Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q2 2019 Earnings Presentation
52 slides from Sparebank 1 Ostlandet's earnings presentation, 2019
Slide 1: Company presentation Second quarter 2019
Company presentation Second quarter 2019
Slide 2: A solid first half of 2019
A solid first half of 2019 Summary second quarter 2019 • Strong contribution from financials behind extraordinary profit in 1H-19 • Still good customer growth • Customer dividends paid for the second time • Improved contribution from real estate brokerage and accounting services • Declining mortgage
Slide 3: High profitability in 1H-19, but also high growth in operating costs
High profitability in 1H-19, but also high growth in operating costs Financial targets 2019 and actual performance Profitability Return on equity at least 10 % √ 16.9 % Dividends 50 % pay-out ratio* √ 50 % Solidity CET 1 at 16 % √ 16.7 % Costs Growth in operating costs in parent bank within 2 %** 6.
Slide 4: The bank and the market area
The bank and the market area
Slide 5: SpareBank 1 Østlandet at a glance
SpareBank 1 Østlandet at a glance Norway's fourth largest savings bank with a broad and diversified 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 174 billion.
Slide 6: SpareBank 1 Østlandet - present where the growth is
SpareBank 1 Østlandet - present where the growth is Considerable population growth in the Greater Capital Area Population projection 2018-2040 Population projection, municipalities 2018-2040 SpareBank 1 Østlandet’s branch network 2,000,000 +19% (0.8% yearly) 1,750,000 Oppland Hedmark 1,500,000 1,250
Slide 7: Population growth a major driver in the housing market
Population growth a major driver in the housing market The housing market in Eastern Norway The Capital Region • The population growth is stabilizing in Oslo and increasing in the surrounding municipalities – especially in the Romerike area. • Reduced supply of units affordable for families in the O
Slide 8: The highest creation of new jobs in Norway within the market area
The highest creation of new jobs in Norway within the market area The Romerike area • Just north of Oslo – the Nedre Romerike area – had Norway’s highest rate of job creation in 2018. ‒ Oslo airport is a hot spot. ‒ Companies moving out of Oslo. ‒ Lower office rental prices conducive to SMEs. • The
Slide 9: Housing prices levelling out on record high turnover
Housing prices levelling out on record high turnover Housing price developments for relevant areas compared with Norway Housing prices by area, 12-month growth (per cent) Housing prices, indexed** 30.0% 30.0% 150.00 150.00 JULY 2019 25.0% • Nominal -1.1 %/seasonally 25.0% adjusted -0.7 % • Record hi
Slide 10: Still high economic activity in Eastern Norway
Still high economic activity in Eastern Norway High output in the Capital Region and low unemployment throughout Growth in production, q/q and forecast for 6 months (per cent) Registered unemployment rate, NAV (per cent) 5.0 5.0 4 4 4.5 4.5 3 3 4.0 4.0 2 2 3.5 3.5 3.0 3.0 1 1 2.5 2.5 0 0 2.0 2.0 201
Slide 11: Steady customer growth after the merger
Steady customer growth after the merger Numbers of customers in parent bank 350 343 90 • During the first half year some 340 341 342 337 338 339 customers have been off-boarded. 340 80 334 336 • During 1H-2019 the Bank carried out a 332 331 327 329 large project validating the KYC 330 326 70 324 doc
Slide 12: Customer dividend ensures customer satisfaction
Customer dividend ensures customer satisfaction Norway’s first bank with customer dividend • A total of NOK 222 million was distributed to customers with deposits and loans through 2018. This is equivalent to a 16 bps rebate on qualifying loans and deposits. • The customer dividend is an efficient t
Slide 13: The strategic focus on ESG bears fruit
The strategic focus on ESG bears fruit SpareBank 1 Østlandet receives solid ESG ratings • In the survey “Sustainable Brand Index 2019”, customers named SpareBank 1 Norway’s most sustainable banks. • In 1Q-19, the Bank received its first ESG rating from Sustainalytics. Sustainalytics rates SpareBank
Slide 14: The customer's focus on «green» offerings is increasing
The customer’s focus on «green» offerings is increasing Customer survey by KANTAR May 2019 50 % of the customers believe they will 42 % of the customers believe they will 37 % of the customers believe they will acquire/use «green» products and services acquire/use «green» products and services acqui
Slide 15: SpareBank 1 Østlandet aims to introduce relevant ESG offerings
