Interim Financial Statements for second quarter of 2018

Transcription

1 SG FINANS AS 218 Interim Financial Statements for second quarter of 218 (Unaudited figures)

2 CONTENTS REPORT OF THE BOARD OF DIRECTORS 3 INTERIM FINANCIAL STATEMENT INCOME STATEMENT 5 BALANCE SHEET 6 STATEMENT OF CHANGES IN EQUITY 7 CASH FLOW STATEMENT 8 NOTES 1. ACCOUNTING PRINCIPLES 9 2. IMPORTANT ACCOUNTING ESTIMATES AND DISCRETIONARY EVALUATION 1 3. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES 1 4. NET INTEREST INCOME NET FEES AND INCOME ON OTHER ACTIVITY NET GAINS ON FINANCIAL INSTRUMENTS AT FAIR VALUE OPERATING EXPENSES DUE FROM BANKS CUSTOMERS LOANS ALLOWANCES RECOGNISED AND CUSTOMER LOANS LOSSES AND ALLOWANCES RECOGNISED IN THE PROFIT AND LOSS LEASING (FINANCIAL LEASING ASSETS) RISK CLASSIFICATION DOUBTFUL LOANS INCOME TAX DUE TO BANKS SUBORDINATED DEBT INFORMATION ON RELATED PARTIES EMPLOYEE BENEFITS CAPITAL ADEQUACY METHOD FOR CALCULATION OF FAIR VALUE OF FINANCIAL INSTRUMENTS OFFSETTING CONTINGENCIES ASSETS PLEDGED AND RECEIVED AS SECURITY EVENTS AFTER THE REPORTING PERIOD 22 ADDRESSES 23

3 Report of the Board of Directors as of June 3, 218 In the first six months of 218, SG Finans has: - established new financing to clients for MNOK 8 14 (MNOK 7 84 for the same period in 217), which is 14,4% more than in the same period last year. - net banking income of MNOK 673,6 (MNOK 769,3). - net cost of risk of MNOK 32,5 or,19 % of average funded assets (MNOK 6,9 /,4 %). - total comprehensive income of MNOK 253,5 (MNOK 353,). - total assets of MNOK (MNOK 36 59). - capital adequacy ratio of 16,7 % (16,4 %) for tier 1 capital and 18,6 % (2,4 %) for total capital. Business activities In the first six months of 218 SG Finans has established new financing in Scandinavia of MNOK 8 14 compared to MNOK 7 84 for the same period in 217. This is an increase of 14,4 %. Margins for new financing are in average lower than in the same period last year, notably in the financing of Industrial Equipment. In equipment finance, we have a market share in Norway of 27 % at the end of second quarter. This is higher than for the second quarter last year, and at the same level as the market share for 217. SG Finans maintains its position as market leader in equipment finance in Norway. We see continued growth in new financing of equipment in Denmark, and we maintain our market share in the Danish market at close to 12%. Also in Sweden, new financing volumes are increasing compared to last year, and we see volumes of new financing increase with 27%. Within Factoring, SG Finans is market leader in Norway with a market share of 39 % in ordinary factoring. Total assets at end of second quarter 218 are MNOK ,7 which is 1,7 % higher than MNOK 36 59,1 at end of June 217. We note a continued growth in new financing contributing to further increase of our outstanding portfolio of funded assets. 349 people were employed in SG Finans at the end of the second quarter. This is an increase of 3 staff since year end 217. Financial Results SG Finans has Net Banking Income of MNOK 673,6 in the first half of 218 compared to MNOK 769,3 in the same period in 217. Net Interest Income for the first half year ends at MNOK 262,, which is lower compared to MNOK 358,4 in first half of 217. The main reason for the drop in Net Interest Income is the impact in second quarter of 217 from the realisation of fixed rate investments. Other Income is maintained at same level as last year, with MNOK 156,9 Other Income in the first half of 218. Operating expenses amount to MNOK 39,1 in the period ending June 3 218, compared to MNOK 298,1 in the same period in 217. The increase in operating expenses is due to increased payroll, social expenses and other staff cost. With effect from January 1, 218, the measurement of credit losses (cost of risk) is changed with the implementation of IFRS9, the new accounting standard for financial instruments. The methodology and impact of the new accounting standard is presented in the notes, cf. note 3. Total Cost of Risk year to date amount to MNOK 32,5 compared to MNOK 6,9 in the same period last year. This represents,19% of average outstanding loans in the period, which is an increase compared to,4% in the first half of last year. 3

