Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q2 2020 Earnings Presentation
40 slides from Sparebank 1 Ostlandet's earnings presentation, July 2020
Slide 1: 2020 Company Presentation
2020 COMPANY PRESENTATION
Slide 2: Highlights 2Q-2020
Highlights 2Q-2020 Summary • Strengthened market position through continued strong customer and volume growth. • Significant interest rate cuts with a rapid reduction in lending rates weakened net interest income in the 2. quarter. • Reduced operating costs and introduction of a more ambitious cost
Slide 3: COVID-19 will affect profitability in 2020
COVID-19 will affect profitability in 2020 Long term financial targets and actual performance as of 2Q-2020 Profitability Return on equity at least 11 % 9.1 % ! Dividends 50 % pay-out ratio1 TBD ! Solidity Regulatory requirement + 100 bps2 17.1 % √ Costs Zero cost growth in parent bank3 -3.2 % √ 1.
Slide 4: 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 (As per 30 July 2020) 120 7.8% 10% 350 10.000 115 300 5% 7.500 110 250 200 Reported cases 9.208 105
Slide 5: Customer activity normalising
Customer activity normalising COVID-19 – Customer activity • After strong increase in demand for application for Retail customers – strong decrease in application for payment holidays payment holidays in March, the demand has slowed (7 days moving average) 300 significantly. 250 ‒ Retail : Total 5,1
Slide 6: Solid – but reduced dividends for owners and customers
Solid – but reduced dividends for owners and customers Good feedback from owners and customers • The dividend pay-out ratio for 2019 was 40 %, compared with the long term target of 50 %. We stand by ‒ To meet the authorities’ recommendations, the our customers Supervisory Board chose to reduce divid
Slide 7: Climate neutrality – we continue to work to further reduce our CO2 footprint
Climate neutrality – we continue to work to further reduce our CO2 footprint SpareBank 1 Østlandet has significantly strengthened its ESG profile Which financial institution stands out with a 2020 2018 Difference clear ESG profile? * SpareBank 1 (Eastern Norway) 23 17 6 DNB 21 21 0 Other local savin
Slide 8: The Bank and Sparebankstiftelsen Hedmark with important contributions
The Bank and Sparebankstiftelsen Hedmark* with important contributions SpareBank 1 Østlandet and has strengthened its position during the crisis • The bank has been present supporting and helping both retail and corporate customers and local voluntary organisations. • The Foundation, Sparebankstifte
Slide 9: Another quarter with strong growth in the customer base
Another quarter with strong growth in the customer base Numbers of customers in parent bank (in 1,000x) 370 40 360 354 357 38 • Strong customer growth last 352 348 quarter. 350 36 343 340 340 337 34 • Off-boarding of customers with low 332 332 account activity in 1Q-2020 as part 329 327 327 330 322
Slide 10: Financial Accounts
FINANCIAL ACCOUNTS
Slide 11: Good performance despite COVID-19 measures
Good performance despite COVID-19 measures Financial accounts 2Q 2020 (last year’s figures in brackets) • Profit after tax in 2Q-20 NOK 438 (NOK 471 million). Stable profits • Profit after tax in 1-H-20 NOK 704 million (NOK 1,227 million). • ROE in 2Q-20 11.3 % (12.8 %). Good return on equity • ROE
Slide 12: Income statement 2Q-2020 and 1H-2020 (2019)
Income statement 2Q-2020 and 1H-2020 (2019) Group 2Q-2020 2Q-2019 1H 2020 1H 2019 2019 Net interest income 498 520 1,093 1,027 2,166 Net commission income 245 287 523 560 1,152 Other income 56 78 120 145 236 Dividends 0 6 12 18 19 Net profit from ownership interest 128 131 243 477 519 Net income fro
Slide 13: Key financials - quarterly (1)
Key financials - quarterly (1) Pre-tax profit (NOK million) Net interest income and and commision fees from covered bond companies (NOK million) 585 535 526 639 666 673 602 406 540 251 2Q-19 3Q-19 4Q-19 1Q-20 2Q-20 2Q-19 3Q-19 4Q-19 1Q-20 2Q-20 Impairments on loans and guarantees (NOK million) Total
Slide 14: Key financials - quarterly (2)
Key financials - quarterly (2) Return on equity CET 1 ratio 12.8% 16.7 % 16.7 % 17.2 % 17.0 % 17.1 % 10.7% 11.3% 7.3% 6.9% 2Q-19 3Q-19 4Q-19 1Q-20 2Q-20 2Q-19 3Q-19 4Q-19 1Q-20 2Q-20 Lending growth last 12 months Deposit growth last 12 months 9.0 % 9.4 % 10.4 % 10.5 % 9.5 % 9.4 % 9.8 % 7.5 % 6.5 % 6
Slide 15: Profit contributions from subsidiaries
Profit contributions from subsidiaries Profit contribution 1H-2020 (1H-2019) NOK 58 million (NOK 63 million) NOK 2 million (NOK -1 million) SpareBank 1 Finans Østlandet AS SpareBank 1 Østlandet VIT AS - group • Profit after tax NOK 58 NOK (NOK 63 million). • Profit after tax NOK 2 million (NOK -1 mi
Slide 16: Profits in joint ventures
Profits in joint ventures Profits 1H 2020 (2019) NOK 21 million* NOK (1,287 million) NOK 11 million (NOK 44 million) SpareBank 1 Gruppen AS • Profit after tax NOK 21 million (NOK 1,287 million). SpareBank 1 Kreditt AS • The controlling interest’s share of profit -35 million • Profit after tax NOK 11
Slide 17: Important events in 2Q-2020
Important events in 2Q-2020 Description Interest rate changes • The Bank reduced the lending rates two times during 2Q-2020. • A total of 1.25 percentage points. • First time with 0.85 percentage points effective from 6 April 2020, and a second with 0.40 percentage points effective from 25 May 2020.
