Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q3 2022 Earnings Presentation
58 slides from Sparebank 1 Ostlandet's earnings presentation, 2022
Slide 1: 2022 Company Presentation
2022 COMPANY PRESENTATION
Slide 2: Highlights in 3rd quarter of 2022
Highlights in 3rd quarter of 2022 Summary • Return on equity in the quarter of 9.4 %. Strong underlying development in core banking operations. • Solid growth in net interest income (including commission income from transferred loans), of 12.3 % y/y (5.1 % q/q), from repricing and good lending growt
Slide 3: Financial targets and achievements per 30 September 2022
Financial targets and achievements per 30 September 2022 Long-term goals versus actual results Profitability Return on equity at least 11 % 9.7 % Dividends 50 % pay-out ratio1 50 % Solidity Regulatory requirement + 100 bps2 18.2 % Costs Max 4 % cost increase in parent bank3 6.7 % 1. Out of profits a
Slide 4: Higher policy rates due to increased inflation and despite weaker activity
Higher policy rates due to increased inflation and despite weaker activity Companies in the market area expect lower activity. Norges Bank forecasts moderately higher unemployment 4
Slide 5: Expected fall in prices of homes and commercial real estate
Expected fall in prices of homes and commercial real estate Fall is mitigated by relatively low unemployment, high office demand and increased rental income Average CRE yield in Malling & Co’s investor yield survey (unweighted) Source: Malling og Co 5
Slide 6: Another strong quarter for core operations
Another strong quarter for core operations Strong income increase from NII and good underlying development in commission income Net interest income, net commission income and operating expenses (NOK mill.) 540 583 14% 452 466 492 456 478 1000 447 428 451 463 429 352 13% 728 765 600 673 652 680 655 6
Slide 7: Continued strong lending growth
Continued strong lending growth Strong lending growth in the corporate market, somewhat slower pace in the retail market Gross lending (NOK billion) Lending growth (12 months, %) Last national* 186.7 Households: 4.3% 183.3 173.7 177.8 1.8 % Non-fin corp.: 7.6% 170.4 2.0 % 3.1 % 2.4 % 16.6 % 50.0 51.
Slide 8: High deposit growth
High deposit growth High deposit growth compared with last year. Seasonal drop in deposits for the retail market. Deposits (NOK billion) Deposit growth (12 months, %) 100.0 98.9 92.2 93.9 -1.1 % 91.3 6.5 % 1.9 % 1.0 % 44.6 44.5 40.3 40.9 41.6 10.5 % 9.0 % 3Q21; 8.4 % 6.7 % 2Q22; 7.3 % 51.0 51.3 52.3
Slide 9: Ambition: Norway's best relationship bank
Strategic objectives towards 2025 We know our We create We have one of the We are a clear driver customers and create tomorrow’s most attractive equity of the sustainable the best customer relationship bank in capital certificates on transition experience an open and Oslo Stock Exchange engaging wor
Slide 10: Profitable growth in the capital region
Profitable growth in the capital region Strong challenger position in the country’s most attractive market • Capital region: Important growth market for the bank. The region has Norway’s highest expected population growth. • Inland region: Continue to develop our already strong position. Statistics
Slide 11: Strengthening of operations in Oslo
Strengthening of operations in Oslo Recruitment of up to 10 new financial advisors and planned establishment of new branch RM-loans by county 4% • Oslo and surrounding areas is an important growth market for the bank. 27 % 34 % • Local presence and competent financial advice is important in order to
Slide 12: We aim to be the best at cross sales
We aim to be the best at cross sales Intensified strategic focus on capital-light income to ensure profitable growth Insurance commission fees per 3Q-2022 % of total assets* Bank 1 Bank 2 SpareBank 1 Bank 4 Østlandet *Sum of commission income from Fremtind Forsikring and SpareBank 1 Forsikring. 12
