Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — DNB's SME Conference 2018
59 slides from Sparebank 1 Ostlandet's conference presentation, Mar 21, 2018
Slide 1: SpareBank 1 Østlandet Company presentation
SpareBank 1 Østlandet Company presentation Geir-Egil Bolstad | CFO DNB’s SME Conference 2018 Oslo, 21 March 2018
Slide 2: Executive summary
Executive summary • Norway’s fourth largest savings bank • Long history of stable profits and stable low loan losses • Diversified income stream SpareBank 1 Østlandet • Low risk bank book with a 74 % retail share, of which 96 % housing mortgages • The best capitalised regional savings bank in Norway
Slide 3: Content
Content Introduction to SpareBank 1 Østlandet Region and economic outlook Strategy and ambitions Appendix: Financials 2017 3
Slide 4: Introduction to SpareBank 1 Østlandet
Introduction to SpareBank 1 Østlandet © crazybutterflys.com © berkutschi.com
Slide 5: 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 6: 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 7: 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 8: 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 9: 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 2003 2016 1987 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2004 2005 2006
Slide 10: Strong profitability adjusted for gearing
Strong profitability adjusted for gearing Return on equity (per cent) ROE history 1996-2016 Average 1996-2016 25% 25% 16% 15,2% 13,7% 14% 20% 20% 12% 10,3% 15% 15% 10% 8% 10% 10% 6% 5% 5% 4% 2% 0% 0% 1997 2000 2003 2006 2009 2012 2015 0% Hedmark, rep. Peers, rep. SB1 Østlandet Hedmark, rep. @ CET-1
Slide 11: 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 12: 2017 - Successful merger and IPO
2017 - 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 mer
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 and economic outlook
Region and economic outlook OPPLAND SpareBank 1. @STLANDET
Slide 15: 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 16: 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 5,00 5 4,50 4 4,00 3 3,50 2 3,00 2,50 1 2,00 0 1,50 okt.02 aug.03 feb.06 okt.07 aug.08 feb.11 okt.12 aug.13 feb.
Slide 17: 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% 150,00 FEBRUARY 2018 • Nominal +1,1 %/seasonally adjusted +0,4 % 25,0% • 12-month: -2.3 % 140,00 20,0% • High activity and contin
Slide 18: 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 19: Strategy and ambitions
Strategy and ambitions SpareBank 1 — = @STLANDET
Slide 20: 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 21: 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 22: 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* 22 *Nominal costs pro-forma parent bank compared with 2017
Slide 23: 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 24: We are in the forefront of digital banking
We are in the forefront of digital banking SpareBank 1 Østlandet launched Europe’s first internet bank in 1996 and remains at the forefront Banking customers Banking in SpareBank 1 Østlandet • Among our retail customers: • A long list of innovations ‒ 9 out of 10 use either internet or – Norway’s fi
Slide 25: But we also believe strongly in local banking
But we also believe strongly in local banking Our largest competitors are closing branch offices in the region • We believe that most people still want to discuss personal economy with their bank – even the millennials. • We believe that business leaders need discussion partners that understand thei
Slide 26: Staying innovative: The Customer dividend
Staying innovative: The Customer dividend Tool for keeping equity ratio stable. First bank to introduce in Norway ILLUSTRATIVE • Creating together is the bank’s vision: In Profits* line with our basic values as a savings MNOK 1,263 bank. EC-owners Primary capital MNOK 848 MNOK 408 • Provides simple
Slide 27: The customer dividend – a main differentiator
The customer dividend – a main differentiator SpareBank 1 Østlandet is the bank that introduced customer dividends For 2017 the customer dividend is estimated @ 19,8 bps on qualifying loans and deposits* 27 *Preliminary. Terms and conditions apply, most important being that qualifying volumes are av
Slide 28: The LO customers represent a significant potential
The LO customers represent a significant potential Number of LO members and customers in the Bank’s market area Region No. of Members Bank Market share customers Hedmark 44,682 27,590 62% Oppland* 39,430 1,371 3% Oslo 78,505 11,979 15% Akershus 73,934 8,871 12% Outside our market area 4,096 Total 23
Slide 29: We take sustainability seriously
We take sustainability seriously Among the first in providing green financing for retail customers 29
Slide 30: Contact details
Geir-Egil Bolstad CFO Phone: +47 918 82 071 geir-egil.bolstad@sb1ostlandet.no Contact Runar Hauge Portfolio Manager/IR details Phone: +47 482 95 659 runar.hauge@sb1ostlandet.no 30
Slide 31: Appendix: Financials 2017
Appendix: Financials 2017 31
Slide 32: 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 33: 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 34: Income statement Q4-2017
Income statement Q4-2017 Adjusted (pro forma) Group* Reported Adjusted 4Q- 2017 4Q- 2016 2017 2016* Net interest income 501 452 1,956 1,739 Net commissions 285 252 1,095 1,040 Other operating income 29 43 168 189 Total operating costs 550 477 1,898 1,573 Profit for banking operations before losses 2
Slide 35: Profit contributions from subsidiaries
Profit contributions from subsidiaries 2017 (2016) SpareBank 1 Finans Østlandet - Profit before tax NOK 158 million (NOK 115 million) - Good growth and increasing profitability EiendomsMegler 1 Hedmark - Profit before tax NOK 14 million (NOK 19 million) - Solid market position, good profitability Ei
Slide 36: Contribution from joint ventures
Contribution from joint ventures 2017 (2016) SpareBank 1 Gruppen - Profit before tax NOK 2,210 million (NOK 2,019 million) - Ownership 12.4 % SpareBank 1 Boligkreditt AS - Profit before tax NOK -238 million (NOK -146 million) - Ownership 21.1 % SpareBank 1 Næringskreditt - Profit before tax NOK 79 m
Slide 37: 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 38: 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 39: 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 39
Slide 40: 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 41: Good utilisation of quotas in the mortgage regulation
Good utilisation of quotas in the mortgage regulation* Daily follow-up ensures that utilisation remain within the permitted quota Utilisation of flexibility quota in the fourth quarter of 2017 • Loan to Value (LTV): 85 % ‐ 75 % legal limit for cover pool City of Oslo • Secondary housing and flexible
Slide 42: 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 43: …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 44: 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% 44
Slide 45: 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 46: 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 46
Slide 47: 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 48: 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 49: 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 50: 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 51: 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 52: Low levels of problem loans
Low levels of problem loans Non-performing and other doubtful commitments* 1,64% 700 ,0 1,8 0% 1,6 0% 1,37% 600 ,0 1,4 0% • The proportion of problem 1,12% loans is stable at low levels 500 ,0 271 1,2 0% 209 400 ,0 1,17% 254 1,0 0% 257 272 0,98% 0,8 0% 0,61% 300 ,0 0,59% 0,80% 0,6 0% 200 ,0 0,4 0% 1
Slide 53: 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 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: SPOL and dividend
SPOL and dividend A dividend of NOK 3.96 per equity certificate is proposed 31 December • The Board will propose to the Supervisory 2017 Board payment of a dividend of NOK 3.96 Equity certificates per equity certificate Market price (in NOK) 90.50 • The Supervisory Board will meet on 22 March (appro
Slide 56: Solid dividends for owners and customers
Solid dividends for owners and customers Allocation of profit ILLUSTRATIVE* Profit after tax in the Group 67.5% NOK 1,263 million 32.5% Donations Foundation OWNERS Primary capital NOK 231 million 54.4% Dividends Dividend equalisation Primary capital provision Customer dividends NOK 424 million fund
Slide 57: 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 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