Jyske Realkredit A/S (formerly BRFkredit a/s) Interim Financial Report Q1 - Q3 2018

Transcription

1 Jyske Realkredit A/S (formerly BRFkredit a/s) Interim Financial Report Q1 - Q3 Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 1 / 26

2 Interim Financial Report Q1 - Q3 Management s Review 3 Jyske Realkredit 4 Summary 4 Comments by Management 5 Financial Review 11 Capital 14 Other information Interim financial statements 16 Income statement and statement of comprehensive income 17 Balance sheet 18 Statement of changes in equity 18 Capital statement 19 Notes 26 Statement by the Executive and Supervisory Boards Jyske Realkredit A/S Klampenborgvej 205 DK Kgs. Lyngby Telephone: brfkredit@brf.dk Website: brf.dk Business Reg. No. (CVR): Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 2 / 26

3 Jyske Realkredit Core profit and net profit for the period, DKKm Q1-Q3 Q1-Q3 Index 18/17 Q3 Q2 Q1 Q4 Q3 Full year Administration margin income, etc. 1,412 1, ,881 Other net interest income Net fee and commission income, etc Value adjustments, etc Other income Core income 1,790 1, ,135 Core expenses Core profit before loan impairment charges and provisions for guarantees 1, ,284 Loan impairment charges (minus = income) Core profit 1, ,082 Investment portfolio earnings Profit before IFRS 9 implementation 1, ,131 IFRS 9 adjustment of impairment charges, beginning of Pre-tax profit ,131 Tax (minus = income) Net profit or loss for the period As of, the return on Jyske Realkredit s portfolio of securities (investment portfolio earnings) is recognised as core income under Other net interest income and Value adjustments, etc. as the purpose of the portfolio of securities is now primarily to support mortgage operations, including compliance with LCR rules, etc. Summary of Balance Sheet, end of period, DKKm Mortgage loans, fair value 319, , , , , , , ,121 Bonds and shares, etc. 16,329 16, ,329 18,081 14,715 18,397 16,265 18,397 Total assets 344, , , , , , , ,732 Issued bonds, fair value 324, , , , , , , ,305 Equity 16,378 13, ,378 16,057 15,679 15,731 13,511 15,731 Financial ratios and key figures Pre-tax profit p.a. as a percentage of average equity Profit for the period p.a. as a pct. of average equity Expenses as a percentage of income Capital ratio Common Equity Tier 1 capital ratio (CET1 %) Individual solvency requirement (%) Capital base (DKKm) 16,357 13,180-16,357 16,080 15,490 15,529 13,180 15,529 Weighted risk exposure (DKKm) 76,640 72,439-76,640 75,097 74,862 74,686 72,439 74,686 No. of full-time employees at endperiod No. of employees split between the companies, at end-period Employees split between the companies are included in the number of part-time employees stated in the interim financial report for Jyske Bank A/S, and their salaries are paid through Jyske Bank A/S. Jyske Realkredit A/S pays this expense for employees split between the companies through a service agreement with Jyske Bank A/S, and it is recognised under the item Other administrative expenses. Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 3 / 26

4 Summary Pre-tax profit, exclusive of derived effects from IFRS 9: DKK 1,194m, corresponding to a return of 9.9% p.a. on average equity. Post-tax profit, exclusive of derived effects from IFRS 9: DKK 951m, corresponding to a return of 7.9% p.a. on average equity. Pre-tax profit: DKK 787m (Q1 - Q3 : DKK 860m) corresponding to a return of 6.5% p.a. on average equity (Q1 - Q3 : 8.7% p.a.). Net profit for the period: DKK 634m (Q1 - Q3 : DKK 673m) corresponding to a return of 5.3% p.a. on average equity (Q1 - Q3 : 6.8% p.a.). Core profit: DKK 1,194m (Q1 - Q3 : DKK 797m). Core expenses: DKK 552m, corresponding to a decline by 15% relative to Q1 -Q3. Ordinary impairment charges affected core profit by DKK 44m (Q1 - Q3 : DKK 101m). The effect from the implementation of IFRS 9 and adjustments to the standard amounted to DKK 407m at the beginning of. At the end of the first nine months of, the capital ratio and Core Tier 1 capital ratio was 21.3% (End of : 20.8%). Comments by Management In connection with the presentation of the Interim Financial Report for the first nine months of, Lars Waalen Sandberg, Chief Executive Officer, states: Today Jyske Realkredit publishes a profit of DKK 634m, corresponding to a return of on equity of 5.3% p.a. Adjusted for derived effects from IFRS 9, the return amounts to 7.9% p.a. Core profit increased compared to the first nine months of. The profit before the IFRS 9 implementation was favourably affected by impairment charges which fell due to the improving credit quality while at the same time the institution reported falling costs. The capital base is solid at a capital ratio of 21.3%. In the first nine months of, the portfolio of mortgage loans increased by DKK 11.8 bn. It is expected that lending will still show a positive trend, albeit at a more moderate pace than until now. Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 4 / 26