SpareBank 1 Østlandet aims to introduce relevant ESG offerings “Green agricultural loan” • SpareBank 1 Østlandet is one of the country's leading agricultural banks and concerned with our farmer's welfare. • Through the Bank’s credit policy, the Bank aims to stimulate to environmentally smart choices
Slide 16: Financial Accounts 2Q-2019
Financial Accounts 2Q-2019 SpareBank a @STLANDET
Slide 17: The financial accounts show significant improvements from last year
The financial accounts show significant improvements from last year (Last year’s figures in brackets) Pre-tax profit in 2Q-19 isolated NOK 471 million (NOK 416 million). Extraordinary high profit Pre-tax profit in 1H-19 NOK 1,227 million (NOK 730 million). ROE in 2Q-19 at 12.8% (12.9%). Return on eq
Slide 18: Profit contributions from subsidiaries
Profit contributions from subsidiaries 1H 2019 (1H 2018) SpareBank 1 Finans Østlandet - Profit after tax NOK 63 million (NOK 73 million). - High and stable lending growth. - Increased loan losses from retail customers. Last year saw a one-off gain from sale of portfolio. EiendomsMegler 1 Hedmark - P
Slide 19: Contribution from joint ventures (1)
Contribution from joint ventures (1) 1H 2019 (1H 2018) SpareBank 1 Gruppen - Profit after tax NOK 1,287 million (NOK 601 million). - Ownership 12.4 %. - Increase mainly related to revaluation of properties with NOK 596 million. SpareBank 1 Boligkreditt AS - Profit after tax NOK 130 million (NOK -5 m
Slide 20: Contribution from joint ventures (2)
Contribution from joint ventures (2) 1H 2019 (1H 2018) SpareBank 1 Kredittkort - Profit after tax NOK 44 million (NOK 65 million) - Ownership 20.8 % - Last year’s profit affected by portfolio sale of NOK 15 million SpareBank 1 Betaling AS - Profit after tax NOK -24 million (NOK -31 million) - Owners
Slide 21: Income statement 2Q 2019 and 1H 2019
Income statement 2Q 2019 and 1H 2019 Group 2Q 2019 2Q 2018 1H 2019 1H 2018 2018 Net interest income 520 511 1.027 1.006 2.074 Net commission income 287 283 560 564 1.106 Other income 78 51 145 93 181 Total operating expenses 489 468 983 918 1.881 Operating profit before losses on loans and guarantee
Slide 22: Special items 2Q 2019 - 1
Special items 2Q 2019 - 1 Description and effects • On January 28 January the Bank received a binding ruling from The Norwegian Tax Administration stating that the customer dividend paid by the bank is tax deductible. Tax deductibility of customer • The Supervisory Board decided on 28 March 2019 to
Slide 23: Special items 2Q 2019 - 2
Special items 2Q 2019 - 2 Description and effects • Fremtind Forsikring AS was established 1 January 2019 as a consequence of the merger between SpareBank 1 Skadeforsikring AS and DNB Skadeforsikring AS. • DNB ASA increased its ownership 1 January 2019 to 35 % in Fremtind. DNB ASA owns a call option
Slide 24: Key financials – quarterly (1)
Key financials – quarterly (1) Pre-tax profit (NOK million) Net interes income and and commision fees from 810 covered bond companies (NOK million) 585 599 606 633 592 605 518 461 347 2Q-18 3Q-18 4Q-18 1Q-19 2Q-19 2Q-18 3Q-18 4Q-18 1Q-19 2Q-19 Impairments on loans and guarantees (NOK million) Total
Slide 25: Key financials – quarterly (2)
Key financials – quarterly (2) Return on equity CET 1 ratio 21.2 % 16.9 % 16.1 % 15.9 % 16.8 % 16.7 % 12.9 % 12.8 % 10.8 % 9.1 % 2Q-18 3Q-18 4Q-18 1Q-19 2Q-19 2Q-18 3Q-18 4Q-18 1Q-19 2Q-19 Lending growth (including loans transferred to Deposit growth last 12 months covered bond companies) last 12 mo
Slide 26: Net interest income – influenced by reclassification effects
Net interest income – influenced by reclassification effects Net interest income incl. commissions from covered bond companies 1400 1.75% 1.76% 1.80% 1.73% 1.65% 1.70% • In the subsidiary SB1 Finans Østlandet 1200 1.62% there has been a reclassification of 1000 1.60% certain items from net interest
Slide 27: Dampened lending growth – above market growth last 12 months
Dampened lending growth – above market growth last 12 months Lending volume (Group, NOK billion) 160.0 141 144 135 138 140 140.0 • Total lending in the Group, including loans transferred to covered bond 39 40 41 42 43 120.0 companies, increased by NOK 3.3 billion in the second quarter. 100.0 80.0 •
Slide 28: Lending margins
Lending margins Retail and corporate divisions (parent bank) • The lending margins saw a reduction in the second quarter, both within the CM and the RM of the parent bank. 2.53% 2.51% 2.50% 2.48% 2.44% • The reduction is largely explained by the 18 bps increase of the 3M Nibor in the second quarter.