Slide 18: Reduced net interest income
Reduced net interest income Net interest income incl. commissions from covered bond companies 1600 1.80% 1.71% 1.72% 1400 1.62% 1.64% 1.70% • Reduction of net interest income in 2Q- 1200 1.60% 20 due to reduced lending rates. 1000 1.50% • The impact the rate reductions in 2Q- 1.38% 2020 had on net i
Slide 19: Continued strong lending growth
Continued strong lending growth Lending volume (Group, NOK billion) 158 • Total lending in the Group, including mortgages transferred to 147 151 154 144 covered bond companies, increased by NOK 4.1 billion in 2Q-20. 43 44 45 46 43 • This is equivalent to a 2.7 % lending growth in the quarter. 102 10
Slide 20: The Bank's lending growth is geographically diverse
The Bank’s lending growth is geographically diverse Lending to customers per geographic area and change last 12 months (NOK million and %) Lending to customers per county (volume/share in %)* Change last 12 months Former 54,616/35.2% 6.7 % Hedmark Oslo 41,890/26.4% 8.5 % Former 39,641/24.7% 13.4 % A
Slide 21: Low risk lending portfolio with broad based growth
Low risk lending portfolio with broad based growth Lending to customers per sector (NOK million and %) Lending to customers per sector (volume/share in %)* Change last 12 months Retail market Private customers 71,571/ 45.3 % 9.8 % 116,130/73.5% SB1 Boligkreditt 44,559/ 28.2 % 7.5 % Real estate (incl
Slide 22: Strengthened deposit growth
Strengthened deposit growth Deposit volume and deposit growth (Group – NOK billion) • Deposits growth of 7.0 % ( 6.9 %) in 2Q-20. Deposits from customers 77 77 78 80 85 • Deposit growth last 12 months: 10.5 % (9.5 %). ‒ Retail deposit growth 12.1 %. ‒ Corporate deposit growth 8.4 %. -0.6 % 2.1 % 1.8
Slide 23: Positive contribution from financial items in 2Q 2020
Positive contribution from financial items in 2Q 2020 Net income from financial assets and liabilities (NOK millions) • Net income from financial assets and liabilities was NOK 314 million 314 • Net profit from ownership interests amounted to NOK 128 million (NOK 115 million in 1Q-20). 198 • Net inc
Slide 24: Increased commissions fees from mutual funds and insurance products
Increased commissions fees from mutual funds and insurance products Net commissions and other income (NOK million) 282 • Reduced net commissions and other income compared with 266 264 corresponding period last year. 16 259 250 15 16 14 42 15 • Increased commissions fees from mutual fund and insuranc
Slide 25: Reduced operating costs at both group and parent bank level
Reduced operating costs at both group and parent bank level Operating costs per quarter (NOK million) 490 600 489 487 489 490 487 457 447 457 447 500 45 45 45 32 39 32 34 28 400 144 151 151 31 32 138 120 146 137 132 300 121 132 51 49 200 52 52 41 17 18 23 18 17 100 345 320 339 336 327 197 197 202 20
Slide 26: Further strengthening of loss provisions in 2Q-2020
Further strengthening of loss provisions in 2Q-2020 Impairments on loans and guarantees (NOK million) Impairments on loans and guarantees (NOK million) 151 • Total impairments on loans and guarantees in 130 2Q-20 were NOK 130 million. • Parent bank 98 MNOK • SB1 Finans Østlandet 33 MNOK 24 33 8 • Mo
Slide 27: Defaulted and doubtful commitments still at low levels
Defaulted and doubtful commitments still at low levels Specification of impairments and net exposure (NOK million) 1000 0.68% 0.80% 0.61% 0.59% • The defaulted and other doubtful commitments (not in 800 0.42% 0.41% 0.45% 0.46% 0.49% 0.60% default) increased in 2Q-2020. 600 0.32% 0.33% 391 0.40% 400
