YEaR-EnD REPoRT volvofinans bank ab

Transcription

1 YEAR-END REPORT volvofinans bank ab

2 MESSAGE FROM THE PRESIDENT The beginning of was difficult, as the effects of the global financial crisis were felt on the Swedish market. There was a great deal of uncertainty as to how this would affect the Swedish economy, consumption, vehicle sales and therefore Volvofinans Bank. It is with pleasure, pride and a certain amount of relief that I am able to confirm that was once again a successful year for Volvofinans Bank in spite of the financial crisis. Our aim was to achieve a profit of over SEK 200 million despite the rapid sharp fall in the repo rate to a record low of 0.25 %, the gloomiest forecasts for vehicle sales and increased risks of credit losses. We are now able to confirm that we have achieved this aim by a good margin with a profit of SEK 220 million. The fundamentally secure business model for sales financing that we share with the Swedish Volvo dealerships provides a stable platform and is a key factor in the year's performance. Our well-established business model, where the credit risk is borne by the Volvo dealers, means that as before there are no credit losses within sales financing. The stable vehicle fleet business that we have built up over the years and the credit card business we have operated at great profit and which is dominated by the Volvo Card (Volvokortet), has made a major contribution to our results. Over the years, the Volvo Card has become something of a crown jewel for the Volvo dealerships, Volvo Cars and latterly also for Volvo Trucks in the form of the Volvo Truck Card. There was a slight increase in credit losses within credit card business, but this remains at a low level, which indicates that we have reliable customers even in times of crisis. Profit for the financial year amounted to SEK 220 million, compared with SEK 273 million in. The balance sheet total is SEK 24.1 billion (25.4). Lending totalled SEK 23.2 billion compared with SEK 24.3 billion in. At the end of, Volvofinans Bank signed up for the Swedish government's guarantee scheme as security against the extraordinary market situation prevailing at the time. The aim of this was to secure the ability of Volvo Cars, Volvo Trucks and the Swedish Volvo dealerships to continue to distribute vehicles on the Swedish market. In retrospect we are able to confirm that this decision was the right one, which can clearly be seen in the continued dominant market shares of Volvo Cars, Volvo Trucks and the Swedish Volvo dealerships. Volvofinans Bank did not make use of any government guarantee to secure new borrowing during the second half of. Deposits from the public via the Volvo Card and from the Volvo dealerships continues to increase and amounted to SEK 1.9 billion at the end of the year, which is equivalent to 10 % of Volvofinans Bank's financing requirements. The corresponding percentage for was 4 %, which represents a major increase achieved through campaigns providing good terms on savings and clear profiling as an excellent niche bank. This campaign will be intensified during Volvofinans Bank is owned 50 % by the Swedish Volvo dealerships through the holding company Volverkinvest and 40 % by the Sixth Swedish National Pension Fund The remaining 10 % is owned by Volvo Cars, which has been transferred from Ford Credit, which is a natural progression in terms of Ford's intention to sell Volvo Cars. We are continuing to broaden our overall business through the Volvo dealerships' sale of additional brands. Volvo, Renault, Ford, Jaguar and Land Rover have in recent years been joined by Hyundai, Mazda, Toyota, Nissan and BMW. This gives us access to a larger market than before via the Volvo dealerships. Today, Volvo dealerships comprise 69 companies, of which 46 are solely passenger car dealers, 20 are solely truck dealers and 3 are mixed. They have a total of 200 sales outlets and approximately 8,500 employees. Sales through Volvo dealerships totalled approximately SEK 36 billion in, with an overall profit of around SEK 525 million, which is significantly better than the profit for of around SEK 100 million. Passenger car dealers have increased their profits considerably, while the profits of truck dealers fell from a previously high level to a more normal level. Swedish passenger car sales fell from 254,000 registrations (new cars) in to 213,400 registrations in. Volvo dealers, the majority of which now sell Ford and even