4 The operating profit is MNOK 332,1 in the first six months of 218, compared to MNOK 464,2 in the first six months of last year. The main driver for the MNOK 132,1 reduction in operating profit is the one-off impact in Q2 217 from the reversal of fixed rate investments and the higher Cost of Risk in first half of 218. SG Finans AS produces a net result after tax of MNOK 255,1 for the period from January 1 to June 3, 218. This compares to a net result after tax of MNOK 352,3 in the same period last year. Risk management and Capital adequacy In the second quarter of 218, we have renewed the tier2 capital base, with the replacement of the previous MNOK 1,1 subordinated loan with a new loan of MNOK 55. The reduction in tier 2 capital comes as a result of the targeted strengthening of the tier 1 capital base further to recent years evolution in capital regulation and increased prudential requirements for tier 1 capital buffers. Finanstilsynet, the Norwegian prudential authority has validated the new MNOK 55 subordinated loan to qualify as tier 2 capital. In order to ensure full compliance of all capital requirements during the process to replace tier 2 capital, the company decided to maintain a higher tier 1 capital ratio until the new structure came in place. The Board assesses the capital situation as adequate also after the replacement of the tier 2 capital, and the company has good access to funding from its parent company as well as external lenders. In the second quarter we have established new financing from the Nordic Investment Bank with a new loan of close to NOK 1,5 bn for the financing of the SME sector in Norway, and with a particular share to be allocated to the Arctic region. This is the third loan we establish in cooperation with the Nordic Investment Bank. We have also signed a new loan from the European Investment Bank of MEUR 1 for the financing of SME s in Denmark and Sweden, with a targeted share to fund climate action projects in the two countries. The regulatory capital as of June 3 is MNOK 5 477,8. The regulatory capital consists of MNOK 4 927,8 tier one capital, and MNOK 55, tier two capital. The basis for the calculation of capital requirements and adequacy at the end of second quarter was MNOK ,5. The capital adequacy at end of June 218 was 18,6 %. Tier 1 capital ratio was 16,7 %. The capital coverage is satisfactory compared to regulatory minimum requirements and the company s internal requirements and guidelines for solidity and capital adequacy. As part of the company s capital management procedures, stress testing of all relevant risks is performed and the change in the capital requirement under various stress scenarios evaluated. The capital adequacy is considered satisfactory also considering the results of the performed stress tests. Lysaker, August 15, 218 Jochen Jehmlich Chairman Ellen Altenborg Tommy Pedersen Peter Ström Deputy chairman Anett Carlsson Philippe Dairien Carsten Thorne Managing Director 4

5 INCOME STATEMENT ( in NOK thousand) Notes Total interest income Total interest expenses Commission and fee income Commission and fee expenses Net gains and losses on financial transactions Income on other activity Net banking income Total payroll, fees and other staff cost Total other operating expenses Gross operating income Cost of risk Operating income Taxes Profit for the period Q2, 218 Q2, 217 YTD Q2, 218 YTD Q2, 217 FY, Other comprehensive income Items that could be reclassified: Exchange differences on translation of foreign operations Taxes Items that cannot be reclassified: Actuarial gains and losses Taxes Attributable to: Equity holder of the parent Total comprehensive income of the period

6 INTERIM FINANCIAL STATEMENT BALANCE SHEET - ASSETS & LIABILITIES 1 ( in NOK thousand) Notes Cash and deposits with central banks Q2, 218 Q2, FY, Revaluation differences Repossessed assets Hedging derivative assets 6,21,22 Due from banks 8 Customer loans 9,1,11,12,13 Deferred tax assets 15 Shares and primary capital certificates Tangible and intangible fixed assets Other assets Total Financial liabilities at fair value through profit and loss 6,21 Hedging derivative liabilities 6,21 Due to banks 16, Customer deposits Other liabilities Pension liabilities Current tax liabilities Subordinated debt Share capital Share premium account Total liabilities Other equity including profit for the year Total equity Total 1) Restated, see note 3.1.d, 3.2 Lysaker, August 15th, 218 Jochen Jehmlich Chairman Ellen Altenborg Tommy Pedersen Peter Ström Deputy chairman Anett Carlsson Philippe Dairien Carsten Thorne Managing Director 6