5 Financial Review Material circumstances Adjustment of product range Through Jyske Bank, Jyske Realkredit has consolidated the range of new home loans for personal clients (0-80% mortgaging) with a view to enhancement of processes and simplification towards the clients. In future, the Jyske Bank Group will offer only one variety of each product, which are all marketed under the Jyske brand. As of 20 August, Jyske Rentetilpasning (F1 - F6) and Jyske Fastrente will be offered as mortgage loans by Jyske Realkredit, while Jyske Renteloft CIBOR3 and Jyske Q4 Plus will be offered by Jyske Bank as bank mortgage loans, which can be jointly funded at Jyske Realkredit. F1 is offered with the possibility of redemption at the price of 100 at five days notice, but otherwise the products are unchanged. Implementation of new impairment rules, IFRS 9 IFRS 9 took effect on 1 January and have been incorporated in the Danish accounting rules. As a consequence of the new rules, impairment charges are calculated as the expected loss on all loans, advances and guarantees. Due to the company s implementation of and adjustment to IFRS 9 derived effects, the balance of impairment charges was on 1 January increased by DKK 407m, which affected the profit in early. The overall effect was fully recognised in the financial statements and solvency ratio in the first quarter of. Sale of owner-occupied property Jyske Realkredit s owner-occupied property, Klampenborgvej 205, was sold at the end of June. The sale affected Other income by DKK 185m. In connection with the sale, Jyske Bank has entered into an 11-year lease agreement for the property with the buyer. Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 5 / 26

6 Net profit for the period The pre-tax profit amounted to DKK 787m in the first nine months of. Calculated tax amounted to an expense of DKK 153m, and the net profit for the period then amounted to DKK 634m. The pre-tax profit was affected by the implementation of derived effects from IFRS 9, resulting in a non-recurring adjustment on loan impairment charges and provisions for guarantees of DKK 407m at the beginning of. The adjustment is presented as a special item, and therefore comparability of the individual items is still possible. In addition, the sale of the owner-occupied property Klampenborgvej 205 resulted in an accounting gain of DKK 185m. Exclusive of the above special items, pre-tax profit amounted to DKK 1,012m. Core profit and net profit for the period, DKKm Q1-Q3 Q1-Q3 Index 18/17 Q3 Q2 Q1 Q4 Q3 Full year Administration margin income, etc. 1,412 1, ,881 Other net interest income Net fee and commission income, etc Value adjustments, etc Other income Core income 1,790 1, ,135 Core expenses Core profit before loan impairment charges and provisions for guarantees 1, ,284 Loan impairment charges and provisions for guarantees (minus = income) Core profit 1, ,082 Investment portfolio earnings Profit before IFRS 9 implementation 1, ,131 IFRS 9 adjustment of impairment charges, beginning of Pre-tax profit ,131 Tax (minus = income) Net profit or loss for the period As of, the return on Jyske Realkredit s portfolio of securities (investment portfolio earnings) is recognised as core income under Other net interest income and Value adjustments, etc. as the purpose of the portfolio of securities is now primarily to support mortgage operations, including compliance with LCR rules, etc. Core income consisting primarily of administration margin income, etc. as well as brokerage and fee income from mortgage activities amounted to DKK 1,790m in the first nine months of against DKK 1,549m in the first nine months of. Administration margin income amounted to DKK 1,412m in the first nine months of against DKK 1,400m for the same period of. Administration margin income was positively affected by the increasing portfolio, yet negatively affected by falling average administration margin rates. The increase in the Personal client area can still be attributed to Jyske Bank s distribution of Jyske Realkredit s home loans. The shift on the part of clients to fixed-rate loans and/or amortized loans, etc., for which the administration margin/the risk are lower continued in the third quarter and fuelled a minor decline in the average administration margin rate. In relation to Corporate Clients, the portfolio of weak loans with high administration margin rates was still reduced due to repayments and renegotiation of accounts that had grown stronger. Moreover, in the first half of, a non-recurring income relating to an individual major corporate client was recognised. Other net interest income consists, among other things, of interest on the portfolio of securities, interest expenses for senior debt incurred in order to comply with SDO and rating requirements as well as various interest income and amounted to an income of DKK 61m in the first nine months of against an expense of DKK 64m in the first nine months of. To some extent, the increase can be attributed to reclassification of the portfolio of securities and also to the fact that Jyske Realkredit redeemed senior debt in January. Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 6 / 26

