gjensidige.com Interim report for Gjensidige bank Group Gjensidige bank ASa

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1 gjensidige.com Interim report for FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS Gjensidige bank Group Gjensidige bank ASa

2 GJENSIDIGE BANK GROUP HIGHLIGHTS FOURTH QUARTER Profit before tax NOK 14.4 million (3.7) Increased return on equity to 4.6 per cent (1.2) Increased customer portfolio Launch of mobile bank and high interest account Opp Finans, new brand for consumer finance, launched in December Profit/loss NOK thousand Total Assets NOK thousand 70,000 20,000 60,000 16,000 50,000 40,000 12,000 30,000 8,000 20,000 10,000 4, Q 4. Q Q 4. Q INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

3 INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS BUSINESS Gjensidige Bank ASA was launched in 2007, with Online Retail Banking in Norway as its main area of business. The Bank has offices in Førde and Oslo. The Bank offers traditional banking products such as current accounts, savings products and secured and unsecured loans. The Bank is one of the largest actors in consumer financing in Norway. By combining Internet banking with a local presence, the Bank has achieved a unique position compared with other Internet-based banks. Since its establishment Gjensidige Bank ASA has purchased services from Sparebanken Sogn og Fjordane. All services are now being insourced by the Bank and the agreement with Sparebanken Sogn og Fjordane expired on Distribution takes place via the group portal, and the group s 21 consultation offices at central locations throughout the country. The Bank s products are also offered through its own customer service centre. The Bank has agreements with Tekna, the Confederation of Vocational Unions (YS), the Norwegian Society of Engineers and Technologists (Nito) and the Norwegian- Farmersand Smallholders Union (NBS) relating- to the delivery of products and services to the organisations members. Gjensidige Bank ASA is a wholly owned subsidiary of Gjensidige Bank Holding AS, which in turn is a wholly owned subsidiary of Gjensidige Forsikring ASA. Gjensidige Bank Boligkreditt AS is a wholly owned subsidiary of Gjensidige Bank ASA. The Bank has access to financing with covered bonds via Gjensidige Bank Boligkreditt AS. The quarterly reports are consolidated and include Gjensidige Bank ASA and Gjensidige Bank Boligkreditt AS. MARKETING AND GROWTH IN CUSTOMER BASE At the end of the quarter, the Bank had 98,183 customers. This is 1,850 more than at the beginning of the quarter. Through association with the Gjensidigebrand, customer base and distribution system, the Bank differentiates itself from other players in the market. In the fourth quarter, the Bank has focused, through mass communication and activities to it s own customers, on the new high-interest account. The product has been well received by the market. The marketing campaigns have been followed up by the Bank s own customer service center and distribution network in the Gjensidige Forsikring ASA. Approximately half of the customers are also insurance customers. The Bank has in the fourth quarter focused particularly on increasing the customers commitments. Experience shows that customers with a broad range of products are more satisfied than customers with single commitments. During the fourth quarter, the percentage of total customers in the bank increased by about 33 per cent. At the beginning of 2012, 54 percent of the customers who have loans for residential purposes, are total customers. The focus on increasing the numbers of total customers will continue in the The Bank has during the fourth quarter decided a new loyalty program that will be launched in the first quarter of PROFIT PERFORMANCE BEFORE TAX Profit before tax was NOK 14.4 million for the quarter, compared with a profit of NOK 3.7 million for the corresponding period in This represents an improvement in earnings of NOK 10.7 million. The main reason for improvement is cost savings and lower write-downs and losses. The preliminary financial statements for show a profit before tax of NOK 66.8 million