Sparebank 1 Smn · OSL:MING
Sparebank 1 Smn — Q3 2017 Earnings Presentation
57 slides from Sparebank 1 Smn's earnings presentation, Oct 26, 2017
Slide 1: Third quarter 2017
Third quarter 2017 26. October 2017
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 14,380 corporate customers Sparebanken Midt-Norge since 1985 Market leader in the region Listed on Oslo Børs since 1994 Loan volume NOK 147bn SpareBank 1 Alliance s
Slide 3: Good profits 3rd quarter 2017
Good profits 3rd quarter 2017 Net profit NOK 1,250m (1,185m), CET1 14.7 % (14.3 %). Leverage return on equity 10.8 % (11.0 %) ratio 7.5 % (6.8 %) Result of core business NOK Growth in lending RM 10.3 % (10.8 1,064m (713m) exclusive of loan %) and CM 7.9 % (minus 0.4 %), losses. Loan losses NOK 263m
Slide 4: SpareBank 1 SMN
SpareBank SMN
Slide 5: Economic barometer – main results for the year. Optimism is back
Economic barometer – main results for the year. Optimism is back • The oil slump appears to be over this time round, and optimism is growing once again in all three counties in Trøndelag and Møre and Romsdal • We have analysed the accounts of some 40,000 businesses in our region. The conclusion is c
Slide 6: More moderate house price development. Unemployment remains low
More moderate house price development. Unemployment remains low 12-month growth in house prices. September 2015 to Unemployed in per cent of the labour force (NAV) September 2017 Monthly figures. September 2016 and September 2017 Sep-16 Sep-17 3.0% 2.8% 2.5% 2.5% 2.3% 2.1% 2.0% 2.1% Norway Nord- Sør
Slide 7: Sentiment has turned around in North Trøndelag and Møre and Romsdal
Sentiment has turned around both in North Trøndelag and in Møre and Romsdal + Source: Sentio Research Norge 7
Slide 8: Industry indicators
Industry indicators Macro Offshore service Maritime Status Status Seafarm- Status Status industry ing Outlook Outlook Outlook Outlook Construc- Com- Retail trade Fisheries tion Status mercial Status Status property Outlook Outlook Outlook Outlook Source: Economic barometer SMN 8
Slide 9: A considerable readjustment, in both organisational and technological terms
A considerable readjustment, in both organisational and technological terms Digital bank with a Traditional bank digitalised personal and local signature 3rd quarter 2017 9
Slide 10: Increased sales across all channels
Clear planning and design of distribution model will ensure increased selling power and cost effectiveness Increased sales across all channels - from a total of 120,000 in 2016 to 170,000 to 200,000 in 2020 Increased share of digital sales and increased sales effectiveness - from 20,000 in 2016 til
Slide 11: SpareBank 1 SMN key in start up of FinTech Incubator F3
Sparebank 1 SMN key in start up of FinTech Incubator – F3 «Finance For the Future» • Financial technology challenges traditional financial services, and revolutionises our way of thinking • New solutions and business ideas are in heavy demand, and the pace of technological development is high • The
Slide 12: DRIV: Banking and accounts in a single service
DRIV Banking and accounts in a single service DRIV - Digital financial assistant from SpareBank 1 • DRIV is a portal for SMB clients offering an easy overview of banking and accounts • Driv is a client-oriented system designed to give management a better overview of the the company’s various bank ac
Slide 13: We have launched TUT: a new digital ecosystem for buying or selling a car
We have launched «TUT»: a new digital ecosystem for a safer, simpler way to buy or sell a car, and it pays Safe for both buyer and seller Electronic identification using «BankID» Designated digital purchase agreement Insurance for both buyer and seller Easy car loan application; instant loan decisio
Slide 14: Key figures
Key figures Return on equity CET1 15,1% 14,9% 14,7% 13,6% 14,3% 10,7% 11,3% 11,0% 10,8% 11,2% 2014 2015 2016 30.9.16 30.9.17 2014 2015 2016 30.9.16 30.9.17 Earnings per ECC Dividend 8,82 7,91 7,02 5,70 6,06 Figures for 30.9.16 3,00 3,03 are ¾ av the year’s 2,25 2,25 2,25 dividend. 30.9.17 are 50 % o
Slide 15: Strengthened focus on income diversification through subsidiaries
Strengthened focus on income diversification through subidiaries SpareBank 1 Finans Midt-Norge EiendomsMegler 1 Midt-Norge • Pre-tax profit of NOK 94m (75m) • Pre-tax profit of NOK 13m (60m). The profit performance is weakened by start- • Solid market position up costs of NOK 16m at BN Bolig • Leasi
Slide 16: Lower loan losses
Lower loan losses Losses per quarter, NOKm Distribution at 3rd quarter 2017 170 130 PM 11 118 99 89 86 88 56 56 Leasing 4 NL 249 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Loan losses including collective losses provisions 0.25 % (0.42 %) of gross lending as of 30.9.2017 3rd quarter 2017
Slide 17: Considering sale of head office, Søndre gt nos. 4 - 10
Considering sale of head office, Søndre gt nos. 4 - 10 • SpareBank 1 SMN is considering the sale of parts of the bank’s head office in Trondheim. The property is situated in the city centre, Søndre gt. nos. 4 -10 • The property was completed in 2010 and has a total floorage of about 18,200 sqm, dist
Slide 18: 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 • Dividend policy revised to permit payouts above 50 per cent 3,00 3,03 • Payout policy that prevents 2,25 2,25 2,25 negative dilution effects Figures for 30.9.16 are ¾ av the year’s dividend.