other marques alongside Volvo and Renault, were affected by this downturn. Volvo fell from 47,800 new cars in to 41,800 in, Ford from 15,100 to 13,100 and Renault from 7,300 to 7,000. Volvo's market share is now 19.6 % (18.8), Ford's 6.2 % (6.0) and Renault's 3.3 % (2.9). Volumes on the truck market fell sharply during, a slowdown which started in the last quarter of and had an impact on Volvo Truck's operations. The total for the market was 4,800 new trucks over 16 tons (6,000), with Volvo as one of two market leaders with 2,074 new cars (2,612) and a market share of 43.4 % (43.3). On the truck side, the three major Volvo dealerships of Liljedahls (Växjö, Jönköping and Skövde), Persson Invest (Östersund, Umeå, Västerås and Uppsala) and Rejmes (Örebro and Norrköping) account for approximately 32 % of the Swedish Volvo market. Volvo Truck Centre, which does not finance its operations through Volvofinans Bank, accounts for approximately 38 %; the remaining 30 % is mostly accounted for by medium-sized dealerships. Last year, Volvofinans Bank had 218,000 contracts in its portfolio, 1

3 compared with 229,000 the year before. Volvofinans Bank markets and administers two charge and credit cards: the Volvo Card and the Volvo Truck Card. The Volvo Card acts as a method of payment at all Volvo dealers for repairs, servicing, spare parts/accessories and fuel at the Volvo dealers' "Tanka" chain of service stations, as well as at OKQ8's network of stations. This card is also available with VISA for wider use outside Volvo dealerships. During, a bonus system was introduced at a large number of dealers in order to further increase the use of the card. Together, Tanka and OKQ8 provide an extensive network of stations, with over 1,000 stations in Sweden. A total of 52,000 new accounts were opened in. Overall, 2 million card purchases were made per month during the year, which means 7.9 million statements of account representing a unique opportunity to communicate with our customers, together with the dealers. The Volvo Truck card is increasing in importance and scope. All truck dealerships market the card and an increasing number of major hauliers are becoming affiliated with the card. The number of Truck Cards is now 22,000. We, that is Volvofinans Bank and Sweden's Volvo dealers, are currently living in interesting times with the expansion of services and not least the supply of new brands. This, together with the much clearer signals of improved economic conditions, make us more resolute in our belief that 2010 will be a successful year for Volvofinans Bank. Our cooperation with the owners, the continued strong network of Volvo dealerships, forms a sound basis for future success. The future of the Volvo dealers' key supplier, Volvo Cars, will of course have a bearing on Volvofinans Bank. However, as the Volvo dealerships are now able to sell more and different marques, Volvofinans Bank will also have a significant future role in the Swedish Volvo dealership system. An upward economic trend, more customers at the Volvo dealerships and the expansion of our services leads me to believe that the future will be bright. Bert Björn President Volvofinans Bank AB The information contained in this report is that which Volvofinans Bank AB (publ), corporate ID no is obliged to publish in accordance with the Swedish Securities Market Act (SFS 2007:528). This report was submitted for publication at a.m. on 19 February In the event of conflict in interpretation or differences between this annual report and the Swedish version, the latter will prevail. 2

4 OWNERSHIP Volvofinans Bank is owned 50 % by the Swedish Volvo dealerships through the holding company Volverkinvest and 40 % by the Sixth Swedish National Pension Fund. The remaining 10 % is owned by Volvo Personvagnar AB, which has been transferred from Ford Credit International Inc. PRIMARY TASK The primary task of Volvofinans Bank is to actively support sales of products marketed by Volvo dealers on the Swedish market by providing product and sales financing, while reporting favourable earnings. GROUP STRUCTURE Volvofinans Bank AB, along with Volvo Personvagnar Norden AB, Volvohandlarnas Service AB and Volvohandelns PV Försäljnings AB, jointly and equally own three limited partnership companies, the first two of which conduct commission sales (one company for new and one for used) among the Volvo dealerships in Sweden, while the third carries out leasing operations, primarily to