Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 Østlandet — Q4 2022 Earnings Presentation
66 slides from Sparebank 1 Ostlandet's earnings presentation, 2023
Slide 1: 2022 Company Presentation
2022 COMPANY PRESENTATION
Slide 2: Highlights in 4th quarter of 2022
Highlights in 4th quarter of 2022 Summary • Very strong return on equity in the 4th quarter: 12.9 %. Strong development in core banking operations, but net financials were also positive. • Solid growth in net interest income (including commission income from transferred loans): Up 24.4 % y/y (10.5 %
Slide 3: Strong development for core operations
Strong development for core operations Sharp increase in NII and good underlying development in commission income Net interest income, net commission income and operating expenses (NOK mill.) 1400 15% 642 540 583 494 456 478 14% 428 451 463 452 429 466 1000 324 352 342 324 251 264 276 275 313 297 31
Slide 4: Financial targets and achievements in 2022
Financial targets and achievements in 2022 Long-term goals versus actual results Profitability Return on equity at least 11 % 10.5 % Dividends 50 % pay-out ratio1 60 % Solidity Regulatory requirement + 100 bps2 17.7 % Costs Max 4 % cost increase in parent bank 6.1 % 1. Out of profits after taxes tak
Slide 5: An eventful year for the bank
An eventful year for the bank 5% 9.9 % 5
Slide 6: Further strengthening of our sustainability efforts in 2022
Further strengthening of our sustainability efforts in 2022 The bank reports and follows up on our net zero committment (see next Annual Report) New products Reporting 6
Slide 7: Very good feedback on our corporate social responsibility and reporting
Very good feedback on our corporate social responsibility and reporting Bank has taken a credible leadership role in sustainable financing 7
Slide 8: The most important feedback: High customer satisfaction
The most important feedback: High customer satisfaction Important factor in achieving our strategic objectives Customer relationship index (TRIM*) for SpareBank 1 Østlandet’s retail customers 70 67 66 66 64 2014 2016 2018 2020 2022 Sources: Kantar, SpareBank 1 Østlandet. 8 * Last survey from period
Slide 9: Customer dividends: More than NOK 300 mill. to be paid in 2023
Customer dividends: More than NOK 300 mill. to be paid in 2023* Almost NOK 1.5 bill. paid to customers since the customer dividend was launched Customer dividends paid, NOK mill. 380 1 455 1 700 295 306 180 220 227 700 202 206 -20 -300 2018 2019 2020 2021 2022 2023* Annual payments Accumulated payme
Slide 10: Our activities in the local community span widely
Our activities in the local community span widely 10
Slide 11: Sparebankstiftelsen Hedmark has donated almost NOK 560 mill.
Sparebankstiftelsen Hedmark has donated almost NOK 560 mill. Another NOK 156 mill. shared in 2022 to large and small local projects, with dividends from the bank Annual donations (NOK mill.) and distribution in 2022 559 2022 156 2021 2020 2019 Culture 2018 and Sports society 2017 and 8% outdoor acti
Slide 12: Our employees are also our superpower
Our employees are also our superpower 12
Slide 13: Companies and households in the market area are pessimistic
Companies and households in the market area are pessimistic Expected fall in profitability and investments. Inland region generally more pessimistic than capital region. Business expectations index* Business expectations survey, Eastern Norway* 40 40 60 60 20 20 50 50 0 0 40 40 -20 -20 30 30 2017 20
Slide 14: Challenging times are good times for the savings bank model
Challenging times are good times for the savings bank model • In challenging times, the Norwegian savings bank model has performed strongly. • Good advice and local knowledge supports a solid lending portfolio. • We will contribute with good solutions for existing customers, also those that experien
Slide 15: Revised financial targets: RoE-target increased to 12 %
