure and changed expectations of the Norwegian economy Loss on individual exposures 143 • Losses of NOK 308m in the group in Q1 Offshore general stage 1 and 2 17 • Losses of NOK 264m on the corporate Offshore individual (stage
Slide 26: Increased payment defaults in Q1, 0.38 per cent of gross lending
Increased payment defaults in Q1, 0.38 per cent of gross lending Retail customers show the largest increase in defaults in 2019 and 2020 Last two years, per quarter Loans in default, NOKm Loans in default as a percentage of gross loans 0,38 0,26 0.26 0,22 0,18 0,18 0,19 0,18 649 356 424 429 275 284
Slide 27: Financial information
Financial information Kjell Fordal, CFO
Slide 28: Profits weakened, at a high degree due to increased loan losses
Profits weakened, at a high degree due to increased loan losses ROE CET1 23,3% 17,2% 16,3% 14,8% 15,0% 15,1% 14,9% 10,2% 7,1% 5,7% Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Profit per ECC Loan losses as a percentage of total loans 5,02 0,73% 3,21 2,30 1,60 0,25% 1,26 0,17% 0,14% 0,
Slide 29: Profits
Profits NOK mill Q1 20 Q4 19 Q3 19 Q2 19 Q1 19 Net interest 710 697 678 664 649 Commission income and other income 570 579 554 606 551 Operating income 1.280 1.276 1.232 1.271 1.200 Total operating expenses 716 720 673 701 704 Pre-loss result of core business 564 556 559 570 496 Losses on loans and
Slide 30: Total growth lending 6.0 % last 12 months
Total growth lending 6.0 % last 12 months Lending RM +9.2 % (CAGR) High growth in home mortgage lending 8,3% 7,6% 10,9% 10,0% • Residential mortgage market growth of 100,4 108,7 117,0 about 4.9 % (C2) last 12 months. 82,3 91,3 • Growth in retail lending at a high level • Share of loans to personal b
Slide 31: Lending margins
Lending margins Increasing margins Q1 20 • Key policy rate down to 0.25 in March; falling market rates in March 2020 have strengthened margins in Q1 2020 2,71 2,71 2,70 2,71 2,81 2,80 2,75 2,71 2,73 2,75 2,73 2,69 2,56 2,56 2,52 2,52 2,67 • Three mortgage lending rate hikes 1,99 1,96 1,84 1,85 1,70
Slide 32: Total growth deposits 8.7 % last 12 months
Total growth deposits 8.7 % last 12 months Deposits RM + 7.1 % (CAGR) Good growth in deposits • Stable and good growth in deposits from reatail +6,4% +9,2% customers +5,1% +7,6% 37,2 • Deposit-to-loan ratio 69 % (68 %), including loans sold 32,0 34,1 28,3 29,8 to Bolig- and Næringskreditt 52 % (50 %
Slide 33: Deposit margins Retail and Corporate
Deposit margins Retail and Corporate Deposits RM Deposits CM 0,59 0,66 0,75 • Decreased Nibor in 2020 has 0,50 0,31 0,37 0,24 0,39 0,46 weakened the margins 0,19 0,14 0,28 0,27 0,13 0,14 0,03 0,03 • Interest rate reduction also on 0,02 0,03 0,09 0,14 0,06 deposits -0,11 -0,14 -0,06 -0,03 -0,06 -0,11
Slide 34: Change in net interest income
Change in net interest income 1st quarter 2020 compared with 1st quarter 2019 Net interest income strengthened by growth and increased deposit margin Net interest Q1 20 710 Net interest Q1 19 649 • Net interest income strengthened by increased Change 61 lending volume Obtained as follows: • Margins
Slide 35: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income Commissions 1st quarter 2020 and 1st quarter 2019 mill kr 2020 2019 Change Payment transmission income 59 50 9 1.280 Creditcards 16 15 1 1.200 1.119 Commissions savings and asset management 22 24 -2 Commissions insu
Slide 36: Satisfying access to capital market funding
Satisfying access to capital market funding Funding maturity 31. March 2020 (NOK bn) Comments 18,4 • SpareBank 1 Boligkreditt is the main funding source through covered bonds. NOK 42 billion transferred as of 31. March 2020 9,5 10,0 7,3 6,6 • Maturities next two years NOK 23,0 bn: • NOK 7.3 bn in 20
