Sparebank 1 Smn · OSL:MING
Sparebank 1 Smn — Q2 2019 Earnings Presentation
49 slides from Sparebank 1 Smn's earnings presentation, Aug 8, 2019
Slide 1: 1st half 2019 – Second quarter 2019
1st half 2019 Second quarter 2019 8. August 2019
Slide 2: Very good profits 1st half 2019
Very good profits 1st half 2019 Pre loss result of core business NOK 1.066m (991m) Loan losses NOK 126 m (127m) Net profit NOK 1.729m (1.209m) ROE ex gain Fremtind 13.8 % Leverage ratio 7.5 % (7.4) ROE 19.0 % (14.4) Growth in lending RM 6.7 % (10.6) and CM 3.6% (2.0) Growth in deposits 7.7 % (6.3) C
Slide 3: Good profits and strong capitalization
Good profits and strong capitalization Return on equity CET1 19,0% 14,8% 14,6% 14,6% 15,0% 15,0% 14,4% 11,3% 11,5% 12,2% 2016 2017 2018 30.6.18 30.6.19 2016 2017 2018 30.6.18 30.6.19 Earnings per ECC Loan losses as a percentage of total lending 9,97 0,39% 8,71 8,23 7,93 5,75 0,24% 0,17% 0,17% 0,16%
Slide 4: Industry indicator: Position and prospects unchanged from previous quarter
Industry indicator: Position and prospects unchanged from previous quarter Fisheries Aquaculture Agriculture Retail trade Construction Commercial property Maritime industry Offshore services 1st half 2019 4
Slide 5: House prices levelling out at a high level, low unemployment
House prices levelling out at a high level Low unemployment House prices 2005 – Q2 2019 Monthly figures July 2018 and July 2019 July 18 July19 2,0 Norway 2,4% Trondheim 2,2% 2,1% 2,0% 2,2% 2,2% 1,5 1,0 0,5 Norge Trøndelag Møre og Romsdal 0,0 2005 2007 2009 2011 2013 2015 2018 1st half 2019 Sources:
Slide 6: Good regional development with growing labour shortage
Expectations indicator A good development in the region with Labor shortage for submarine good growth and high activity, but a contract growing labour shortage Output growth by region, last three months and next six months Mid-Norway Accelerating growth in 4,0 Trøndelag Mid-Norway Møre og Romsdal No
Slide 7: Increased revenues, number of customers and volumes
Increased revenues, number of customers and volumes Number of customers Total loan volume Operating income +10% +37% +52% 238 216 164 2.470 120 1.622 2014 Q2 2019 2014 Q2 2019 Q2 2014 Q2 2019 Stronger customer growth Stronger lending Strengthening incomes than population growth growth than credit on
Slide 8: Strong market position for subsidiaries
Strong market position for subsidiaries SpareBank 1 Finans Midt-Norge NOK 74m (72m) Solid market position. Leasing / corporates NOK 3.7bn and car loans 4.7 bn. Strong growth in car loans SpareBank 1 Regnskapshuset SMN NOK 62m (44m) Turnover NOK 292m 1st half 19 (NOK 253m). Consolidating and digitali
Slide 9: Improving efficiency reduces number of FTEs in parent bank
Improving efficiency and effectiveness reduces number of FTEs in parent bank FTEs at parent bank • No. of FTEs at the parent bank reduced substantially in recent years 720 • In the same period 100 new staff members have been recruited, in particular in the areas of digital development and control 64
Slide 10: Active role in development of joint companies and solutions
Active role in the development of joint companies and solutions in Norway’s banking market Millions of transactions per quarter, 3Q17 – 2Q19 • Growth last 12 months BankAxept = 2% • Growth last 12 months Vipps P2P 45% • Growth last 12 months BankID = 11% • Share NFC/Tap June 2019 = 12% • Growth last
Slide 11: 50 staff members dedicated to anti-money laundering
50 staff members at SMN dedicated to anti-money laundering • The authorities want the banks to intensify their efforts to combat money laundering and terrorist financing • SMN has strengthened this effort through a clearer-cut organisational set-up and increased resource use • We have no evidence to
Slide 12: 100 days learning the ropes
100 days ‘learning the ropes’ • Proud organisation, strong market position and known for «icy nerves strategy» • Good, diversified customer portfolio. Revenue and expense potential between the group entities • Digital distribution to be taken forward, combined with a local presence • Increased focus
Slide 13: Caring adds competitive power in a digital world
«caring adds competitive power, Og i tillegg tar viespecially et betydelig in a digital world» samfunnsansvar og blir godt likt av folk flest 1st half 2019 13