7 Net fee and commission income amounted to DKK 182m in the first nine months of against DKK 185m in the first nine months of. The period saw two refinancing events against three refinancing events in the same period of. The volume of loans refinanced in the first nine months of was more or less similar to the volume in the first nine months of, and therefore the fee income is at a practically unchanged level. Value adjustments, etc. amounted to an expense of DKK 61m in the first nine months of against an income of DKK 8m in the first nine months of. Among other things, the difference was caused by a negative value adjustment of the portfolio of securities, which was previously included in the return on the portfolio. Typically, the portfolio of securities consists of bonds with a short time to maturity that have been bought at a price above par and are held to maturity, which results in a positive interest yield and a negative value adjustment. Other income amounted to DKK 195m in the first nine months of against DKK 20m in the first nine months of. The increase could primarily be attributed to an accounting gain of DKK 185m from the sale of Jyske Realkredit s owner-occupied property, Klampenborgvej 205, at the end of June. In connection with the sale, Jyske Bank has entered into an 11-year lease agreement for the property with the buyer. Core expenses amounted to DKK 552m in the first nine months of against DKK 651m in the first nine months of. The decline of DKK 99m can be attributed to the on-going adjustment of the staff as well as the fact that a number of work functions/areas have been outsourced to Jyske Bank. Based on intra-group service agreements, Jyske Realkredit pays Jyske Bank to perform these tasks. Core profit before loan impairment charges and provisions for guarantees rose by 38% and amounted to DKK 1,238m in the first nine months of against DKK 898m in the first nine months of. Loan impairment charges The implementation of IFRS 9, which took effect on 1 January, caused effects that resulted in a non-recurrent adjustment in the amount of DKK 407m of loan impairment charges and provisions for guarantees at the beginning of. Exclusive of the derived effects from IFRS 9, loan impairment charges and provisions for guarantees amounted to DKK 44m against DKK 101m in the first nine months of. Relative to total loans, the effect from the impairment charges on the income statement amounted to 0.01% in the first nine months of (0.14% inclusive of derived effects from IFRS 9) against 0.04% in the first nine months of. Jyske Realkredit's holding of assets held temporarily amounted to DKK 385m as at 30 September against DKK 435m at the end of. The decline could primarily be attributed to value adjustments of properties already acquired through foreclosure. Jyske Realkredit had no exposures after deductions that accounted for more than 10% of the capital base. The concentration risk is followed closely and all large exposures are monitored on an on-going basis. The total balance of impairment charges amounted to DKK 1,503m at the end September (end of : DKK 1,219m), corresponding to 0.5% of total loans. Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 7 / 26

8 Loans, advances and guarantees, DKKm Q1-Q3 Q1-Q3 Index 18/17 Q3 Q2 Q1 Q4 Q3 Full year Non-performing loans and guarantees: Loans, advances and guarantees before impairment charges 4,463 8, ,463 4,391 4,944 8,377 8,738 8,377 Impairment charges Loans, advances and guarantees after impairment charges 3,823 7, ,823 3,789 4,230 7,449 7,758 7,449 NPL ratio (%) NPL contribution ratio (%) Past due mortgage loans (90 days) Operational loan impairment charges and provisions for guarantees Operating loss Non-performing loans, advances and guarantees fell significantly from the fourth quarter of to the first quarter of, which can materially be attributed to changed definitions in consequence of the implementation of IFRS 9. Arrears rate The arrears rate measured 90 days after the June repayment date amounted to 0.2%, i.e. an unchanged level relative to the corresponding repayment date in. The arrears rate measured 15 days after the September repayment date amounted to 1.6% against 0.9% in the corresponding period of. Arrears rate September June March December September After 90 days After 15 days 1) ) The arrears rate measured 15 days after the September repayment date has increased to 1.6%. The increase relates primarily to one property for which the entire outstanding debt owed on the loan fell due for payment. Exclusive of this property, the arrears rate measured 15 days after the September repayment date amounted to 1.1%. June Core profit and investment portfolio earnings The pre-tax profit for the first nine months of as well as the first nine months of broken down by core earnings and investment portfolio earnings is stated below. Breakdown of pre-tax profit, DKKm Core operations: Core profit Q1-Q3 Q1-Q3 Reclassification Total Core Investment Reclassification profit portfolio earnings Administration margin income, etc. 1,412-1,412 1, ,400 Other net interest income Net fee and commission income Value adjustments, etc Other income Core income 1,790-1,790 1, ,611 Core expenses Core earnings before loan impairment charges and provisions for guarantees 1,238-1, Loan impairment charges Pre-tax profit The return on Jyske Realkredit's portfolio of securities (investment portfolio earnings) has since the beginning of been recognised as Core income under Other net interest income and Value adjustments, etc.', see page 6. Total Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 8 / 26

9 Quarterly reporting The third quarter of compared to the second quarter of The pre-tax profit for the third quarter of amounted to DKK 409m against DKK 278m for the second quarter of, exclusive of the gain of DKK 185m from the sale of a owner-occupied property (DKK 462m inclusive of the gain from the sale of the property). The primary reason for the increase in the third quarter is higher fee income as well as reversal of impairment charges. Administration margin income, etc. rose from DKK 472m in the second quarter of to DKK 475m in the third quarter of, which increase can be attributed to the positive development of the loan portfolio. Other interest income fell from DKK 29m in the second quarter to DKK 13m in the third quarter. The decline can be attributed to lower interest income from the portfolio of securities as well as a lower level of various interest income relating to mortgage operations. Net fee and commission income increased from DKK 25m in the second quarter of to DKK 91m in the third quarter of. The increase in the third quarter of can be attributed to fees from the refinancing of adjustable-rate loans, including refinancing of a major part of F10 loans - no refinancing events took place in the second quarter of - and also the increase can be attributed to fee income relating to the transfer of the loan portfolio relating to Subsidised Housing (rental housing) to a new capital centre, which fully guaranteed by the state. Value adjustments amounted to DKK -12m in the third quarter of compared to DKK -22m in the second quarter of. The improvement related primarily to the securities portfolio, which saw fewer negative value adjustments in the third quarter of. Other income, etc. fell from DKK 191m in the second quarter of to DKK 2m in the third quarter of, which decline can primarily be attributed to the fact that, in the second quarter of, a gain of DKK 185m from the sale of Jyske Realkredit s owner-occupied property was recognised as income. Core expenses fell from DKK 192m in the second quarter of to DKK 178m in the third quarter of. One reason, among others, for the decline was that property expenses were no longer incurred after the sale of the owner-occupied property. Losses and impairment charges amounted to an income of DKK 18m in the third quarter of against an expense of DKK 40m in the second quarter of. The income in the third quarter of related primarily to reversal of impairment charges in the corporate client segment. Alternative performance targets The alternative performance targets applied in the management's review constitute valuable information for readers of financial statements as they provide a more uniform basis for comparison of accounting periods. No adjusting entries are made, and therefore the net profit or loss for the period will be the same in the alternative performance targets of the management's review and in the financial statements prepared according to the provisions of the Danish Executive Order on the Preparation of Financial Statements. Administration margin income, etc. covers administration margin income as well as interest rate margin for products with no administration margin. In Jyske Realkredit's reporting format of core earnings and investment portfolio earnings, total interest income, interest expenses and value adjustments relating to the balance principle are recognised under 'Other net interest income, etc.' Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 9 / 26