Revised financial targets: RoE-target increased to 12 % Cost target reflects high inflation, strategic initiatives and regulatory requirements Profitability Return on equity at least 12 % Dividends 50 % pay-out ratio1 Solidity Regulatory requirement + 100 bps2 Costs 2023: Cost growth within 5 % in p
Slide 16: Financial Accounts
2022 FINANCIAL ACCOUNTS
Slide 17: A strong quarter, with good results from core operations
A strong quarter, with good results from core operations Financial accounts 4Q 2022 and 2022 (same period last year in brackets) • Profit after tax in 4Q22 of NOK 622 million (NOK 505 million) Profit after tax • Profit after tax in 2022 of NOK 1,948 million (NOK 2,022 million). • ROE in 4Q22 of 12.9
Slide 18: Income statement
Income statement Group 4Q22 3Q22 4Q21 2022 2021 Net interest income 789 684 563 2,693 2,161 Net commission income 327 351 365 1,375 1,430 Other income 43 44 59 213 233 Dividends 14 1 0 43 21 Net profit from ownership interest 113 37 126 186 405 Net income from financial assets/liabilities 46 -27 -14
Slide 19: Net interest income
Net interest income Strong growth. High volume growth and improved deposit margins. Low commissions from covered bond companies. Net interest income incl. commissions from covered bond companies (MNOK and %) 1300 2.00% 1.83% 1.80% 1100 1.55% 1.60% 1.44% 1.50% 1.60% 10.5% 900 835 1.40% 756 46 718 671
Slide 20: Lending margins
Lending margins Somewhat lower mortgage margins from higher money market interest rates, but rise in corporate margins Lending margins, parent bank (%)* 2.49% 2.33% 2.39% 2.22% 2.00% 1.88% 1.76% 1.21% 1.03% 1.09% 0.40% 0.37% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21
Slide 21: Deposit margins
Deposit margins Sharp increase driven by higher money market rates Deposit margins, parent bank (%)* 1.95% 1.65% 0.81% 1.20% 0.73% 0.95% 0.43% 0.23% 0.50% 0.44% 0.28% 0.08% 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 Deposit margin Retail custo
Slide 22: Loan volumes and growth
Loan volumes and growth High activity in the corporate market, slower pace in the retail market at the end of the year Gross lending (NOK billion) Lending growth (12 months, %) Last national* 186.7 188.7 Households: 4.2% 183.3 173.7 177.8 1.1 % Non-fin corp.: 8.0% 1.8 % 2.4 % 3.1 % 3Q22; 16.6 % 16.1
Slide 23: Highly collateralised mortgages, some more mortgage deferral applications
Highly collateralised mortgages, some more mortgage deferral applications Bank closely follows up payment problems, but far fewer customers than expected have problems LTV by exposure* Share of retail customers with interest-only mortgage, % 96.3 % 12 12 10 10 8 8 6 6 4 4 2 2 3.1 % 0.3 % 0.2 % 0 0 B
Slide 24: Deposit volume and growth
Deposit volume and growth Solid deposit growth through the year. Quarterly growth in retail deposits, lower corporate deposits Deposits (NOK billion) Deposit growth (12 months, %) 100.0 98.9 98.8 92.2 93.9 -0.1 % -1.1 % 6.5 % 1.9 % 44.6 44.5 44.1 40.9 41.6 4Q21; 10.8 % 3Q22; 10.5 % 7.8 % 6.8 % 3Q22;
Slide 25: Commission income
Commission income Good growth from payment services and insurance. Lower real estate commissions. Demerger impacts accounting Commision income and other income, excluding covered bond companies (NOK million) 342 316 324 324 304 16 17 35 18 18 15 35 38 38 36 49 31 28 Commission income from credit car
Slide 26: Profits in subsidiaries
Profits in subsidiaries Profit after taxes (NOK million) 4Q22 4Q21 Sparebank 1 Finans Østlandet AS - Group 24.1 41.4 EiendomsMegler 1 Innlandet AS 1.7 - 1.9 EiendomsMegler 1 Oslo Akershus AS - Group 0.9 1.2 SpareBank 1 ForretningsPartner Østlandet AS - Group * - 3.1 - 4.3 Subsidiaries 23.6 36.4 * Sp
Slide 27: Net income from financial assets and liabilities
Net income from financial assets and liabilities Good result from SB1 Group, net positive contribution from other financial items Net income from financial assets and liabilities, NOK million Selected valuation changes: 172 • Liquidity portfolio incl. 113 14 hedges: NOK 53 mill. 0 100 16 113 Dividen