compared with a profit of NOK 33.1 in This represents an improvement in earnings of NOK 33.7 million. This is a result of better quality in the loan portfolio, increasing income from financial instruments and technology investments in 2010 related to the integration of the consumer finance business acquired in The profit performance is in line with the expectations. NET INTEREST AND CREDIT COMMISSION INCOME Net interest income for the quarter amounted to NOK million, compared with NOK million for the corresponding quarter in This represents an improvement in earnings of NOK 5.1 million. The main reason for the positive development is the reclassification of loan fees at the end of 2010 from Commission income and income from bank services to Net interest and credit commission income. The preliminary financial statements for show net interest income of NOK million compared with NOK million in The main reason for the positive increase of NOK 23.8 million is the reclassification of loan fees at the end of 2010 from Commission income and income from bank services to Net interest and credit commission income. The Bank s net interest income in relation to the average total assets was 2.71 per cent at the end of, compared with 2.88 per cent in The decline is mainly due to increased interest expenses and higher share of mortgage loans compared with last year. Increased loan portfolio compensated the drop in interest margin. OPERATING EXPENSES Operating expenses for the quarter amounted to NOK 76.0 million, compared with NOK 83.4 million for the corresponding quarter in This represents a reduction in costs INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 3

4 of NOK 7.4 million. The improvement compared with last year is mainly due to reduced technology costs as a result of system integration. The preliminary financial statements for show total operating expenses of NOK million, up from NOK million in This represents an increase of NOK 6.8 million. The increase in operating expenses is driven mainly by structural changes in the organisation. The technology invest ments in 2010 related to the inte gration of retail bank and consumer finance have had a positive effect on the total costs. WRITE-DOWN AND LOSSES The Bank recognised an expense of NOK 24.4 million (27.6) in group impairment, individual write-downs and losses during the quarter. This is a decrease of NOK 3.2 million compared to corresponding quarter last year. This is the result of a significant improvement of quality in the loan portfolio. In line with Kredittilsynets (The Financial Supervisory Authority of Norway) recommendation to banks to review the models of group provisioning, taking into account the turbulent situation in the international economy and the possible effect on the loss, the bank increased its group write downs this quarter. The Bank has recognised expenses of NOK 94.2 million from loans write-downs and losses year to date (109.4). The decline of NOK 15.2 million compared to the previous year is mainly due to improved development in the loan portfolio. The write-downs and losses are primarily related to estimated group writedowns, which cover losses on commit ments that are not individually identified as doubtful. Loans in default over 30 days amounted to NOK million at the end of the quarter, compared with NOK million for the corresponding quarter in This is an increase of NOK 76.8 million that is attri buted primarily to the consumer loan portfolio and is a consequence of transition to IFRS account ing rules. Loans in default over 30 days are 2.17 per cent relative to gross lending at the end of the quarter. Unsecured loans and credit cards that default are collectively assessed for impairment. Other loans and borrowings are assessed individually for impairment. In addition, the Bank uses a model for unspecified group provisions for the part of the portfolio that is not in default. A loss is recognized when it is a high probability that a loan will not be repaid. The loss costs as a percentage of gross lending is 0.65 per cent (0.84) in. The improvement is attributed primarily to a greater share of lending