Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q3 2019 Earnings Presentation
46 slides from Sparebank 1 Ostlandet's earnings presentation, October 2019
Slide 1: Company presentation Third quarter 2019
Company presentation Third quarter 2019 The world’s tallest timber building, Mjøstårnet, was completed in March 2019. The building has a height of 85.4 meters, with 18 floors and is located on the banks of Mjøsa in Brumunddal. The building contains apartments, hotel, swimming pool, office premises a
Slide 2: Highlights from Q3-19
Geir-Egil: Highlights fra Q3-19 Third quarter 2019 Summary • Entered into partnership with The Norwegian Confederation of Trade Unions (“LO”) becoming a preferred partner for providing housing mortgages to LO’s more than 900,000 members. The customer growth continues. • Increased net interest income
Slide 3: High profitability – reduced growth in operating costs
High profitability – reduced growth in operating costs Financial targets 2019 and actual performance Profitability Return on equity at least 10 % √ 14.8 % Dividends 50 % pay-out ratio* √ 50 % Solidity CET 1 at 16 % √ 16.7 % Costs Growth in operating costs in parent bank within 2 %** 4.5 % ! 3 * Prof
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 well established market position and a 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. covere
Slide 6: Still moderate housing price growth
Still moderate housing price growth Housing price developments for relevant areas compared with Norway Housing prices, indexed (2015=100) 150.00 150.00 • Continued moderate housing price growth in September 140.00 140.00 130.00 130.00 ‒ Nominal -1.1 %/seasonally adjusted +0.2 % 120.00 120.00 ‒ Highe
Slide 7: High economic activity in Eastern Norway
High economic activity in Eastern Norway High production growth in the Capital Region and low unemployment in the market area Growth in production, q/q and forecast for 6 months (per cent) • Solid economic growth in Norway and Eastern Norway 4 ‒ Economic growth above trend – Norway in an internation
Slide 8: Steady customer growth after the merger
Steady customer growth after the merger Numbers of customers in parent bank 360 40 • 2019 has been characterized by off- 348 38 boarding of some customers with low 350 346 340 341 342 343 344 account activity. 338 339 340 336 337 36 • During 1H-2019 the Bank carried out a 334 331 332 large project v
Slide 9: Financial Accounts 3Q-2019
Financial Accounts 3Q-2019 SpareBank 1 @STLANDET
Slide 10: 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 3Q-19 NOK 409 million (NOK 362 million). Improved profitability Pre-tax profit YTD NOK 1,637 million (NOK 1,092 million). ROE in 3Q-19 10.7% (10.8%). Increased return on equity ROE
Slide 11: Profit contributions from subsidiaries
Profit contributions from subsidiaries 3Q-19 (3Q-18) SpareBank 1 Finans Østlandet AS - Profit after tax NOK 93 million (NOK 107 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 Innlandet A
Slide 12: Contribution from joint ventures (1)
Contribution from joint ventures (1) 3Q-19 (3Q-18) SpareBank 1 Gruppen - Profit after tax NOK 1,515 million (NOK 970 million). - Ownership 12.4 %. - Improvement mainly related to revaluation of properties with NOK 596 million in 2Q-19. SpareBank 1 Boligkreditt AS - Profit after tax NOK 157 million (
Slide 13: Contribution from joint ventures (2)
Contribution from joint ventures (2) 3Q-19 (3Q-18) SpareBank 1 Kredittkort - Profit after tax NOK 78 million (NOK 96 million) - Ownership 20.8 % - Last year’s profit positively affected by gain on portfolio sale of NOK 15 million SpareBank 1 Betaling AS - Profit after tax NOK -35 million (NOK -38 mi
Slide 14: Income statement 3Q 2019 and 2019 YTD
Income statement 3Q 2019 and 2019 YTD Group 01.01.2019- 01.01.2018- 3Q-19 3Q-18 30.09.2019 30.09.2018 2018 Net interest income 554 524 1,582 1,530 2,074 Net commission income 296 276 856 840 1,106 Other income 54 40 199 132 181 Dividends 0 0 19 13 13 Net profit from ownership interest 44 58 520 141
Slide 15: Special items YTD 2019 - 1
Special items YTD 2019 - 1 Description and effects 1. 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 16: Special items YTD 2019 - 2
Special items YTD 2019 - 2 Description and effects • On January 28 January the Bank received a binding ruling from The Norwegian Tax Administration stating Tax deductibility of customer that the customer dividend paid by the bank is tax deductible. dividend • The Supervisory Board decided on 28 Marc