companies within the Volvo Personvagnar AB Group. Volvofinans IT AB, Volvofinans Leasing AB, Autofinans Nordic AB and Automanagement AR AB are dormant companies. Volvofinans Konto Bank AB is in liquidation after the Swedish Financial Supervisory Authority withdrew its permission to conduct financing operations at the request of the company. VOLUMES/LENDING The total contract portfolio (loan and leasing contracts) amounted to 186,083 contracts (196,359). The truck and bus element amounted to 8,321 contracts (8,584) which represents more than 4 % of the total. The number of corporate customers for which Svensk Vagnparksfinans conducts car administration is at a stable level and at year-end administration was being provided for 31,618 cars (32,737). Volvofinans Bank's lending volume was SEK 21.7 billion (23.7). The truck and bus element was SEK 3.7 billion (3.6), which corresponds to 17 % of total lending. Account credits of SEK 1.7 billion (1.7) remained unchanged from the preceding year. Sales through the Volvo Card totalled SEK 10.1 billion (10.4) and through the Volvo Truck Card SEK 492 million (484). Volvofinans Bank s primary segments are the business lines of the passenger car market and the truck market. The geographic distribution reflects the Group as a whole. The operating profit, operating revenue, number of contracts and lending volume for Volvofinans Bank's lines of business are detailed below. Operating revenue is defined as the net of interest income, interest expenses, leasing net, dividends received, the net result of financial transactions, commission income and commission expenses. Jan - Dec Cars Trucks Group Assets, SEK M (average) 20,622 4,430 25,052 Lending volume, SEK M (average) 19,740 4,299 24,039 Operating revenue, SEK T 483,198 31, ,092 Operating profit, SEK T 197,842 21, ,708 Expenses, SEK T 277,424 12, ,890 Number of contracts (average) 215,153 8, ,606 Loans Leasing Total Number of contracts 115,444 70, ,083 Average contract, SEK T Collateral value, SEK M 11,291 10,492 21,783 Credit used, SEK M 10,940 8,534 19,474 Collateral value, % 97 % 81 % 89 % Market value, SEK M 16,652 10,176 26,828 Surplus value, SEK M 5,712 1,642 7,354 Surplus value, % 52 % 19 % 38 % INCOME Earnings before credit losses amounted to SEK million (293.2). The drop in earnings is mainly the result of the effect on net interest income of rapidly falling market interest rates, the very low interest rate level and higher borrowing margins. During the latter part of the year, the market adjustments made to our lending margins have had a positive effect. Expenses are 14 % lower than in the previous year. Net profit before tax fell by 19 % to SEK million (272.8). CREDIT RISKS AND CREDIT LOSSES The credit risk continues to be very low as most of the credit risk and residual value risk is borne by the Volvo dealers. Problem credits are all receivables that are overdue by more than 90 days. Volvofinans Bank's problem credits for credit card receivables total SEK million (109.5) and for loan and leasing lending SEK million (92.3). The increase in problem credits is due to an increase in the average liability for credit cards, partly as the result of higher fuel prices and customers' opportunities for longer credit periods. Dealers bear the credit risk through recourse agreements for the majority, SEK million, of problem credits relating to loans and leasing. There are no loans for which interest concessions have been agreed and no property has been received to provide security for receivables. Confirmed credit losses relate mainly to credit card operations and recovered losses consist mostly of payments for losses sold that had previously been written off. Provisions for anticipated credit losses are estimated for the household segment using statistical risk models and for the corporate segment using an expert risk classification model and a manual review. 3

