Sparebank 1 Smn · OSL:MING
Sparebank 1 Smn — H1 2017 Earnings Presentation
51 slides from Sparebank 1 Smn's earnings presentation, Aug 8, 2017
Slide 1: 1st half 2017
1st half 2017 8. August 2017
Slide 2: Continuing good trend and strong growth in keeping with plan
Continuing good trend and strong growth in keeping with plan The bank is gaining efficiency, the Good profit in 1st half 2017 target is zero cost growth also for 2017 The bank is growing in terms of lending, deposits, insurance, saving Dividend 50 per cent and investment, estate agency and accountin
Slide 3: SpareBank 1 SMN, the region's most important financial institution
SpareBank 1 SMN, the region’s most important financial institution SpareBank 1 SMN History 216,000 retail customers Established in 1823 12,600 corporate customers Sparebanken Midt-Norge since 1985 Market leader in the region Listed on Oslo Børs since 1994 Loan volume NOK 140bn SpareBank 1 Alliance s
Slide 4: More moderate growth in house prices. Continued low unemployment rate in the region
More moderate growth in house prices. Continued low unemployment rate in the region 12-month growth in house prices June 2015 to June 2017 Unemployed in per cent of the labour force (NAV) Monthly figures - June 2016 and June 2017 June 2016 June 2017 2.9 2.6 2.9 2,7 2.2 2.0 2.4 2.1 Norge Nord- Sør-Tr
Slide 5: Stable trend in the regional economy
Stable trend in the regional economy Excellent profits in fishery and aquaculture which are important industries in the bank’s market area. Area Status Outlook Area Status Outlook Macro Offshore Service Vessels Construction Maritime industry Commercial property Aquaculture Retail trade Fishery 1st h
Slide 6: Good profits and strong capitalization. Lower loan losses
Good profits and strong capitalization. Lower loan losses Return on equity CET 1 14,1% 14,3% 14,9% 14,8% 15,0% 12,9% 12,2% 11,3% 10,5% 9,4% Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Earnings per ECC Loan losses as a percentage of total loans 2,21 2,21 0,39% 2,00 1,92 0,36% 1,73 0,2
Slide 7: Total growth lending 8.5 % last 12 months
Total growth lending 8.5 % last 12 months Lending RM +10.5 % last 12 months High growth in home mortgage lending 10,5% • Of the growth in home mortgage 10,2% lending, 2/3 refers to established 85,2 94,1 customers and 1/3 to new customers 77,3 • Share of retail lending increased from 61 to 65 % last
Slide 8: Lending margins
Lending margins Increased lending margins Retail and Corporate Comments • Mortgage lending rates raised 3,00 3,05 3,05 3,00 2,93 2,86 by up to 20 bp as from 2,81 2,75 January 2017 2,67 2,62 2,66 2,57 2,68 2,69 2,71 2,62 2,75 2,45 2,47 2,52 2,40 2,31 2,33 2,28 2,28 2,06 2,00 1,92 1,78 1,81 1,70 1,71
Slide 9: Total growth deposits 12.7 % last 12 months
Total growth deposits 12.7 % last 12 months Deposits RM + 6.2 % +5,4% +6,2% 28,6 30,2 32,0 Share of deposits 30.6.15 30.6.16 30.6.17 45% RM Deposits CM + 18.0 % CM 55% +18,0% -1,7% 43,5 37,5 36,9 30.6.15 30.6.16 30.6.17 1st half 2017 9
Slide 10: FTEs reduced at the parent bank. Group FTEs rising
FTEs reduced at the parent bank. Group FTEs rising in keeping with established strategy for the subsidiaries FTEs at parent bank 730 • Considerable reduction in the number of 720 FTEs at the parent bank in recent years, primarily through natural wastage 645 • Target for 2017 is 590 FTEs at parent ba
Slide 11: More efficient banking operations and increased activity in the subsidiaries
More efficient banking operations and increased activity in the subsidiaries Cost growth in the group 1.169 • Cost growth in the subsidiaries 1.016 • SMN Regnskapshuset’s acquisition substantially 556 increases cost base Subsidiaries 413 • Stronger business focus at SpareBank 1 Markets • Start-up co
Slide 12: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income 2.036 1.791 1.550 827 • Robust income platform 700 • A wide range of products both from the Commissions 441 166 parent bank, the subsidiaries, and the Comm. covered bond companies 175 149 SpareBank 1 Group • High gr
Slide 13: Strengthened focus on income diversification. Subsidiaries show solid profit growth
