Sparebank 1 Smn · OSL:MING
Sparebank 1 Smn — Q2 2015 Earnings Presentation
44 slides from Sparebank 1 Smn's earnings presentation, Aug 12, 2015
Slide 1: 1st half and 2nd quarter 2015
1st half and 2nd quarter 2015 August 12th 2015
Slide 2: Mid-Norway faring well - moderate exposure to lower shelf activity
Mid-Norway faring well - moderate exposure to consequences of lower shelf activity • Credit quality of the bank’s loan portfolio is satisfactory, and loss and default levels are low • The bank anticipates declining GDP growth rate due to reduced oil investments. A weaker Norwegian krone is positive
Slide 3: BN Bank to be dedicated to the retail segment
BN Bank to be dedicated to the retail segment • The board of directors of BN Bank has resolved to cultivate the bank as a retail bank and to wind down the corporate business which consists of lending to commercial property. • The background to this decision is a desire to further develop the retail
Slide 4: Excellent result and strengthened financial position in 1st half of 2015
Excellent result and strengthened financial position in 1st half of 2015 Strong profit performance, 13.7% return on equity in first half of 2015 Core business remains on positive trend. Strengthens a very solid market position in Trøndelag and in Møre and Romsdal CET1 capital ratio at 12.7 %. Target
Slide 5: Strong profits and capitalization
Strong profits and capitalization Return on equity Tier 1 capital ratio with and without hybrid capital 16,8% 12,7% 15,1% 11,1% 11,2% 11,4% 13,3% 13,7% 10,0% 11,7% 2012 2013 2014 Q2 14 Q2 15 2012 2013 2014 Q2 14 Q2 15 Earnings per ECC Loans in default and other problem loans as a percentage of total
Slide 6: 1st half 2015
1st half 2015 Net profit NOK 871m (963m, including gains Nets 156m) Return on equity 13.7 % (16.8 %) Result of core business NOK 718m (706m) Cost growth parent bank 0.8 % (1.7%) CET 1 12.7 % (11.4 %) Growth in lending RM 8.4 % (8.2%) and CM 8.6 % (0.4%), deposits CET1 capital at 11.4% (10.3%) 11.4 %
Slide 7: Q2 2015
Q2 2015 Profit NOK 430m (464m) ROE 13.4 % (16.0 %) Result of core business NOK 349m (367m) Growth in lending RM 2.9 % (2.5 %) and CM -1.2 % (3.1 %) in Q2 2015 Earnings per ECC NOK 2.13 (2.29) 7 Q2 2015
Slide 8: Positive development operating income
Commission income Positive development Commission income Boligkreditt - Næringskreditt operating income Net interest income Last two years per quarter 856 880 818 825 823 844 800 801 798 273 286 330 253 263 262 285 265 293 96 98 91 83 114 119 123 110 104 434 436 430 463 485 467 467 403 412 Q2 13 Q3
Slide 9: Lending margins Retail and Corporate
Lending margins Retail and Corporate Per quarter from Q2 2011 Comments Percent • Strong competition 3,00 3,05 3,05 3,00 2,93 2,86 2,81 • Interest rate changed on best home loans 2,75 2,67 2,64 2,65 2,47 2,44 2,45 2,47 2,52 2,40 with effect from June and December has 2,27 2,28 2,31 2,33 2,28 reduced
Slide 10: Total growth lending 8.4% last 12 months
Total growth lending 8.4 % last 12 months Lending RM +8.4 % last 12 months, 2.9 % in Q2 15 8,4% 8,2% Loans 65,9 71,3 77,3 Boligkr. 25 % 30.6.13 30.6.14 30.6.15 RM CM 38% 38% Lending CM +8.6 % in last 12 months, -1,2 % in Q2 15 +0,4% +8,6% 43,3 43,5 47,2 30.6.13 30.6.14 30.6.15 10 Q2 2015
Slide 11: Deposit margins Retail and Corporate
Deposit margins Retail and Corporate Per quarter from Q2 2011 Comments Per cent • Margin increased due to repricing Deposits RM Deposits CM • Further repricing to be carried out, 0,83 both of corporate and retail deposits 0,64 0,41 0,11 0,17 0,21 -0,26 -0,39 -0,33 -0,35 -0,08 -0,53 -0,4 -0,48 -0,41