secured by a mortgage, as well as the good performance of the overall loan portfolio. The Bank considers loan performance to be satisfactory. CUSTOMER LOANS AND DEPOSITS At the end of the quarter, gross loans amounted to NOK 15,019.0 million, compared with NOK 14,119.5 million in This represents an increase of NOK million over the past twelve months. The growth in lending for the quarter is NOK million. The portfolio mainly consists of loans with adjustable interest rates. The Bank lends to consumers and agricultural customers. At the end of the quarter, per cent of the Bank s exposure to customer lending was secured by a mortgage on residential or agricultural property. The amount of the average loan secured by a mortgage on residential or agricultural property is NOK 1.3 million. There are no exposures exceeding NOK 10 million. Customer deposits amounted to NOK 9,776.2 million at the end of the quarter, compared with NOK 9,120.0 million This represents an increase of NOK million in customer deposits over the past twelve months. The deposits increased by NOK 525,0 million in the fourth quarter with good effect from re-opening of the High Interest Account. The deposit-to-loan ratio at the end of the quarter was 65.1 per cent, compared with 64.6 per cent in The increase in the deposit-to-loan ratio compared with last year is attributed mainly to the larger percentage increase in deposits than the percentage increase in lending. 16,000,000 10,000,000 12,000,000 8,000,000 8,000,000 4,000,000 6,000,000 4,000,000 2,000, Q.10 2.Q.10 3.Q.10 4.Q.10 1.Q.11 2.Q.11 3.Q.11 4.Q Q.10 2.Q.10 3.Q.10 4.Q.10 1.Q.11 2.Q.11 3.Q.11 4.Q.11 Customer loans Customer deposits 4 INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

5 SEGMENTS The Bank s main target group is the private customer segment. This segment includes organisation customers, loyalty programme customers, agricultural customers and others. The Bank also offers a deposit product that targets corporate customers. These customer s are spread throughout Norway. CAPITAL ADEQUACY At the end of the quarter, the Gjensidige Bank Group had a capital adequacy ratio of 15.0 per cent, compared with 16.1 per cent for the corresponding period in The decline in the capital adequacy ratio was expected and is primarily attributed to the payment of a Group contribution and higher lending volume. At the end of the quarter, net equity and subordinated loan capital amounted to NOK 1,201.8 million. The core capital include the preliminary financial result. The Bank aims for capital adequacy ratio of minimum 12 per cent. DEBT SECURITIES ISSUED Net issues of debt securities amounted to NOK 4,824.5 million at the end of the quarter, compared with NOK 4,763.1 million for the corresponding period in The total nominal value of the securities issued the bank is NOK 4,825.0 and out of those NOK 1,475.0 will mature over next 12 months. The Bank issued covered bonds totalling NOK million during the fourth quarter. NOK million of these were bonds issued by Gjensidige Bank Boligkreditt as. Gjensidige Bank asa has a reserve of covered bonds totalling NOK million, issued by Gjensidige Bank Boligkreditt as. Of this reserve, NOK million is utilised in the swap arrangement with Norges Bank (the central bank of Norway). The swap arrangement has provided the Group with NOK million in liquid treasury bills. LIQUIDITY At the end of the quarter, the Gjensidige Bank Group had net liquid assets of NOK million, divided between NOK million in bank deposits and NOK 1,516.0 million in bonds, certificates and money market funds. NOK million of these assets were investments in covered bonds from Gjensidige Bank Boligkreditt as (eliminated in the consolidated accounts) that were not utilised in the swap arrangement with Norges Bank. Some of these assets are listed on the Oslo Alternative Bond Market (ABM). The net liquid assets are at an adequate level that covers the debt payments that will fall due over the next 14 months. KEY RISK AND UNCERTAINTY FACTORS Financial risk The Bank s financial risk mainly includes credit, liquidity and interest rate risk. Risk is reported monthly and is assessed