7 STATEMENT OF CHANGES IN EQUITY in NOK thousand Share capital Share premium Retained earnings Translation differences Actuarial gains and losses Equity Profit for the period Other comprehensive income Dividends Total equity Equity Adjustment in first time application IFRS 9 Adjusted equity Profit for the period Other comprehensive income Total equity Total

8 CASH FLOW STATEMENT Amounts in NOK thousand Operations Interest income Interest expenses Other receipts Operating expenses Receipts on previous losses Paid taxes Net cash flow from operations Net cash flow Cash at the 1st of January Cash at end of period New investments leasing Proceeds from sale of leasing assets Decrease in loans ( net ) Decrease ( increase ) in other receivables Decrease ( increase ) in advance payments Net cash flow from current financial activity Decrease ( increase) in tangible assets Shares and primary capital certificates Net cash flow from investment activity Increase (decrease) in deposits from customers Payment of dividends Increase (decrease) in loans from credit institutions Increase (decrease) in debt Increase (decrease) accrued costs Currency exchange without cash effect Net cash flow from long term financial activity Reconciliation cash at end of period Cash and deposits with central banks Deposits with financial institutions Cash at end of period 8

9 NOTES 1. ACCOUNTING PRINCIPLES SG Finans AS is a Scandinavian finance company and its business is carried out through a broad, Scandinavian distribution network with 15 regional and sales offices in Norway, 4 offices in Sweden and 2 in Denmark. SG Finans AS forms part of Société Générale SA, a group listed on the stock exchange with head office in Paris, France. The Group consolidated financial statement is prepared by Société Générale SA, and is available on The company is a limited company incorporated and domiciled in Norway. Its registered office is in Strandveien 18, Lysaker. The interim financial statements for the period ended June 3th 218, were authorised for issue by the Board of Directors on August 15th, 218. SG Finans AS's activities are neither seasonal nor cyclical in nature, its period results were not affected by any seasonal or cyclical factors. The interim financial statements for SG Finans AS for the 3 month period ending June 3th, 218, are prepared and presented in accordance with the revised IAS 34 Interim Financial Reporting. The interim financial statements do not include all the information and disclosures required in the annual financial statement, and should be read in conjunction with the financial statement as at 31 December 217. IFRS, IFRIC interpretation and amendments applied by SG Finans AS as at January 1st, 218 Accounting standards, amendments or interpretation Adoption date by the European Union Effective date IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers IFRIC 22 Foreign Currency Transactions and Advance Consideration Accounting standards, Amendments or interpretation to be applied in the future Not all of the accounting standards and interpretations published by the IASB (International Accounting Standards Board) have been adopted by the European Union at June 3, 218. These accounting standards and interpretations are required to be applied from annual periods beginning on January 1, 219 at the earliest or on the date of their adoption by the European Union. Accordingly, they were not applied by SG Finans AS as of March 218. Accounting standards, Amendments or interpretation adopted by the European Union on June 3, 218 Accounting standards, amendments or interpretations Adoption date by the European Union Effective date Amendments to IFRS 9: Prepayment Features with Negative Compensation IFRS 16 Leases Accounting standards, amendments or interpretations not yet adopted by the European Union on June 3, 218 Accounting standards, amendments or interpretations Adoption date by the IASB Effective date IFRS 17 Insurance Contracts IFRIC 23 Uncertainty over Income Tax Treatments Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures Annual Improvements to IFRS Standards Cycle Amendments to IAS 19: Plan Amendment, Curtailment or Settlement Amendments to References to the Conceptual Framework in IFRS Standards