10 Balance sheet At the end of the third quarter of, Jyske Realkredit s balance sheet amounted to DKK 345 bn (DKK 338 bn at the end of ). The positive business volume growth continued in as the volume grew from DKK 308 bn at the end of to DKK 320 bn at the end of the third quarter of, corresponding to 3.8% growth. Equity was affected by the net profit for the period by DKK 634m as well as other comprehensive income of DKK 13m, and amounted then to DKK 16,378m at the end of the third quarter of (DKK 15,731m at the end of ). Summary of Balance Sheet, end of period, DKKm 30 Sept. 30 Sept. Index 18/17 30 Sept. 30 June 31 March 31 Dec. 30 Sept. Full year Assets / equity and liabilities 344, , , , , , , ,732 Mortgage loans, nominal value 312, , , , , , , ,516 Loans and advances, fair value 319, , , , , , , ,121 Issued bonds, fair value 324, , , , , , , ,305 Equity 16,378 13, ,378 16,057 15,679 15,731 13,511 15,731 Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 10 / 26

11 Capital Jyske Realkredit's long-term capital management objective is in line with that of the Jyske Bank Group, i.e. a capital ratio of 17.5% and a Common Equity Tier 1 capital ratio of 14.0%. At these levels, Jyske Realkredit is comfortable in respect of the capital base requirements. At the end of the third quarter of, Jyske Realkredit met both targets due to its capital ratio and its Common Equity Tier 1 capital ratio of 21.3%. The development of Jyske Realkredit's capital and Core Tier 1 capital ratios appears from the table below. At the end of the third quarter of, the capital and Core Tier 1 capital ratios had increased by 0.5 percentage point relative to the end of. Jyske Realkredit still has a solid base compared to the Group's target. Capital and core capital ratios 30 Sept. 31 Dec. Change 18/17 Capital ratio Tier 1 Capital ratio (%) Common Equity Tier 1 capital ratio (%) Capital base At the end of the third quarter of, the capital base of Jyske Realkredit amounted to DKK 16.4 bn against DKK 16.1 bn at the end of previous quarter. The increase can essentially be attributed to the recognition of the profit for the third quarter of. Jyske Realkredit still has a high proportion of Common Equity Tier 1 capital in its capital base, which is in line with the desired capital structure. Capital base and total risk exposure, DKKm 30 Sept. 31 Dec. Equity 16,378 15,731 Intangible assets -0-1 Prudent valuation Deferred tax assets -5 - Diff. between expected loss and impairment charges (deduction) Core capital/common Equity Tier 1 capital 16,351 15,529 Diff. between expected loss and impairment charges (addition) 6 - Capital base 16,357 15,529 Total weighted risk exposure 76,640 74,686 Minimum capital requirement Determination of the minimum capital requirement expresses the regulatory capital requirement and rests on the risk types credit risk, market risk and operational risk. Jyske Realkredit has been approved to apply the advanced internal rating-based approach (AIRB) when determining credit risk. The approval extends to the application of advanced methods for determining the minimum capital requirement for the main part of Jyske Realkredit's credit portfolio. The minimum capital requirements for market and operational risks are measured according to the standardised approach. Minimum capital requirement by risk type, DKKm 30 Sept. 31 Dec. Credit risk 5,845 5,569 Market risk Operational risk Minimum capital requirement, Pillar I 6,131 5,975 Capital requirement, transitional provisions - 3,726 Total minimum capital requirement 6,131 9,701 Transitional rules for capital requirements according to Basel I ended at the end of. Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 11 / 26