in accordance with the principles, strategies and limits on risk adopted by the Board. Credit risk represents the risk of losses arising from customers and other counterparties failing to repay their debts when they are due. The Bank uses risk classification models to calculate the risk associated with its exposure to customers. The Bank considers its loan performance to be satisfactory and monitors its portfolio closely. Liquidity risk is the risk that the Bank will be unable to meet all its financial obligations when they are due, or be unable to fund its lending activities. The legal framework to attract liquid funds is in place. Also, in order to reduce the risk, liquidity forecasts are continuously updated and reviewed. The Bank holds a liquidity reserve, at a level that allows it sufficient time to implement necessary measures in the event of an acute liquidity freeze. Interest rate risk is the risk that equity will fall in value as a result of unexpected changes in the interest rate levels in the market. Such changes in the interest rate levels may lead to a fall in the market value of fixed-interest assets. Alternatively, the market value of fixed-interest debt/liabilities may increase. The Bank s exposure to general interest rate levels shall be kept low in relation to its core capital. EVENTS AFTER THE BALANCE SHEET DATE No significant events have occurred after the end of the period. OUTLOOK The distribution of the Bank s products through the Group s offices shows good results in the second half of and will continue in Along with the focus on increasing the total customer commitments, this is expected to generate profitable growth. The new brand of consumer finance launched in December is also expected to contribute to improved results in the future. The Board is confident that the performance of Gjensidige Bank asa will develop satisfactorily in the future. Oslo, 8. February 2012 Bjørn Walle Per Kumle ingun Ranneberg-Nilsen Chairman of the Board Marianne B. Einarsen lise H Vallestad Hans O. Harén CEO INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 5

6 Profit & loss Account and balance sheet Profit & loss account NOK thousand Note 4.Q. 4.Q Interest income etc. 230, , , ,585 Interest costs etc. 121, , , ,568 Net interest income 108, , , ,017 Commission income and income from bank services 5,536 8,532 20,773 39,466 Commission costs and costs of bank services 1,327 1,275 5,182 4,665 Income from other financial investments 1,683 (2,678) 9,953 (5,594) Other operating income 384 6,790 13,411 8,340 Net other operating income 6,277 11,369 38,954 37,547 Total income 114, , , ,564 Wages, salaries and general administration expenses 55,127 65, , ,267 Depreciation of fixed assets 7,216 5,212 27,185 18,243 Other operating expenses 13,630 12,525 50,202 52,637 Total operating expenses 75,973 83, , ,146 Profit / (loss) before loan losses 38,817 31, , ,417 Write-down on loans 4 24,388 27,644 94, ,359 Profit / (loss) before tax expense 14,429 3,713 66,767 33,059 Tax expense 3, ,134 8,468 PROFIT / (LOSS) FOR THE PERIOD 10,950 3,462 48,633 24,591 Earnings per share (NOK ) (basic and diluted) BALanCE sheet NOK thousand Note Assets Cash and claims from central banks 36, ,777 Loans to and claims from credit institutions 336,855 59,237 Loans to and claims from customers 2 15,019,023 14,119,485 -Write-downs 4 (187,788) (117,148) Net loans to customers 14,831,235 14,002,337 Repossessed assets 75 Certificates, bonds and other interest-bearing 654, ,058 Shares (and other securities with variable yield) 501, ,636 Intangible assets 65,176 62,826 Fixed assets 2,918 4,414 Other assets 10,466 6,406 Advance payments and accrued income 48,849 33,941 Total assets 16,488,805 15,763,631 LiabiLITies Liabilities to credit institutions 6 513, ,108 Deposits and liabilities to customers 2 9,776,236 9,120,004 Liabilities opened for the issue of securities 3 4,824,449 4,763,068 Other liabilities 36,829 19,802 Accrued costs and advance payment of income 59,682 53,313 Provision for commitments and costs 11,491 4,417 Total liabilities 15,221,796 14,473,712 EQuiTY Share capital 876, ,000 Premium reserve 332, ,192 Other paid-in equity 3,789 73,780 Other equity 55,028 7,946 Total equity 1,267,009 1,289,918 Total liabilities and equity 16,488,805 15,763,631 6 INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