Slide 29: Loan book dominated by retail and SME lending
Loan book dominated by retail and SME lending Lending to customers per sector (% and NOK million) Lending to customers per sector (volume/share in %) Changes last 12 months Private customers 65,026 /41.5% 4.1 % Boligkreditt 41,438 /28.7% 9.2 % Real estate 15,209 /10.5% 10.1 % Industries/power and wa
Slide 30: Reduced lending towards retail and wholesale trade, hotels and restaurants
Reduced lending towards retail and wholesale trade, hotels and restaurants Corporate lending growth YoY – sector (NOK million) 56 41 -66 95 -94 180 -278 320 345 393 412 2.805 1.400 30
Slide 31: The highest lending growth outside Oslo
The highest lending growth outside Oslo Lending to customers per geographic area and change last 12 months (% and NOK million) Lending to customers by geographic area (volume/share in %) Changes last 12 months Hedmark 51,288 /35.5% 5.4 % Oslo 38,572 /26.7% 3.8 % Akershus 34,904 /24.2% 8.0 % Oppland
Slide 32: Retail lending growth is highest outside Oslo
Retail lending growth is highest outside Oslo Lending to customers per geographic area and change last 12 months (% and NOK million) – Retail market Lending to retail customers by geographic area (volume/share in %) Changes last 12 months Hedmark 35,473 / 33.6 % 7.3 % Oslo 28,906 / 27.4 % 3.7 % Aker
Slide 33: The credit growth within the corporate market is highest in «New market areas»
The credit growth within the corporate market is highest in «New market areas» Lending to customers per geographic area and change last 12 months (% and NOK million) – Corporate market Lending to retail customers by geographic area (volume/share in %) CM Changes last 12 months Hedmark 16,103 /41.5%
Slide 34: The concentration risk is low
The concentration risk is low Retail and corporate loans by size (% share)* Retail market Corporate market 37.9 % 35.0 % 26.9 % 23.5 % 13.7 % 18.1 % 9.0 % 11.7 % 11.0 % 8.8 % 4.4 % 34 * Including loans transferred to the covered bond companies
Slide 35: High quality credit process leads to low and stable LTV
High quality credit process leads to low and stable LTV Percentage of granted mortgages and average LTV per period and county Percentage of granted volume Average LTV at the time of grant 78% 73% 72% 69% 70% 67% 70% 66% 66% 62% 62% 66% 69% 67% 63% 64% 62% 61% 62% 60% 61% 60% 64% 60% 58% 33% 34% 31%
Slide 36: Mortgage regulation – The Bank is utilising the flexibility quota
Mortgage regulation – The Bank is utilising the flexibility quota Exposure per LTV bucket in the residential mortgage portfolio 94.8 % Mortgages - Utilisation of flexibility quota in 2Q-2019: City of Oslo Other areas 7.4 % (8 % quota) 6.5 % (10 % quota) • The mortgage regulation* constrains housing
Slide 37: Satisfactory deposit coverage and strong deposit growth
Satisfactory deposit coverage and strong deposit growth Deposit volume and deposit growth (Group) Deposit volume (NOK billion) 77 71 70 71 72 • Deposit growth of 6.9 % in the second quarter. • Seasonality (tax settlements, holiday pay) • Deposit growth last 12 months: 9.5% (5.3 %). 2Q-18 3Q-18 4Q-18
Slide 38: Deposit margins
Deposit margins Retail and corporate divisions (parent bank) • Strong increase in deposit margins in the parent bank both for RM and CM. 0.42% • The increase is largely explained by the 18 bps increase of the 3M Nibor in the second 0.36% quarter. 0.33% 0.32% • The customers were notified of interest
Slide 39: Increased income from subsidiaries - and reclassification effects
Increased income from subsidiaries - and reclassification effects 350 Net commissions and other income (NOK million) • Reclassification from “Net Interest 282 300 Income” to “Other Income” of 256 Total certain income items in SpareBank 1 246 42 Finans Østlandet, had a positive 234 250 12 224 38 16 O
