Report for the 2nd quarter Bank Norwegian AS

Transcription

1 2018

2 Letter from the CEO Current quarter Bank Norwegian is operating in a benign environment. The Nordic region is still experiencing robust GDP development and favorable employment on an overall level combined with low interest rates. Regulatory focus on the financial industry has increased lately to ensure sustainable development in household economies. Bank Norwegian has successfully adapted its historically solid credit vetting and prudent provision policy to accommodate updated regulations and guidelines. Second quarter results reflect the favorable backdrop where record high profits of MNOK 484 are combined with robust growth both in terms of loans and customers. Customer engagement continues to increase as shown from the app where app logins exceeded 40,000 customers daily and 1 million monthly. The app was revamped in June to improve sales and interactive communication with our 1.4 million customers. During the quarter, the mutually beneficial partnership with Norwegian Air Shuttle ASA was extended by a 10-year agreement. Our focus is still on the attractive Nordic region, with an option to explore new markets. We launched additional third-party insurance products in addition to the current offering of products comprising more than 100,000 active policies. Insurance is an area that has not yet been developed to its full potential and will be further explored. Two-tier strategy In addition to favorable macro conditions, we expect continued growth in our core products due to the strong awareness of- and trust in Bank Norwegian s brand in all markets. Further, IFRS 9 implementation and improved risk selection tools such as proprietary scorecards throughout our footprint will optimize pricing and strengthen the competitive position. Bank Norwegian s cost-efficient operation and fully digitalized customer journey combined with a focused selection of own products on the balance sheet enables us to be highly competitive and is widely considered to be the future model of banking. Going forward we will leverage our customer insight, trust and engagement to enter lucrative niche markets and provide access to industry-leading services from third parties in addition to our own products. Bank Norwegian will explore the attractiveness of account information agent (AISP) and payment agent (PISP) positions in connection with the implementation of PSD2 regulation by Nordic banks to ensure rapid implementation of chosen commercial positions. Bærum, August 14, 2018 Tine Wollebekk, CEO 1

3 2018 is a wholly owned subsidiary of Norwegian Finans Holding ASA. The ownership of Norwegian Finans Holding ASA is divided between institutional and private investors in Norway and abroad, of which Norwegian Air Shuttle ASA is the largest owner with a stake of 16.4% at the end of the 2nd quarter Norwegian Finans Holding ASA is listed on the Oslo Stock Exchange with the ticker code NOFI. Bank Norwegian started its operations in November 2007 and offers consumer loans, credit cards and deposit accounts to retail customers distributed through the Internet in the Nordic market. Bank Norwegian offers, in cooperation with the airline Norwegian, a combined credit card and reward card. The bank started operations in Sweden in May In December 2015 the bank launched operations in Denmark and Finland, where it initially offered consumer loans and deposit accounts. Credit cards were launched in June Bank Norwegian is a digital bank that offers simple and competitive products to the retail market. The strategy is based on leading digital solutions, synergies with the airline Norwegian, attractive terms for our customers, costeffective operations and effective risk selection. At the end of the 2nd quarter 2018 the bank had a customer base of 1,392,600 customers, which can be broken down into 1,018,300 credit card customers, 187,400 loan customers and 186,900 deposit customers. Profit and loss as of June 30, 2018 The bank s comprehensive income amounted to MNOK as of June 30, 2018, compared with MNOK for the same period in Net interest income totalled MNOK 2,120.3, net other operating income amounted to MNOK 134.7, while total operating expenses were MNOK Provisions for loan losses were MNOK Profit and loss for the 2nd quarter 2018 The bank s comprehensive income amounted to MNOK compared with MNOK in the 1st quarter Annual return on equity in the 2nd quarter was 33.8%, while return on assets was 4.2%. Net interest income amounted to MNOK 1,091.8, an increase of MNOK 63.3 from the 1st quarter. The increase is mainly explained by loan growth. The net interest margin was 9.4%, compared with 9.5% in the 1st quarter. Net other operating income amounted to MNOK 94.3 compared with MNOK 40.5 in the 1st quarter. Net commission income increased with MNOK 19.3 to MNOK 73.2 due to network and insurance incentive in addition to increased credit card usage. Net gain on securities and currency amounted to MNOK 21.1, compared with a net loss of MNOK 13.5 in the 1st quarter. The change is due to a gain on currency, compared with a loss in the 1st quarter. Total operating expenses amounted to MNOK compared with MNOK in the 1st quarter. Personnel expenses decreased with MNOK 4.3 due to accrual effects. The MNOK 2.1 decrease in administrative expenses is explained by lower spending on digital marketing expenses and non-recurring items in the 1st quarter. Depreciation increased with MNOK 0.2. Other operating expenses increased with MNOK 0.5. The bank s write-downs on loans were MNOK 234.7, an increase of MNOK 25.8 from the 1st quarter. Write-downs in the 2nd quarter equalled 2.6% of average gross loans, compared with 2.4% in the 1st quarter. Gross delinquent loans were MNOK 3,785, compared with MNOK 3,160 at the end of the 1st quarter. Delinquent loans accounted for 10.3% of gross loans, compared with 9.0% at the end of the 1st quarter. Gross non-performing loans accounted for 8.1% of gross loans, compared with 7.1% as of The level of non-performing loans is developing as expected considering the unseasoned portfolios in Denmark and Finland, and the portfolios in Norway and Sweden are increasing from a low base following the sale of nonperforming loan portfolios in Balance sheet as of June 30, 2018 Total assets increased with MNOK 1,935 in the quarter and amounted to MNOK 47,293. Net loans to customers increased MNOK 1,621 and amounted to MNOK 35,435. The loan growth is comparable to the previous quarter, adjusted for currency changes. Consumer loans amounted to MNOK 26,465 and credit card loans amounted to MNOK 10,421. Customer deposits increased MNOK 1,917 and amounted to MNOK 37,706 at the end of the quarter. Liquid assets increased MNOK 336 and amounted to MNOK 11,528, equivalent to 24.4% of total assets. Total equity amounted to MNOK 6,450, compared with MNOK 6,162 as of The general meeting resolved to distribute a group contribution of MNOK in the 2nd quarter. After group contributions, the total capital ratio was 20.5% the core capital ratio was 19.0% and the common equity tier 1 ratio was 17.1% as of There has been a limited review of the accounts as of , and the full result is added to retained earnings. Outlook for the remaining of the year The economic trends in the Nordic markets where the bank operates are positive. The Norwegian economy shows increasing growth and falling unemployment rate. The Swedish economy is showing a high economic growth. The Danish and Finnish economies show moderate growth and an improved labor market. The interest rate levels in the countries where the bank is represented are expected to remain low, although higher interest rates are expected going forward. The bank is still expected to benefit from the interest rate level through low funding costs. 2

