Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Debt Investor Presentation (2021)
56 slides from Sparebank 1 Ostlandet's debt investor presentation, 2021
Slide 1: 2020 Company Presentation
2020 COMPANY PRESENTATION
Slide 2: SpareBank 1 Østlandet – Where we are
SpareBank 1 Østlandet – Where we are SpareBank 1 Østlandet’s home market • Population 1.7 million • The fastest growing region of Norway for both population and job creation • Cyclical stable region • Normally low unemployment and high economic activity – affected as the country in the coronavirus p
Slide 3: Executive summary
Executive summary • Norway’s fourth largest savings bank • One of the best capitalised regional savings bank in Norway - CET1 17.8 %, Capital adequacy ratio of 20.8 %, Leverage ratio 7.2 % SpareBank 1 Østlandet • Low risk bank book with a ~74 % retail share • Diversified income stream • Long history
Slide 4: Aa3 Moody's Senior Unsecured rating with stable outlook
Aa3 Moody’s Senior Unsecured rating with stable outlook Based on Rating Action as of 5 March and 3 July 2020 Main take aways ‒ “Consistently stronger financial performance compared to peers” ‒ “Particularly resilient asset quality and strong capital metrics throughout the credit cycle” ‒ “Despite si
Slide 5: Introduction
INTRODUCTION 5
Slide 6: SpareBank 1 Østlandet celebrates its 175th anniversary in 2020
SpareBank 1 Østlandet celebrates its 175th anniversary in 2020 SpareBank 1 Østlandet at a glance Return on Equity (ROE) (%) Highlights • Celebration: Established in 1845 – known as Sparebanken 13.6 % 12.8 % Hedmark (“SBHE”) until 1 April 2017. 10.4 % 10.2 % 10.5 % 10.1 % • Norway’s fourth largest sa
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 EiendomsMegler 1 Totens Sparebank Retail Innlandet AS ~25% 100% Savings bank Segment Real estate agent K
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 • Total number of branches: 301 «SpareBank 1 Alliance» = 14 cooperating independent savings banks • Total number of
Slide 9: The Bank has a history of increasing profits
The Bank has a history of increasing profits Net profit and profit pre-financials and loan losses (NOK million) 2020 Strong result, strong banking operations and good customer growth Nov 2018 No fiscal year Private with a financial placement of deficit since the 700 MNOK mid 1940-ies 2016 Acquisitio
Slide 10: Long history of low loan losses – still at moderate levels
Long history of low loan losses – still at moderate levels Impairments on loans as a percentage of gross loans* 3.0 % 2.5 % 2.0 % 1.5 % 1.0 % 0.44 % 0.5 % 0.20 % 0.0 % -0.5 % -1.0 % SpareBank 1 Østlandet Peers Source: Bank reports and SpareBank 1 Markets 3Q 2020. Peers: NONG, SRBANK, MING, MORG, SVE
Slide 11: High and stable capitalisation
High and stable capitalisation Common Equity Tier 1 ratio (Group) 17.8 % 16.9 % 17.2 % 16.9 % 17.2 % 16.8 % 16.8 % 16.2 % 15.1 % 15.2 % 14.8 % 14.1 % 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 *SpareBank 1 Østlandet 4Q 2020 11
Slide 12: Region, Strategy & Ambitions
REGION, STRATEGY & AMBITIONS
Slide 13: Norwegian economy with a faster rebound than expected
Norwegian economy with a faster rebound than expected Key macroeconomic variables Low levels of reported COVID-19 cases in Norway The Norwegian Central Bank expects faster rebound in activity in 2021 120 7.6% 10% 1000 80,000 Reported cases 65,547 115 800 5% Hospitalised 84 60,000 110 600 Deaths 592
Slide 14: Customer activity normalising – reduced demand for instalment deferrals
Customer activity normalising – reduced demand for instalment deferrals COVID-19 – Customer activity • The level of instalment deferrals approaching pre-COVID levels Retail customers – strong decrease in application for instalment deferrals ‒ Retail : Total 7,744 (March – December) – 3,360 in March
Slide 15: 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
Slide 16: Asset Quality & Funding Plans
ASSET QUALITY & FUNDING PLANS 16
Slide 17: Low risk lending portfolio