Strengthened focus on income diversification. Subsidiaries and product companies show solid profit growth SpareBank 1 Finans Midt-Norge EiendomsMegler 1 Midt-Norge • Pre-tax profit of NOK 58m (49m) • Pre-tax profit of NOK 23m (43m). The profit performance is weakened by start- • Solid market positio
Slide 14: SpareBank 1 SMN is strengthening its position as the leading finance house
SpareBank 1 SMN is strengthening its position as the leading finance house in the region, taking market shares, increasing product spectre and strengthening business platform Larger customer platform, increased volumes and increased incomes Number of customers Total loan volume Operating income +8%
Slide 15: From a traditional bank to a digital bank with a personal and local signature
From a traditional bank to a digital bank with a personal and local signature Digital bank with a Traditional bank digitalised personal and local signature 1st half 2017 15
Slide 16: Increased sales across all channels and share of digital sales
Clear planning and design of distribution model will ensure increased selling power and cost effectiveness Increased sales across all channels - from a total of 120,000 in 2016 to 170,000 to 200,000 in 2020 Increased share of digital sales and increased sales effectiveness - from 20,000 in 2016 til
Slide 17: The bank expects lower loan losses in 2017 than in 2016
The bank expects lower loan losses in 2017 than in 2016 Losses per quarter, NOKm Distribution 1st half 2017 170 130 PM 7 118 99 89 86 56 56 Leasing 3 35 NL 166 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Loan losses including collective losses provisions 0.25 % (0.44 %) of gross lending as
Slide 18: Offshore Service Vessels: restructuring largely completed
Restructuring largely completed Offshore Service Vessels* – Largest client groupings EAD - MNOK 0 200 400 600 800 1.000 No. of vessels LTV Impairment 4 57 % 36 76 % 9 64 % 2 109 % * 6 105 % * 4 75 % * 3 46 % Obligors 2 46 % 1 64 % 3 42 % 2 78 % 1 68 % 2 53 % 1 84 % 1 8% Restructured Under process No
Slide 19: Strong capitalization. Capital target achieved and high leverage ratio
Strong capitalization. Capital target achieved and high leverage ratio Development CET1 14,9 15,0 13,6 11,2 Development leverage ratio 7,4 7,2 6,7 6,0 2014 2015 2016 Q2 17 Development CET 1 without transitional arrangements (Basel III) 2014 2015 2016 Q2 17 16,2 16,4 15,0 11,2 2014 2015 2016 Q2 17 1s
Slide 20: SpareBank 1 SMN is considering selling its head office complex
SpareBank 1 SMN is considering selling its entire head office complex, or parts of it, in Trondheim • «SpareBank 1 SMN is considering selling its entire head office complex, or parts of it, in Trondheim. The property is located in the city centre, at Søndre gate 4-10, and extends from Kongens gate t
Slide 21: SpareBank 1 SMN is fully focused on creating value for its owners
Sparebank 1 SMN is fully focused on creating value for its owners • Ambitious ROE targets Utbytte per egenkapitalbevis • Dividend policy revised to permit payouts above 50 per cent 3,00 2,25 2,25 1,75 • Payout policy that prevents negative dilution effects • Changes to statutes have given EC holders
Slide 22: SpareBank 1 SMN intends to be one of the best performing banks
SpareBank 1 SMN intends to be one of the best performing banks Customer oriented Efficient Best for customer experience Nominal costs at the parent bank unchanged from 2014 to 2018 Continuing to strengthen market position Profitable Utbytte Return on equity among the best Payout ratio in the region
Slide 23: Appendix
Appendix 1st half 2017 23
Slide 24: First half 2017
First half 2017 Net profit NOK 759m (771m), CET1 15.0 % (14.1 %). Leverage return on equity 9.9 % (10.9 %) ratio 7.2 % (6.8 %) Result of core business NOK 692m Growth in lending RM 10.5 % (10.2 (487m) exclusive of loan losses. %) and CM 4.8 % (0.4 %), deposits Loan losses NOK 175m (NOK 287m) 12.7 %
Slide 25: Key figures
Key figures Return on equity CET1 15,1% 14,9% 15,0% 13,6% 14,1% 10,7% 11,3% 10,9% 11,2% 9,9% 2014 2015 2016 30.6.16 30.6.17 2014 2015 2016 30.6.16 30.6.17 Earnings per ECC Loan losses as a percentage of total loans 8,82 7,91 0,44 7,02 0,39 0,25 3,71 3,65 0,14 0,08 2014 2015 2016 30.6.16 30.6.17 2014
Slide 26: Profits