4 The earnings growth is expected to continue through strong loan growth, stable margins, cost control and good credit quality, even though the Nordic market for unsecured credit is impacted by increased competition. Increased competition may lead to higher customer acquisition cost, margin pressure or lower growth. Increased run-off in line with a growing portfolio may affect future loan growth. The bank has a broad Nordic platform and loan volumes are growing faster outside of Norway. The bank has therefore a diversified risk in relation to the individual markets. A high deposit to loans ratio and good access to the securities market are expected to maintain the bank s strong liquidity position. The investment portfolio has provided a satisfactory return. The portfolio's low risk mandate will remain. The credit quality of the loan portfolio in Norway shows a stable development and the levels of write-downs are expected to remain stable going forward. After the sale of non-performing loan portfolios in Norway and Sweden, the delinquency is expected to gradually increase to a normalized level. The Danish and Finnish loan portfolios show a stable development. Relatively high writedowns in Denmark and Finland are still expected for a period going forward. Common equity tier 1 ratio was 17.1% at the reporting date and exceeds the current minimum common equity tier 1 ratio requirement of 15.5% with a wide margin. The bank aims to maintain a good margin to the minimum capital adequacy requirements. The current capital base and internal generation of capital are considered sufficient to ensure the bank's growth ambitions. Bærum, August 14, 2018 Board of directors of John Høsteland Chairman of the Board Bjørn Østbø Board Member Lars Ola Kjos Board Member Christine Rødsæther Board Member Gunn Ingemundsen Board Member Anders Gullestad Board Member Tine Wollebekk CEO 3

5 Profit and loss account Note Q Q YTD 2018 YTD Interest income, amortised cost 1,222, ,282 2,369,543 1,904,949 4,077,517 Other interest income 23,863 24,177 48,069 45,518 95,122 Interest expenses 154, , , , ,211 Net interest income 10 1,091, ,245 2,120,344 1,717,906 3,670,428 Commission and bank services income ,359 93, , , ,998 Commission and bank services expenses 11 70,174 50, ,083 92, ,730 Net change in value on securities and currency 12 21,089 4,612 7,613 10,127 7,458 Net other operating income 94,274 48, ,728 92, ,726 Total income 1,186, ,550 2,255,072 1,810,574 3,867,154 Personnel expenses 17,016 16,260 38,299 35,337 73,953 General administrative expenses , , , , ,286 Ordinary depreciation 12,150 10,861 24,072 22,236 44,477 Other operating expenses 14 12,393 10,130 24,256 21,235 43,472 Total operating expenses before losses 306, , , ,206 1,068,188 Provision for loan losses 3, 5, 6 234, , , , ,388 Profit before tax 645, ,686 1,193, ,950 2,126,577 Tax charge 161, , , , ,995 Profit after tax 483, , , ,962 1,599,582 Earnings per share (kroner) Diluted earning per share (kroner) Comprehensive income Q Q YTD 2018 YTD Profit on ordinary activities after tax 483, , , ,962 1,599,582 Change in fair value for assets available for sale ,629 8,176 Tax Other comprehensive income ,602 8,115 Comprehensive income for the period 483, , , ,564 1,607,697 4

6 Balance sheet Note Assets Cash and deposits with the central bank 9, 16 65,975 61,981 65,976 Loans and deposits with credit institutions 9, 16 2,072,249 1,392,570 1,254,152 Loans to customers 4, 7, 16 35,434,748 28,868,053 32,451,553 Certificates and bonds 15 9,389,792 8,185,779 8,859,834 Financial derivatives 15 43, ,935 Shares and other securities 15, 18 37, Assets available for sale 15, 18-28,374 32,922 Intangible assets 114, , ,678 Deferred tax asset 11,157 3,771 11,157 Fixed assets 810 1,094 1,000 Receivables , , ,800 Total assets 47,293,012 38,791,298 42,988,451 Liabilities and equity Loans from credit institutions 85, Deposits from customers 16 37,705,983 30,922,923 33,682,275 Debt securities issued 16, 17 1,808,003 2,040,622 2,242,423 Financial derivatives 15 2,494 3,999 52,246 Tax payable 491, , ,886 Other liabilities 20 91, , ,689 Accrued expenses , , ,045 Subordinated loan 16, , , ,614 Total liabilities 40,842,739 33,951,877 37,285,179 Share capital 183, , ,315 Share premium 966, , ,646 Tier 1 capital 635, , ,000 Retained earnings and other reserves 4,665,313 3,054,461 3,918,312 Total equity 22 6,450,273 4,839,421 5,703,272 Total liabilities and equity 47,293,012 38,791,298 42,988,451 Bærum, 14 August, 2018 Board of directors of John Høsteland Chairman of the Board Bjørn Østbø Board Member Lars Ola Kjos Board Member Christine Rødsæther Anders Gullestad Gunn Ingemundsen Board Member Board Member Board Member Tine Wollebekk CEO 5