7 COMPONENTS OF OTHER COMPREHENSIVE INCOME NOK thousand 4.Q. 4.Q Profit for the period 10,950 3,462 48,633 24,591 Other components of profit / loss Actuarial gains and loss on pensions (2,192) 182 (2,192) (1,437) Tax on other result components 614 (51) Total other profit / loss components (1,579) 131 (1,579) (1,035) TOTAL PROFIT / LOSS FOR THE PERIOD 9,371 3,593 47,054 23,556 STATEMENT OF CHANGES IN EQUITY NOK thousand Share capital Premium reserve Fund Other paid-in CCapiTAL Total paid-in CCapiTAL Other equity The CCapiTAL Total equity The CCapiTAL Equity , ,192 93,218 1,301,410 (89,117) 1,212,293 Group contributions received (after tax) ,280 53,280 53,280 Share-based payment transactions settled in equity Profit for the period ,591 24,591 Other components of profit / loss Implementing pension liability Actuarial gains and loss on pensions (1,437) (1,437) Tax on other result components Total other profit/loss components (1,035) (1,035) Total profit / loss for the period ,556 23,556 To cover the uncovered losses (73,508) (73,508) 73,508 Equity as of ,780 1,281,972 7,946 1,289,918 Equity ,780 1,281,972 7,946 1,289,918 Group contribution paid (after tax) (70,001) (70,001) (70,001) Share-based payment transactions settled in equity Profit for the period ,633 48,633 Other components of profit / loss Actuarial gains and loss on pensions (2,192) (2,192) Tax on other result components Total other profit/loss components (1,579) (1,579) Total profit / loss for the period ,054 47,054 Equity as of ,817 1,212,009 55,000 1,267,009 No. shares at end of period 876,000 INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 7

8 STATEMENT OF CASH FLOW NOK thousand Operating activities Net payment of loans to customers (899,538) (2,543,880) Net payment of deposits by customers 656,232 2,569,562 Payment of interest from customers 848, ,803 Payment of interest to customers (281,507) (208,077) Net payment of interest from credit institutions etc. (8,967) 6,631 Taxes paid (2,896) (161) Net other commission income 29,003 35,677 Payment to operations (281,690) (283,904) Net paid/received upon purchase and sale of financial instruments and interest-bearing securities (349,687) (136,741) Net cash flow from operating activities (290,777) 170,911 Investment activities Net purchase of intangible assets and fixed assets (23,405) (36,271) Net cash flow from investment activities (23,405) (36,271) Financing activities Net paid(-)/received when taking out loans from credit institutions 61, ,343 Net payment of interest on financing activities (169,641) (146,098) Net paid(-)/received for other short-term positions 13,249 (15,799) Net intragroup contribution/dividend received (74,070) 74,000 Net cash flow from financing activities (169,080) 308,446 Total cash flow (483,263) 443,086 Cash flow for the period Liquid assets at start of period 857, ,928 Liquid assets at end of period 373, ,014 Net payment made(-)/received of cash (483,263) 443,086 Specification of liquid assets Claims from central banks 36, ,777 Deposits with financial institutions 336,855 59,237 Liquid assets in statement of cash flow 373, ,014 The analysis of cash flow displays payments made and received of cash and cash equivalents throughout the year. The analysis has been adjusted for items which do not initiate cash flow, such as provisions, depreciation and write-down of loans and guarantees. Cash flow is classified as operating activities, investment activities or financing activities. The liquid assets are defined as cash and claims from central banks and loans to and claims from credit institutions. 8 INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