5 Group Parent Company Amounts in SEK T Confirmed credit losses - 14,249-12,822-14,249-4,313 Recovered losses 3,149 2,828 3,149 1,051 Total - 11,100-9,994-11,100-3,262 Provisions for credit risk Provisions for anticipated credit losses 5,605-10,429 5,605-12,023 Credit losses, net - 5,495-20,423-5,495-15,285 CAPITAL PROCUREMENT The effect on the money and capital markets of the financial crisis during the year resulted in higher borrowing costs for Volvofinans Bank. This was most noticeable during the first quarter, while the rest of the year saw a slow but significant reduction. During the year, Volvofinans Bank extended the maturity period of market borrowing, primarily by replacing short-term commercial paper borrowing with long-term bond loans. Market borrowing was obtained at a favourable cost during the first half of the year through the government guarantee under the Swedish government's guarantee scheme. From the second half of the year onwards, market borrowing has been arranged solely without using the government guarantee. Nevertheless, Volvofinans Bank chose to extend its affiliation with the Swedish government's guarantee scheme in November, for a further period of six months. Volvofinans Bank's short-term market borrowing is arranged through the issuing of commercial papers under a Nordic and Euro Commercial Paper Programme. Overall, commercial papers with a value of SEK 5.7 billion were issued during the year. For loans with a longer maturity period, bonds are issued through our Swedish MTN programme. During, seven bond issues were completed for a total of SEK 4.5 billion, with terms of two to four years. Overall, outstanding financing via our three market loans programmes was SEK 12.7 billion at year-end. In addition to market borrowing, operations were financed in the amount of SEK 4.1 billion in the form of bank loans, as well as an increased volume of customer deposits of SEK 1.9 billion. The proportion of long-term financing with a remaining period greater than one year was 62 % at the year-end. Adjusted for the short-term investment of surplus liquidity, long-term borrowing accounted for 66 % of net financing. FINANCIAL RISKS Operations within the financial sector mean that Volvofinans Bank is continuously exposed to a number of financial risks. Liquidity risk is the risk that Volvofinans Bank's payment obligations cannot be met on maturity without significant costs in terms of the means of payment or in a worst-case scenario cannot be met by any means. In order to manage short periods of refinancing disruption, Volvofinans Bank has a daily surplus liquidity of SEK 500-1,500 million. In order to secure its ability to pay over a longer period, Volvofinans Bank has entered into agreements with banks concerning credit facilities that can be utilised at short notice. Borrowing with a remaining period of less than one year must be covered at all times by unutilised credit facilities. The total volume of available facilities at the year-end was SEK 9.6 billion, of which SEK 1.2 billion was in the form of a liquidity injection agreement with Volverkinvest and the Sixth Swedish National Pension Fund. SEK 5.7 billion represented long-term facilities with a remaining period of more than one year. Interest rate risk is the current and future risk that net interest income declines as a result of unfavourable changes in the interest rate. The vast majority of Volvofinans Bank's lending and all borrowing follow the short-term market interest rate or have short fixed interest periods through swap contracts, which involves a slight interest rate risk. Currency risk is the risk of unfavourable changes in exchange rates. All of Volvofinans Bank's lending is in Swedish kronor and any borrowing in foreign currency is hedged, thus Volvofinans Bank is not exposed to fluctuations in exchange rates. RATING Volvofinans Bank has international credit ratings from Moody s Investors Service as follows: - Short-term financing: P-2 - Long-term financing: Baa1 Since 22 July, Volvofinans Bank's credit rating has been subject to special review, which may result in downgrading. You will find a detailed analysis from Moody's Investors Service on our website, volvofinans.se CAPITAL ADEQUACY The regulatory framework for capital adequacy means that Volvofinans Bank must at all times have a capital base that corresponds at least to the total of the capital requirement for credit risk, market risk and operational risk, as well as the calculated capital requirement for additional identified risks in operations. Volvofinans Bank calculates the capital requirement for credit risk using the standardised method, which means that all exposures are allocated to one of fifteen exposure categories with a different risk weighting for each category. The capital requirement for operational risk is calculated using the base indicator method, which means that the capital requirement is 15 % of the average operating income for the last three financial years. EVENTS AFTER THE BALANCE SHEET DATE No other significant events have occurred since the balance sheet date. The Annual Report is scheduled to be published during week 11 of 2010 and the report for 31 March will be published on 11 May The report will be available on our website: For further information, contact Bert Björn, President of Volvofinans Bank AB Tel. +46 (0) or info@ volvofinans.se This report has not been the subject of special examination by the company's auditors. 4