Slide 12: Total growth deposits 11.4% last 12 months
Total growth deposits 11.4 % last 12 months Deposits RM + 9.1 % +7,7% +9,1% Deposits 24,4 26,3 28,6 30.6.13 30.6.14 30.6.15 CM 57% RM Deposits CM + 13.3 % 43% +13,3% +7,3% 33,1 37,5 30,9 30.6.13 30.6.14 30.6.15 12 Q2 2015
Slide 13: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income Commission income 1st half 2014 and 2015 NOKm 30 June 30 June mill kr 2015 2014 1.724 Payment transmission income 94 94 1.622 Creditcards 27 25 1.459 Commissions savings 26 21 547 616 Commissions insurance 74 66 Com
Slide 14: SpareBank 1 SMN will achieve zero growth in costs
New distribution model: 1 Increased self-service and digitalisation, continued strong presence in market area SpareBank 1 SMN will Organizational adjustment: achieve zero growth in 2 Staff reduction in the period to 2017 costs by means of defined measures Cost reduction programme: Targeted measures
Slide 15: FTEs crucial to achieving costs goal
FTEs crucial to achieving costs goal FTEs at parent bank • At end-June there were 48 fewer FTEs 763 at the parent bank than at year-end 730 721 • This is mainly natural wastage 673 • A further reduction of about 75 FTEs is aimed for by the end of 2016 In this set-up 32 FTEs in the capital markets ac
Slide 16: Subsidiaries
Subsidiaries Profit subsidiaries 1st half per quarter 30 June 30 June 2015 2014 Change Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 EiendomsMegler 1 Midt-Norge (87 %) 29,2 25,5 3,6 21,3 7,8 8,7 16,6 22,1 SpareBank 1 Regnskapshuset SMN 20,3 19,1 1,3 12,4 7,9 16,4 5,0 12,4 SpareBank 1 Finans Midt-Norge (90 %) 43,4 3
Slide 17: Associated companies
Associated companies Profit shares after tax 1st half per quarter 30 June 30 June 2015 2014 Change Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 SpareBank 1 Gruppen (19,5 %) 127,6 150,5 -22,9 68,2 59,4 98,5 109,0 104,5 SpareBank 1 Boligkreditt (18,4 %) 50,1 12,5 37,6 9,1 41,0 14,8 10,3 4,5 SpareBank 1 Næringskredit
Slide 18: Low losses, 0.09% of total gross lending
Low losses , 0.09 % of total gross lending Losses per quarter Distribution as of 31.3.2015 NOK mill 34 35 32 30 RM 4 24 22 22 17 15 SMN Finans 3 CM 49 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 • Loan losses 0.09 % (0.06 %) of gross lending as of 30.6.2015 18 Q2 2015
Slide 19: Defaults and other problem loans
Defaults and other problem loans Low levels Last two years, per quarter 1.400 1,50 1.200 1,30 Problem loans 1.000 1,10 Loans in default Loans in default % of total loans 800 0,90 600 368 0,70 209 146 157 206 206 231 216 400 226 0,50 413 391 386 334 338 270 287 200 0,38 263 0,30 0,35 0,34 237 0,29 0,
Slide 20: Strengthened capital
Strenghtened capital Development CET1 Development CET 1 without transitional arrangements (Basel III) 13,6% 12,7% 11,1% 11,2% 11,6% 11,2% 10,0% 10,4% 2012 2013 2014 Q2 15 2012 2013 2014 Q2 15 20 Q2 2015
Slide 21: SpareBank 1 SMN will attain its goal of a CET1 ratio of 13.5%
SpareBank 1 SMN will attain its goal of a CET1 ratio of 13.5% per 30. June 2016. New goal 14,0 % per 31. december 2016 Development CET 1 Q1 15 – Q2 15 13,5 Goal to be attained by 0,8 • Moderate growth • Retained profit 12,7 0,2 0,5 • Restructurering BN 0,5 Bank 12,4 0,2 q1 15 IRB BN Floor Dividends
Slide 22: SpareBank 1 SMN intends to be among the best performing banks
SpareBank 1 SMN intends to be among the best performing banks Customer Best on customer experience orientation Will continue to strengthen market position Profitable Among the best performing banks, ROE 12 % annually Solid 13.5% by the end of 1. half 2016 and 14.0% by the end of 2016 Efficient Zero