7 Cash flow statement Q Q Profit / loss after tax 894, ,564 1,607,697 Unrealized gain or losses on currency 102,244 10,445 47,565 Depreciations and amortizations 24,072 22,236 44,477 Provision for loan losses 443, , ,388 Change in loans to customers -3,372,235-4,685,149-8,602,144 Change in deposits from customers 4,023,708 6,499,150 9,258,502 Change in certificates and bonds -529,958-3,721,577-4,395,632 Change in Assets available for sale, before tax - 3,629 8,176 Change in receivables, deferred tax asset and financial derivatives 30,854-31, ,202 Change in loans from credit institutions 85, Change in shares and other securities -4, Change in tax payable, accrued expenses and other liabilities -117,185-35, ,047 Net cash flow from operating activities 1,581, ,842-1,126,125 Payment for acquisition of intangible assets -24,127-20,950-55,381 Payment for acquisition of tangible assets - -1,050-1,050 Net cash flow from investment activities -24,127-22,000-56,431 Paid-in share capital and share premium - 500, ,000 Issued debt securities - 500,000 1,299,320 Repayment of debt securities -434, , ,870 Issued subordinated loan - 199, ,699 Issued Tier 1 capital - 299, ,250 Paid interest Tier 1 capital -14,347-7,576-21,858 Paid group contribution, after tax -188, Net cash flow from financing activities -636,860 1,208,129 1,395,541 Currency effect on cash and cash equivalents -102,244-10,445-47,565 Net cash flow for the period 818, , ,420 Cash and cash equivalents at the start of the period 1,320,128 1,154,708 1,154,708 Cash and cash equivalents at the end of the period 2,138,224 1,454,551 1,320,128 6

8 Changes in equity Share capital Share premium Tier 1 capital Retained earnings and other reserves Balance , , ,000 3,918,312 5,703,272 This period's profit , ,879 Items that may be reclassified to profit and loss, after tax Comprehensive income for the period , ,879 Paid interest Tier 1 capital ,347-14,347 Paid group contribution after tax , ,100 Change in write-downs under IFRS ,569 54,569 Balance , , ,000 4,665,313 6,450,273 Total equity Balance , , ,000 2,333,223 3,318,183 This period's profit , ,962 Items that may be reclassified to profit and loss, after tax ,602 3,602 Comprehensive income for the period , ,564 Paid interest Tier 1 capital ,576-7,576 Capital increase 6, , ,000 Issued Tier 1 capital , ,250 Balance , , ,000 3,054,461 4,839,421 7

9 Notes Note 1. General accounting principles The interim report for the second quarter 2018 is prepared according to International Financial Reporting Standards as adopted by the European Union, hereunder IAS 34 Interim Financial Reporting. The interim report for the second quarter 2018 is prepared according to the Norwegian Ministry of Finance's regulations on annual accounts, Section 1-6, on the use of IFRS. Accounting standards which have been implemented in 2018 IFRS 9 - Financial Instruments IASB has published the final version of IFRS 9 Financial Instruments, which replaced IAS 39 Financial Instruments Recognition and Measurement. IFRS 9 introduced changes to the rules for the classification and measurement of financial instruments, impairment of financial assets and hedge accounting. The standard is effective for annual reporting periods beginning on 1 January 2018 or later. Earlier application is permitted. The standard must be applied retrospectively, except for hedge accounting. Restatement of comparative figures is not required. The standard was approved by the EU in the 4th quarter of The rules for classification and measurement of financial assets under IFRS 9 are more principle-based than the rules under IAS 39. Under IFRS 9, financial assets are assessed based on the entity s business model and the asset s cash flows. The bank has made an assessment of the balance sheet with regards to classification and measurement of financial assets. The bank has reclassified Assets available for sale to Shares and other securities. The classification and measurement of the bank s financial liabilities have not been affected by the transition to IFRS 9. Assets available for sale, which consist of the bank s ownership interest in Visa Norge FLI, was under IAS 39 classified at fair value through other comprehensive income (with reclassification). The asset was held for sale, and will after the implementation of IFRS 9 be classified at fair value through profit and loss. For further details, see note 3. IFRS 9 requires write-downs on loans to be calculated using different assumptions about future development of credit losses. The bank has made calculations of losses under IFRS 9 based on a base, upper and lower scenario. The calculations at show an after-tax reduction of write-downs of NOK 55 million after tax compared to write-downs under IAS 39. The decreased in write-downs has been booked as a change in equity as per , and increases Loans to customers. In connection with the introduction of IFRS 9, an amendment to IAS 1, par. 82 (a) was made that applies to accounting periods beginning on or after January 1, According to this change, interest income calculated using the effective interest rate method (financial assets measured at amortized cost or at fair value through comprehensive income) shall be presented separately in the income statement. The bank has classified Cash and deposits with the central bank, Loans and deposits with credit institutions and Loans to customers at amortized cost. Interest income calculated using the effective interest method is presented separately in the income statement. Comparative figures are presented accordingly. The bank has paid a group contribution of 247,5 million to its parent company Norwegian Finans Holding ASA in the second quarter. 8