Slide 17: Key financials – quarterly (1)
Key financials – quarterly (1) Pre-tax profit (NOK million) Net interest income and commission fees from covered 810 bond companies (NOK million) 585 606 633 592 602 638 526 461 347 3Q-18 4Q-18 1Q-19 2Q-19 3Q-19 3Q-18 4Q-18 1Q-19 2Q-19 3Q-19 Impairments on loans and guarantees (NOK million) Total op
Slide 18: Key financials – quarterly (2)
Key financials – quarterly (2) Return on equity CET 1 ratio 21.2 % 16.8 % 16.9 % 16.7 % 16.7 % 15.9 % 12.8 % 10.8 % 10.7 % 9.1 % 3Q-18 4Q-18 1Q-19 2Q-19 3Q-19 3Q-18 4Q-18 1Q-19 2Q-19 3Q-19 Lending growth (including mortgage transferred to covered bond companies) last 12 months Deposit growth last 12
Slide 19: Net interest income – influenced by reclassification effects
Net interest income – influenced by reclassification effects Net interest income incl. commissions from covered bond companies 1400 1.76% 1.80% 1.73% • In the subsidiary SB1 Finans Østlandet 1200 1.65% 1.64% 1.70% there has been a reclassification of 1.62% certain items from net interest income to 1
Slide 20: The lending growth has rebounded the last two quarters
The lending growth has rebounded the last two quarters Lending volume (Group, NOK billion) 180.0 • Total lending in the Group, including 144 147 160.0 138 140 141 mortgages transferred to covered bond companies, increased by NOK 3.0 billion 140.0 43 43 40 41 42 120.0 in the third quarter. 100.0 80.0
Slide 21: Lending margins
Lending margins Retail and corporate divisions (parent bank) • The lending margins in the parent bank both within the CM and the RM 2.51% 2.50% 2.48% saw a marginal reduction the last 2.44% 2.43% quarter. • The reduction is largely explained by the 17 bps increase of the 3M Nibor during the quarter.
Slide 22: Loan book dominated by retail and SME lending
Loan book dominated by retail and SME lending Lending to customers per sector (NOK million and %) Lending to customers per sector (volume/share in %) Changes last 12 months Private customers 66,157/44.9% 3.5 % SB1 Boligkreditt 42,244/28.7% 10.0 % Real estate (incl. SB1 17,014/11.6% 10.8 % Næringskre
Slide 23: Highest credit growth within primary industries and commercial services
Highest credit growth within primary industries and commercial services Corporate lending growth YoY – sector (NOK million) 61 25 71 -131 133 199 -240 302 478 529 3,089 1,661 *Incl. SB1 Næringskreditt 23
Slide 24: 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 by geographic area (volume/share in %) Changes last 12 months Hedmark 51,721/35.2% 4.8 % Oslo 39,292/26.7% 4.2 % Akershus 36,115/24.6% 8.7 %
Slide 25: 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 (NOK million and %) – Retail market Lending to retail customers by geographic area (volume/share in %) Changes last 12 months Hedmark 36,872/34.0 % 6.3 % Oslo 29,025 / 26.8 % 2.9 % Akersh
Slide 26: The SME credit growth is highest in «New market areas»
The SME credit growth is highest in «New market areas» Lending to customers per geographic area and change last 12 months (NOK million and %) – Corporate market Lending to retail customers by geographic area (volume/share in %) CM Changes last 12 months Hedmark 15,142/38.9% 0.6 % Oslo 10,267/26.4% 7
Slide 27: The concentration risk is low
The concentration risk is low Retail and corporate loans by size (% share)* Retail market Corporate market 37.6% 35.6% 28.4% 23.7% 13.8% 17.6% 8.8% 11.5% 10.1% 8.7% 4.2% 27 * Including loans transferred to the covered bond companies
Slide 28: 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% 69% 70% 67% 66% 66% 62% 62% 66% 69% 63% 64% 65% 62% 61% 62% 62% 60% 64% 60% 60% 61% 60%
Slide 29: Mortgage regulation – targeted utilisation of the flexibility quota
Mortgage regulation – targeted utilisation of the flexibility quota Exposure per LTV bucket in the residential mortgage portfolio 94.8 % Mortgages - Utilisation of flexibility quota in 3Q-19: City of Oslo Other areas 6.7 % (8 % quota) 6.3 % (10 % quota) • The mortgage regulation* constrains housing
Slide 30: Deposit coverage ratio in line with ambitions
Deposit coverage ratio in line with ambitions Deposit volume and deposit growth (Group) Deposit volume (NOK billion) 77 77 70 71 72 • Deposits growth of - 0.6 % in the third quarter. • Deposit growth last 12 months: 9.4% (7.6 %). • Retail deposits grew 6.2 %. • Corporate deposits grew 13.8 %. 3Q-18
Slide 31: Strongly improving deposit margins