Slide 13: All-time high customer satisfaction index
All-time high customer satisfaction index Important factor in achieving our strategic objectives Customer relationship index (TRIM*) for SpareBank 1 Østlandet’s customers 70 69 67 67 66 66 66 64 63 2014 2016 2018 2020 2022 Retail market Corporate market Sources: Kantar, SpareBank 1 Østlandet. 13 * L
Slide 14: SpareBank 1 ForretningsPartner Østlandet established
SpareBank 1 ForretningsPartner Østlandet established Strengthen efforts in accounting, payroll and advisory services, emphasising cross-Group cooperation • SpareBank 1 ForretningsPartner («Business Partner») Østlandet was established on 24 August through the demerger and sale of the consultancy oper
Slide 15: New and encouraging feedback on our ESG-efforts
New and encouraging feedback on our ESG-efforts Motivating for our efforts to become a clear driver in the sustainable transition 2nd place in Sustainable Banking 8th place in World’s Most Socially Revenues Ranking 2022* Responsible Banks 2022** SpareBank 1 Østlandet is the only Nordic bank rated am
Slide 16: Green loan portfolio is crucial to achieve the net zero target
Green loan portfolio is crucial to achieve the net zero target Important for role as a driver in the transition, but also to reduce climate risk in the bank’s own portfolio • Extended green agricultural loan: ‒ Existing agricultural loan was initially directed towards solar energy systems. ‒ Now ext
Slide 17: Financial Accounts
2022 FINANCIAL ACCOUNTS
Slide 18: Lower return on equity, but strong core operations
Lower return on equity, but strong core operations Financial accounts 3Q 2022 and year to date (same period last year in brackets) • Profit after tax in 3Q22 of NOK 441 million (NOK 561 million) Profit after tax • Profit after tax ytd. of NOK 1,326 million (NOK 1,517 million). • ROE in 3Q22 of 9.4 %
Slide 19: Income statement
Income statement Group 3Q22 2Q22 3Q21 Y TD 2022 Y TD 2021 2021 Net interest income 694 644 552 1.931 1.628 2.202 Net commission income 342 357 364 1.020 1.034 1.389 Other income 44 60 50 170 174 233 Dividends 1 14 0 30 21 21 Net profit from ownership interest 37 20 109 73 278 405 Net income from fin
Slide 20: Net interest income
Net interest income Increased NII from volume growth and higher deposit margins while lending margins fell in 3Q Net interest income incl. commissions from covered bond companies (MNOK and %) 1200 1.70% 1.62% 1.57% 1.60% 1000 1.53% 1.47% 5,1% 1.50% 1.41% 765 800 728 681 681 686 71 Commission fees fr
Slide 21: Commission income
Commission income Strong growth from payment services, and mutual funds and insurance. Demerger impacts accounting. Commision income and other income, excluding covered bond companies (NOK million) 332 314 306 16 295 285 17 18 38 15 14 38 40 35 38 49 31 43 Commission income from credit cards 40 52 7
Slide 22: Profits in subsidiaries
Profits in subsidiaries Profit after taxes (NOK million) 3Q22 3Q21 Sparebank 1 Finans Østlandet AS - Group 25.7 46.6 EiendomsMegler 1 Innlandet AS 0.3 0.5 EiendomsMegler 1 Oslo Akershus AS - Group 1.0 2.0 SpareBank 1 ForretningsPartner Østlandet AS - Group * - 0.7 0.1 Subsidiaries 26.2 49.2 * SpareB
Slide 23: Proforma: Accounting effects from demerger of TheVit AS
Proforma: Accounting effects from demerger of TheVit AS • Accounting effects of demerger from 24 Aug. Pro forma income statement for SB1 ForretningsPartner* • Effect on commission income for accounting (NOK million) 3Q-22 2Q-22 1Q-22 4Q-21 3Q-21 2Q-21 operations in 3Q-22: Net operating income 24.9 3
Slide 24: Profits in joint ventures
Profits in joint ventures Profit after taxes (NOK million) 3Q22 Ownership 3Q21 Ownership SpareBank 1 Gruppen AS - Group* 206.9 12.40 % 621.0 12.40 % SpareBank 1 Forvaltning AS 48.8 6.26 % 53.9 12.40 % SpareBank 1 Boligkreditt AS 58.6 23.15 % 57.6 22.45 % SpareBank 1 Næringskreditt AS 0.2 14.35 % 16.