Profits Profits 1st half and five last quarters 1st half 1st half NOK mill 2017 2016 Change Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 Net interest 1.043 942 102 521 522 493 449 472 Commission income and other income 993 849 144 538 455 414 412 448 Operating income 2.036 1.791 246 1.059 977 907 860 921 Total ope
Slide 27: Deposit margins Retail and Corporate
Deposit margins Retail and Corporate Comments Deposits RM • Margins improved due to Deposits CM repricing last two years • Decreased Nibor has 0,24 0,17 0,30 0,36 0,33 weakened the margins in 1st 0,19 0,05 half 2017 -0,15 -0,10 -0,33 -0,39 -0,33 -0,34 -0,35 -0,48 -0,53 -0,46 -0,03 -0,09 -0,19 -0,25
Slide 28: Change in net interest income
Change in net interest income 1st half 2017 compared with 1st half 2016 Comments • Increased lending volume the main Net interest this quarter 1.043 reason for higher net interest income Net interest at same period last year 942 Change 102 • Limited changes due to margin Obtained as follows: movemen
Slide 29: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income Commissions 1st half 2017 and 2016 mill kr 2017 2016 Change 2.036 Payment transmission income 103 94 8 1.791 Creditcards 29 30 -1 1.550 827 Commissions savings and asset management 44 42 2 700 Commissions insurance
Slide 30: Operating income
Operating income Commission income Commission income covered bonds Operating income per quarter last two years Net interest income 1.059 977 922 907 843 850 869 860 448 379 327 374 350 299 297 342 76 90 79 81 74 75 64 70 466 473 469 472 493 522 521 449 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
Slide 31: Subsidiaries
Subsidiaries Pre tax profit subsidiaries 1st half and five last quarters 1st half 1st half 2017 2016 Change Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 EiendomsMegler 1 Midt-Norge (87 %) 23 43 -20 19 4 7 16 33 SpareBank 1 Regnskapshuset SMN (95 %) 36 26 10 20 15 10 7 22 SpareBank 1 Finans Midt-Norge (90 %) 58 49
Slide 32: Associated companies
Associated companies Profit shares after tax and five last quarters 1st half 1st half 2017 2016 Change Q2 17 Q1 17 Q4 16 Q3 16 Q2 16 SpareBank 1 Gruppen (19,5 %) 134 141 -7 68 66 97 79 80 SpareBank 1 Boligkreditt (18,4 %) -37 22 -59 -13 -24 -26 -13 -2 SpareBank 1 Næringskreditt (36,5 %) 13 15 -2 5 8
Slide 33: Return on financial investments
Return on financial investments 1st half 2017 and 1st half 2016 1. halvår 1. halvår NOKm 2017 2016 Endring Capital gains shares 34 69 -35 Gain/(loss) on derivatives -3 21 -24 Gain/(loss) on other financial instruments at fair value (FVO) 15 20 -4 Foreign exchange gain / (loss) 19 28 -9 Gain/(Loss) o
Slide 34: SpareBank 1 SMN will come across as cost-efficient also as a group
SpareBank 1 SMN will come across as cost-efficient not just on an individual basis but also as a group High operating margins in EM1 and Profitable and non-capital-intensive Regnskapshuset SMN subsidiaries: • Both EM1 and Regnskapshuset SMN are 0,91 companies making a sound profit – and 0,84 0,83 re
Slide 35: Loan to value mortgages
Loan to value mortgages Last two years LTV mortgages • 98.4 % of the exposure has an LTV of 93,0% 93,5% less than 85 % Q2 16 • Exposure with LTV higher than 85 Q2 17 points 1.6 % 5,4% 4,7% 0,9% 1,2% 0,7% 0,6% Under 70 % 70 - 85 % 85 - 100 % Over 100 % 1st half 2017 35
Slide 36: Very low levels on loans in default
Very low levels on loans in default (0,18 %). Reduction in problem loans in 2017 after restructuring of offshore exposures Last two years, per quarter Problem loans Loans in default Loans in default % of total loans 1.474 1.360 1.198 1.151 1.078 448 399 411 0,19 0,17 0,16 0,16 0,16 0,16 0,15 0,18 21
Slide 37: Stable credit risk
Stable credit risk SpareBank 1 SMN’s loans distributed on risk class and SpareBank 1 SMN’s loans distributed on size of customer share of Exposure At Default engagement and share of Exposure At Default 84,5% 85,5% Share of EAD 30.6.2016 Share of EAD 30.6.2016 68,5% 69,3% Share of EAD 30.6.2017 Share
Slide 38: EAD Offshore: 5,467 mill
Offshore risk is primarily in the PSV segment. Most of the exposures have been restructured The offshore segment Segment and EAD Risk class (share of offshore in %) distribution 1. Offshore exposure is 5.5 bill (6.3) Subsea 2,137 (39%) • Offshore is 3.5 % of total credit exposure Low risk • 92 vesse
Slide 39: Høy nedskrivningsandel på tapsutsatte engasjementer