Slide 14: Financial information
Financial information Kjell Fordal, CFO
Slide 15: Good profits and strong capitalization. Lower loan losses
Good profits and strong capitalization. Lower loan losses Return on equity CET 1 15,0% 14,9% 14,6% 14,8% 15,0% 23,3% 17,9% 14,9% 11,1% 9,0% Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Earnings per ECC Loan losses as a percentage of total loans 5,02 0,20% 0,18% 0,17% 0,17% 3,54 0,14%
Slide 16: Strengthened profits
Strengthened profits NOK mill 2019 2018 Change Q2 19 Q1 19 Q4 18 Q3 18 Q2 18 Net interest 1.313 1.149 164 664 649 644 610 581 Commission income and other income 1.157 1.149 9 606 551 543 486 607 Operating income 2.470 2.297 173 1.271 1.200 1.187 1.096 1.188 Total operating expenses 1.404 1.306 98 70
Slide 17: Total growth lending 5.7% last 12 months
Total growth lending 5.7 % last 12 months Lending RM +9.5 % (CAGR) High growth in home mortgage lending 10,6% 6,7% • Residential mortgage market growth of about 5.5 10,4% 10,2% % (C2) last 12 months. 104,1 111,1 94,1 • Growth in retail lending quickened in the second 77,3 85,2 quarter of 2019 after
Slide 18: Lending margins
Lending margins Increasing Nibor challenges the lending margins Comments • Increased Nibor in 2018 and 2019, and mortgage margins have been under pressure 2,67 2,62 2,66 2,56 2,71 2,71 2,70 2,71 2,81 2,80 2,75 2,71 2,73 2,75 2,73 2,69 • Base rate increased by 0.75 2,56 percentage points since 2,06 2
Slide 19: Total growth deposits 7.7% last 12 months
Total growth deposits 7.7 % last 12 months Deposits RM + 6.1 % (CAGR) Good growth in deposits • Stable and good growth in deposits from reatail customers +5,6% +6,0% +7,3% +5,4% • High growth in deposits from corporate customers 2019 30,2 32,0 34,3 36,2 • Deposit-to-loan ratio 71 % (69 %), including
Slide 20: Deposit margins Retail and Corporate
Deposit margins Retail and Corporate Comments Deposits RM Deposits CM • Increased Nibor in 2018 and 2019 has strengthened the 0,59 margins 0,31 0,37 0,24 0,39 0,46 0,19 0,14 0,28 0,27 0,05 0,13 0,14 0,03 0,03 -0,15 -0,10 -0,06 -0,03 -0,06 -0,11 -0,14 -0,13 -0,05 -0,04 -0,05 -0,02 0,02 0,03 -0,19 -0,
Slide 21: Robust income platform and increased commission income
Robust income platform and increased commission income Net interest and other income Commissions 1st half 2019 and 1st half 2018 mill kr 2019 2018 Change Payment transmission income 103 99 4 Creditcards 29 31 -1 2.470 Commissions savings and asset management 45 52 -7 2.297 Commissions insurance 89 8
Slide 22: Cost growth from initiatives at subsidiaries and the bank
Cost growth brought by initiatives both at the subsidiaries and the bank Costs 1st half 2018 and 1st half 2019 • Cost growth at the subsidiaries • Acquisitions by SMN Regnskapshuset • Strengthened commitment at SpareBank 1 Markets 1.404 • Start-up costs BN bolig 1.306 • Acquisition of DeBank • Deter
Slide 23: Lower loan losses
Lower loan losses Losses mainly in the offshore industry Losses per quarter, NOKm Distribution 1st half 2019 Retail parent bank 11 88 78 78 69 67 67 59 48 Corporate parent bank 93 Retail SB1 Finans 14 Q2 17 Q3 17 Q4 17 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Corporate SB1 Finans 8 Loan losses including collec
Slide 24: Low levels on loans in default (0,22%)
Low levels on loans in default (0,22 %) Last two years, per quarter Loans in default, mNOK Loans in default, as a percentage of gross loans 0,19 0,22 0,18 0,19 0,18 0,18 0,19 0,18 356 284 289 275 284 310 288 263 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 1st half 2019 24
Slide 25: High share mortgages and diversified portfolio SMEs
High share mortgages of 68 % and diversified portfolio SMEs. Total lending NOK 164bn Lending by sector as a share of total lending and change last 12 months, NOKbn Mortages 43,4 % 4,1 Mortages funded by cov. bonds 24,5 % 2,9 Commercial real estate 9,0 % 0,1 Agriculture/forestry/fisheries 5,1 % 0,6 T
Slide 26: Offshore exposure less than 3% of total credit risk
Offshore exposure less than 3 % of total credit risk Impairment level corresponds to 12.1 per cent of the offshore portfolio Offshore constitutes a small share of the Subsea and PSV largest segments total credit risk (EAD share) (EAD MNOK) Other 2,7 % Sei smic 117 437 3% 9% PSV 1.520 32 % Subs ea 2.