12 Individual solvency requirement and capital buffer At the end of the third quarter of, Jyske Realkredit calculated an individual solvency requirement of 9.2% (end of : 9.3%). The table below shows the contribution from the individual types of risk to the adequate capital base and the individual solvency requirement. Individual solvency requirement, DKKm 30 Sept. % of REA 31 Dec. % of REA Credit risk 6, , Market risk Operational risk Total 7, , The statutory buffers are currently the SIFI buffer and the capital conservation buffer of 1.2% and 1.875%, respectively, of the total risk exposure. Hence the individual solvency requirement plus statutory buffers amount to 12.3% of the total risk exposure. The Minister for Industry, Business and Growth has chosen to follow the recommendation from The Systemic Risk Council to activate the countercyclical buffer rate by 0.5 percentage point with effect as of the first quarter of 2019 and by another 0.5 percentage point as of the third quarter of The capital buffer plus earnings from operations denote the maximum sustainable loss without the need for additional capital. Jyske Realkredit s large proportion of Tier 1 capital cements the quality of the total capital. Capital buffer, DKKm 30 Sept. % of REA 31 Dec. % of REA Capital base 16, , Core capital 16, , Individual solvency requirement 7, , Individual solvency requirement plus buffers 9, , Capital requirement, transitional provisions - - 9, Capital buffer 6, ,828 7, 8 The capital buffer also meets the requirement of the size of the debt buffer, which when fully phased in in 2020 will amount to 2% of total loans. Due to the end of the transitional rule at the end of, the capital buffer has increased. On an on-going basis, Jyske Realkredit assesses the capital requirements the institution is subject to in respect of risk appetite and future capital requirements. LCR The binding requirement for Jyske Realkredit s holding of liquid assets originates from the LCR floor requirement of 2.5% of total mortgage loans, which at the end of the third quarter of corresponded to almost DKK 8.0 bn. Jyske Realkredit has liquid assets in the amount of almost DKK 13.2 bn and hence a significant buffer relative to the LCR floor requirement. As of October, the LCR floor requirement must be met through bonds that are not, at the same time, applied to meeting the requirement of supplementary collateral. Already now at the end of the third quarter of, Jyske Realkredit meets the new tighter interpretation, but in future the overcollateralisation for the LCR floor requirement will be lower. Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 12 / 26

13 Refinancing The breakdown of loans has changed over the past couple of years, as products with very short-term funding, such as F1 loans (adjustable-rate loans) account for a smaller proportion of the total loans. A larger proportion of borrowers now have loans with longer-term funding, such as CIBOR loans with or without an interest rate cap. Over the remaining period of, Jyske Realkredit will continue its efforts to reduce the refinancing risk. This takes place in consideration of the requirement that the individual series must be so large that, in respect of the liquidity buffer of the investors, they meet the LCR requirement (Liquidity Coverage Ratio). Jyske Realkredit s loan portfolio, on 30 September, by time of refinancing 15% 36% Refinansiering Refinancing and og maturity fundingudløb of funding inden within for det the næste next år year Refinansiering Refinancing and og maturity fundingudløb of funding efter after mere more end 1 than år 1 year 49% Øvrige Other types lånetyper of loan The information according to the Article 129(7) CRR on covered bonds (SDO) (among other things, disclosure of the value of the cover pool and outstanding covered bonds (SDO), geographical distribution and type of covered assets, maturity structure and loans more than 90 days past due) will be disclosed in an ECBC label template quarterly simultaneously with interim and annual reports. Please see BRF.com. Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 13 / 26

14 Other information Rating Jyske Bank's and Jyske Realkredit's joint issuer rating by Standard and Poor s (S&P) is A- (positive outlook). As of 5 April, the issuer rating was improved from 'neutral' to 'positive'. Jyske Realkredit's bonds issued out of Capital Centre E, Capital Centre B and the General Capital Centre have been assigned a triple A (AAA) rating (Stable). Rating, 30 September Rating Date of rating / change of rating Covered bonds - issued out of Capital Centre E AAA 17/ Mortgage credit bonds - issued out of Capital Centre B AAA 17/ issued out of the General Capital Centre AAA 27/ Issuer rating (long-term rating) A- 1) 12/ Issuer rating (short-term rating) A-2 1) 12/ ) On 5 April, S&P confirmed Jyske Realkredit's issuer rating at A-/positive/A-2 Standard & Poor's requirements for supplementary security to maintain the AAA rating was increased in the course of the past year. This increase was solely based on an increase in the portfolio, while the average requirement to maintain an AAA rating fell slightly. The decline in the average requirement of supplementary security can generally be attributed to the improved credit quality. Requirement of supplementary security, Standard & Poor's DKKbn % of loans 7% 6% 5% 4% 3% 2% 1% 0% DKKbn Mia. kr. % af of udlån loans (højre (right-hand akse) axis) Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 14 / 26

15 The supervisory diamond for mortgage credit institutions The supervisory diamond defines a number of special risk areas stating the limits that financial institutions should generally not exceed. The supervisory diamond limits applicable to Jyske Realkredit are shown below. Supervisory diamond - benchmarks, % 30 Sept. 31 Dec. Concentration risk <100% Increase in loans <15% annually in the segment: - Owner-occupied home and vacation homes Residential rental property Other sectors Borrower's interest-rate risk <25% - Residential property Interest-only schemes <10% - Owner-occupied home and vacation homes Loans with short-term funding: - Refinancing (annually) <25% Refinancing (quarterly) <12.5% At the end of the first nine months of, Jyske Realkredit met all benchmarks of the supervisory diamond. On an ongoing basis, Jyske Realkredit reviews the institution's positions relative to the benchmarks. Resolutions by the Supervisory Board No other resolution that falls within the duty of disclosure set out in the Rules for Issuers of Securities Listed on NASDAQ Copenhagen A/S was adopted by the Supervisory Board during the third quarter of. Additional information For further information, please see brf.com, which website also gives detailed financial information about Jyske Realkredit. Jyske Realkredit's Interim Report for the first nine months of can be downloaded from brf.dk. Contact Lars Waalen Sandberg, Chief Executive Officer or Jyske Realkredit Corporate Announcement No. 94 /, of 30 October 15 / 26