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
Financial information 3rd quarter 2017 3rd quarter 2017 20
Slide 21: Very good profit
Very good profit The bank is gaining efficiency, the Very good profit at 3rd quarter 2017 target is zero cost growth Growth and high customer influx Dividend 50 per cent Good results at subsidiaries, product Strong financial position companies and BN Bank. Satisfactory return on financial assets 3rd
Slide 22: Good profits and strong capitalization. Lower loan losses
Good profits and strong capitalization. Lower loan losses Return on equity CET 1 14,3% 14,9% 14,8% 15,0% 14,7% 12,2% 12,5% 11,3% 10,5% 9,4% Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Earnings per ECC Loan losses as a percentage of total loans 2,41 0,39% 2,21 2,00 1,92 1,73 0,29% 0,2
Slide 23: Strengthened profits from core business
Strengthened profits from core business January to January to September September NOK mill 2017 2016 Change Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 Net interest 1.603 1.391 212 559 521 522 493 449 Commission income and other income 1.475 1.260 215 482 538 455 414 412 Operating income 3.078 2.651 427 1.041 1.0
Slide 24: Pre-loss results of core business
Pre-loss results of core business Per qaurter last two years 461 459 424 406 381 393 356 335 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Tredje kvartal 2017 24
Slide 25: Total growth lending 9.4 % last 12 months
Total growth lending 9.4 % last 12 months Lending RM +10.3 % last 12 months High growth in home mortgage lending 10,3% • Of the growth in home mortgage 10,8% lending, 2/3 refers to established 87,4 96,4 customers and 1/3 to new customers 78,9 • Share of retail lending increased from 61 to 65 % last
Slide 26: Loan to value mortgages
Loan to value mortgages Last two years LTV mortgages • 98.5 % of the exposure has an LTV of 93,1% 93,8% less than 85 % Q3 16 • Exposure with LTV higher than 85 % Q3 17 points 1.5 % 5,4% 4,8% 0,8% 0,8% 0,7% 0,6% Under 70 % 70 - 85 % 85 - 100 % Over 100 % 3rd quarter 2017 26
Slide 27: Lending margins
Lending margins Increased lending margins Retail and Corporate Comments • Mortgage lending rates raised 3,05 3,05 3,00 2,93 2,86 as from January 2017 2,81 2,75 2,71 2,71 2,70 2,71 2,81 2,80 2,45 2,47 2,52 2,40 2,67 2,62 2,66 2,56 • Repricing of loans to 2,31 2,33 2,28 corporates are carried out 2,06
Slide 28: Total growth deposits 10.3 % last 12 months
Total growth deposits 10.3 % last 12 months Deposits RM + 6.2 % +5,2% +6,2% 28,2 29,7 31,5 Share of deposits 30.9.15 30.9.16 30.9.17 45% RM Deposits CM + 13.6 % CM 55% +13,6% +3,4% 41,6 35,4 36,6 30.9.15 30.9.16 30.9.17 3rd quarter 2017 28
Slide 29: Deposit margins Retail and Corporate
Deposit margins Retail and Corporate Comments Deposits RM • Margins improved due to Deposits CM repricing last two years • Decreased Nibor has 0,24 0,17 0,30 0,36 0,33 weakened the margins in 2017 0,19 0,19 0,05 -0,15 -0,10 -0,39 -0,48 -0,33 -0,34 -0,35 -0,53 -0,46 -0,06 -0,03 -0,06 -0,11 -0,14 -0,1
Slide 30: Change in net interest income
Change in net interest income 30.9.2017 compared with 30.9.2016 Comments • Increased lending volume and ledning Net interest this quarter 1.603 margins the main reason for higher net Net interest at same period last year 1.391 interest income Change 212 Obtained as follows: Fees on lending -10 Lendi
Slide 31: More efficient banking operations and increased activity in the subsidiaries