Slide 28: Operating expenses
Operating expenses Restructured accounting operations, lower real estate commission pay. Parent bank cost growth in 2022 of 6.1 % Operating expenses by item (NOK million) Operating expenses, by unit (NOK mill.) 531 600 504 520 517 496 531 520 517 500 504 496 88 65 85 63 66 15 150 119 19 19 26 15 18
Slide 29: Loan loss provisions
Loan loss provisions Increased model-based losses, but still very low write-offs 4Q21 1Q22 2Q22 3Q22 4Q22 Parent bank 24 6 -61 16 58 SB1FØ 3 -2 2 3 6 Group 28 4 -59 19 63 Losses as a percentage of total lending 0.09 % 0.01 % -0.19 % 0.06 % 0.20 % Loan loss provisions (NOK million) 4Q21 1Q22 2Q22 3Q2
Slide 30: 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.) 86.8 % 800.0 18 % 86.0 % 86.1 % 86.3 % 85.8 % 17.3 % 727 700.0 657 17 % 623 587 588 600.0 9.0 % 17 % 8.3 % 8.4 % 8.5 % 16.3 % 8.0 % 500.0 16 % 400.0 15.8 % 15.5 % 16 % 30
Slide 31: High CET-1 ratio, well above regulatory requirements
High CET-1 ratio, well above regulatory requirements Somewhat lower than in Q3-22, due to higher dividend, basis swap effects and higher risk-weighted assets. 16,8 % 16,3 % 17.8 % 18.0 % 18.2 % 17.7 % 16.8 % 17.2 % 1.0 % 1.0 % 9.0 % 9.5 % 1.8 % 1.8 % 4.5 % 4.5 % 2018 2019 2020 2021 3Q-22 4Q-22 Curre
Slide 32: Corporate Market: Status and Strategy
2022 CORPORATE MARKET: STATUS AND STRATEGY
Slide 33: The relationship bank
The relationship bank Good customer relations and advice combined with leading digital solutions. 33
Slide 34: High customer satisfaction
High customer satisfaction The savings bank model is valued by our corporate customers Customer relationship index (TRIM*) for SpareBank 1 Østlandet’s corporate customers 69 67 66 63 2014 2016 2018 2020 2022 Sources: Kantar, SpareBank 1 Østlandet. 34 * Last survey from period Feb-Apr 2022. TRIM-inde
Slide 35: Geographical strategy: Main axis from Oslo to Hedmark
Geographical strategy: Main axis from Oslo to Hedmark Market leader in Inland region and Northern Akershus, selective growth in Oslo Corporate loans per county, parent bank, % Inland 41.3 % Viken 30.0 % Oslo 14.0 % INLAND Other areas 2.4 % Corporate loans per county, parent bank, y/y i % Inland 6.8
Slide 36: Real estate and agriculture are our largest corporate exposures
Real estate and agriculture are our largest corporate exposures A reflection of the geography in which we operate Loans to customers (NOK bill. and percent) 22,6 Real estate activities (52%) 6,8 Agriculture and forestry (16%) 5,6 Construction (13%) 2,1 Wholesale and retail trade (5%) 1,5 Others (3%)
Slide 37: Geography and industry segments are closely related
Geography and industry segments are closely related Our lending share to commercially-related real estate is on par with all lending in the market area Banks in our market area SB1Ø corporate exposure 65 % 65 % In our market area, 65 % of banks’ corporate In our corporate loan portfolio, 65 % of len
Slide 38: We will be a clear driver of the sustainable transition
We will be a clear driver of the sustainable transition Lending to new buildings, sustainable renovation, solar panels, sustainability in agriculture etc. Actual and targeted carbon intensity in the corporate portfolio BE OPPDATERER Science-based target Reported carbon intensity 38
Slide 39: Strong loan growth, improving margins
Strong loan growth, improving margins Effects from repricing come later than the rise in money market rates Lending growth (12 months, %) Last national* Corporate margins vs 3 mth. Nibor, %** Non-fin corp.: 8.0% 3.5 % 3.31% 3Q22; 16.6 % 16.1 % 3.0 % 2.5 % 4Q21; 11.1 % 2.00% 2.0 % 1.5 % 1.20% 1.0 % 0
Slide 40: Commercial real estate is the bank's 2nd largest customer segment
Commercial real estate is the bank’s 2nd largest customer segment NOK 28.2 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.