16 Income statement and statement of comprehensive income Note Q1 - Q3 Q1 - Q3 Income statement DKKm 4 Interest income 4,661 4,892 5 Interest expenses 3,210 3,474 Net interest income 1,451 1,418 Dividends, etc Fees and commission income Fees and commission expenses Net interest and fee income 1,639 1,604 7 Value adjustment (- is an expense) Other operating income Employee and administrative expenses Amortisation, depreciation and impairment charges 3 5 Other operating expenses Loan impairment charges Profit on investments in associates and group enterprises 10 2 Pre-tax profit Tax Net profit or loss for the period Distributed to: Jyske Realkredit A/S shareholders Total Statement of Comprehensive Income Net profit or loss for the period Other comprehensive income: Items that cannot be recycled to the income statement: Value adjustment of owner-occupied properties in group enterprises - 26 Value adjustment of owner-occupied properties 17 - Tax on other comprehensive income -4 - Other comprehensive income after tax Comprehensive income for the period Distributed to: Jyske Realkredit A/S shareholders Total Jyske Realkredit Corporate Announcement No. 94 / of 30 October 16 / 26

17 Balance sheet Note 30 Sept. 31 Dec. 30 Sept. Assets DKKm Cash balance and demand deposits with central banks Due from credit institutions and central banks 7,816 9,762 5, Loans and advances at fair value 319, , ,266 Bonds at fair value 16,112 18,182 16,048 Shares, etc Equity investments in group enterprises Intangible assets Land and buildings, total of which investment property of which owner-occupied properties Other property, plant and equipment Deferred tax assets Assets in temporary possession Other assets Prepayments Total assets 344, , ,064 Equity and liabilities Liabilities Due to credit institutions and central banks 1, Issued bonds at fair value 324, , ,298 Issued bonds at amortised cost - 1,871 2,902 Current tax liabilities Other liabilities 2,294 2,815 2,626 Deferred income Liabilities, total 328, , ,533 Provisions Provisions for deferred tax Other provisions Provisions, total Equity Share capital 3,306 3,306 1,306 Share premium Revaluation reserve Reserve according to the equity method Retained profit 12,970 12,176 11,995 Total equity 16,378 15,731 13,511 Total equity and liabilities 344, , , Off-balance sheet items Guarantees, etc Other contingent liabilities, etc. (loan offers) 17,141 19,152 15,759 Total guarantees and other contingent liabilities 17,144 19,160 15,767 Jyske Realkredit Corporate Announcement No. 94 / of 30 October 17 / 26

18 Statement of changes in equity Reserve according to Share Share Revaluation the equity Retained capital premium reserves 1) method 2) profit Total Equity at 1 January 3, ,176 15,731 Adjustment at beginning of period according to new accounting rules DKKm Net profit or loss for the period Transferred from Retained profit Other comprehensive income Comprehensive income for the period Equity at 30 September 3, ,970 16,378 Equity at 1 January 1, ,354 12,812 Net profit or loss for the period Transferred from Retained profit Other comprehensive income Comprehensive income for the period Equity at 30 September 1, ,995 13,511 1) Revaluation reserves relate to the revaluation of a owner-occupied property, which is wound up and transferred to Retained profit in connection with the sale of the property. 2) Revaluation according to the equity method is wound up and transferred to Retained profit in connection with the sale of a subsidiary. Capital statement DKKm 30 Sept. 31 Dec. 30 Sept. Equity 16,378 15,731 13,511 Intangible assets Deferred tax assets Difference between expected loss and the carrying amount of impairment charges Prudent valuation Common Equity Tier 1 capital / Core capital 16,351 15,529 13,180 Difference between expected loss and the carrying amount of impairment charges Capital base 16,357 15,529 13,180 Weighted risk exposure involving credit risk etc. 73,058 69,615 67,511 Weighted risk exposure involving market risk 32 1,906 1,763 Weighted risk exposure involving operational risk 3,551 3,165 3,165 Total weighted risk exposure 76,640 74,686 72,439 Capital requirement, Pillar I 6,131 5,975 5,795 Capital requirement, transitional provisions - 3,726 3,732 Capital requirement, total 6,131 9,701 9,527 Capital ratio Core Tier 1 Capital ratio (%) Common Equity Tier 1 capital ratio (%) Transitional rules for capital requirements according to Basel I ended at the end of. For further information on the individual solvency requirement, please see the section in the management's review on "Capital structure". Jyske Realkredit Corporate Announcement No. 94 / of 30 October 18 / 26