10 2. IMPORTANT ACCOUNTING ESTIMATES AND DISCRETIONARY EVALUATION The preparation of interim financial statements in conformity with generally accepted accounting principles requires that occasionally management must make estimates and assumptions. Estimates and discretionary evaluations are regularly assessed and are based on historic experience and other factors, including the expectations of future events that are considered to be probable under the current circumstances. The company prepares estimates and makes presumptions and assumptions connected to the future. The accounting estimates that are based on this will seldom be entirely in accordance with the final outcome. Some accounting principles are considered to be especially important to enlighten the company s financial position because they require the management to make difficult or subjective assessments and determine estimates that are, for the most part, uncertain at the time the estimates are made. The key sources of estimation uncertainty were the same as those described in the last annual financial statements, except for new significant judgements and key sources of estimation uncertainty related to the application of IFRS 9, which are described in Note CHANGES IN SIGNIFICANT ACCOUNTING POLICIES 3.1 IFRS 9 FINANCIAL INSTRUMENTS IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. The following table summarises the impact, net of tax, of transition to IFRS 9 on the opening balance. Retained earning 218 Recognition of expected credit losses under IFRS Related tax Impact at 1 January a) Classification and measurement of financial assets and financial liabilities IFRS 9 has not had any significant impact on accounting policies related to financial liabilities and financial derivatives as the previous classification under IAS 39 was for the most part the same. Financial assets are required to be classified into three categories according to applicable measurement methods (amortised cost, fair value through profit or loss (FVTPL) and fair value through other comprehensive income (FVOCI)). For financial assets, loan and receivable is no longer a category. Classification depends on the contractual cash flow characteristics of the instruments and the entity s business model for managing its financial instruments. Implementing IFRS 9, classification will be modified, but there is no effect on the measurement. The hold to collect business model with collection of principal and interest measured at amortised cost is a continuation of the existing measurement for loan and receivable under IAS 39. Other financial assets are classified and measured at FVPL, as SG Finans has no financial assets classified and measured at FVOCI. Conditions -is held within a business model whose objective is to hold to collect contractual cash flow and; -its contractual terms give rise on specific dates to cash flow that are solely payments of principal and interest on the principal outstanding. Financial assets at amortised cost: Subsequent measurement These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gain and losses and impairment are recognised in profit and loss. Any gain or loss on recognition is recognised in profit or loss. Financial assets at FVTPL Conditions Subsequent measurement -all assets not classified as measured at amortised cost or FVOCI These assets are subsequently measured at fair value. Net gain and losses, including any interest or dividend income, are recognised in profit and loss. The following table explains the measurement categories under IAS 39 and IFRS 9 Financial assets IAS 39 IFRS 9 Carrying amount IAS 39 Carrying amount IFRS 9 Loans and receivable due from banks Loans and receivable Amortised cost Loans and receivable due from customers Loans and receivable Amortised cost Lease financing receivable Loans and receivable Amortised cost Hedging derivative-fair value hedge Fair value Fair value Loans and receivable due from banks and customer, and lease financing receivable were categorised under the IAS 39 measurement group loan and receivable. The hold to collect business model with collection of principal and interest measured at amortised, replaces the loan and receivable classification. 1