Slide 41: CRE for lease: Attractive location, diversified rental type
CRE for lease: Attractive location, diversified rental type 96 % 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 42: CRE for lease: Good collateral and conservative lending practices
CRE for lease: Good collateral and conservative lending practices Loan portfolio is well positioned for higher yields in the commercial real estate market Share of lending according to LTV* Corp. arrears below 90 days (MNOK)** 600 61.0 % 500 400 300 27.5 % 200 8.7 % 100 1.1 % 1.7 % 0.0 % 0 Jan-22 Ma
Slide 43: Why invest in SpareBank 1 Østlandet (SPOL)?
Why invest in SpareBank 1 Østlandet (SPOL)? 43
Slide 44: 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 45: Appendix Financials/ECC
2022 APPENDIX Financials/ECC
Slide 46: Profit after tax and return on equity
Profit after tax and return on equity Profit after tax (NOK mill.) Return on equity (%) 622 12.9% 536 12.2% 505 11.1% 441 9.4% 350 7.7% 4Q21 1Q22 2Q22 3Q22 4Q22 4Q21 1Q22 2Q22 3Q22 4Q22 46
Slide 47: Key financials - quarterly (1)
Key financials - quarterly (1) Pre-tax profit (NOK million) Net interest income and commission fees from covered 751 bond companies (NOK million) 542 573 575 835 480 677 718 756 671 4Q21 1Q22 2Q22 3Q22 4Q22 4Q21 1Q22 2Q22 3Q22 4Q22 Net commission income excl. covered bond companies Operating expense
Slide 48: Key financials - quarterly (2)
Key financials - quarterly (2) Impairments on loans and guarantees (NOK million) 63 CET-1 ratio 18.0 % 18.0 % 18.0 % 18.2 % 17.7 % 28 19 4 -59 4Q21 1Q22 2Q22 3Q22 4Q22 4Q21 1Q22 2Q22 3Q22 4Q22 Lending growth last 12 months, inc. transferred loans Deposit growth last 12 months 8.1 % 8.4 % 9.4 % 9.6 %
Slide 49: 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 1 137 1 131 1 130 1 120 1 121 174 170 162 123 115 SpareBank 1 ForretningsPart
Slide 50: Contribution to changes in net interest income
Contribution to changes in net interest income Contribution to change in NII excl. commissions from covered bond companies, MNOK ESTIMATE 308 -164 -45 7 0 789 684 *Interest income and expenses from volume growth is calculated as the change in average volume per quarter using interest rates equal to
Slide 51: 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. 18 Aug-22 22 Sep-22 3 Nov-22 15 Dec-22 Norges Loans in subsidiaries Bank 10 10 9 24 25 25 Effective dates Nibor-linked loans new loans and 24 Aug-22 29 Sep-22 10 Nov-22 21 Dec-22 49 50 51 deposits LO-loa
Slide 52: Structure on funding and security holdings also affect NII
Structure on funding and security holdings also affect NII Most rate fixings of own balance sheet occur towards end of the quarter. Covered bond funding lags Nibor. Net rate fixings per month, share of quarter, %** Securities, NOK bill.* 53% 52.4 % 3.5 51% 40.6 % 3.0 30% 32% 19% 2.5 16% 28 26 26 7.0
Slide 53: Profits in joint ventures