6 CAPITAL ADEQUACY Amounts in SEK M Parent Company 31 Dec Parent Company 31 Dec Capital base Capital base 3,087 2,984 Core capital 2,877 2,774 Supplementary capital Capital requirements Capital requirement for credit risk using the standardised method Capital requirement for operational risk using the base indicator method 1,529 1, Total minimum capital requirement pursuant to Basel II 1,616 1,737 Total minimum capital requirement pursuant to Basel I 1,817 1,979 Capital adequacy Capital adequacy ratio Capital adequacy level, % Core capital ratio, % The capital adequacy information given above is for the parent company Volvofinans Bank AB. In contrast to the previous year, the company is no longer included in any financial corporate group. CONSOLIDATED STATEMENT OF INCOME Jan-Sept Amounts in SEK T Jan-Sept Interest income 616, , ,472 1,399, ,317 1,045,317 Leasing income 433, , , ,018 56, ,807 Interest expenses - 404,761-65, ,339-1,056, , ,876 Dividends received 3,298 3,298-1,825 1,825 - Net result of financial transactions* 3, ,581-12,166-11, Commission income 302,115 81, , ,693 74, ,333 Commission expenses - 37,183-12,627-24,556-24,584-10,198-14,386 Total operating income 916, , , , , ,619 General administrative expenses - 232,273-67, , ,165-62, ,412 Depreciation of fixed assets - 422, , , ,614-57, ,797 Other operating expenses - 36,401-15,612-20,789-65,895-24,775-41,120 Total operating expenses - 691, , , , , ,329 Income before credit losses 225,203 59, , ,243 50, ,290 Credit losses, net - 5,495 4,637-10,132-20,423-18,412-2,011 Income before tax 219,708 63, , ,820 32, ,279 Taxes - 57,902-16,867-41,035-24,746 42,532-67,278 Profit 161,806 46, , ,074 75, ,001 * Net income from financial transactions Currency-related Interest-bearing securities and related derivatives 3, ,507-12,771-11,711-1,060 Total 3, ,581-12,166-11,

7 PARENT COMPANY STATEMENT OF INCOME Jan-Sept Amounts in SEK T Jan-Sept Interest income 476, , , , , ,020 Leasing income 2,327, ,195 1,740,423 2,500, ,698 1,868,059 Interest expenses - 404,761-65, ,339-1,047, , ,635 Dividends received 1,222 1,2, Net result of financial transactions* 3, ,581-12,166-11, Commission income 302,115 81, , ,009 72,504 60,505 Commission expenses - 37,183-12,627-24,556-18,109-7,758-10,351 Total operating income 2,668, ,224 1,969,360 2,465, ,649 1,793,022 General administrative expenses - 232,273-67, , ,713-65,875-75,838 Depreciation of fixed assets - 2,176, ,681-1,618,102-2,092, ,290-1,560,342 Other operating expenses - 36,402-15,617-20,785-36,694-24,674-12,020 Total operating expenses - 2,445, ,264-1,803,194-2,271, ,839-1,648,200 Income before credit losses 223,126 56, , ,632 49, ,822 Credit losses, net - 5,495 4,637-10,132-15,285-18,411 3,126 Income before appropriations and taxes 217,631 61, , ,347 31, ,948 Appropriations - 23,050-23, , ,600 - Taxes - 51,840-10,803-41,037-16,886 24,540-41,426 Profit 142,741 27, ,997 40,861-65, ,522 * Net income from financial transactions Currency-related Interest-bearing securities and related derivatives 3, ,507-12,771-11,711-1,060 Total 3, ,581-12,166-11, CONDENSED BALANCE SHEET Amounts in SEK T Group 31 Dec Group 31 Dec Parent Company 31 Dec Parent Company 31 Dec Lending incl. leasing objects 23,154,847 24,321,453 23,154,847 24,321,453 Lending Group companies Other assets* 912,473 1,060,698 1,059,248 1,283,920 Total assets 24,067,320 25,382,151 24,214,095 25,605,373 Borrowing 18,813,628 20,230,636 18,981,759 20,473,788 Other liabilities* 1,246,610 1,276,136 1,246,610 1,275,486 Debenture loans 209, , , ,564 Deferred tax liabilities 812, , Guarantee fund loan 200, , , ,000 Untaxed reserves - - 3,087,919 3,064,869 Shareholders equity 2,623,854 2,411, , ,805 Income before appropriations and taxes 161, , ,741 40,861 Total liabilities and shareholders equity 24,067,320 25,382,151 24,214,095 25,605,373 * Of which derivative instruments with positive and negative market value Derivative instruments with positive market value 164, , , ,089 Derivative instruments with negative market value - 7,418-9,376-7,418-9,376 6