11 b) Impairment All debt instruments classified as financial assets, measured at amortised cost or at fair value through other comprehensive income, as well as lease receivables, loan commitments and issued financial guarantee contracts, will be systematically subject to depreciation or provision for expected credit losses. This depreciation or provision will be recognised as soon as loans are granted or as soon as commitments are issued, without waiting for objective evidence of impairment to occur. The purpose of this approach is to recognise credit losses in profit or loss on a timely basis, symmetrically to the recognition in profit or loss of the credit spread embedded in the interest income. Thus, these financial assets will be allocated among three categories according to the gradual deterioration of their credit risk since their initial recognition, and an impairment loss will be recognised for each of these categories as outlined in the table. Methodologies for measuring depreciations and provisions Credit risk category Transfer criteria Measurement of credit risk Interest income recognition basis Stage 1 Stage 2 Stage 3 Performing assets Underperforming assets Credit-impaired or defaulted assets Initial Credit risk on recognition of the instrument the instrument has increased in stage 1 significantly since initial recognition/ 35 days past due* 12-month expected credit risk Gross carrying amount of the asset before impairment Lifetime expected credit risk Gross carrying amount of the asset before impairment Evidence that the instrument has become credit-impaired/ 9 days past due Lifetime expected credit risk Net carrying amount of the asset after impairment The measurement of expected credit losses is primarily calculated as the product of the instruments probability of default (PD), loss given default (LGD) and exposure at default. Estimates of 12-month expected credit losses use a maximum of 12-month probability of default, while estimates of lifetime expected credit losses use a probability of default assessed over the remaining life of the instrument. Parameters necessary for these evaluations will be assessed on the basis of financial asset portfolios. For that purpose, portfolios of financial assets and commitments were segmented to ensure their homogeneity in terms of credit risk characteristics and their correlation with the international and local macroeconomic variables that can affect them. This new segmentation of portfolios was determined consistently with that used for the needs of the Basel prudential calculations to guarantee the uniqueness of the historical data of default and losses that are used. Assessment of the increase in credit risk Increases in a financial asset s credit risk since its initial recognition, entailing transfer from stage 1 (performing assets) to stage 2 (deteriorated assets), and from stage 2 to stage 3 (non-performing or doubtful loans), are firstly assessed on the basis of the internal credit risk rating currently used by SG Finans. Significant degradation of the rating is assessed on a portfolio basis according to default probability curves used to measure provisions and depreciations for credit risk under IFRS 9. A more than 35 day past due payment automatically triggers the transfer of the related financial asset into stage 2. In addition, if at the closing date a significant increase in credit risk has been identified on a given counterparty, all the outstanding s on this counterparty at this date will then be transferred to stage 2 and depreciated for lifetime expected losses. After this transfer to stage 2, any new instrument concluded with the same counterparty will then be initially recognised in stage 1 and will then follow the process of assessment of the subsequent degradation of the credit risk. SG Finans do observe a higher ODR (observed default rate) for the 3 dpd (days past due) sample than the rest of the portfolio, but it is significantly lower than the 35 dpd. More than 9% of the 3 dpd that defaults, will at some point be included by a 35 dpd rule. By setting the rule to 35 dpd, the probability of falsely classifying good clients as bad is reduced, thus increasing the quality and stability of stage 2. The identification of a default situation leading to a transfer to stage 3 is assessed according to the same criterion as those previously used under IAS 39 for the assessment of an incurred credit risk on an individual outstanding. In the same way, as currently done under IAS 39, the assessment of a default situation on an individual outstanding implies by contagion that all the outstanding s on the defaulting counterparty are transferred to stage 3. 11

12 Forward looking approach Using a forward-looking approach to determine the amount of expected credit losses (12-month or lifetime) depends above all on the integration of the economic perspectives in the evaluation of the probabilities of default. The main macroeconomic variables used in that calculation is generally the economic growth rate of the country. Concerning the calculation of expected losses in case of default (Loss Given Default - LGD), the forward looking approach is currently limited to finance lease portfolios. Expected credit losses are calculated on the basis of probabilised average of three macroeconomic scenarios established by the Group s economists for all the consolidated entities (a base scenario and a stress scenario, plus an optimistic scenario). In addition, a marginal adjustment can be applied, following expert appraisal, to increase or decrease the total expected credit losses calculated, in order to take into account future risks that cannot be modelled (mostly related to legislative or regulatory changes). For SG Finans AS, the IFRS 9 impairment model covers assets measured at amortised cost. Loans, leasing and factoring contracts and in addition, loans and deposits to financial institutions are in scope of the impairment model. SG Finans will apply a sophisticated approach for the main part of the portfolios. Portfolios not meeting given requirements will be calculated based on a simplified approach. Recognition of expected credit loss will be based on assessment on individual basis, taking into consideration both backward and forward looking information. Presentation of impairment Financial assets measured at amortised cost are presented net of allowance. The losses are presented under cost of risk. More detailed information is given in separate notes. Impact of the IFRS 9 impairment model 218 Commitments to Loss allowance customers At 31 December 217 under IAS Effect from first time application recognised 1 January 218 Repayment loans Factoring loans and receivables 1 8 Financial lease agreements Commitments to customers 1 9 At 1 January 218 under IFRS c) Hedge accounting SG Finans has analysed the various options offered by IFRS 9 in its transition guidance for hedge accounting and has decided, as allowed by IFRS 9, not to modify the hedge accounting methods currently applied in accordance with IAS 39 as adopted in the European Union. d) Transition SG Finans has taken an exemption not to restate comparative information for prior periods with respect to classification and measurement. The information presented for 217 does not reflect the requirements of IFRS 9 but rather those of IAS 39. However, where presentation has been amended, the 217 has changed correspondingly. 12