Slide 25: Net income from financial assets and liabilities
Net income from financial assets and liabilities Weaker results from SB1 Group, value decline for own equity instruments and fixed-rate lending Net income from financial assets and liabilities, NOK million Selected valuation changes: 198 • Liquidity portfolio incl. 0 hedges: minus NOK 40 mill. 109 1
Slide 26: Operating expenses
Operating expenses Lower quarterly costs, partly due to demerger of TheVIT. Cost growth in parent bank of 6.7 % ytd. Operating expenses by item (NOK million) Operating expenses, by unit (NOK mill.) 600 531 520 473 504 496 531 520 500 504 496 87 65 473 62 65 58 16 150 20 20 26 15 400 13 27 22 143 158
Slide 27: Loan loss provisions
Loan loss provisions Increased model-based losses on the basis of adjustments in key assumptions 3Q21 4Q21 1Q22 2Q22 3Q22 Parent bank -17 24 6 -61 16 SB1FØ 1 3 -2 2 3 Group -16 28 4 -59 19 Losses as a percentage of total lending-0.05 % 0.09 % 0.01 % -0.18 % 0.06 % Loan loss provisions (NOK million)
Slide 28: Exposures per stage and credit loss provision ratio in stage 3
Exposures per stage and credit loss provision ratio in stage 3 Exposure by stages (% of gross loans) Loans in Stage 3 (NOK mill.) 800 17.5 % 87.2 % 86.8 % 86.3 % 699 17.3 % 86.0 % 86.1 % 700 657 623 17.0 % 587 588 600 8.3 % 8.4 % 8.5 % 16.5 % 8.0 % 500 16.3 % 7.0 % 400 16.0 % 16.0 % 5.3 % 5.1 % 5.0
Slide 29: Highly collateralised mortgages, some more mortgage deferral applications
Highly collateralised mortgages, some more mortgage deferral applications Slight increase in number of digital applications for mortgage deferrals, expected to rise further due to rate hikes Digital applications for mortgage deferrals LTV by exposure* (number of applications) 97.1 % 141 200 180 1 92
Slide 30: Commercial real estate is the bank's 2nd largest customer segment
Commercial real estate is the bank’s 2nd largest customer segment NOK 30 bn. in gross loans to commercially-related real estate, including building and construction • Financing of commercially related real CRE-related, share of gross lending* estate is the bank’s largest corporate market exposure. C
Slide 31: CRE for lease: Attractive location, diversified rental type
CRE for lease: Attractive location, diversified rental type 98 % of tenants have contracts that are 100 % indexed (to CPI) * Location* Normal: 8% Acceptable: Share of lending according to LTV* Housing: 1% Hotels, travel: 1% 7% Retail, Warehouse, shopping Best: 42% industrial, malls: 29% mech.: 29% C
Slide 32: CRE for lease: Good collateral and conservative lending
CRE for lease: Good collateral and conservative lending Loan portfolio well equipped to handle higher yields in CRE market Share of lending according to LTV* • Higher financing costs and yields will affect portfolio value negatively. Reflected through increased LGD in loan 58.1 % loss provisions. •
Slide 33: Projects & building: Stable activity, evenly distributed over building process
Projects & building: Stable activity, evenly distributed over building process Requirement of pre-sales normally of at least 60 %, depending for example on EQ and complexity Loans to real estate projects, building and Draw on construction loans, volume-weighted, construction, NOK bn* share in %* 30%
Slide 34: Higher high CET-1 ratio, well above regulatory requirements
Higher high CET-1 ratio, well above regulatory requirements The bank has a management buffer of 100 bps, in line with the pillar 2 guidance Requirements 16.8 % 17.8 % 18.0 % 18.2 % 15.8 % 17.2 % 1.0 % 16.8 % 1.0 % 9.5 % 8.5 % 1.8 % 1.8 % 4.5 % 4.5 % 2018 2019 2020 2021 3Q22 Current Long term Common
Slide 35: Highlights in 3rd quarter of 2022
Highlights in 3rd quarter of 2022 Summary • Return on equity in the quarter of 9.4 %. Strong underlying development in core banking operations. • Solid growth in net interest income (including commission income from transferred loans), of 12.3 % y/y (5.1 % q/q), from repricing and good lending growt
Slide 36: Why invest in SpareBank 1 Østlandet (SPOL)?