10 Note 2. Segments The profit and loss and balance sheet presentation for segments are based on internal financial reporting as it is reported to management. The figures are based on Bank Norwegian's governance model and accounting principles. Profit and loss account Q YTD Norway Sweden Denmark Finland Total Net interest income 1,026, , , ,892 2,120,344 Net other operating income 85,865 40,569 11,533-3, ,728 Total income 1,112, , , ,654 2,255,072 Total operating expenses before losses 271, ,322 77, , ,291 Provision for loan losses 113,233 69,064 95, , ,609 Profit before tax 727, ,840 66, ,532 1,193,172 Tax charge 181,989 47,960 16,711 51, ,293 Profit after tax 545, ,880 50, , ,879 Other comprehensive income Comprehensive income for the period 545, ,880 50, , ,879 Balance sheet Norway Sweden Denmark Finland Total Loans to customers 17,854,487 5,705,343 3,524,529 8,350,356 35,434,716 Other assets 6,880,984 2,120, ,403 1,902,449 11,858,297 Total assets 24,735,471 7,825,804 4,478,932 10,252,806 47,293,012 Deposits from customers 18,897,900 5,975,535 3,466,248 9,366,268 37,705,951 Other liabilities and equity 5,837,571 1,850,269 1,012, ,538 9,587,061 Total liabilities and equity 24,735,471 7,825,804 4,478,932 10,252,806 47,293,012 Profit and loss account Q YTD Norway Sweden Denmark Finland Total Net interest income 953, , , ,508 1,717,906 Net other operating income 62,580 28, ,668 Total income 1,016, , , ,430 1,810,574 Total operating expenses before losses 252, ,428 68,850 77, ,206 Provision for loan losses 128,084 59,869 66,844 77, ,417 Profit before tax 636, , , ,950 Tax charge 159,021 44, , ,988 Profit after tax 477, , , ,962 Other comprehensive income 3, ,602 Comprehensive income for the period 480, , , ,564 Balance sheet Norway Sweden Denmark Finland Total Loans to customers 15,678,158 5,223,041 2,448,201 5,518,653 28,868,053 Other assets 7,827, ,892 1,010, ,065 9,923,245 Total assets 23,505,637 6,090,933 3,459,011 5,735,717 38,791,298 Deposits from customers 17,374,054 5,601,487 3,349,468 4,597,914 30,922,923 Other liabilities and equity 6,131, , ,543 1,137,803 7,868,375 Total liabilities and equity 23,505,637 6,090,933 3,459,011 5,735,717 38,791,298 Profit and loss account 2017 Norway Sweden Denmark Finland Total Net interest income 1,947, , , ,913 3,670,428 Net other operating income 128,393 60,055 3,864 4, ,726 Total income 2,076, , , ,327 3,867,154 Total operating expenses before losses 508, , , ,317 1,068,188 Provision for loan losses 192, , , , ,388 Profit before tax 1,375, ,017 35, ,393 2,126,577 Tax charge 336,358 84,575 7,532 98, ,995 Profit after tax 1,038, ,442 28, ,862 1,599,582 Other comprehensive income 8, ,115 Comprehensive income for the period 1,047, ,442 28, ,862 1,607,697 Balance Norway Sweden Denmark Finland Total Loans to customers 16,561,731 5,718,448 3,121,962 7,049,412 32,451,553 Other assets 6,462,719 1,937, ,098 1,210,522 10,536,898 Total assets 23,024,450 7,656,007 4,048,060 8,259,934 42,988,451 Deposits from customers 17,909,401 5,875,474 3,313,982 6,583,384 33,682,241 Other liabilities and equity 5,115,048 1,780, ,078 1,676,550 9,306,210 Total liabilities and equity 23,024,450 7,656,008 4,048,060 8,259,934 42,988,451 9

11 Note 3. IFRS 9 Note 3.1. Change in balance sheet items Change in balance sheet items IAS 39 IFRS 9 Book value Book value Financial assets Category Category Cash and deposits with sentral banks Amortised cost 65,976 Amortised cost 65,976 Loans and deposits with credit institutions Amortised cost 1,254,152 Amortised cost 1,254,152 Loans to customers Amortised cost 32,451,553 Amortised cost 32,524,311 Certificates and bonds Fair value 8,859,834 Fair value 8,859,834 Financial derivatives Fair value 1,935 Fair value 1,935 Shares and other securities Fair value 443 Fair value 33,365 Assets available for sale* Fair value** 32,922 Fair value - * Will be reclassified to Shares and other securites under IFRS 9. ** Fair value through other comprehensive income. New model Reclassification for expected Assets available for sale IAS 39 credit loss IFRS 9 Balance , Reclassification - -32, Balance The tables below show the reclassification of balance sheet items and new expected credit loss. New model Reclassification for expected Loans to customers Balance IAS 39 32,451,553 - credit loss - IFRS 9 - Change in expected credit loss ,758 - Balance ,524,311 New model Reclassification for expected ECL IAS 39 credit loss IFRS 9 Balance ,140, Change in expected credit loss ,758 - Balance ,067,394 New model Reclassification for expected Shares and other securities IAS 39 credit loss IFRS 9 Balance Reclassification - 32, Balance ,365 10