13 3.2 IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS AND SUBSEQUENT CLARIFICATIONS This standard sets out the requirements for recognising revenue that apply to all contracts with customers, except for lease contracts, insurance contracts, financial instruments and guarantees. It replaces IAS 18 and IAS 11. The recognition of revenues in the income statement shall depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To apply this core principle, IFRS 15 provides a five-step model from the identification of the contract with the customer until the recognition of the related revenue when the performance obligation is fulfilled: Step 1: Identification of a contract Step 2: Identification of performance obligations Step 3: Determination of the transaction price Step 4: Allocation of the transaction price Step 5: Recognition of revenue Contracts that are concerned by the new standard are -banking services contracts that lead to the recognition of fee income -resale of assets temporarily not leased Implementing IFRS 15 had no impact on the financial position 1 January 218. SG Finans has however, as part of the consideration taken amended relevant presentation. Part of transaction with customers is related to resale for assets temporarily not leased. These transactions have for periods prior to the IFRS 15 implementation been considered as part of the cost of risk. For the period ending 31 March 218, these transactions have been reclassified. 217 has been restated correspondingly as outlined in the table below Income on other activity before reclassification Reclassification Income on other activity Losses on loans before reclassification Reclassification Losses on loans

14 4. NET INTEREST INCOME Interest income from financial institutions, valued at amortised cost Interest income from customers financial leases and loans, valued at amortised cost Interest income financial instruments Total interest income Q2, 218 Q2, Interest expenses to financial institutions, valued at amortised cost Interest expenses on deposits and debt to customers, valued at amortised cost Interest expenses financial instruments Interest expenses on subordinated debt Other interest expenses Total interest expenses Net interest income NET FEES AND INCOME ON OTHER ACTIVITY Commission and fee income from loans and similar to customers Commission and fee income Q2, 218 Q2, Net commission and fees income Gains and losses repossessed assets Termination gain and loss Income from extension of leasing contracts Other income Total income other activity Commission and fee expenses from loans and similar to customers Other commission and fee expenses Commission and fee expenses 6. NET GAINS ON FINANCIAL INSTRUMENTS AT FAIR VALUE Net gains on financial derivatives, trading Change in fair value on financial derivatives, hedging Change in fair value on hedged fixed interest loans Net change in value and gains on foreign currency Net gains/losses on financial instruments at fair value through P&L Q2, Q2,

15 7. OPERATING EXPENSES Q2, 218 Q2, Payroll Pensions Social security costs Other staff cost Total payroll, fees and other staff cost Rent and other office costs Fees and temporary staff Travel and marketing Other operating costs Intragroup services Depreciation and gain/loss Total other operating expenses Total operating expenses 8. DUE FROM BANKS 218 Deposits with financial institutions Loans to financial institutions Due from banks before impairment Impairment of individually impaired loans Revaluation of hedged item Net due from banks CUSTOMERS LOANS Equipment loans Factoring receivables Factoring loans Financial lease agreements Customer loans before impairment Impairment of individually impaired loans Net due from customers ALLOWANCES RECOGNISED AND CUSTOMER LOANS Allowances on loans as of 1.1 Allowances on new loans Movement from S1 to S2 Movement from S1 to S3 Movement from S2 to S3 Movement from S3 to S2 Movement from S3 to S1 Movement from S2 to S1 Loans terminated Change within stage Allowances on loans as of 3.6 Customer loans before impairment 218 Stage 1 Stage 2 Stage 3 Total

16 11. LOSSES AND ALLOWANCES RECOGNISED IN THE PROFIT AND LOSS Losses on loans Write-downs for loan losses at end of period Exchange rate adjustments (opening balance) Write-downs for loan losses as at 1.1 Total actual losses Income on actual losses Cost of risk LEASING (FINANCIAL LEASING ASSETS) Purchase cost 1.1 Exchange rate difference Inflow during the year Outflow during the year Purchase costs at end of period Accumulated ordinary depreciation 1.1 Exchange rate difference Ordinary depreciation during the year Reversed depreciation sold assets Accumulated depreciation at end of period Book value leasing assets at end of period Customer receivable Other accruals Book value in the balance sheet at end of period Customer receivables are ordinary leasing receivables and advancement on leasing rent. Up front fees constitute other accruals. Overview of future minimum finance lease rental: Within 1 year 1 to 5 years Future minimum finance lease rental Average interest Present value of minimum lease payments 3,24 % ,38 % Unearned finance income 16