Profits in joint ventures Profit after taxes (NOK million) 4Q22 Ownership 4Q21 Ownership SpareBank 1 Gruppen AS - Group* 752.2 12.40 % 1,080.0 12.40 % SpareBank 1 Forvaltning AS 27.8 6.26 % 74.8 5.40 % SpareBank 1 Boligkreditt AS 7.2 22.42 % 0.2 23.15 % SpareBank 1 Næringskreditt AS 10.1 15.66 % 3.3
Slide 54: SpareBank 1 Gruppen
SpareBank 1 Gruppen Quarterly post-tax profits (NOK million). SpareBank 1 Gruppen and selected subsidiaries SpareBank 1 Gruppen Fremtind Forsikring (insurance) 550 1080 337 212 170 79 752 4Q21 1Q22 2Q22 3Q22 4Q22 SpareBank 1 Forsikring (insurance) 524 207 142 94 173 3 4Q21 1Q22 2Q22 3Q22 4Q22 -18 -1
Slide 55: Loan losses
Loan losses Loan losses (NOK million) 151 130 63 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 4Q22 55
Slide 56: Cyclically stable loan portfolio
Cyclically stable loan portfolio Lending to customers per sector (% and NOK million) Private customers 42.0 %/79 236 Retail market 72.0 %/135 825 SB1 Boligkreditt 30.0 %/56 590 Real estate (incl. SB1 Næringskreditt) 13.5 %/25 532 Primary industries 4.1 %/7 669 Commercial services/Public sector 3.2 %
Slide 57: 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 37.4 %/ 70 653 4.6 % Viken 30.5 %/ 57 619 13.2 % Oslo 28.0 %/ 52 842 8.0 % Other areas 4.1
Slide 58: 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 34.4 %/ 46 711 3.6 % Viken 35.0 %/ 47 593 9.6 % Oslo 26.6 %/ 36 068 3.6 % Other areas 4.0 %/ 5 452 13.9 % Trø
Slide 59: 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 45.3 %/ 23 942 6.8 % Viken 19.0 %/ 10 026 34.3 % Oslo 31.7 %/ 16 773 18.9 % Øvrige 4.1 %/ 2 1
Slide 60: 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% 67% 67% 66% 66% 66% 66% 65%65% 65%65% 65% 65% 64% 64% 63%64% 63%63% 62% 62%62% 62% 62% 61%
Slide 61: 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 39.2 % 45.0% 40.0% 30.6 % 35.0% 30.0% 24.1 % 25.1 % 25.0% 20.9 % 20.0% 17.3 % 15.0% 12.5 % 8.8 % 8.5 % 10.0% 6.3 % 6.6 % 5.0% 0.0% < NOK 1 NOK 1-2.5 NOK 2.5-5 NOK 5-1
Slide 62: 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 4Q22: 96.3 % City of Oslo Other areas 7.2 % (8 % quota) 8.7 % (10 % quota) Bank uses the flexibility quot
Slide 63: Capital structure and allocation of 2022 profit
Capital structure and allocation of 2022 profit In line with dividend policy, for owners and society (through primary capital) ILLUSTRATION Profit after controlling Gifts and interest donations NOK 1 880 million 70.0 % 30.0 % Foundation Owners Primary capital NOK 411 million 52.1% Dividends Dividend
Slide 64: SPOL
SPOL Metrics for the equity capital certificate 31.12.2022 31.12.2021 • SPOL return: Market price (NOK) 121.20 145.60 • Return 4Q225 13.1 % Market capitalisation (NOK million ) 14 039 16 865 • Return y/y5 - 13.2 % Book equity per ECC 1) 112.71 106.61 • Liquidity in 4Q22 compared to same period in 20
Slide 65: 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 65
Slide 66: 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 — Q4 2022 Earnings Presentation on 6ix