Slide 28: Stable CET 1 with significant buffer over regulatory requirement
Stable CET 1 with significant buffer over regulatory requirement Common Equity Tier 1 ratio (Group) • The Group’s long term CET 1-target is the regulatory requirement with an added management buffer of 100 bps. 17.2 % 17.1 % 16.9 % 16.8 % 16.8 % ‒ The regulatory requirement, incl. the 1.8 %-point Pi
Slide 29: Appendix
APPENDIX Macro/Financials/ECC
Slide 30: Diversified corporate lending growth
Diversified corporate lending growth Corporate lending growth YoY – sector (NOK million) 41 33 16 -4 120 192 328 474 641 4,110 991 1,279 *Included SB1 Næringskreditt (SPACOM) 30
Slide 31: Continued stable and low LTV in new mortgage approvals
Continued stable and low LTV in new mortgage approvals Percentage of new mortgage approvals and average LTV per period and county Percentage of new mortgage appovals (volume) Average LTV at the time of approval 78% 73% 72% 70% 70% 69% 69% 70% 68% 68% 66% 66% 67% 66% 66% 62% 63% 64% 62% 62% 61% 61% 6
Slide 32: The housing market not too affected by COVID-19
The housing market not too affected by COVID-19 Housing price development per market areas compared with Norway • Solid price increase in June 2020 Housing prices - indexed 150 150 ‒ Supported by high supply of new housing and a high 140 140 transaction volume. 130 130 ‒ The turnover in June compens
Slide 33: Broad based retail lending growth
Broad based retail lending growth Lending to retail customers per geographic area and change last 12 months (NOK million and %) Lending to retail customers by county (volume/share in %) Change last 12 months Former 37,541/33.2% 5.6 % Hedmark Oslo 31,429 / 26.9% 7.9 % Former 33,762 / 28.6 % 12.4 % Ak
Slide 34: The corporate lending growth is strongest in the outer Capital region
The corporate lending growth is strongest in the outer Capital region Lending to corporate customers per geographic area and change last 12 months (NOK million and %) Lending to corporate customers by county (volume/share in %) Change last 12 months Former 17,074/40.7% 8.5 % Hedmark Oslo 10,461/25.2
Slide 35: 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 36.1 % 36.8 % 30.2 % 23.9 % 14.2 % 16.5 % 11.0 % 10.7 % 8.1 % 7.6 % 4.8 % * Inkludert lån overført til kredittforetakene 35
Slide 36: Limited use of the increased flexibility quota
Limited use of the increased flexibility quota Exposure per LTV bucket in the residential mortgage portfolio Mortgages – Utilization of flexibility quota in 2Q-20: 94.6 % City of Oslo Other areas 7.7 % (20 % quota) 6.4 % (20 % quota) The mortgage regulation* constrains housing mortgage lending throu
Slide 37: Headcount development
Headcount development Headcount (FTE) • Increased headcount at group level of 8 FTEs last 12 months. • A net increase of 10 FTEs in subsidiaries line with growth 1,130 1,119 1,127 1,148 1,139 ambitions. • Reduction of 2 FTEs in parent bank last 12 months, but a 446 440 455 460 456 reduction of 7 FTE
Slide 38: SPOL
SPOL 30.06.2020 • SPOL rate of return: • Return 2Q-205 +16.8 % Market price (NOK) 87.60 • Return 1H-205 + 0.8 % • Return 12 months5 + 9.7 % Market capitalisation (NOK million ) 10,174 Book equity per ECC 1) 93.51 • Increased daily liquidity • Average daily transaction volume Earnings per ECC, NOK 2)
Slide 39: Contact details
Richard Heiberg CEO +47 902 06 018 richard.heiberg@sb1ostlandet.no Contact details Geir-Egil Bolstad CFO +47 918 82 071 geir-egil.bolstad@sb1ostlandet.no Runar Hauge Investor Relations +47 482 95 659 runar.hauge@sb1ostlandet.no 39
Slide 40: 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 — Q2 2020 Earnings Presentation on 6ix