Slide 23: Appendix
Appendix 23 Q2 2015 SpareBank 1)
Slide 24: Positive development in profits
Positive development in profits Profit 1st half per quarter 30 June 30 June NOK mill 2015 2014 Change Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 Net interest 934 843 91 467 467 485 463 430 Commission income and other income 790 780 10 413 377 371 361 394 Operating income 1.724 1.622 102 880 844 856 823 825 Total
Slide 25: Balance sheet
Balance sheet Last three years 30 June 2015 30 June 2014 30 June 2013 Funds available 21,5 19,8 22,9 Net loans 93,7 85,0 78,8 Securities 1,3 1,1 1,0 Investment in related companies 5,0 4,8 4,4 Goodwill 0,5 0,5 0,5 Other assets 8,8 7,4 5,5 TOTAL ASSETS 130,9 118,8 113,2 Capital market funding 41,8 38
Slide 26: Earnings per ECC
Earnings per ECC Last two years per quarter 2,48 2,29 2,14 2,19 2,18 2,13 1,79 1,85 1,43 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 26 Q2 2015
Slide 27: Change in net interest income
Change in net interest income From 1st half 2014 to 1st half 2015 Comments Net interest 1st half 2014 843 Net interest 1st half 2015 934 • Increased lending volume and deposit margins Change 91 strengthens net interest income Obtained as follows: • Lower lending margins weaken net interest Fees on l
Slide 28: Return on financial investments
Return on financial investments 1st half Per quarter NOKm 2015 2014 Q2 15 Q1 15 Q4 14 Q3 14 Q2 14 Net gain and dividends on securities 70 214 61 10 -15 2 58 Net gain on bonds and derivatives -21 -3 -32 11 -48 -15 -2 Net gain on trading and derivatives Markets 64 34 16 48 11 12 14 Return on financial
Slide 29: Costs, parent bank and subsidiaries
Costs, parent bank and subsidiaries Costs at Q2 14 vs. Q2 15 Comments 950 • Of the increase at group level, NOK 884 46m relates to the consolidation of SpareBank 1 Markets as a subsidiary as Subsidiaries 273 344 from Q2 2015 • The effect of the transfer of markets activities to SB1 Markets in Q2 yie
Slide 30: Cost growth in parent bank 0.8%
Cost growth in parent bank 0.8 %, SB1 Markets transaction taken into account Change in costs 1st half 2014 - 2015 Modest cost growth NOK mill 1st half 2015 Expenses 949,7 Expenses 1st half 2014 884,4 Change 65,3 • Fewer FTEs reduces personnel Obtained as follows: costs Parent bank, effect SMN Market
Slide 31: SpareBank 1 SMN will come across as cost-efficient
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 Regnskapshuset SMN Profitable and non-capital- intensive subsidiaries: 1 Both EM1 and Regnskapshuset 0,85 0,83 SMN are companies making a sound profit – and requir
Slide 32: SpareBank 1 Markets: accounts 1st half 2015 and proforma accounts
SpareBank 1 Markets: accounts 1st half 2015 and proforma accounts SpareBank 1 Markets Comments • Subsidiary of SpareBank 1 SMN 2Q 1Q 30 Jun. SMN Markets 30 Jun. 2015 NOK mill 2015 2015 2015 1Q 2015 proforma from Q2 2015 Equities / High Yield 16 18 34 2 38 Fixed income -3 2 -2 0 -2 Corporate 8 9 16 0
Slide 33: High share mortgages and diversified portfolio SMEs
High share mortgages and diversified portfolio SMEs Lending and change last 12 months by sector in mNOK Wage earners 47,0 5,0 SB1 Boligkreditt 30,3 1,0 Commercial real estate 14,2 1,5 Agriculture/forestry/fisheries 8,2 1,6 Maritime sector and offshore 6,0 1,1 Transport and other services 6,0 -0,1 Co
Slide 34: Oil related portfolio: possible effects of reduced activity