9 Notes 1 accounting policies The comprises Gjensidige Bank ASA and its subsidiary Gjensidige Bank Boligkreditt AS. The Group prepares its accounts in accordance with international financial reporting standards (ifrs ) and the interim accounts for the fourth quarter have been prepared in accordance with IAS 34 - Interim reports. The same accounting principles and calculation methods have been used as last annual report. For more detailed information on account ing principles, we refer to the annual report for 2010 for Gjensidige Bank ASA. The IFRS and interpretations that have been released until 8 February 2012, the use of which is not mandatory as at 31 December ; i.e. frs 9, IFRS 10, IFRS 11, IFRS 12, IFRS 13 and amendments to IAS 12, ias 1, IAS 19, IAS 27, IAS 28, IFRS 7 and IAS 32 is expected, with the exception of IAS 19, based on assessments made so far, not to have a significant impact on reported figures. 2 segment information Preparation of the interim accounts involves the use of assessments, estimates and assumptions that affect the use of accounting policies and recognised amounts for assets and liabilities, revenues and expenses. Actual results may deviate from these estimates. The most material assessments connected with the use of the company s accounting policies and the key sources of uncertainty in the estimates are the same in preparing the interim accounts as in the annual accounts for The was established in the third quarter of 2009 with the establishment of Gjensidige Bank Boligkreditt AS. Share capital totals NOK 143 million and Gjensidige Bank ASA owns all shares. The company was established with the objective of taking over parts of the loan portfolio in Gjensidige Bank ASA with the aim of issuing covered bonds. All amounts are shown in NOK thousand unless otherwise indicated. Due to rounding differences, figures and percentages may not exactly add up to totals indicated. NOK thousand Deposit from customers divided per sector and industry Employees etc. 9,776,236 9,251,249 9,378,632 9,290,546 9,120,004 7,897,256 7,156,986 6,702,886 6,550,442 Total deposits 9,776,236 9,251,249 9,378,632 9,290,546 9,120,004 7,897,256 7,156,986 6,702,886 6,550,442 Loans to customers divided per sector and industry Employees etc. 15,019,023 14,751,485 14,596,735 14,247,902 14,119,485 13,574,812 13,051,033 12,221,875 11,575,604 Gross loans 15,019,023 14,751,485 14,596,735 14,247,902 14,119,485 13,574,812 13,051,033 12,221,875 11,575,604 3 LIABILITIES ON THE ISSUE OF SECURITIES NOK thousand Nominal value Book value Bonded debt 4,900,000 4,750,000 4,891,462 4,744,173 - Own non-amortised certificates/bonds (375,000) (285,000) (375,508) (284,903) Debt securities at amortised cost 4,525,000 4,465,000 4,515,954 4,459,270 Certificate debt and other short-term borrowings 300, , , ,798 Bonded debt - Own non-amortised certificates/bonds Securities issued determined at fair value 300, , , ,798 Total debt securities 4,825,000 4,765,000 4,824,449 4,763,068 Certificate and bond debt divided on due date (nominal value): ,165, ,475,000 1,750, , , ,000, , ,275, , ,000 75,000 Total debt securities (nominal value) 4,825,000 4,765,000 New issues in 1,700,000 Repayments in 1,640,000 INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 9

10 4 LOSS ON LOANS AND GUARANTEES NOK thousand Change for the period in individual write-downs (509) (131) Change for the period in Group impairment 71, ,978 Confirmed loss for the period covered by previous write-downs Confirmed loss for the period without previous indirect write-downs 37,794 7,599 Opening for the period with confirmed losses from previous periods (14,949) (148) = Loan losses for the period 94, ,359 Provision for loss on loans and guarantees Individual write-down at start of period Increase in ind. write-down of position where write-down has been made previously Reversal of ind. write-down from previous periods Write-down of position where ind. write-down has not been carried out previously Confirmed loss for the period where previous ind. write-down has been made Individual write-down at end of period Confirmed loss for the period 38,456 7,660 Group write-down at the start of the period 116,463 14,485 + Change for the period in Group impairment 71, ,978 Group write-down at the end of the period 187, ,463 Total write-down at end of period 187, ,148 Defaulted positions and positions exposed to loss Defaulted loans Gross default over 30 