Low risk lending portfolio Lending to customers per sector (% and NOK million) Private customers 45.5 %/73,331 Retail lending SB1 Boligkreditt 29.1 %/46.872 74.6 %/120,255 Real estate (incl. SB1 Næringskreditt) 10.8 %/17,365 Primary industries 4.6 %/7,367 Commercial services/Public sector 3.7 %/5,93
Slide 18: Size concentration risk in the lending book is low
Size concentration risk in the lending book is low Retail and corporate loans by size (% share)* Retail lending Corporate lending 37.5 % 35.2 % 25.7 % 23.9 % 14.6 % 17.0 % 11.8 % 11.5 % 10.2 % 7.6 % 5.0 % * Included loans transferred to covered bond companies 18
Slide 19: The use of the flexibility quota is targeted at priority customers
The use of the flexibility quota is targeted at priority customers Exposure per LTV bucket in the residential mortgage portfolio Mortgages – Utilisation of flexibility quota in 4Q-20: 94.8 % City of Oslo Other areas 7.6 % (8 % quota) 7.1 % (10 % quota) The mortgage regulation* constrains housing mor
Slide 20: Significantly lower credit losses in 4Q-20
Significantly lower credit losses in 4Q-20 Impairments on loans and guarantees (NOK million) Impairments on loans and guarantees (NOK million) • Credit losses in 4Q-20 were NOK 1 million. 151 • Parent bank -18 MNOK 130 • SB1 Finans Østlandet 19 MNOK • Model based provisions were increased by NOK 11
Slide 21: Defaulted and doubtful commitments stable since last quarter
Defaulted and doubtful commitments stable since last quarter Specification of impairments and net exposure (NOK million) Exposure in stages, percentage of gross loans • The proportion of loans in Stage 3 are reduced as of 4Q-2020. 93.1 % 93.6 % 93.0 % ‒ The reduction is mainly due to established com
Slide 22: The bank's funding ambitions
The bank’s funding ambitions Today’s funding mix and thoughts on funding going forward SP EUR 9% SNP NOK 1% AT1 & T2 1% • Deposits are and will continue to be the Bank’s most Equity important funding source. SP NOK 9% 7% Loans from banks 2% • The Bank exclusively uses SPABOL for covered bond funding
Slide 23: Minimum Requirement for Own Funds and Eligible Liabilities
Minimum Requirement for Own Funds and Eligible Liabilities MREL – The Norwegian legislation • Loss absorbing amount equal to Pillar 1 and Pillar 2 requirements and combined buffer requirement: ‒ Covered by AT1 and Tier 2 • Recapitalization amount equal to Pillar 1 and Pillar 2 requirements and combi
Slide 24: MREL needs going forward
MREL needs going forward Still some regulatory uncertainty • Base scenario: ‒ The Norwegian legislation with increased systemic risk buffer and countercyclical buffer. 250 600 ‒ App. EUR 1.3 bn SNP debt by YE2023. 950 1,400 1,300 ‒ Depending on lending growth. • Uncertainty: ‒ BRRD2 into Norwegian l
Slide 25: Sustainability Strategy
SUSTAINABILITY STRATEGY
Slide 26: SpareBank 1 Østlandet's overarching sustainability strategy
SpareBank 1 Østlandet’s overarching sustainability strategy Sustainability strategy 1. Actively support customers’ 1. All employees are aware sustainability efforts and Consider of our commitment to promote external sustainable Be a driving sustainability in sustainability innovation force behind bo
Slide 27: SpareBank 1 Østlandet's sustainability overview
SpareBank 1 Østlandet’s sustainability overview Newly inaugurated green bond framework is an ESG ratings extension of the Bank’s Sustainability / ESG broader strategy & Disclosure Sustainability commitment to Reporting Green Bond Framework sustainability External Sustainability Global Initiatives Su
Slide 28: Commitment to Climate Action
Commitment to Climate Action Sustainable granting of Internal climate and Responsible investment and Sustainability requirements credit and establishment of environmental work ownership for suppliers and partners customer relationships •Become climate neutral •Work continuously towards •We will inve
Slide 29: Strengthened climate initiatives in 2020 and ambitions going forward
Strengthened climate initiatives in 2020 and ambitions going forward • The bank was on of the first bank to conduct and publish the ambitious Impact analysis from the UNEP FI (The United Nations Environment Program Finance Initiative) Principles for Responsible banking, showing that climate and reso