More efficient banking operations and increased activity in the subsidiaries 1.751 • Cost growth in the subsidiaries 1.521 • SMN Regnskapshuset’s acquisition substantially 837 increases cost base Subsidiaries 623 • Stronger business focus at SpareBank 1 Markets • Start-up costs for BN bolig Parent b
Slide 32: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income Commissions at 30.9.2017 and 30.9.2016 mill kr 2017 2016 Change 3.078 Payment transmission income 157 149 9 2.567 2.651 Creditcards 44 46 -3 1.209 Commissions savings and asset management 64 66 -2 Commissions insura
Slide 33: Subsidiaries
Subsidiaries Pre tax profit subsidiaries January to January to September September mNOK, SMN's share in parentheseis 2017 2016 Change Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 EiendomsMegler 1 Midt-Norge (87 %) 12 59 -47 -11 19 4 7 16 SpareBank 1 Regnskapshuset SMN (95 %) 45 33 12 9 20 15 10 7 SpareBank 1 Finan
Slide 34: Lower loan losses
Lower loan losses Losses per quarter, NOKm Distribution at 3rd quarter 2017 170 130 PM 11 118 99 89 86 88 56 56 Leasing 4 NL 249 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Loan losses including collective losses provisions 0.25 % (0.42 %) of gross lending as of 30.9.2017 3rd quarter 2017
Slide 35: 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 1.198 1.151 1.078 399 411 0,19 0,16 0,16 0,16 0,16 0,15 0,18 0,18 205 205 255 221 214 211 258 263 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 1
Slide 36: 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 42,2 % 14 % Mortages funded by cov. bonds 23,2 % 4% Commercial real estate 10,1 % 8% Agriculture/forestry/fisheries 7,8 % 20 % Transport and other services 4
Slide 37: Strong capitalization
Strong capitalization Reduction in third quarter ascribable to a changed understanding of the calculation of capital charges under the transitional arrangement Development CET1 14,9 14,7 13,6 11,2 Development leverage ratio 7,4 7,5 6,0 6,7 2014 2015 2016 Q3 17 Development CET 1 without transitional
Slide 38: Strong development in CET 1 (capital and ratio)
Strong development in CET 1 (capital and ratio) CET 1 Ratio +8% 14,9% 14,7% 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 Q3-2017 New Goal CET 1
Slide 39: 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 40: Appendix
Appendix Tredje kvartal 2017 40
Slide 41: Operating income
Operating income Commission income Commission income covered bonds Operating income per quarter last two years Net interest income 1.059 1.041 977 922 907 850 869 860 448 383 379 327 374 350 297 342 100 76 90 81 74 75 64 70 522 521 559 473 469 472 449 493 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3
Slide 42: Earnings per ECC
Earnings per ECC Last two years per quarter 2,41 2,21 2,21 2,00 1,92 1,73 1,45 1,49 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 3rd quarter 2017 42
Slide 43: Associated companies in the SpareBank 1 Alliance
Associated companies in the SpareBank 1 Alliance Profit share after tax January to January to September September 2017 2016 Change Q3 17 Q2 17 Q1 17 Q4 16 Q3 16 SpareBank 1 Gruppen (19,5 %) 214 220 -6 80 68 66 97 79 SpareBank 1 Boligkreditt (19,0 %) -26 9 -36 11 -13 -24 -26 -13 SpareBank 1 Næringskr
Slide 44: Return on financial investments
Return on financial investments Januar - Januar - September September NOKm 2017 2016 Endring Q3 17 Q2 17 Q1 17 Capital gains shares 79 100 -22 45 26 8 Gain/(loss) on derivatives 32 52 -19 36 2 -6 Gain/(loss) on other financial instruments at fair value 11 26 -16 -5 5 11 Foreign exchange gain / (loss
Slide 45: 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 730 • Considerable reduction in the number of 720 FTEs at the parent bank in recent years, primarily through natural wastage 645 • By the end of 2017 number of FTEs at 630