Slide 37: Reduced costs in the subsidiaries, increased costs in the bank
Reduced costs in the subsidiaries, increased costs in the bank Costs 1st quarter 2019 and 1st quarter 2020 Net decline of NOK 20m in costs in the subsidiaries 704 716 • Lower activity at SpareBank 1 Markets • BN Bolig wound up Subsidiaries 371 350 Growth in parent bank costs • Additional FTEs assign
Slide 38: Balance sheet
Balance sheet 31.3.20 31.3.19 31.3.18 Funds available 35,5 29,8 25,5 Net loans 126,1 119,3 112,1 Securities 1,4 2,0 2,2 Investment in related companies 6,7 6,4 6,5 Goodwill 0,9 0,8 0,8 Other assets 14,6 6,2 4,9 Total Assets 185,2 164,6 152,1 Capital market funding 62,5 54,8 49,8 Deposits 88,2 81,1 7
Slide 39: Capitalization
Capitalization CET1 Leverage ratio 17,2 16,3 14,6 14,6 7,2 7,4 7,5 6,9 2017 2018 2019 31.3.20 2017 2018 2019 31.3.20 39 1st quarter 2020
Slide 40: Strong development in CET 1 (capital and ratio)
Strong development in CET 1 (capital and ratio) CET 1 ratio 16,9% +6% 17,2 16,3 14,8 1,0 14,6% 14,6% Other buffers 13,6% 2,5% Countercycial 11,1% 11,2% 1,9% Pi l ar 2 9,5% 10,0% 9,0% 2,5% Cons ervation buffe 4,5% Sys temic Risk 4,5% Equi ty ca pital 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 41: Changed distribution of profit for 2019
Changed distribution of profit for 2019 • The board of directors of SpareBank 1 SMN has in light of the economic prospects decided to change the distribution of the net profit for 2019, and is reducing the payout ratio from 53.5% to 41.2%. • The new dividend payout is NOK 5.00 per equity certificate
Slide 42: Change in payout ratio
Change in payout ratio Dividend 646 [5,00] EC capital 1,573 [12.14] Dividend EK equalisation fund * 64 % 927 Profit before distribution Payout 2020 2,460 Community 200 (80) Grf dividend 36 % Community owned 364 Foundation capital Retained 164 887 community owned capital * * Retained equity: ownerles
Slide 43: Why invest in SpareBank 1 SMN (MING)
Why invest in SpareBank 1 SMN (MING) High return over time and solid capitalisation. Efficient banking operations and 11 unrealised income and cost synergies within the group. Shareholder-friendly dividend policy 2 Strong position and good growth in an attractive region and across all business lines
Slide 44: SpareBank 1 SMN
SpareBank 1 SMN 7467 TRONDHEIM CEO Jan-Frode Janson CFO Kjell Fordal SpareBank 1 SMN Tel +47 909 75 183 Tel +47 905 41 672 Tel +47 915 07 300 E-mail jan-frode.janson@smn.no E-mail kjell.fordal@smn.no Internet adresses: SMN homepage og internet bank: www.smn.no Financial calendar 2020 Q1 20 8. May 20
Slide 45: Appendix
Appendix 1st quarter 2020 45
Slide 46: Finance house offering a wide range of products
Finance house offering a wide range of products Retail customers 227 900 Corporate customers 15 800 Loan volume 171 bn Norway’s largest equity-certificate-issuing bank Market leader in the region Co-owner of SpareBank 1 Alliance 1st quarter 2020 46
Slide 47: History through almost 200 years
History through almost 200 years Strong financial results over time 1823 Established 1985 Sparebanken Midt-Norge 1994 Listed on Oslo Børs 1996 SpareBank 1 Alliance 2005 Acquired Romsdals Fellesbank 2009 Acquired BN Bank/Sunnmøre 1st quarter 2020 47
Slide 48: Profits weakened, at a high degree due to increased loan losses