Slide 30: Specific ESG and climate targets
Specific ESG and climate targets Retail Division • By 2050, 40 % of residential buildings built before 2012 (TEK 10) has been upgraded and has improved their energy efficiency by 30 %. • By 2050, 80 % of Residential buildings built from the 1st January 2021 are in line with the EU taxonomy. • By 202
Slide 31: Embedding Climate Risk within the bank & our credit processes
Embedding Climate Risk within the bank & our credit processes Climate Risk assessments in the credit process We have started to incorporate climate risk into the credit process. This is not just climate work, but also good banking practice. Climate risk is particularly prominent in three areas where
Slide 32: ESG DD assessment at loan origination (example)
ESG DD assessment at loan origination (example) Due diligence assessment 32
Slide 33: Loan book CO2 reporting (Scope 3) - carbon-related credit exposure
Loan book CO2 reporting (Scope 3) - carbon-related credit exposure* Carbon-related credit exposure • Method: Based on proportion of lending by Norwegian banks and financial institutions the Bank accounts for, then multiplied by total emission from individual industry. • Assumptions: Individual indus
Slide 34: Sustainable Products - Mortgages
Sustainable Products - Mortgages 1 Green Mortgages • SpareBank 1 Østlandet offers Green Mortgages for environmentally friendly and energy-saving measures in new and old homes • Ydalir is built as part of ZEN (Zero • The loans have favourable interest rates Emission Neighbourhood) – a research projec
Slide 35: Sustainable Products (continued)
Sustainable Products (continued) 2 Green Agricultural Loans 3 Green Car Loans • For agricultural customers, the bank wants to • The Bank’s subsidiary, SpareBank 1 Finans contribute to lower emissions and the Østlandet, provides Green Car loans for adjustment to a more sustainable society electrical
Slide 36: Sustainability ratings
Sustainability ratings ESG 100 – The Oslo Stock Exchange • A- CDP • A MSCI • A (scale AAA-CCC) Sustainalytics • 20.27 ESG Risk Rating • 86% Fair Finance Guide • #3 rank out of 14 Norwegian banks • In September The Governance Group published the report «ESG 100 – The Oslo Stock Exchange». The report
Slide 37: Green Bond Framework
pee i y N N N BOND FRAMEWORK
Slide 38: Green Bond Framework - Highlights
Green Bond Framework - Highlights • Follows best market practice and in line with • Pre-issuance impact reporting calculated by the ICMA Green Bond Principles (GBP) specialist consultant Multiconsult • Prepared by the Green Bond Committee, • Cicero second party opinion: Medium Green including repres
Slide 39: Use of Proceeds
Use of Proceeds Strict Eligibility Criteria in line with ICMA Standards, best market practices and upcoming EU regulation ICMA GBP 1 Eligible Category Description of the Eligible Loans UN SDGs EU Objectives • Residential buildings in Norway ✓ Before 31s t of December 2020: Buildings belonging to the
Slide 40: Process for Project Evaluation and Selection
Process for Project Evaluation and Selection Loan selection process: Eligible loans should: • Contribute to at least one of the EU Environmental Objectives 1. Applications include both ESG dialogues with customers and ESG due diligence analyses • Not significantly harm (‘DNSH’) any other EU Environm
Slide 41: Management of Proceeds
Management of Proceeds Approach • Allocate amount equal to net Assets Liabilities proceeds from the issue of Green Bonds to Eligible Green Loan Portfolio • Size Eligible Green Loan Portfolio should match or exceeds balance of net proceeds from outstanding Green Net Green Bonds Loans Proceeds • Pendi
Slide 42: Allocation Reporting (FY20)
Allocation Reporting (FY20) Residential Buildings (NOK m) Green Bond Portfolio 904 NOK (m) % Green Residential Buildings 21,802 84% Residential buildings built from 2012 (TEK10, TEK17) Green Commercial Buildings 2,250 9% Residential buildings (older than 2012, with EPC A or B) Forestry 843 3% Renewa