Høy nedskrivningsandel på tapsutsatte engasjementer Risk class distribution Impairments per risk class and share of EAD Last five quarters (bill NOK) 30 June 2017 Individua Share of 2,7 NOKm EAD l Group Total EAD 2,6 Q2 16 Q1 17 Low risk 811 2 2 0,3 % 2,4 Medium risk 2.718 34 34 1,3 % Q3 16 Q2 17 2,
Slide 40: High share mortgages and diversified portfolio SMEs
High share mortgages and diversified portfolio SMEs Lending by sector as a share of total lending and change last 12 months, per cent Mortages 42 % 15 % Mortages funded by cov. bonds 24 % 4% Commercial real estate 10 % 5% Agriculture/forestry/fisheries 8% 20 % Transport and other services 4% 13 % Ma
Slide 41: Balance sheet
Balance sheet Last three years 30.6.17 30.6.16 30.6.15 Funds available 27,8 27,1 19,0 Net loans 106,4 97,0 93,7 Securities 1,5 1,5 1,3 Investment in related companies 5,7 5,7 5,0 Goodwill 0,7 0,6 0,5 Other assets 7,5 9,3 11,3 Total Assets 149,4 141,1 130,9 Capital market funding 49,2 48,4 41,8 Depos
Slide 42: Strengthened capital adequacy
Strengthened capital adequacy As at Q2 2017 and Q2 2016 NOKm 30.6.17 30.6.16 Core capital exclusive hybrid capital 13.806 12.757 Hybrid capital 1.817 1.846 Core capital 15.622 14.604 Supplementary capital 2.026 2.278 Total capital 17.649 16.882 Total credit risk IRB 4.131 4.123 Exposures calculated
Slide 43: Strong development in CET 1 (capital and ratio)
Strong development in CET 1 (capital and ratio). Target of 15.0 % achieved CET 1 Ratio +8% 14,9% 15,0% 15,0% 13,6% 0,9% Other buffers 2,0% 11,1% 11,2% Countercyclical 9,5% 10,0% 2,1% Pilar 2 9,0% 8,0% 2,5% Conservation Buffer 3,0% Systemic Risk 4,5% Equity Capital 2009 2010 2011 2012 2013 2014 2015
Slide 44: Satisfying access to capital market funding
Satisfying access to capital market funding Funding maturity 30. June 2017 Comments 19,6 • SpareBank 1 Boligkreditt is the main funding source through covered bonds. 9,2 NOK 34 billion transferred as of 30. 6,1 6,5 June 2017 1,7 2017 2018 2019 2020 2021 -> • Maturities next two years NOK 16.5 bn: 4,
Slide 45: Key figures ECC
Key figures ECC Last five years 30.6.17 30.6.16 2016 2015 2014 2013 ECC ratio 64,0 % 64,0 % 64,0 % 64,0 % 64,6 % 64,6 % Total issued ECCs (mill) 129,83 129,83 129,83 129,83 129,83 129,83 ECC price 71,75 46,70 64,75 50,50 58,50 55,00 Market value (NOKm) 9.316 6.063 8.407 6.556 7.595 7.141 Booked equi
Slide 46: Earnings per ECC
Earnings per ECC Last two years per quarter 2,21 2,21 2,00 1,92 1,73 1,45 1,49 1,26 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 1st half 2017 46
Slide 47: SpareBank 1 SMN – adjustment to the dividend policy
SpareBank 1 SMN – adjustment to the dividend policy The following wording applied prior to the adjustment: • “SpareBank 1 SMN assumes and expects up to one-half of the owner capital’s share of the net profit to be paid out as dividend and the same proportion of the ownerless capital’s share of the n
Slide 48: Increased influence for equity certificate capital owners
Increased influence for equity certificate capital owners - amendment to the Articles of Association The Supervisory Board decided to amend Article 10-1 of the Articles of Association from Article 10-1 Redemption in the event of merger. Transitional provision • The Regulations on Equity Certificates
Slide 49: Key figures
Key figures Last three years 30.6.17 30.6.16 30.6.15 CET 1 ratio 15,0 % 14,1 % 12,7 % Core capital ratio 16,9 % 16,1 % 14,6 % Capital adequacy 19,1 % 18,7 % 17,3 % Leverage ratio 7,2 % 6,8 % 6,5 % Growth in loans (incl.Boligkreditt and Næringskreditt) 8,5 % 6,5 % 8,4 % Growth in deposits 12,7 % 1,3
Slide 50: Target of 12% stands firm and enhanced focus on profitability
Target of 12% stands firm and enhanced focus on profitability Continued growth on profitable products and on Return on equity 2016 capital-light product areas Volume growth Efficient allocation and use of capital in the group measured against required yield Growth in other income Correct risk pricin
Slide 51: SpareBank 1 SMN
SpareBank 1 SMN 7467 TRONDHEIM CEO Finn Haugan CFO Kjell Fordal Switchboard Tel +47 900 41 002 Tel +47 905 41 672 Tel +47 07300 E-mail finn.haugan@smn.no E-mail kjell.fordal@smn.no Internet adresses: SMN homepage og internet bank: www.smn.no HuginOnline: www.huginonline.no Equity capital certificate