19 Notes 1 Accounting policies The Interim Financial Report for the period 1 January - 30 September for Jyske Realkredit A/S was prepared according to the Danish Financial Business Act as well as the relevant accounting rules in compliance with IFRS. Furthermore, the Interim Financial Report was prepared in accordance with the additional Danish disclosure requirements for the interim reports of listed financial undertakings. On 1 January, a number of new and changed rules took effect in the Danish Executive Order on the Preparation of Financial Statements relating to the implementation of IFRS 9. Classification and measurement According to the new rules, classification and measurement of financial assets are made on the basis of the business model for the financial assets and the contractual cash flows that relate to the financial assets. The application of the new rules on measurement categories for financial assets on the basis of the business model does not result in material changes to measuring principles for Jyske Realkredit's reporting. Mortgage loans etc., own bond portfolio and issued mortgage bonds in Jyske Realkredit will be recognised in the category of fair value recognized through the income statement) according to the provisions of the Danish Executive Order on the Preparation of Financial Statements (exemption clauses in IFRS 9 on accounting mismatch). This choice has been made to eliminate financial inconsistency between the recognition of mortgage loans at amortised cost and the fair value of the listed bonds resulting from the purchase and sale of own issued bonds. Impairment charges (adjustment for credit risk) According to the Danish Executive Order on the Preparation of Financial Statements and the accompanying instructions on loan impairment charges measured at fair value, the calculation of the credit risk for loans at fair value shall be similar to that for loan impairment charges at amortised cost. The new rules imply earlier recognition of impairment charges for financial assets, as already at the first recognition, impairment charges corresponding to a 12-month expected credit loss must be recognised. If, subsequently, the probability of loss on the asset increases materially, recognition of the expected credit loss over the remaining life of the loan will take place. According to the new rules, financial assets must be divided into three categories/stages depending on the credit deterioration. Stage 1 covers exposures without material deterioration in credit quality, while stage 2 covers assets with significant deterioration in credit quality, and stage 3 covers exposures in default. The ranking in the various stages will affect the calculation method applied and it is determined on the basis of the calculated probability of default over 12-month or the remaining life of the exposures. For exposures in stage 1 impairment charges corresponding to a 12 month expected loss are recognised, while for exposures in stages 2 and 3 the expected losses over the remaining life of the exposures are recognised. Exposures with evidence of credit deterioration are placed in stage 3 or in the weakest part of stage 2. The assessment of the indication of impairment for these exposures is based on individual expert assessments of the probability-weighted expected loss. The new rules have not resulted in any material changes in the extent of impairment of these exposures. The transition to these new impairment rules resulted in an increase by DKK 407m of Jyske Realkredit's balance of impairment charges. As mortgage loans are stated at fair value, the adjustment of the balance of impairment charges is to be accounted for as a changed estimate and is recognised in the income statement for the first quarter of. Moreover, the accounting policies are identical to those applied to and described in detail in the Annual Report. 2 Material accounting estimates Measurement of the carrying value of certain assets and liabilities requires the management's estimate of the influence of future events on the value of such assets and liabilities. Estimates of material importance to the financial reporting are, among other things, based on the impairment of loans and advances and also assets in temporary possession, cf. the detailed statement in the Annual Report. The estimates are based on assumptions which management finds reasonable, but which are inherently uncertain. Besides, the company is subject to risks and uncertainties which may cause the actual results to differ from those estimates. The financial statements reflect adjusting events until 30 October. Jyske Realkredit Corporate Announcement No. 94 / of 30 October 19 / 26

20 Notes - cont. 30 Sept. 31 Dec. 30 Sept. 3 Financial ratios and key figures Capital ratio Core Tier 1 Capital ratio (%) Return on equity (average) before tax for the period (%) Return on equity (average) after tax for the period (%) Income/cost ratio (%) Currency position (%) Accumulated impairment ratio (%) Impairment ratio for the period (%) Increase in loans and advances for the period (%) Loans relative to equity Return on capital employed Q1 - Q3 Q1 - Q3 4 Interest income Due from credit institutions and central banks 1) -7-2 Loans and advances 3,291 3,512 Administration margin 1,238 1,249 Bonds Derivatives, interest-rate and currency contracts Other interest income - 0 Interest income before offsetting of interest on own bonds 4,791 5,014 Interest on own bonds, set off against interest on issued bonds Total 4,661 4,892 1) of which interest income on reverse repos carried under "Due from credit institutions and central banks" Interest expenses Due to credit institutions and central banks 1) Issued bonds 3,256 3,535 Other interest expenses Interest expenses before offsetting of interest on own bonds 3,340 3,596 Interest on own bonds, set off against interest on issued bonds Total 3,210 3,474 1) Of which interest expenses on repo carried under "Due to credit institutions and central banks" -4-0 Jyske Realkredit Corporate Announcement No. 94 / of 30 October 20 / 26

21 Notes - cont. DKKm Q1 - Q3 Q1 - Q3 6 Fees and commission income Securities trading and custody services Loan application fees Other fees and commissions 0 0 Total Value adjustment (- is an expense) Mortgage loans -1,234 2,511 Other loans, advances and receivables at fair value 0 0 Bonds Shares, etc Investment properties - 0 Currency -1 1 Currency, interest-rate and other contracts as well as other derivatives Issued bonds 1,207-2,404 Total Value adjustment of the balance principle amounted to an expense of DKK 19m (: DKK -5m), resulting from a net value adjustment of the following items: Mortgage loans by DKK -1,234m (DKK +2,511m), issued mortgage bonds by DKK +1,207m (DKK -2,391m), which are recognised under 'Issued bonds', and derivatives by DKK +8m (DKK -125m), recognised 'under"currency, interest-rate and other contracts as well as other derivatives". 8 Employee and administrative expenses Employee expenses Wages and salaries, etc Pensions 4 30 Payroll tax 7 36 Social security -0 2 Total Salaries and remuneration to the Executive Board and the Supervisory Board Executive Board 5 5 Supervisory Board 0 0 Total 5 5 Other administrative expenses IT Rent, lighting, heating, etc Other administrative expenses Total Total Jyske Realkredit Corporate Announcement No. 94 / of 30 October 21 / 26