Slide 43: Impact Reporting (FY20)
Impact Reporting (FY20) Direct Indirect Estimated Estimated Estimated emissions emissions annual Eligible reduced renewable Total CO2 Eligible Project Eligible Project Share of Total Eligibility for avoided vs avoided vs reduced portfolio energy energy Storage Category Subcategory Financing Green Bo
Slide 44: External Review
External Review • SpareBank 1 Østlandet has obtained an independent Second Party Opinion from Cicero, confirming the validity of the Green Bond Framework & compliance with the ICMA Green Bond Principles • Green Shading given per Use of Proceeds category, where overall Framework has received: Medium
Slide 45: Contact details
Geir-Egil Bolstad CFO +47 918 82 071 geir-egil.bolstad@sb1ostlandet.no Cathrine Mordal Head of Treasury +47 62 51 09 10 Contact details cathrine.mordal@sb1ostlandet.no Karoline Bakka Hjertø Head of Sustainability +47 992 27 303 karoline.hjerto@sb1ostlandet.no Runar Hauge Investor Relations +47 482 9
Slide 46: Appendix: ESG – Guidelines/initiatives/reporting
APPENDIX ESG – Guidelines/initiatives/reporting
Slide 47: General and Sector specific guidelines
General and Sector specific guidelines Nature & Agriculture Power/Energy Production Retail Market Corporate Market Mutual Funds • Consider whether • Encourage customers to • Encourage customers to We do not lend to • Work with industry to operations have switch from fossil to save more and consume b
Slide 48: External sustainability initiatives
External sustainability initiatives For external goals the bank needs to cooperate with customers and society in general to achieve them • UN Sustainable Development Goals, with specific focus on SDGs 4, 8, 9, 12, 13, 15 and 16. And with goal 17 on cooperation as the guiding method. • UN Global Comp
Slide 49: Sustainability reporting
Sustainability reporting SpareBank 1 Østlandet follows global reporting standards and obtains third party verification • SpareBank 1 Østlandet follows the Global Reporting Initiative, the leading international standard for sustainability reporting, and GRI reporting is an integral part of the Bank’s
Slide 50: Appendix: Financials/ECC
APPENDIX Financials/ECC
Slide 51: Increased net interest income
Increased net interest income Net interest income incl. commissions from covered bond companies 1600 1.80% 1.71% 1.72% 1400 1.70% • Increased net interest income in 4Q-20. 1200 1.60% 1.48% • The increase in net interest income was 1000 1.44% 1.50% 1.38% mainly due to higher deposit margins. 800 673
Slide 52: Stable lending
Stable lending Lending volume (Group, NOK billion) • Total lending in the Group, including mortgages transferred to 154 158 161 161 covered bond companies, increased by NOK 0.3 billion in 4Q-20. 151 Equivalent to a 0.2 % lending growth in the quarter. 44 45 46 47 48 107 109 112 114 113 • Lending gro
Slide 53: Stable deposits and increasing deposit margins
Stable deposits and increasing deposit margins Deposit volume and deposit growth (Group – NOK billion) Deposits from customers • Deposits growth of 0.1 % (1.8%) in 4Q-20. 80 85 85 86 ‒ After a significant increase in deposits in the second quarter, 78 the volume of deposits stabilized in the second
Slide 54: Strengthened CET 1 ratio
Strengthened CET 1 ratio Common Equity Tier 1 ratio (Group) • The Group’s long term CET 1-target is the regulatory requirement with an 17.8 % added management buffer of 100 bps. 16.9 % 16.8 % 16.8 % 17.2 % ‒ The regulatory requirement, incl. the 1.8 %-point Pilar 2 requirement, is currently 14.1 %.
Slide 55: Continued customer growth
Continued customer growth Numbers of customers in parent bank (in 1,000x) 370 363 365 40 360 357 38 354 348 352 • Solid customer growth despite 350 36 340 343 340 off-boarding of customers with 339 340 332 337 34 low account activity in 1Q-2020 332 330 327 329 327 32 and a year with the coronavirus
Slide 56: Disclaimer
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 reasonabl
SpareBank 1 Østlandet — Debt Investor Presentation (2021) on 6ix