Strongly improving deposit margins Retail and corporate divisions (parent bank) 0.52% • Strong improvement in deposit margins in the parent bank both within RM and CM. 0.42% • The increase is largely explained by 0.42% the 17 bps increase of the 3M Nibor 0.33% in the third quarter. 0.32% 0.36% 0.28%
Slide 32: Increased income from subsidiaries - and reclassification effects
Increased income from subsidiaries - and reclassification effects Net commissions and other income (NOK million) 350 282 300 • Reclassification from “Net Interest 266 Income” to “Other Income” of 256 16 15 certain income items in SpareBank 1 234 15 250 224 42 35 Finans Østlandet, had positive impact
Slide 33: Group operating costs
Group operating costs Operating costs per quarter (NOK million) 600 • The operating costs in 3Q-19 was in 600 506 494 489 line with the corresponding quarter 500 457 457 500 last year. 70 38 44 45 23 36 33 40 400 Total • The operating costs YTD are 4.5 % 400 24 30 Total higher than last year. Other
Slide 34: Operating costs in the Parent Bank
Operating costs in the Parent Bank Operating costs per quarter (NOK million) • The operating costs YTD were NOK 48 million higher than corresponding period last year. • Comments to special cost items: • During 1H-2019 the Bank carried out a large project validating the KYC documentation for customer
Slide 35: Reduced headcount – driven by the parent bank
Reduced headcount – driven by the parent bank Headcount (FTE) 1,146 1,139 1,141 1,130 1,119 • The headcount in the Group is further reduced in the third quarter of 2019. 453 442 450 446 440 • The headcount reduction is driven by the Parent Bank, with a 17 FTE reduction since the start of the year. •
Slide 36: The contribution from financial items has increased
The contribution from financial items has increased Net income from financial assets and liabilities (NOK millions) • Increased net profit from ownership interests of NOK 379 million is specified above (“Contribution from joint ventures”). The increase includes effects of NOK 54 291 million from the
Slide 37: Still very low impairments on loans and guarantees
Still very low impairments on loans and guarantees Impairments on loans and guarantees (NOK million) • Impairments on loans and guarantees in 3Q-19 24 were NOK 24 million. 12 11 • Parent bank NOK 13 million 8 • SB1 Finans Østlandet NOK 11 million • The impairments in SB1 Finans Østlandet in 3Q- 19 i
Slide 38: The proportion of problem loans declines further
The proportion of problem loans declines further Non-performing and other doubtful commitments 600 1.12% 1.20% 500 1.00% • The proportion of problem loans 400 0.80% decreases further in 3Q-19. 0.80% 0.61% 0.59% 300 234 233 287 0.45% 0.60% • The levels must be characterised 0.39% as “very low”. 200 0
Slide 39: 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) Impairments per segment - quarterly 3Q-19 2Q-19 1Q-19 4Q-18 3Q-18 • Gross loans and receivables Personal customers 1.2 -8.7 -16.5 0.2 3.6 defined as Stage 3 amounted to Corporate customers 11.
Slide 40: Stable CET 1
Stable CET 1 Common Equity Tier 1 ratio (Group) 16.8 % 16.9 % 16.7 % 16.7 % 15.9 % • The Group’s CET 1-target is 16 %. • The CET 1 ratio was 16.7 % by the end of 3Q-19. The leverage ratio was 7.4 %. • An increase in the LGD-buffers in the IRB capital requirement calculations was implemented in 1Q-19
Slide 41: SPOL
SPOL 30.09.2019 • An extraordinary first half of 2019 resulted in extraordinary KPIs. Market price (NOK) 83.50 • The performance in 3Q-19 is Market capitalisation (NOK million ) 9,672 considered more normal and reduce the KPIs somewhat. Book equity per EC 1) 91.20 • A further normalization of the KP
Slide 42: Changes to capital requirements are expected to reduce the management buffer
Changes to capital requirements are expected to reduce the management buffer Group CET 1 (per cent) – and expected consequences of changes to capital requirements • The government has proposed several changes to the bank’s capital ILLUSTRATION requirements. • Implementation of CRD4 will lead to remo
Slide 43: Another strong financial quarter with solid customer acquisition
Another strong financial quarter with solid customer acquisition. Summary 43
Slide 44: 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 44
Slide 45: 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 46: Together to create
Together to create @STLANDET
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