Profits weakened, at a high degree due to increased loan losses ROE CET1 23,3% 17,2% 16,3% 14,6% 14,6% 14,8% 12,2% 13,7% 11,5% 5,7% 2017 2018 2019 31.3.19 31.3.20 2017 2018 2019 31.3.19 31.3.20 Earnings per ECC Loan losses as a percentage of total loans 12,14 9,97 0,73 8,71 5,02 0,24 0,18 0,17 0,17
Slide 49: Development in lending, Retail Market
Development in lending, Retail Market Lending NOKbn and growth per cent per quarter +2,2% +1,5% +2,0% +1,7% +2,4% +1,4% +0,6% • The bank’s retail market growth has been high for a 108 109 111 113 115 117 long period 104 107 • As from Q3 19 the growth has been at a high degree to LO members (the LO i
Slide 50: Subsidiaries
Subsidiaries Pre tax profit subsidiaries mNOK, SMN's share in parentheseis Q1 20 Q4 19 Q3 19 Q2 19 Q1 19 EiendomsMegler 1 Midt-Norge (87 %) 0 0 0 31 0 BN Bolig (subsidiary of EM1) 0 -7 -7 -8 -9 SpareBank 1 Regnskapshuset SMN (89 %) 27 27 20 41 21 SpareBank 1 Finans Midt-Norge (61 %) 47 35 41 35 40 S
Slide 51: Associated companies
Associated companies Profit shares after tax mNOK, SMN's share in parentheseis Q1 20 Q4 19 Q3 19 Q2 19 Q1 19 SpareBank 1 Gruppen (19,5 %) -115 -12 40 186 38 Gain Fremtind 340 0 0 0 460 SpareBank 1 Boligkreditt (20,9 %) -31 0 3 8 14 SpareBank 1 Næringskreditt (31,0 %) 2 6 5 2 8 BN Bank (35,0 %) 23 28
Slide 52: Return on financial investments
Return on financial investments NOKm Q1 20 Q4 19 Q3 19 Q2 19 Q1 19 Capital gains shares -42 11 1 23 84 Gain/(Loss) on sertificates and bonds 50 -42 -26 15 32 Gain/(loss) on derivatives -148 40 29 40 23 Gain/(loss) on financial instruments related to hedging -6 -8 4 -1 -4 Gain/(loss) on other financi
Slide 53: Key figures
Key figures 31.3.20 31.3.19 31.3.18 CET 1 ratio 16,3 % 14,8 % 14,6 % Core capital ratio 18,0 % 16,4 % 16,2 % Capital adequacy 20,1 % 18,6 % 18,2 % Leverage ratio 6,9 % 7,4 % 7,3 % Growth in loans (incl.Boligkreditt and Næringskreditt) 6,0 % 6,6 % 7,9 % Growth in deposits 8,7 % 6,8 % 8,2 % Deposit-to
Slide 54: Key figures ECC
Key figures ECC 31.3.20 31.3.19 2019 2018 2017 2016 ECC ratio 64,0 % 64,0 % 64,0 % 64,0 % 64,0 % 64,0 % Total issued ECCs (mill) 129,22 129,41 129,30 129,62 129,38 129,64 ECC price 67,60 87,40 100,20 84,20 82,25 64,75 Market value (NOKm) 8.735 11.310 12.956 10.914 10.679 8.407 Booked equity capital
Slide 55: The group's CET1 ratio ended up at 16.3%
The group’s CET1 ratio ended up at 16.3%, the requirement at the end of Q1 is 12.9% 0,3 0,4 17,2 • Changed distribution strengthens 0,5 CET1 by 0.3% • Growth in risk weighted assets 0,3 weakens CET1 by 1.2% 0,2 0,2 16,3 • Weak performance contributes to virtually no change in CET1 Q4 19 Changed IRB
Slide 56: Kraftfull distribusjon
Important instruments for taking an even clearer position in the region among target groups: the family and small and medium businesses Battle arena: Battle arena: Battle arena: Battle arena: Geographical catchment Prioritised target groups Channels Customer needs area FAMILIES Everyday Payments, Di
Slide 57: SpareBank 1 Alliance: National champion, regional focus
SpareBank 1 Alliance: National champion, regional focus • The SpareBank 1-alliance consists of 14 banks • Operate exclusively in Norway – Norway’s most extensive branch network with approx. 350 branches • SpareBank 1-banks are at the forefront of technological innovation • Operate as independent ban
Slide 58: SpareBank 1 Alliance companies
Spare Bank 1 Alliance Members SpareBank 1 SpareBank 1 SpareBank 1 SpareBank 1 Trade Union, Samspar SMN SR-Bank Nord-Norge Østlandet LO Products, commissions, dividends Sales, loan portfolios, capital SB 1 Covered BN Bank SpareBank 1 Group AS Bonds, residential SpareBank 1 Alliance companies SpareBan