12 Note 3.2. Economical variables used to measure expected credit loss The bank has chosen to disclose the three most important modeling variables in each individual country. The variables differ between countries. The following macro-economic variables are used in the models: real interest rate in absolute terms, 3-month interbank rate, unemployment level in thousands, hourly pay in NOK, aggregated monthly consumption for the entire population measured in millions in local currency, and unemployment rate in percentage of the total labor force. The data is modeled accross three scenarios: a base, an upper and a lower case for expected credit loss. The model is based on the NiGEM-model developed by UK's Institute of Economic and Social Research. The following weights has been used across all portfolios per : - Base scenario for expected credit loss: 40% - Upper scenario for expected credit loss: 30% - Lower scenario for expected credit loss: 30% Norway Base 1.74 % 2.20 % 2.64 % 3.27 % 3.32 % 3-month interbank rate Upper 1.49 % 1.95 % 2.39 % 3.02 % 3.07 % Lower 2.39 % 2.72 % 3.10 % 3.59 % 3.80 % Base Hourly pay in NOK Upper Lower Base % % % 0.26 % 0.14 % Real interest rate Upper % % % % % Lower 0.99 % 0.65 % 0.76 % 1.36 % 0.97 % Sweden Base 0.37 % 0.93 % 1.63 % 2.23 % 2.83 % 3-month interbank rate Upper 0.12 % 0.44 % 0.93 % 1.33 % 1.73 % Lower 0.78 % 1.62 % 2.58 % 3.46 % 4.34 % Unemployment level in thousands Base Upper Lower Base 176, , , , ,632 Consumption in millions Upper 179, , , , ,274 Lower 173, , , , ,400 Denmark Base 0.47 % 0.97 % 1.47 % 1.97 % 2.47 % 3-month interbank rate Upper 1.23 % 1.57 % 1.97 % 2.43 % 2.87 % Lower 0.10 % 0.33 % 1.03 % 1.63 % 2.17 % Base 79,644 81,182 82,816 84,392 86,002 Consumption in millions Upper 83,142 86,534 89,533 92,188 94,797 Lower 75,990 75,853 76,428 77,238 78,142 Base 5.26 % 5.38 % 5.33 % 5.29 % 5.29 % Unemployment percentage Upper 4.41 % 4.32 % 4.49 % 4.62 % 4.91 % Lower 6.33 % 6.51 % 5.97 % 5.79 % 5.58 % Finland Base 0.33 % 0.87 % 1.37 % 1.77 % 2.27 % 3-month interbank rate Upper 0.77 % 1.17 % 1.57 % 1.97 % 2.37 % Lower % 0.27 % 0.77 % 1.27 % 1.77 % Base 9,376 9,491 9,609 9,735 9,869 Consumption in millions Upper 9,736 9,973 10,181 10,387 10,591 Lower 9,028 9,032 9,072 9,132 9,205 Base 7.88 % 7.65 % 7.60 % 7.56 % 7.53 % Unemployment percentage Upper 5.38 % 5.97 % 6.39 % 6.52 % 6.93 % Lower % 9.61 % 8.68 % 8.46 % 8.08 % 11

13 Note 3.3. Significant increase in credit risk Probability of default (PD) is an experience-based probability that a commitment is in breach for more than 90 days in the next twelve months. The tables below show the different trigger levels that need to be in place for a commitment to be classified in Stage 2 due to a significant increase in credit risk. A significant increase in credit risk is assessed on the basis of several criteria, including late payment beyond 30 days after maturity. The most important factor for the assessment is a comparison between the original probability of default and the probability of default at the reporting date. Each product has its own threshold values when one considers an increase to be significant. Products with absolute low application PDs therefore lead to high trigger requirements, as they are relative and come from a low level. Norway Original Instalment Original Credit card PD loans PD loans <=5% 700 % <=2% 900 % >5%, 10%] 30 % >2% 0 % >10% 20 % Sweden Original Instalment Original Credit card PD loans PD loans <=20% 30 % <=2% 900 % >20% 10 % >2%, 5%] 40 % >5% 0 % Denmark Original Instalment Original Credit card PD loans PD loans <=20% 300 % <=50% 80 % >20%, 40%] 100 % >50% 0 % >40% 20 % Finland Original PD Instalment loans Original PD Credit card loans <=20% 200 % <=30% 200 % >20%, 40%] 100 % >30% 30 % >40% 40 % 12

14 Note 4. Loans to customers by customer groups Loan loss allowance Gross loans Stage 1 Stage 2 Stage 3 Other changes Total Instalment loans Norway 12,191,971 44,208 33, ,253-11,839,330 Credit card loans Norway 6,100,898 7,002 6,441 72,265-6,015,189 Instalment loans Sweden 3,933,187 45,377 61, ,289-3,716,825 Credit card loans Sweden 2,054,545 9,134 21,131 35,763-1,988,518 Instalment loans Denmark 3,204,290 57,345 24, ,255-2,939,843 Credit card loans Denmark 667,682 13,067 11,179 58, ,686 Instalment loans Finland 7,147,493 35,155 64, ,010-6,867,043 Credit card loans Finland 1,586,060 8,272 24,342 13,064-1,540,382 Additional provision Finland* ,069-57,069 Total 36,886, , , ,650 57,069 35,434,748 *The Bank is working with implementation of an internal model as Finland, as a temporary solution, is using a standardized model. Working with the new model in Q2 has created an expectation that the standardized model is believed to underestimate expected credit losses. The additional provision is not attributed to any product or step. Therefore, provisions for credit losses in Finland includes a management override of MNOK 57 in the second quarter Note 5. Change in loan loss allowance Instalment loans Norway Loan loss allowance Stage 1 Stage 2 Stage 3 12 months Lifetime Lifetime expected expected expected credit loss credit loss credit loss Total Loan loss allowance as at ,135 33, , ,297 Transfers between Stage 1 and Stage 2-3,060 14,019-10,959 Transfers between Stage 1 and Stage Transfers between Stage 2 and Stage 1 1,957-5, ,863 Transfers between Stage 2 and Stage ,991 29,909 18,918 Transfers between Stage 3 and Stage ,994-7,060 Transfers between Stage 3 and Stage New financial assets issued or purchased 3,853 1,553-5,406 Financial assets derecognized in the period, including down payments -2, ,151 15,631 Loan loss allowance as at ,208 33, , ,641 Loan loss provisions and guarantees The loan loss allowance is calculated based on the expected credit loss (ECL) using the 3-stage method as described in note 2.1 of the Annual Report Migration out of one stage is calculated at opening date , while migration into one stage is calculated at the closing date Gross loans to customers Stage 1 Stage 2 Stage 3 Total Gross loans to customers as at ,511,647 1,325,287 1,113,643 11,950,577 Transfers between Stage 1 and Stage 2-581, ,685-1,807 Transfers between Stage 1 and Stage 3-21,469-21, Transfers between Stage 2 and Stage 1 366, , ,532 Transfers between Stage 2 and Stage , , Transfers between Stage 3 and Stage 2-37,056-46,784-9,728 Transfers between Stage 3 and Stage 1 1, ,938-1,001 New financial assets issued or purchased 770,429 42, ,872 Financial assets derecognized in the period, including down payments -435,108-78,743-34, ,672 Gross loans to customers as at ,611,670 1,312,304 1,267,997 12,191,971 13