days 325, ,913 -individual write-down Net default loans 325, ,228 Loss severity 0.1 % 0.3 % Other positions exposed to loss Positions exposed to loss (not defaulted) Individual write-downs 28 Net other positions exposed to loss 455 Loss severity 5.8 % 5 CAPITAL ADEQUACY NOK thousand Subordinated loan capital Share capital and premium reserve fund 1,208,192 1,208,192 Other equity 58,817 80,936 Equity 1,267,009 1,289,128 Interim results included in core capital Deduction Goodwill and other intangible assets (59,829) (62,113) Deferred tax asset (5,348) (714) Group contributions Core capital 1,201,832 1,226,301 Net equity and sub-ordinated loan capital 1,201,832 1,226, INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

11 5 CAPITAL ADEQUACY (cont.) NOK thousand Minimum requirement subordinated capital Credit risk: Of which: Institutions 788 1,078 Enterprises 944 1,557 Mass market positions 221, ,417 Positions secured by mortgage 356, ,391 Overdue positions 38,463 25,169 Covered bonds 1,119 Shares in securities' fund 8,028 3,866 Other positions 1, Total minimum requirement credit risk 628, ,924 Operational risk 28,754 28,754 Deduction: Group write-down (15,010) (9,317) Minimum requirement equity and subordinated loan capital 642, ,361 Surplus subordinated capital 559, ,940 Basis of calculation balance sheet items not included in trading portfolio 6,990,400 6,442,452 Basis of calculation off balance sheet items not included in trading portfolio 868, ,484 Capital adequacy Capital adequacy ratio 15.0 % 16.1 % Core capital adequacy 15.0 % 16.1 % 6 CLOSELY RELATED PARTIES Gjensidige Forsikring ASA, Gjensidige Bank ASA and Gjensidige Bank Boligkreditt AS are considered to be closely related parties. All transactions and agreements with these parties are carried out in accordance with arm s length principles. Significant transactions with closely related parties as of are as follows: Gjensidige Bank ASA has purchased services from Gjensidige Forsikring asa of NOK 27.6 million and the balances is NOK 2.5 million. At the time Gjensidige Bank Boligkreditt AS was established, an agreement was signed with Gjensidige Bank ASA regarding the provision of services relating to loan servicing and the running of the company. In addition Gjensidige Bank Boligkreditt AS was granted a long-term credit facility of up to NOK 250 million. Utilized credit is per is NOK million. Revenue and interest on these agreements amounts to NOK 10.9 million. These items have been eliminated in the consolidated financial statements. The Ceo of Gjensidige Bank Boligkreditt AS is outsourced to Gjensidige Bank ASA effective with 40 per cent of the position. Gjensidige Bank ASA has invested NOK million in covered bonds issued by Gjensidige Bank Boligkreditt AS, of which NOK million is used in Norges Bank s swap arrangement. Interest on bonds amounted to NOK 25.8 million and is eliminated on the consolidated financial statements. Gjensidige Bank Boligkreditt AS has deposits with Gjensidige Bank ASA of NOK million and interest totals NOK 3.8 million. Both items have been eliminated on the consolidated financial statements. 7 CONTINGENT LIABILITIES AND SECURITY NOK thousand Loan commitment 1,140,168 1,549,478 Unutilised overdraft facility 2,125,170 1,693,799 Total contingent liabilities 3,265,338 3,243,277 Securities offered as security for loans/ overdraft facility in Norges Bank 1,064, ,537 Securities provided as security for the swap arrangement of treasury bills for covered bonds 586, ,559 Guarantee declaration Bankenes Sikringsfond 3,426 Total securities provided 1,650,656 1,346,522 The accounts for the period have not been audited. INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 11