Slide 27: Balance sheet
Balance sheet 30.6.19 30.6.18 30.6.17 Funds available 29,8 25,1 27,8 Net loans 121,0 114,7 106,4 Securities 2,2 2,5 1,5 Investment in related companies 6,4 5,8 5,7 Goodwill 0,9 0,8 0,7 Other assets 7,0 10,6 7,5 Total Assets 167,3 159,6 149,4 Capital market funding 51,4 53,1 49,2 Deposits 86,6 80,3 7
Slide 28: Strong capitalization
Strong capitalization CET1 14,8 14,6 14,6 15,0 Leverage ratio 7,4 7,2 7,4 7,5 2016 2017 2018 30.6.19 CET 1 without transitional arrangements (Basel III) 2016 2017 2018 30.6.19 16,2 16,5 16,8 17,1 2016 2017 2018 30.6.19 28 1st half 2019
Slide 29: CRR/CRD IV implementation
CRR/CRD IV implementation The Ministry of Finance published a consultation document on 25.6.2019 • The ministry proposes to increase the systemic risk buffer by 1.5% til 4.5% in order to maintain the aggregate level of capital in Norwegian banks upon the removal of the Basel 1 floor and introduction
Slide 30: Ambitious goals
Ambitious goals Profitable 12 % ROE Financially solid CET1 ratio of 15 % An independent, regional Pay out ratio of about 50 % and profitable bank that contributes to the region’s Increased number of satisfied development and value customers 35 % market share and 250 000 customers creation Increased
Slide 31: SpareBank 1 SMN
SpareBank 1 SMN 7467 TRONDHEIM CEO Jan-Frode Janson CFO Kjell Fordal Switchboard Tel +47 909 75 183 Tel +47 905 41 672 Tel +47 915 07 300 E-mail jan-frode.janson@smn.no E-mail kjell.fordal@smn.no Internet adresses: SMN homepage og internet bank: www.smn.no HuginOnline: www.huginonline.no Equity capi
Slide 32: Appendix
Appendix 1st half 2019 32
Slide 33: Finance house offering a wide range of products
Finance house offering a wide range of products Retail customers 224 thousand Corporate customers 15 thousand Loan volume 164 bn Norway’s largest equity-certificate-issuing bank Market leader in the region Co-owner of SpareBank 1 Alliance 1st half 2019 33
Slide 34: History through almost 200 years
History through almost 200 years Strong financial results over time 1823 Established 1985 Sparebanken Midt-Norge 1994 Listed on Oslo Børs 1996 SpareBank 1 Alliance 2005 Acquired Romsdals Fellesbank 2009 Acquired BN Bank/Sunnmøre 1st half 2019 34
Slide 35: Profitable and sustainable
Profitable and sustainable As a regional bank, sustainability and social responsibility are important focal areas for SpareBank 1 SMN SpareBank 1 played its part in preparing the roadmap for green competitiveness in the Norwegian financial sector The sector’s vision is for the « financial sector of
Slide 36: Strategy for sustainability and corporate social responsibility
Strategy for sustainability and corporate social responsibility This strategy builds on the bank’s vision and values, with responsible as the most important underlying precept. SMN is working to concretise the strategy in terms of sustainability, and in so doing is further strengthening its effort a
Slide 37: Development in lending, retail market
Development in lending, retail market Per quarter 2018 and 2019 Slower growth +1,4% +0,6% • The bank’s retail market growth has been very high +3,7% +2,4% +2,2% for a long period +1,8% • Decline in growth as from the fourth quarter of 2018 due to sharper competition • But growth quickened in the sec
Slide 38: Change in net interest income
Change in net interest income 1st half 2019 compared with 1st half 2018 Net interest income strengthened by growth and increased deposit margin; lending margin on residential mortgages under pressure Net interest 1st half 19 1.313 Net interest 1st half 18 1.149 • Net interest income strengthened by
Slide 39: Cost-efficient subsidiaries and group