15 Credit card loans Norway Loan loss allowance Stage 1 Stage 2 Stage 3 12 months Lifetime Lifetime expected expected expected credit loss credit loss credit loss Total Loan loss allowance as at ,560 6,479 58,767 71,806 Transfers between Stage 1 and Stage ,280-2,976 Transfers between Stage 1 and Stage Transfers between Stage 2 and Stage , ,152 Transfers between Stage 2 and Stage ,696 5,753 Transfers between Stage 3 and Stage ,358-2,257 Transfers between Stage 3 and Stage New financial assets issued or purchased Financial assets derecognized in the period, including down payments ,630 9,329 Loan loss allowance as at ,002 6,441 72,265 85,709 Loan loss provisions and guarantees The loan loss allowance is calculated based on the expected credit loss (ECL) using the 3-stage method as described in note 2.1 of the Annual Report Migration out of one stage is calculated at opening date , while migration into one stage is calculated at the closing date Gross loans to customers Stage 1 Stage 2 Stage 3 Total Gross loans to customers as at ,758, , ,610 5,613,301 Transfers between Stage 1 and Stage 2-238, ,697-38,098 Transfers between Stage 1 and Stage 3-11,416-11, Transfers between Stage 2 and Stage 1 193, , ,332 Transfers between Stage 2 and Stage ,044 78, Transfers between Stage 3 and Stage 2-8,944-19,895-10,951 Transfers between Stage 3 and Stage 1 1, ,990-4,853 New financial assets issued or purchased 179,824 16, ,716 Financial assets derecognized in the period, including down payments 310,547-13,909-2, ,603 Gross loans to customers as at ,193, , ,467 6,100,898 14

16 Instalment loans Sweden Loan loss allowance Stage 1 Stage 2 Stage 3 12 months Lifetime Lifetime expected expected expected credit loss credit loss credit loss Total Loan loss allowance as at ,500 90,069 91, ,123 Transfers between Stage 1 and Stage 2-5,813 11,030-5,217 Transfers between Stage 1 and Stage Transfers between Stage 2 and Stage 1 6,002-12, ,145 Transfers between Stage 2 and Stage ,890 18,498 9,608 Transfers between Stage 3 and Stage 2-2,106-8,027-5,921 Transfers between Stage 3 and Stage New financial assets issued or purchased 6, ,707 Financial assets derecognized in the period, including down payments -3,992-6,199 7,680-2,511 Other adjustments 5,152-15, ,093 Loan loss allowance as at ,377 61, , ,361 Loan loss provisions and guarantees The loan loss allowance is calculated based on the expected credit loss (ECL) using the 3-stage method as described in note 2.1 of the Annual Report Migration out of one stage is calculated at opening date , while migration into one stage is calculated at the closing date Gross loans to customers Stage 1 Stage 2 Stage 3 Total Gross loans to customers as at ,658,112 1,809, ,303 3,890,581 Transfers between Stage 1 and Stage 2-233, , ,300 Transfers between Stage 1 and Stage 3-9,477-9, Transfers between Stage 2 and Stage 1 263, , ,904 Transfers between Stage 2 and Stage , , Transfers between Stage 3 and Stage 2-38,990-44,761-5,771 Transfers between Stage 3 and Stage 1 2, , New financial assets issued or purchased 316,463 18, ,455 Financial assets derecognized in the period, including down payments -142, ,148-16, ,395 Other adjustments 264, , ,655 Gross loans to customers as at ,120,307 1,326, ,972 3,933,187 Other adjustments include the effects of a correction to the macro model unique to instalment loans in Sweden 15

17 Credit card loans Sweden Loan loss allowance Stage 1 Stage 2 Stage 3 12 months Lifetime Lifetime expected expected expected credit loss credit loss credit loss Total Loan loss allowance as at ,691 27,015 27,675 63,381 Transfers between Stage 1 and Stage ,736-5,480 Transfers between Stage 1 and Stage Transfers between Stage 2 and Stage , ,468 Transfers between Stage 2 and Stage ,435 7,178 4,744 Transfers between Stage 3 and Stage ,566-1,931 Transfers between Stage 3 and Stage New financial assets issued or purchased Financial assets derecognized in the period, including down payments ,484 2,092 Loan loss allowance as at ,134 21,131 35,763 66,028 Loan loss provisions and guarantees The loan loss allowance is calculated based on the expected credit loss (ECL) using the 3-stage method as described in note 2.1 of the Annual Report Migration out of one stage is calculated at opening date , while migration into one stage is calculated at the closing date Gross loans to customers Stage 1 Stage 2 Stage 3 Total Gross loans to customers as at ,538, ,077 96,275 1,935,512 Transfers between Stage 1 and Stage 2-66,159 70,176-4,017 Transfers between Stage 1 and Stage 3-3,395-3, Transfers between Stage 2 and Stage 1 86, , ,559 Transfers between Stage 2 and Stage ,584 29, Transfers between Stage 3 and Stage 2-6,506-10,269-3,763 Transfers between Stage 3 and Stage New financial assets issued or purchased 83,534 2,094-85,628 Financial assets derecognized in the period, including down payments 62,844-11,942-2,870 48,032 Gross loans to customers as at ,701, , ,780 2,054,545 16