Slide 46: 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 1,00 companies making a sound profit – and 0,89 0,84 re
Slide 47: Balance sheet
Balance sheet Last three years 30.9.17 30.9.16 30.9.15 Funds available 21,6 24,6 18,5 Net loans 109,6 98,6 94,4 Securities 1,6 1,3 1,2 Investment in related companies 5,9 5,9 5,2 Goodwill 0,7 0,6 0,5 Other assets 7,5 8,8 9,4 Total Assets 146,9 139,8 129,2 Capital market funding 47,6 47,7 41,9 Deposi
Slide 48: 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 84,1% 85,6% Share of EAD 30.9.2016 Share of EAD 30.9.2016 68,5% 69,3% Share of EAD 30.9.2017 Share
Slide 49: Offshore risk still mainly related to the PSV segment
Offshore risk still mainly related to the PSV segment Most exposures financially restructured The Offshore segment Segment and exposure Default risk class (share of offshore in %) distribution 1. Expsoure (EAD) to offshore is 5.6 bill (5.5) Subsea 2.367 (42%) • Offshore constitutes 3.5% of the total
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 3rd quarter 2016 – 3rd quarter 2017 (bill NOK) 30. September 2017 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Total Indi- impair- Share of 2,7 mill kr EAD vidual Group ments EAD 2,6 Low
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 Impairment 10 76 % * 37 81 % * 9 69 % 2 125 % * 4 83 % * 3 44 % Obligors 2 48 % 2 15 % 3 44 % 2 87 % 1 70 % 2 54 % 1 87 %
Slide 52: Strengthened capital adequacy
Strengthened capital adequacy As at Q3 2017 and Q3 2016 NOKm 30.9.17 30.9.16 Core capital exclusive hybrid capital 13.990 12.895 Hybrid capital 1.817 1.840 Core capital 15.807 14.736 Supplementary capital 2.286 2.275 Total capital 18.093 17.011 Total credit risk IRB 4.084 4.080 Exposures calculated
Slide 53: Satisfying access to capital market funding
Satisfying access to capital market funding Funding maturity 30. September 2017 Comments 19,7 • SpareBank 1 Boligkreditt is the main funding source through covered bonds. 8,9 NOK 34 billion transferred as of 30. 5,9 6,6 September 2017 0,8 2017 2018 2019 2020 2021 -> • Maturities next two years NOK 1
Slide 54: Key figures ECC
Key figures ECC Last five years 30.9.17 30.9.16 2016 2015 2014 2013 ECC ratio 64,0 % 64,0 % 64,0 % 64,0 % 64,6 % 64,6 % Total issued ECCs (mill) 129,83 129,83 129,83 129,83 129,83 129,83 ECC price 81,25 55,75 64,75 50,50 58,50 55,00 Market value (NOKm) 10.549 7.238 8.407 6.556 7.595 7.141 Booked equ
Slide 55: Key figures
Key figures Last three years 30.9.17 30.9.16 30.9.15 CET 1 ratio 14,7 % 14,3 % 13,2 % Core capital ratio 16,6 % 16,3 % 15,2 % Capital adequacy 19,1 % 18,8 % 17,9 % Leverage ratio 7,5 % 7,1 % 6,7 % Growth in loans (incl.Boligkreditt and Næringskreditt) 9,4 % 6,6 % 8,3 % Growth in deposits 10,3 % 4,2
Slide 56: Increased influence for equity certificate capital owners
Increased influence for equity certificate capital owners - amendment to the Articles of Association The Supervisory Board decided to amend Article 10-1 of the Articles of Association from Article 10-1 Redemption in the event of merger. Transitional provision • The Regulations on Equity Certificates
Slide 57: SpareBank 1 SMN – adjustment to the dividend policy
SpareBank 1 SMN – adjustment to the dividend policy The following wording applied prior to the adjustment: • “SpareBank 1 SMN assumes and expects up to one-half of the owner capital’s share of the net profit to be paid out as dividend and the same proportion of the ownerless capital’s share of the n