Why invest in SpareBank 1 Østlandet (SPOL)? 36
Slide 37: Creating together
Creating together Proficient Near Engaged We have worked for more than 175 years for people and businesses to succeed Our work continues
Slide 38: Appendix
2022 APPENDIX Financials/ECC
Slide 39: Profit after tax and return on equity
Profit after tax and return on equity Profit after tax (NOK mill.) Return on equity (%) 561 536 505 12.6% 12.2% 441 11.1% 350 9.4% 7.7% 3Q21 4Q21 1Q22 2Q22 3Q22 3Q21 4Q21 1Q22 2Q22 3Q22 39
Slide 40: Key financials - quarterly (1)
Key financials - quarterly (1) Pre-tax profit (NOK million) Net interest income and commission fees from covered bond companies (NOK million) 706 542 573 575 480 686 728 765 681 681 3Q21 4Q21 1Q22 2Q22 3Q22 3Q21 4Q21 1Q22 2Q22 3Q22 Net commission income excl. covered bond companies Operating expense
Slide 41: Key financials - quarterly (2)
Key financials - quarterly (2) Impairments on loans and guarantees (NOK million) CET-1 ratio 28 19 18.0 % 18.0 % 18.0 % 18.0 % 18.2 % 4 -16 -59 3Q21 4Q21 1Q22 2Q22 3Q22 3Q21 4Q21 1Q22 2Q22 3Q22 Lending growth last 12 months, inc. transferred loans Deposit growth last 12 months 8.1 % 8.4 % 9.4 % 9.6
Slide 42: Lending margins
Lending margins Lower due to increased money market interest rates Lending margins, parent bank (%)* 2.49% 2.51% 2.33% 2.39% 2.22% 1.88% 1.76% 1.55% 1.21% 1.03% 1.09% 0.40% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 Lending margin RM, incl. covered
Slide 43: Deposit margins
Deposit margins Increase due to higher money market rates Deposit margins, parent bank (%)* 1.65% 0.95% 0.81% 0.43% 0.73% 0.23% 0.50% 0.07% 0.44% 0.28% 0.08% 0.06% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 Deposit margin Retail customers Deposit m
Slide 44: Bank has adjusted interest rates following Norges Bank's rate hikes
Bank has adjusted interest rates following Norges Bank’s rate hikes Loan and deposits, NOK bill. Norges Bank 23 Jun-22 17 Aug-22 21 Sep-22 Gross loans excl Nibor- 100 101 linked 98 Effective dates new loans LO-loans 30 Jun-22 24 Aug-22 29 Sep-22 and deposits 48 49 50 Nibor-linked loans 22 24 25 Exis
Slide 45: Somewhat lower headcount compared to last year
Somewhat lower headcount compared to last year Increased staffing in parent bank and SB1FØ, stable at the real estate brokers. Reduction in relation to TheVit demerger. Full-time equivalents in parent bank and subsidiaries 1 135 1 137 1 131 1 130 1 120 169 174 170 162 123 SpareBank 1 ForretningsPart
Slide 46: SpareBank 1 Gruppen: Good insurance result in Fremtind
SpareBank 1 Gruppen: Good insurance result in Fremtind Quarterly post-tax profits (NOK million). SpareBank 1 Gruppen and selected subsidiaries SpareBank 1 Gruppen Fremtind Forsikring (insurance) 1080 559 549 621 337 170 207 94 142 79 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 SpareB
Slide 47: Loan losses
Loan losses Loan losses (NOK million) 151 130 47 33 28 24 19 8 1 11 4 -18 -16 -33 -59 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 47
Slide 48: Cyclically stable loan portfolio