18 Instalment loans Denmark Loan loss allowance Stage 1 Stage 2 Stage 3 12 months Lifetime Lifetime expected expected expected credit loss credit loss credit loss Total Loan loss allowance as at ,306 34, , ,640 Transfers between Stage 1 and Stage 2-3,082 14,860-11,778 Transfers between Stage 1 and Stage ,874 9,185 Transfers between Stage 2 and Stage 1 1,435-5, ,237 Transfers between Stage 2 and Stage ,054 43,269 24,214 Transfers between Stage 3 and Stage ,778-2,335 Transfers between Stage 3 and Stage New financial assets issued or purchased 5, ,068 Financial assets derecognized in the period, including down payments 245-1,087-4,754-5,596 Loan loss allowance as at ,345 24, , ,446 Loan loss provisions and guarantees The loan loss allowance is calculated based on the expected credit loss (ECL) using the 3-stage method as described in note 2.1 of the Annual Report Migration out of one stage is calculated at opening date , while migration into one stage is calculated at the closing date Gross loans to customers Stage 1 Stage 2 Stage 3 Total Gross loans to customers as at ,520, , ,786 2,965,585 Transfers between Stage 1 and Stage 2-86,578 89,055-2,477 Transfers between Stage 1 and Stage 3-17,620-18, Transfers between Stage 2 and Stage 1 41,803-42, ,081 Transfers between Stage 2 and Stage ,382 79, Transfers between Stage 3 and Stage 2-3,653-5,413-1,759 Transfers between Stage 3 and Stage New financial assets issued or purchased 212,511 5, ,967 Financial assets derecognized in the period, including down payments 38,482-8,496-8,564 21,423 Gross loans to customers as at ,709, , ,177 3,204,290 17

19 Credit card loans Denmark Loan loss allowance Stage 1 Stage 2 Stage 3 12 months Lifetime Lifetime expected expected expected credit loss credit loss credit loss Total Loan loss allowance as at ,197 11,427 53,777 79,401 Transfers between Stage 1 and Stage ,653-2,431 Transfers between Stage 1 and Stage ,607 1,564 Transfers between Stage 2 and Stage , ,235 Transfers between Stage 2 and Stage ,812 6,473 3,661 Transfers between Stage 3 and Stage , Transfers between Stage 3 and Stage New financial assets issued or purchased 6, ,349 Financial assets derecognized in the period, including down payments -7, ,309-8,357 Loan loss allowance as at ,067 11,179 58,751 82,996 Loan loss provisions and guarantees The loan loss allowance is calculated based on the expected credit loss (ECL) using the 3-stage method as described in note 2.1 of the Annual Report Migration out of one stage is calculated at opening date , while migration into one stage is calculated at the closing date Gross loans to customers Stage 1 Stage 2 Stage 3 Total Gross loans to customers as at ,465 55, , ,880 Transfers between Stage 1 and Stage 2-22,532 24,519-1,987 Transfers between Stage 1 and Stage 3-3,640-3, Transfers between Stage 2 and Stage 1 12,918-14, ,334 Transfers between Stage 2 and Stage ,218 16, Transfers between Stage 3 and Stage 2-1,864-4,416-2,552 Transfers between Stage 3 and Stage New financial assets issued or purchased 12, ,291 Financial assets derecognized in the period 12,333-4,326-2,723 5,285 Gross loans to customers as at ,350 47, , ,682 18

20 Instalment loans Finland Loan loss allowance Stage 1 Stage 2 Stage 3 12 months Lifetime Lifetime expected expected expected credit loss credit loss credit loss Total Loan loss allowance as at ,427 56, , ,155 Transfers between Stage 1 and Stage 2-4,580 31,676-27,096 Transfers between Stage 1 and Stage Transfers between Stage 2 and Stage 1 1,536-8, ,232 Transfers between Stage 2 and Stage ,838 49,432 30,594 Transfers between Stage 3 and Stage 2-1,843-4,085-2,243 Transfers between Stage 3 and Stage Financial assets issued or purchased 3,949 1,286-5,236 Financial assets derecognized in the period, including down payments ,539-3,306 Loan loss allowance as at ,155 64, , ,449 Loan loss provisions and guarantees The loan loss allowance is calculated based on the expected credit loss (ECL) using the 3-stage method as described in note 2.1 of the Annual Report Migration out of one stage is calculated at opening date , while migration into one stage is calculated at the closing date Gross loans to customers Stage 1 Stage 2 Stage 3 Total Gross loans to customers as at ,990, , ,933 6,638,906 Transfers between Stage 1 and Stage 2-531, ,514-8,419 Transfers between Stage 1 and Stage 3-1,698-1, Transfers between Stage 2 and Stage 1 184, , ,129 Transfers between Stage 2 and Stage , , Transfers between Stage 3 and Stage 2-18,155-21,912-3,757 Transfers between Stage 3 and Stage New financial assets issued or purchased 593,514 27, ,197 Financial assets derecognized in the period, including down payments -60,676-33,622-15, ,877 Gross loans to customers as at ,174,900 1,083, ,059 7,147,493 19

21 Credit card loans Finland Loan loss allowance Stage 1 Stage 2 Stage 3 12 months Lifetime Lifetime expected expected expected credit loss credit loss credit loss Total Loan loss allowance as at ,571 22,879 10,212 40,663 Transfers between Stage 1 and Stage 2-1,268 6,851-5,582 Transfers between Stage 1 and Stage Transfers between Stage 2 and Stage , ,857 Transfers between Stage 2 and Stage ,758 3,762 2,004 Transfers between Stage 3 and Stage Transfers between Stage 3 and Stage Financial assets issued or purchased 1, ,109 Financial assets derecognized in the period, including down payments ,446 Loan loss allowance as at ,272 24,342 13,064 45,678 Loan loss provisions and guarantees The loan loss allowance is calculated based on the expected credit loss (ECL) using the 3-stage method as described in note 2.1 of the Annual Report Migration out of one stage is calculated at opening date , while migration into one stage is calculated at the closing date Gross loans to customers Stage 1 Stage 2 Stage 3 Total Gross loans to customers as at , , ,796 1,384,763 Transfers between Stage 1 and Stage 2-135, ,195-27,321 Transfers between Stage 1 and Stage Transfers between Stage 2 and Stage 1 52,662-53, Transfers between Stage 2 and Stage ,323 40, Transfers between Stage 3 and Stage 2-3,351-5,015-1,664 Transfers between Stage 3 and Stage New financial assets issued or purchased 68,757 9,116-77,873 Financial assets derecognized in the period, including down payments 116,312-14,420-2,520 99,373 Gross loans to customers as at , , ,006 1,586,060 20