8 KEY RATIOS Group Group Parent Company Parent Company Return on shareholders equity, % Risk capital/balance sheet total, % Income/Risk-weighted assets, % Capital adequacy ratio - * - * Capital adequacy level, % - * - * Core capital ratio, % - * - * Credit losses/lending, % I/E ratio I/E ratio, excl. credit losses * These figures are reported only for the Parent Company as the Group does not form part of a financial corporate group. CASH FLOW STATEMENT Amounts in SEK T Group Group Ongoing operations Operating income 219, ,820 Share in earnings of associated companies, equity method - 2,076-1,143 Depreciation 422, ,614 Tax paid - 51,840-42,800 Changes in operating assets and liabilities Lending to credit institutions - 866, ,017 Lending to the public 3,307,866 1,148,820 Other assets 132,595-78,339 Liabilities to credit institutions - 3,150, ,989 Borrowing from the public 1,131, ,227 Securities issued 602,558-1,405,330 Other liabilities - 29, ,137 Cash from ongoing operations 1,716, ,704 Investment operations Change in intangible fixed assets 17,796 6,869 Change in shares and participations - 1,221-1,682 Change in tangible fixed assets - 1,696, ,180 Cash flow from investment operations - 1,679, ,993 Financing operations Debenture loans ,583 Dividend paid - 35,900-33,300 Cash flow from financing operations - 36,164-18,717 Cash flow for the year Cash and cash equivalents at start of year - 6 Cash from ongoing operations 1,716, ,704 Cash flow from investment operations - 1,679, ,993 Cash flow from financing operations - 36,164-18,717 Cash and cash equivalents at the end of the period - - 7

9 LEASING INCOME AND AGGREGATE NET INTEREST At the Parent Company all leasing agreements are reported as operational, while at Group level some are reported as financial. This means that the leasing net of financial contracts is reclassified as interest income in the consolidated accounts. Group Parent Company Amounts in SEK T Income from operational and financial leasing agreements 433, , ,018 56,211 2,327, ,195 2,500, ,698 Scheduled depreciation - 401, , ,804-50,053-2,155, ,354-2,076, ,526 Interest income 616, ,093 1,399, , , , , ,159 Interest expenses - 404,761-65,422-1,056, , ,761-65,422-1,047, ,046 Aggregate net interest 243,536 75, ,345 91, ,536 75, ,073 94,285 CHANGE IN EQUITY, GROUP Amounts in SEK T Share capital Retained earnings, incl. net profit for the year Total shareholders' equity Opening shareholders equity, 1 January 100,000 2,344,980 2,444,980 Net profit for the year 248, ,074 Total change before transactions with shareholders - 248, ,074 Dividend - 33,300-33,300 Shareholders equity, 31 December 100,000 2,559,754 2,659,754 Opening shareholders equity, 1 January 100,000 2,559,754 2,659,754 Profit for the period after tax 161, ,806 Total change before transactions with shareholders - 161, ,806 Dividend - 35,900-35,900 Bonus issue 100, ,000 - Shareholders equity, 31 December 200,000 2,585,660 2,785,660 CHANGE IN EQUITY, PARENT COMPANY Share capital Statutory reserve fund Retained earnings, incl. net profit for the year Amounts in SEK T Total shareholders' equity Opening shareholders equity, 1 January 100,000 20, , ,689 Net profit for the year 40,861 40,861 Total change before transactions with shareholders ,861 40,861 Group contribution received 92,244 92,244 Tax attributable to Group contribution received - 25,828-25,828 Dividend - 33,300-33,300 Shareholders equity, 31 December 100,000 20, , ,666 Opening shareholders equity, 1 January 100,000 20, , ,666 Profit for the period after tax 142, ,741 Total change before transactions with shareholders , ,741 Dividend - 35,900-35,900 Bonus issue 100, ,000 - Shareholders equity, 31 December 200,000 20, , ,507 ACCOUNTING PRINCIPLES Volvofinans Bank applies the IFRS (International Financial Reporting Standards) as approved by the EU. This report has been prepared in accordance with IAS 34. The Parent Company prepares reports in accordance with legally limited IFRS. As of, Volvofinans Bank applies the IFRS 8 standard relating to operating segments. This standard requires segment information to be presented from the management's perspective, as used in internal reporting. The introduction of this standard has not resulted in any changes to the segment information. In all other respects, the same valuation and accounting principles apply as in the most recent annual report. Volvofinans Bank AB (publ) Corporate ID no Bohusgatan 15 Box 198 SE Gothenburg Tel: +46 (0) Fax: +46 (0)