17 13. RISK CLASSIFICATION 218 Days outstanding status Not past due > 18 > 1 year Total Net loans to customers Not past due > 18 > 1 year Total Days outstanding status Whereof past due, non-doubtful Net loans to customers Whereof past due, non-doubtful Credit exposure: Amounts in NOK thousand Net loans to customers Positive market value derivatives Guarantee liabilities and loan commitments Total credit exposure DOUBTFUL LOANS Gross doubtful loans - Write-downs on impaired assets Net doubtful loans

18 15. INCOME TAX The company calculates the tax payable based on an estimated effective tax rate. For 217 the effective tax rate was 1,3 % at year end and the expected effective tax rate for 217 was 24,1 %. For 218 this is expected to be 23,1 %. Deferred tax assets are for interim based on an estimate for the year. The estimate is prepared based on previous years' development in the leasing portfolio, adjusted for year acquisitions and disposals. Expected changes in the deferred tax is recognised by 23 % for the period ending 31 March 218. The main contributor to the fluctuation in effective tax rate is exchange rate effects from the portfolio. Current income tax expense Gross deferred tax expense Income tax expense for the period DUE TO BANKS Demand deposits and current accounts Term deposits borrowings Related payables Revaluation of hedged item due to banks Total SUBORDINATED DEBT Subordinated debt Subordinated debt related payables Total INFORMATION ON RELATED PARTIES Assets/interest income Loans to Group companies Revaluation of hedged item Interest income from group companies Liability/interest expense Loans from Group companies Related payables Group companies Revaluation of hedged item due to banks Other liabilities Interest expenses to group companies Subordinated debt Interest expenses on subordinated debt Funding is primarily provided by the parent company Société Générale, on the basis of a framework agreement and limits. All transactions are made on market terms. 19. EMPLOYEE BENEFITS For the period ending 3 June 218, it is not obtained a new actuary estimate. It is therefore not presented any effect of actuarial gains and losses in other comprehensive income. The company considers the possible effect of actuarial gains and losses as immaterial for the assessment of the financial position for the 6-month period ending 3 June 218. At year-end 217 the actuarial gains and losses recognised in other comprehensive income was TNOK 8 173, giving a negative effect on the equity of TNOK

19 2. CAPITAL ADEQUACY IRB method Corporate - small and medium sized businesses Corporate - other Total Credit risk, IRB method Credit risk weighted assets Operational risk, basic indicator approach Additional requirement according to Basel II floor Total calculation basis ,7 % 16,7 % 18,6 % 11,51 % 2,5 % 1,51 % 3, %, % 5,24 % 3,74 % 3,61 % 16,4 % 16,4 % 2,4 % 11,21 % 2,5 % 1,21 % 3, %, % 5,21 % 3,71 % 5,7 % Common Equity Tier 1 capital Share capital Share premium account Other equity Independently reviewed interim profits net of any foreseeable charge and dividend Common Equity Tier 1 capital before regulatory adjustment Common equity Tier 1 capital: Regulatory adjustment Deferred tax assets Intangible assets (net of related tax liability) Value adjustments due to the requirements for prudent valuation Negative amounts resulting from the calculation of expected loss Total regulatory adjustments to Common Equity Tier 1 Common Equity Tier 1 capital Additional Tier 1 capital Tier 1 capital Tier 2 capital: instrument and provision Subordinated debt Tier 2 capital before regulatory adjustment Tier 2 capital: regulatory adjustment Total regulatory adjustment to Tier 2 capital Tier 2 capital Total capital Calculation basis Standardised method Local and regional authorities (including muncipalities) Institutions Corporate Engagements in default Total Credit risk, standardised method Capital ratios and buffers Common Equity Tier 1 Tier 1 Total capital Capital requirement including institution specific buffers of which: capital conservation buffer of which: countercyclical buffer of which: systemic risk buffer...of which: systemically important institution buffer Common Equity Tier 1 above minimum capital requirements and capital buffers Tier 1 capital above minimum capital requirements and capital buffers Total capital above minimum capital requirements and capital buffers Capital ratios and buffers, nominal amounts Institution specific buffer requirement of which: capital conservation buffer of which: countercyclical buffer of which: systemic risk buffer 19