22 Note 6. Loan loss provisions and guarantees The bank has no guarantees as of Q Q Realized losses in the period 16,404 5,873 16,325 Individual write-downs on loans including gains/losses from sale of NPL portfolios - 81, ,838 Write-downs - lifetime expected credit loss (stage 3) 334, Net individual write-downs on loans 350,554 87, ,163 The period's change in write-downs on groups of loans including gains/losses from sale of NPL portfolios - 245, ,226 Write-downs - 12 months expected credit loss (stage 1) 20, Write-downs - lifetime expected credit loss (stage 2) 15, Other changes 57, Write-downs on loans 443, , ,388 Note 7. Loans to customers by geographical region Gross loans by geographical regions Q Q Østlandet 9,577,525 8,510,425 8,905,323 Sørlandet 796, , ,306 Vestlandet 4,578,488 4,063,685 4,265,918 Trøndelag 1,332,205 1,177,651 1,237,676 Nord-Norge 1,938,657 1,745,978 1,820,883 Not classified 69,259 45,729 59,785 Total Norway 18,292,868 16,251,486 17,038,890 Götaland 2,467,565 2,200,335 2,429,467 Svealand 2,893,067 2,575,446 2,863,260 Norrland 562, , ,585 Not classified 64,978 17,919 38,614 Total Sweden 5,987,732 5,314,369 5,898,925 Hovedstaden 1,413, ,054 1,227,797 Midtjylland 635, , ,088 Nordjylland 285, , ,884 Sjælland 805, , ,903 Syddanmark 729, , ,437 Not classified 3,217 1,445 2,428 Total Denmark 3,871,972 2,581,657 3,345,537 Södra Finland 5,991,834 3,906,503 5,011,778 Västra Finland 959, , ,531 Östra Finland 685, , ,822 Mellersta Finland 662, , ,740 Norra Finland 376, , ,244 Not classified 57,989 19,399 59,237 Total Finland 8,733,553 5,669,334 7,308,352 Gross loans to customers 36,886,124 29,816,846 33,591,704 Note 8. Liquidity risk The liquidity risk is the risk that the bank is not capable of covering all its financial obligations as they fall due. The liquidity risk is evaluated as low at the time of this report, since a large portion of the bank's assets consists of easily transferable securities. The asset side is financed by core deposits from the retail market, debt securities and subordinated capital. The bank manages its liquidity position by short-term cash flow forecasts and liquidity due date summaries. The Liquidity Coverage Ratio (LCR) is defined as the bank's liquid assets relative to net liquidity output 30 days forward in time in any given stress situation. At the liquidity reserve (LCR) on total level for the bank was 220% (compared to 169% per ). The bank has significant positions in Norwegian, Swedish and Danish kroner in addition to Euro. At the LCR was 324% in Norwegian kroner (compared to 235% per ), 128% in Swedish kroner (compared to 51% per ), 189% Danish kroner (compared to 114% per ) and 151% in Euro (compared to 0% per ). The legal requirement for liquidity reserve at total level and for significant currencies is 100% at , except for Norwegian kroner where the legal requirement is 50%. 21

23 Note 9. Loans and deposits with credit institutions and central banks Q Q Loans and deposits with credit institutions and central banks without agreed maturity or notice period 2,138,224 1,454,551 1,320,128 Loans and deposits with credit institutions and central banks 2,138,224 1,454,551 1,320,128 Specification of currencies Q Q NOK 908, , ,807 SEK 600, , ,840 DKK 276, , ,700 EUR 352, , ,782 Loans and deposits with credit institutions and central banks 2,138,224 1,454,551 1,320,128 Average interest rate 0.20 % 0.43 % 0.22 % Average interest rate is calculated as interest amount in percentage of average volume for the current period. Note 10. Net interest income Q Q Interest income from cash and deposits with the central bank Interest income from loans to and deposits with credit institutions 1,499 1,261 2,660 Interest income from instalment loans 1,761,130 1,460,959 3,102,438 Interest income from overdraft accounts Interest income from credit card loans 605, , ,465 Interest income from sales financing 1,338 2,647 4,571 Interest income, amortised cost 2,369,543 1,904,949 4,077,517 Interest and other income from certificates and bonds 46,248 43,672 91,939 Other interest and other interest related income 1,821 1,846 3,183 Other interest income 48,069 45,518 95,122 Interest expense from deposits from credit institutions Interest expense from deposits from customers 259, , ,959 Interest expense on debt securities issued 15,318 17,619 34,346 Interest expense on subordinated loan 9,903 5,889 15,530 Other interest and other interest related expenses 12,545 8,796 18,241 Interest expenses 297, , ,211 Net interest income 2,120,344 1,717,906 3,670,428 Note 11. Net other operating income Q Q Payment services 169, , ,887 Insurance services 67,889 42,304 87,522 Other fees and commission and bank services income 26,262 22,459 47,589 Total commission and bank services income 263, , ,998 Payment services 68,727 47, ,223 Insurance services 54,200 34,365 78,620 Other fees and commission and bank services expense 13,156 10,128 21,887 Total commission and bank services expenses 136,082 92, ,730 Note 12. Net gains on financial instruments Q Q Net gains on certificates and bonds -17, ,251 Net gains on FX-forwards 212,515 62, ,821 Net currency effects -191,220-51, ,530 Net gains on shares and other securities 4, Total 7,613 10,127 7,458 Note 13. General administrative expenses Q Q Sales and marketing 430, , ,783 IT operations 37,418 48,286 81,940 External services fees 43,328 22,437 51,995 Other administrative expenses 20,094 19,127 41,568 Total 531, , ,286 22