SpareBank 1 SMN will come across as cost-efficient not just on an individual basis but also as a group Cost / Income Profitable and non-capital-intensive 0,95 0,88 subsidiaries: 0,79 0,40 • The subsidiaries are making a sound profit – 0,26 and requiring little equity capital compared with the group’
Slide 40: Subsidiaries
Subsidiaries Pre tax profit subsidiaries mNOK, SMN's share in parentheseis 2019 2018 Change Q2 19 Q1 19 Q4 18 Q3 18 Q2 18 EiendomsMegler 1 Midt-Norge (87 %) 14 18 -3 23 -9 -29 -11 25 SpareBank 1 Regnskapshuset SMN (89 %) 62 44 18 41 21 14 13 27 SpareBank 1 Finans Midt-Norge (61 %) 74 72 2 35 40 42 3
Slide 41: Associated companies
Associated companies Profit shares after tax mNOK, SMN's share in parentheseis 2019 2018 Change Q2 19 Q1 19 Q4 18 Q3 18 Q2 18 SpareBank 1 Gruppen (19,5 %) 224 117 106 186 38 99 72 81 Gain Fremtind 460 0 460 0 460 0 0 0 SpareBank 1 Boligkreditt (20,7 %) 22 -5 28 8 14 -9 7 -8 SpareBank 1 Næringskredit
Slide 42: Return on financial investments
Return on financial investments NOKm 2019 2018 Change Q2 19 Q1 19 Q4 18 Q3 18 Q2 18 Capital gains shares 107 117 -10 23 84 -48 26 113 Gain/(loss) on derivatives 47 -36 83 24 23 -5 50 23 Gain/(loss) on other financial instruments at fair value 63 142 -79 53 10 -13 11 8 Foreign exchange gain / (loss)
Slide 43: Key figures
Key figures Last three years 30.6.19 30.6.18 30.6.17 CET 1 ratio 15,0 % 15,0 % 14,9 % Core capital ratio 16,6 % 17,0 % 16,8 % Capital adequacy 18,8 % 19,0 % 19,0 % Leverage ratio 7,5 % 7,4 % 7,2 % Growth in loans (incl.Boligkreditt and Næringskreditt) 5,7 % 7,6 % 8,5 % Growth in deposits 7,7 % 6,3 %
Slide 44: Key figures ECC
Key figures ECC Last five years 30.6.19 30.6.18 2018 2017 2016 2015 ECC ratio 64,0 % 63,9 % 64,0 % 64,0 % 64,0 % 64,0 % Total issued ECCs (mill) 129,66 129,31 129,62 129,38 129,64 129,43 ECC price 97,70 84,50 84,20 82,25 64,75 50,50 Market value (NOKm) 12.668 10.926 10.914 10.679 8.407 6.556 Booked
Slide 45: Satisfying access to capital market funding
Satisfying access to capital market funding Funding maturity 30. June 2019 (NOK bn) Comments 18,7 • SpareBank 1 Boligkreditt is the main funding source through covered bonds. NOK 40 billion transferred as of 30. June 2019 9,2 8,6 • Maturities next two years NOK 12.6 bn: 5,8 • NOK 0.3 bn in 2019 0,3
Slide 46: Strong development in CET 1 (capital and ratio)
Strong development in CET 1 (capital and ratio) CET1 Ratio +6% 14,8 14,6% 14,6% 15,0% 15,0% 13,6% 1,1% Other buffers 2,0% Countercyclical 11,1% 11,2% 9,5% 10,0% 1,9% Pilar 2 9,0% 8,0% 2,5% Conservation buffe 3,0% Systemic Risk 4,5% Equity Capital Goal 2009 2010 2011 2012 2013 2014 2015 2016 2017 201
Slide 47: Kraftfull distribusjon
Important instruments for taking an even clearer position in the region among target groups: the family and small and medium businesses Battle arena: Battle arena: Battle arena: Battle arena: Geographical catchment Prioritised target groups Channels Customer needs area FAMILIES Everyday Payments, Di
Slide 48: SpareBank 1 Alliance: National champion, regional focus
SpareBank 1 Alliance: National champion, regional focus • The SpareBank 1 Alliance consists of 14 banks • Operate exclusively in Norway – Norway’s most extensive branch network with approx. 350 branches • But physical branch structure is changing and SpareBank 1 banks are at the forefront of technol
Slide 49: SpareBank 1 Alliance companies
Spare Bank 1 Alliance Members SpareBank 1 SpareBank 1 SpareBank 1 SpareBank 1 Trade Union, Samspar SMN SR-Bank Nord-Norge Østlandet LO Products, commissions, dividends Sales, loan portfolios, capital SB 1 Covered BN Bank SpareBank 1 Group AS Bonds, residential SpareBank 1 Alliance companies SpareBan