12 QUARTERLY EARNINGS PERFORMANCE NOK thousand 4. q. 3. q. 2. q. 1. q. 4. q q q q q Interest income etc. 230, , , , , , , ,177 90,945 Interest costs etc. 121, , , , , ,932 88,718 79,602 65,859 Net interest income 108, , , , , , ,757 96,575 25,086 Commission income and income from bank services 5,536 5,565 5,066 4,606 8,532 10,976 10,098 9,859 4,519 Commission costs and costs of bank services 1,327 1,380 1,190 1,285 1,275 1,249 1,116 1,024 1,152 Income from other financial investments 1,683 3,286 3,002 1,982 (2,678) (2,931) (129) 144 (648) Other operating income 384 3,011 6,015 4,001 6, (22) Total income 114, , , , , , , ,131 27,783 Salary and general administration costs 55,127 58,617 62,525 55,218 65,638 58,650 48,936 58,042 28,585 Depreciation of fixed assets 7,216 7,012 6,638 6,320 5,212 4,596 4,351 4,084 3,926 Other operating costs 13,630 10,224 12,680 13,668 12,525 11,478 12,537 16,097 17,225 Total operating costs 75,973 75,852 81,843 75,206 83,375 74,724 65,824 78,223 49,736 Result before loss 38,817 43,234 38,841 40,034 31,357 35,495 47,659 27,908 (21,953) Write-down on loans (24,388) (23,463) (20,748) (25,561) (27,644) (21,396) (37,319) (23,000) 595 Profit before tax for the period 14,429 19,771 18,093 14,473 3,713 14,098 10,340 4,908 (21,358) Key figures Gjensidige Bank group NOK thousand Net interest as a percentage of average administration capital 1) % Loss costs as a percentage of gross loans % Non-performing loans as a percentage of gross loans % Return on equity - annualised 2) % Deposit-to-loan ratio at the end of the period 3) % Capital adequacy 4) % Average assets under management NOK thousand 15,921,782 14,143,625 Average number of FTEs Number Registered customers at end of period Number 98,183 89,594 Registered customers who are also insurance customers at end of period Number 47,396 43,764 1) Net interest as per cent, annualised = net interest and credit commission income/average total assets 2) Return on equity, annualised = profit before tax / average equity during the period 3) Deposit-to-loan ratio = deposits as a percentage of gross lending 4) Capital adequacy = equity and subordinated loan capital / basis of calculation for credit risk, market risk and operational risk 12 INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS

13 PROFIT & LOSS ACCOUNT and Balance sheet Gjensidige Bank ASA PROFIT & Loss ACCounT NOK thousand Interest income etc. 824, ,563 Interest costs etc. 409, ,997 Net interest income 414, ,566 Dividend a.o. income of securities with varia. returns Commission income and income from bank services 20,309 39,405 Commission costs and costs of bank services 5,182 4,665 Income from other financial investments 9,953 (5,594) Other operating income 14,447 8,992 Net other operating income 39,527 38,139 Total income 453, ,705 Wages, salaries and general administration expenses 230, ,418 Depreciation of fixed assets 26,544 17,601 Other operating expenses 48,423 50,691 Total operating expenses 305, ,710 Profit / (loss) before loan losses 148, ,995 Write-down on loans 93, ,037 Profit / (loss) before tax expense 55,062 22,958 Tax expense 14,857 5,639 PROFIT / (LOSS) FOR THE PERIOD 40,205 17,319 Earnings per share (NOK ) (basic and diluted) 45,9 19,8 BALanCe sheet NOK thousand assets Cash and claims from central banks 36, ,777 Loans to and claims from credit institutions 534, ,836 Loans to and claims from customers 11,472,591 11,764,477 -Write-downs (185,161) (115,596) Net loans to customers 11,287,430 11,648,882 Repossessed assets 75 Certificates, bonds and other interest-bearing 1,603,460 1,303,958 Shares (and other securities with variable yield) 501, ,636 Ownership interest in group companies 220, ,030 Intangible assets 64,684 61,792 Fixed assets 2,918 4,414 Other assets 10,466 6,406 Advance payments and accrued income 50,855 38,985 Total assets 14,312,973 14,749,716 LiabiLITies Liabilities to credit institutions 705, ,947 Deposits and liabilities to customers 9,776,236 9,120,004 Liabilities opened for the issue of securities 2,481,544 3,716,080 Other liabilities 33,417 16,907 Accrued costs and advance payment of income 53,974 51,378 Provision for commitments and costs 11,491 4,417 Total liabilities 13,062,328 13,467,733 EQuiTY Share capital 876, ,000 Premium reserve 332, ,192 Other paid-in equity 3,789 73,790 Other equity 38,665 Total equity 1,250,645 1,281,982 Total liabilities and equity 14,312,973 14,749,716 INTERIM REPORT FOR FOURTH QUARTER AND PRELIMINARY ANNUAL FINANCIAL STATEMENTS 13

14 gjensidige.com Gjensidige Bank ASA Drammensveien 288 NO-0282 OSLO, Norway Telephone: 03100