Cyclically stable loan portfolio Lending to customers per sector (% and NOK million) Private customers 42,8 %/80 000 Retail market 72.3 %/134 984 SB1 Boligkreditt 29,5 %/54 983 Real estate (incl. SB1 Næringskreditt) 13,2 %/24 559 Primary industries 4,0 %/7 446 Commercial services/Public sector 3,9 %
Slide 49: The Group's lending by geography
The Group’s lending by geography Lending to customers per geographic area and change last 12 months (% and NOK million) Lending to customers per county (share in %/NOK million) Change last 12 months Innlandet 37,3 %/ 69 660 4.9 % Viken 30,2 %/ 56 422 13.1 % Oslo 28,4 %/ 53 058 10.6 % Other areas 4,0
Slide 50: Mortgage loans by geography
Mortgage loans by geography Retail lending per geographic area and change last 12 months (% and NOK million) Retail lending by county (share in %/NOK million) Change last 12 months Innlandet 34,5 %/ 46 513 4.0 % Viken 34,7 %/ 46 841 10.9 % Oslo 26,8 %/ 36 171 5.0 % Other areas 4,0 %/ 5 459 18.7 % Tr
Slide 51: Corporate market lending by geography
Corporate market lending by geography Corporate lending per geographic area and change last 12 months (% and NOK million) Corporate lending by county (share in %/NOK million) Change last 12 months Innlandet 44,8 %/ 23 148 6.8 % Viken 18,5 %/ 9 581 25.6 % Oslo 32,7 %/ 16 887 24.8 % Øvrige 4,1 %/ 2 10
Slide 52: Stable low LTV in new mortgage approvals
Stable low LTV in new mortgage approvals Share of new mortgage approvals and average LTV per period and county 73%72% Percentage of new mortgage appovals (volume) Average LTV at the time of approval 70% 69%69% 68% 67% 67% 66% 66% 66% 66% 65% 65% 65% 63% 64% 63%64% 64% 63%63% 62% 62%62% 62% 61%61% 62
Slide 53: 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 market Corporate 50.0% market 39.3 % 45.0% 40.0% 30.9 % 35.0% 30.0% 24.2 % 23.2 % 25.0% 20.9 % 20.0% 17.1 % 15.0% 12.8 % 9.5 % 9.4 % 10.0% 6.4 % 6.3 % 5.0% 0.0% < NOK 1 NOK 1-2.5 NOK 2.5-5 NOK 5-1
Slide 54: The use of the flexibility quota is targeted at priority customers
The use of the flexibility quota is targeted at priority customers Exposure per LTV bucket in the residential mortgage portfolio LTV by exposure** Mortgages – Utilisation of flexibility quota in 3Q22: 97.1 % City of Oslo Other areas 8.0 % (8 % quota) 7.4 % (10 % quota) Bank uses the flexibility quot
Slide 55: Capital structure and allocation of 2021 profit
Capital structure and allocation of 2021 profit In line with target of 50 % dividend share, for owners and society (through primary capital) ILLUSTRATION Profit after controlling Gifts and interest donations NOK 1 985 million 69.8% 30.2% Foundation Owners Primary capital NOK 362 million 52.1% Divide
Slide 56: SPOL
SPOL Metrics for the equity capital certificate 30.09.2022 30.09.2021 • SPOL return: Market price (NOK) 107.20 129.60 • Return 3Q225 - 8.5 % Market capitalisation (NOK million ) 12 417 15 012 • Return y/y5 - 11.9 % Book equity per ECC 1) 110.21 106.53 • Liquidity in 3Q22 compared to same period in 2
Slide 57: 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 investor@sb1ostlandet.no Bjørn-Erik R. Orskaug Head of Investor Relations +47 922 39 185 bjorn-erik.orskaug@sb1ostlandet.no 57
Slide 58: 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 — Q3 2022 Earnings Presentation on 6ix