Oil related portfolio: Possible effects for SMNs exposure related to reduced activity in the oil and gas industries • SMN’s exposure to oil and gas related activity is mainly; 1. Exposure to the Offshore Service Vessel segment (OSV) – capital intensive industry 2. Shipyards - OSV, fishing vessels, w
Slide 35: Oil related portfolio: Exposure and portfolio quality
35 Oil related portfolio: Exposure and portfolio quality KEY FIGURES OSV VS. TOTAL CORPORATE PORTFOLIO AS OF 30.06.15 OSV Corp Distribution Risk Groups (PD) Loan MNOK 5.227 45.334 60% • Exposure to Offshore Service Vessels is 53% Share 12,3 % 0,00 % 50% OSV Corp 14% of total corporate exposure EAD M
Slide 36: Loan to value mortgages
Loan to value mortgages Last two years Comments Q2 15 Q2 14 93,6 % 93,5 % • 98.7 % of the exposure has an LTV of less than 85 % • Exposure with LTV higher than 85 points 1.3 % 5,1 % 5,4 % 0,7 % 0,7 % 0,6 % 0,4 % Under 70 % 70 - 85 % 85 - 100 % Over 100 % 36 Q2 2015
Slide 37: Stable credit risk
Stable credit risk SpareBank 1 SMN’s loans distributed on SpareBank 1 SMN’s loans distributed on size of risk class and share of Exposure At Default customer engagement and share of Exposure At Default Share of EAD June 2015 Share of EAD June 2014 Share of EAD June 2015 Share of EAD June 2014 82% 82
Slide 38: Capital adequacy
Capital adequacy Last two years NOKm 30.6.15 30.6.14 Core capital exclusive hybrid capital 11.443 9.945 Hybrid capital 1.699 1.690 Core capital 13.142 11.635 Supplementary capital 2.435 1.529 Total capital 15.577 13.164 Total credit risk IRB 4.068 4.722 Debt risk, Equity risk 210 309 Operational ris
Slide 39: Development in common equity Tier 1 and ROE
Development in common equity Tier 1 (capital and ratio), and ROE from 2009 to Q2 2015 CET 1 Ratio 13,5% 12,7% +8% 1,5% Countercyclical 11,1% 11,2% 10,0% 2,0% SIFI Buffer 9,5% 9,0% 8,0% 2,5% Conservation Buffer 3,0% Systemic Risk 4,5% Equity Capital 2009 2010 2011 2012 2013 2014 2015 Goal 1st half 20
Slide 40: Change in CET 1 capital and RWA in Q2 2015
Change in CET 1 capital and capital requirements (rwa) in Q2 2015 Increased CET1 capital Moderate growth rwa • Good performance strenghtens CET 1 capital • Reduced lending volume corporate and lower risk in both corporate and retail portfolio • Offset by transitional rules 64 68 307 7.198 447 116 12
Slide 41: Satisfying access to capital market funding
Satisfying access to capital market funding Funding maturity 30. June 2015 Comments In NOK bn 14,9 • SpareBank 1 Boligkreditt is the main 9,2 funding source through covered 6,3 bonds. NOK 29 billion transferred as 4,5 of 30. June 2015 2,1 2015 2016 2017 2018 > 2019 • Maturities next two years NOK 11
Slide 42: Key figures
Key figures Last three years 30 June 2015 30 June 2014 30 June 2013 Net interest 1,47 1,46 1,35 Comm. income and net retur on fin. inv. 1,82 2,15 1,67 Operating expenses 1,50 1,53 1,54 Net profit as a percentage of ATA 1,79 2,08 1,48 CET 1 ratio 12,7 % 11,4 % 10,3 % Core capital ratio 14,6 % 13,3 %
Slide 43: Key figures ECC
Key figures ECC Including effects of issues Last five years Q2 15 Q2 14 2014 2013 2012 2011 ECC ratio 64,6 % 64,6 % 64,6 % 64,6 % 64,6 % 60,6 % Total issued ECCs (mill) 129,83 129,83 129,83 129,83 129,83 102,76 ECC price 65,50 54,25 58,50 55,00 34,80 36,31 Market value (NOKm) 8.504 7.043 7.595 7.141
Slide 44: SpareBank 1 SMN CEO Finn Haugan
SpareBank 1 SMN 7467 TRONDHEIM CEO Switchboard Finn Haugan Tel +47 900 41 002 Tel +47 07300 E-mail: finn.haugan@smn.no CFO Kjell Fordal Tel +47 905 41 672 E-mail: kjell.fordal@smn.no Internett adresses: Financial calender 2015 SMN home page and internet bank: www.smn.no 2. Quarter: 12. August 2015 H