22 Notes - cont. DKKm Q1 - Q3 Q1 - Q3 9 Loan impairment charges Loan impairment charges for the period Recognised as a loss, not covered by impairment charges Recoveries Total Balance of impairment charges Balance of impairment charges, beginning of period 1,219 1,183 Implementation of IFRS 9 (changes to accounting rules) 0 - Loan impairment charges for the period Recognised as a loss, covered by impairment charges Balance of impairment charges, end of period 1,503 1,182 Mortgage loan impairment charges 1,440 1,109 Impairment charges on other loans and receivables, etc Impairment charges on balances due from credit institutions and central banks, etc.' 0 - Balance of impairment charges, end of period 1,503 1,182 Breakdown of balance of impairment charges by stage Stage 1 Stage 2 Stage 3 Total Balance according to IAS 39, (previous accounting rules) 1,219 Transitional effect, IFRS 9, incl. effect on loans at fair value Movements over the period Balance of impairment charges, end of period ,503 Implementation of IFRS 9 (changes to accounting rules) relate to the adjustment at the beginning of the period of impairment charges for financial assets, which are recognised at amortised cost and adjusted in equity. The breakdown of impairment charges in stages 1, 2 and 3 allows in the transitional effect, IFRS 9 for the adjustment of impairment charges relating to loans at fair value, which are adjusted in the income statement at the beginning of. Of 'Recognised as a loss, not covered by loan impairment charges', value adjustment of properties acquired in previous financial years amounted to an expense of DKK 49m (: an expense of DKK 35m), and operating profit on properties during the period of foreclosure an expense of DKK 0m (expense of DKK 4m). 10 Tax Effective tax rate Corporation tax rate in Denmark Non-taxable income and non-deductible expenses, etc Total The effective tax rate for the first nine months of was affected by the sale of the property Klampenborgvej 205, as the accounting gain exceeded the taxable gain. Jyske Realkredit Corporate Announcement No. 94 / of 30 October 22 / 26

23 Notes - cont. DKKm 30 Sept. 31 Dec. 30 Sept. 11 Loans and advances at fair value Mortgage loans, nominal value 312, , ,140 Adjustment for interest-rate risk, etc. 7,959 9,189 8,697 Adjustment for credit risk -1,440-1,139-1,109 Mortgage loans at fair value 319, , ,728 Arrears and outlays Other loans and receivables Total 319, , ,266 Mortgage loans at fair value broken down by property category Owner-occupied homes 160, , ,195 Vacation homes 8,006 7,699 7,550 Subsidised Housing (rental housing) 52,291 50,167 50,036 Cooperative housing 15,877 15,893 15,768 Private rental properties (rental housing) 42,709 37,225 35,597 Industrial properties 1,778 1,156 1,175 Office and business properties 33,497 34,077 33,376 Agricultural properties, etc Properties for social, cultural and educational purposes 4,364 4,041 3,896 Other properties Total 319, , , Assets held temporarily Properties acquired through foreclosure Subsidiaries in possession with a view to sale 1) Total ) On 30 September, the item consisted of a company acquired in connection with a loan exposure. 13 Other assets Positive fair value of derivatives Interest and commission receivable Loan applications in process Other assets Total Issued bonds at fair value Issued mortgage bonds, nominal value 348, , ,897 Adjustment to fair value 8,359 9,300 8,878 Own mortgage bonds, fair value -32,191-25,457-31,478 Total 324, , , Other liabilities Negative fair value of derivatives Interest and commission payable 1,718 2,085 2,029 Other liabilities Total 2,294 2,815 2,626 Jyske Realkredit Corporate Announcement No. 94 / of 30 October 23 / 26

24 Notes - cont. DKKm 30 Sept. 31 Dec. 30 Sept. 16 Off-balance sheet items Guarantees, etc. Other guarantees Total Other contingent liabilities, etc. Irrevocable credit commitments 17,105 19,102 15,705 Other contingent liabilities Total 17,141 19,152 15,759 Irrevocable credit commitments relate materially to the obligation to pay out loans according to offers for mortgage loans with a term of up to six months made by Jyske Realkredit (the term may be longer within the subsidised housing sector). All offers were made in accordance with Jyske Realkredit's credit policy and constitute a customary part of the process of paying out mortgage loans. However, in the event that a client is subsequently registered with the RKI debtor register, etc., Jyske Realkredit shall not be bound by the loan offer. 17 Related parties Jyske Realkredit has debit/credit balances, including bank accounts etc., with a number of its related parties. Transactions between related parties are characterised as ordinary financial transactions and services of an operational nature. Transactions with related parties were executed on an arm s length basis or at cost. Over the period 1 January to 30 September, no unusual related party transactions took place. Please see Jyske Realkredit's Annual Report (BRFkredit's annual report) for a detailed description of transactions with related parties. Jyske Realkredit Corporate Announcement No. 94 / of 30 October 24 / 26