20 ...of which: systemically important institution buffer Common Equity Tier 1 above minimum capital requirements and capital buffers Tier 1 capital above minimum capital requirements and capital buffers Total capital above minimum capital requirements and capital buffers Amount below the thresholds for deductions Deferred tax assets arising from temporary differences Pilar 2 requirement Additional core capital buffer requirement ratio 1,5 % Additional core capital buffer requirement Leverage ratio Total Leverage Ratio exposure Leverage Ratio 13,3 % 12,4 % SG Finans has been validated to calculate capital requirements and capital adequacy according to Advanced Internal Rating Based Approach for the major portfolios. The capital adequacy calculations are consequently based on SG Finans internal parameters a.o. for PD ("Probability of Default"), LGD ("Loss given Default"), M ("Maturity) for these portfolios. According to the transition rule, the capital requirement shall not be reduced below 8% of the level calculated using the Basel II Standard method. The impact of the transition rule adjustment factor is presented in the note on capital adequacy. The capital requirement for Operational Risk is calculated according to the Basic Indicator / Standard Approach for operational risk. The entity does not take Market Risk positions, and the capital requirement for market risk is nil. 2

21 21. METHOD FOR CALCULATION OF FAIR VALUE OF FINANCIAL INSTRUMENTS Regarding financial instruments recorded at fair value, see description in note 1 Accounting Principles. Lending (loans and financial leasing) to and receivables on customers: The pricing of lending (loans and financial leasing) is based on market prices. Stipulated prices include additions to cover credit risk. The value of impaired engagements is determined by discounting expected future cash flows. We therefore assess that the recorded value is a fair estimate of fair value for loans and receivables valued at amortised cost. Loans from financial institutions and deposits from customers: Fair value is determined to be equal recorded value for loans from financial institutions and deposits from customers valued at amortised cost. SG Finans uses the following hierarchy related to determining and disclosing the fair value of financial instruments: 1) Quoted (unadjusted) prices in active markets for identical assets or liabilities (level 1) 2) Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly (level 2) 3) Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data (level 3) Financial assets - Level 2 Hedging derivative assets Revaluation differences Total assets Financial liabilities - Level 2 Financial liabilities at fair value through profit and loss Hedging derivative liabilities Total liabilities SG Finans does not have any financial instruments classified in level 1 or OFFSETTING The company has established CSA agreements (collateral security agreement) with its main counterparts. The agreements involve a mutual commitment to provide collateral for derivatives trading between the parties. Financial derivatives -assets Gross amount Amounts that are offset Net amount in financial position Financial instruments on balance sheet Cash collateral in the balance sheet Net position Financial derivatives -liabilities Gross amount Amounts that are offset Net amount in financial position Financial instruments on balance sheet Cash collateral in the balance sheet Net position SG Finans has set-off rights for leasing agreements where customers also have entered into factoring arrangements with the company. 21

22 23. CONTINGENCIES SG Finans AS had no major legal disputes pending at the end of the reporting period. 24. ASSETS PLEDGED AND RECEIVED AS SECURITY In June 214, SG Finans signed a collateral secured loan drawn over a 2 and 4-year funding period with an aggregate value of 25 MEUR. The lender holds encumbrance, MEUR 332,5 in our transport portfolio. 25. EVENTS AFTER THE REPORTING PERIOD The company is at the date of issue, 15 August 218, not familiar with matters that are likely to change the assessment of the financial position as at 3 June

23 SG FINANS AS SG Finans AS is Norway s leading finance company within equipment leasing and factoring. The company s products are marketed under the trademarks Societe Generale Equipment Finance and Societe Generale Factoring. The company is a part of the French Societe Generale Group, one of Europe s largest financial corporations. SG Finans has a strong local presence with 5 years history and 21 offices in Norway, Sweden and Denmark. The head office for the Scandinavian businesses is located at Lysaker (Oslo/Norway). The company has total managed assets of NOK 37 billion and 36 skilled employees, all working to provide our customers and partners with solutions for their business. HEAD OFFICE SCANDINAVIA SG FINANS AS STRANDVEIEN 18 POST BOX LYSAKER TELEPHONE: OFFICES IN NORWAY BERGEN - BODØ - DRAMMEN - FREDRIKSTAD - HAMAR - HARSTAD HAUGESUND - KRISTIANSAND - OSLO/LYSAKER (HEAD OFFICE) SANDEFJORD - SKIEN - STAVANGER - TROMSØ - TRONDHEIM - ÅLESUND OFFICES IN SWEDEN GOTHENBURG - MALMØ - STOCKHOLM - UMEÅ OFFICES IN DENMARK COPENHAGEN - VEJLE 23