Slide 40: Group operating costs
Group operating costs Operating costs per quarter (NOK million) 600 600 506 • The operating costs were reduced 494 489 468 compared to last quarter, but were 457 500 4.5 % higher than the same quarter 500 70 38 44 54 36 last year. 45 23 33 400 Total 400 32 24 Other operating • Of a total increase of
Slide 41: Operating costs in the Parent Bank
Operating costs in the Parent Bank Operating costs per quarter (NOK million) • The operating costs in 1H-19 were NOK 47 million higher than in 1H-18. • Comments to special cost items: • During 1H-2019 the Bank carried out a large project validating the KYC documentation for customers on-boarded befo
Slide 42: Reduced headcount in the parent bank
Reduced headcount in the parent bank Headcount (FTE) • The headcount in the Group is reduced 1,146 1,139 1,141 1,130 in 1H-19. 1,111 • The headcount reduction is driven by 418 453 442 450 446 the Parent Bank, with a 13 FTE reduction. • Since the acquisition of Bank 1 Oslo Akershus in 2016, the headc
Slide 43: The contribution from financial items has increased
The contribution from financial items has increased Net income from financial assets and liabilities (NOK millions) • Net profit from ownership interests of 27 NOK 393 million is specified above (“Contribution from joint ventures”). The increase includes effects of NOK 291 million from the Fremtind
Slide 44: Still very low impairments on loans and guarantees
Still very low impairments on loans and guarantees Impairments on loans and guarantees (NOK million) 12 11 7 8 • Impairments on loans and guarantees in 2Q-19 were NOK 8 million. • Parent bank NOK 3 million • SB1 Finans Østlandet NOK 5 million • Reversal of impairments on loans and -33 guarantees in
Slide 45: Low levels of problem loans
Low levels of problem loans Non-performing and other doubtful commitments 600 1.12% 1.20% 500 1.00% • The proportion of problem loans 400 0.80% 0.80% 0.61% decreases further in 1H-19 and 0.59% 300 234 233 287 0.60% is at a historical low level. 0.45% 0.44% 200 0.40% 0.42% 0.41% 314 257 272 254 342 1
Slide 46: Low impairments and low net exposure in Stage 3
Low impairments and low net exposure in Stage 3 Specification of impairments and net exposure (NOK million) Maximum exposure net of accumulated impairments (on and off- Impairments per segment - quarterly balance sheet items) Net exposure Stage 1 Stage 2 Stage 3 Total 2Q-19 1Q-19 4Q-18 3Q-18 2Q-18 P
Slide 47: Stable capitalization
Stable capitalization Common Equity Tier 1 ratio (Group) 16.8 % 16.9 % 16.7 % 16.1 % 15.9 % • The Group’s CET 1-target is 16 %. • The CET 1 ratio was 16.7 % by the end of 2Q-19. The leverage ratio was 7.3 %. • An increase in the LGD-buffers in the IRB capital requirement calculations was implemented
Slide 48: SPOL
SPOL 30.06.2019 • An extraordinary first half of 2019 resulted in extraordinary KPIs. Market price (NOK) 85.00 • A normalization of the KPIs should be Market capitalisation (NOK million ) 9,846 expected during 2H 2019. Book equity per EC 1) 88.79 Earnings per EC, NOK 2) 7.29 Price/Earnings per EC 3)
Slide 49: Solid performance and a strengthened regional footprint
Solid performance and a strengthened regional footprint Summary 49
Slide 50: Contact details
Richard Heiberg CEO Tel.: +47 902 06 018 richard.heiberg@sb1ostlandet.no Geir-Egil Bolstad Contact details CFO Tel.: +47 918 82 071 geir-egil.bolstad@sb1ostlandet.no Runar Hauge Investor relations Tel.: +47 482 95 659 runar.hauge@sb1ostlandet.no 50
Slide 51: 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 52: Together to create
Together to create @STLANDET
SpareBank 1 Østlandet — Q2 2019 Earnings Presentation on 6ix