Third quarter (Unaudited) Sbanken ASA

Transcription

1 Q3 Third quarter 2018 (Unaudited) Sbanken ASA

2 Q3 Third quarter 2018 Highlights Sbanken ASA Annual lending growth 9.4% (17.8% * ) Cost-to-income ratio 39.0% (38.3% * ) ROE 12.5% (13.0% * ) Net interest margin 1.45% (1.63% * ) Loan loss ratio 0.10% (0.11% * ) CET1 ratio 14.8% ** (14.7% * ) Continued momentum lending growth at 9.3 per cent year to date Effective consumer loan initiatives growth at 15.3 per cent in the quarter Strong growth in funds under management 30.8 per cent last 12 months Winner EPSI Survey 2018 customer satisfaction remains strong Total loans to customers NOK million Earnings before tax NOK million Return on equity** Per cent % 13.3 % 12.5 % 15.3 % 12.5 % 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 3Q17 4Q17 1Q18 2Q18 3Q18 * Comparable figure corresponding period last year. ** Including 90 per cent retained earnings for first nine months of PAGE 2/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

3 Key figures (group) In NOK thousand Reference Q3 18 Q3 17 Jan-Sep 18 Jan-Sep Summary of income statement Net interest income Net fee and commission income Net other income Operating income Other operating expenses Operating profit before loan losses Loan losses Earnings before tax Calculated tax Net profit Profitability Return on equity 1 12,5% 13,0% 13,4% 13,1% 13,1% Net interest margin 2 1,45% 1,63% 1,52% 1,61% 1,62% Cost-to-income ratio 3 39,0% 38,3% 39,1% 40,5% 41,5% Balance sheet figures (in NOK million) Total loan volume Customer deposits Deposit-to-loan ratio 4 64,9% 66,5% 64,6% 67,3% 66,9% Lending growth (gross) previous 12 months 9,4% 17,8% 9,4% 17,8% 13,7% Average total assets Total assets, end of period Losses and defaults Total loan loss (%) 6 0,10% 0,11% 0,09% 0,02% (0,00%) Capital adequacy and leverage ratio 7 Common equity Tier 1 capital ratio 14,8% 14,7% 14,8% 14,7% 14,7 % Tier 1 capital ratio 16,2% 16,2% 16,2% 16,2% 16,2 % Total capital ratio 17,9% 18,2% 17,9% 18,2% 18,1 % Leverage ratio 6,1% 6,1% 6,1% 6,1% 6,1 % Shares Earnings per share (Basic) 1,60 1,49 5,00 4,36 5,94 References 1) Return to shareholders after tax (annualised) as a percentage of average equity in the period excluding AT1 capital. 2) Net interest income (annualised) as a percentage of average total capital. 3) Operating expenses before loss as a percentage of total income. 4) Average deposits from customers as a percentage of average loan volume. 5) Average total assets in the period. 6) Loan losses as a percentage of average loan volume in the period. 7) Including 90 per cent of the profit for the first nine months of 2018 and Year-end is based on actual dividend. PAGE 3/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

4 Third Quarter Results The Sbanken group recorded continued strong growth in lending in the third quarter of The net profit increased to NOK million, compared with NOK million in the third quarter last year. The increase in profit was primarily a result of volume growth, higher net fee and commission income and gains on financial instruments. Net fee and commission income was positively affected by solid growth in funds under management and strong market development, in addition to the seasonal increase in payment transactions volumes in the quarter. At quarter-end, total customer lending had increased to NOK 78.6 billion, compared with NOK 72.0 billion at the end of the third quarter of The CET 1 capital ratio increased to 14.8 per cent compared with 14.7 per cent in the third quarter of Return on equity was 12.5 per cent, compared with 13.0 per cent in the third quarter of Important events during the quarter The average Norwegian short-term money market rates were relatively stable in the third quarter of Norges Bank increased the key policy rate by 0.25 percentage points to 0.75 per cent at its September meeting. interest margin. The net interest margin was 1.45 per cent, down from 1.63 per cent in the third quarter of The reduction was primarily due to an increase in the 3 month NIBOR market rate and lagging repricing of the bank s products, which had effect from 6 November Sbanken conducted an interest rate adjustment on loans and deposits on 25 September, applicable with immediate effect for new customers. For existing customers the new interest rates came into effect from 6 November. Following increased efforts in relation to consumer credit, volume growth reached the highest level since the product launch in In the third quarter, growth in consumer credit reached 15.3 per cent, compared with 8.7 per cent in the third quarter last year. During the first three quarters of 2018 consumer credit volume has grown by 29.2 per cent. Sbanken successfully launched Apple Pay in August, as the third bank to offer the service in the Norwegian market. The payment solution was well received by Sbanken s customers. Sbanken was rated number one in customer satisfaction in the EPSI Rating annual banking survey for 2018, retaining the top position under the Sbanken brand. Net interest and fee and commission income NOK million Q17 4Q17 1Q18 2Q18 3Q18 Net interest revenue Net fee and commissions Interest margin (% right axis) Sbanken was, as the only financial institution, one of three finalists for the Fidus Award in September. The award recognizes companies who have excelled in information security. Sbanken also won the Stockman Award for financial reporting, communication and IR, in the class excluding the 30 largest companies on the Oslo Stock Exchange. Operating income Operating income increased to NOK (384.6) million following an increase in net interest income of NOK 1.9 million, an increase in net fee and commission income of NOK 8.6 million and an increase in net other income of NOK 14.3 million. The increase in net other income is primarily due to gains on financial instruments. The effective lending rate in the quarter was 2.48 per cent, compared with 2.54 per cent in the third quarter of Average effective interest rate by product group 3Q17 4Q17 1Q18 2Q18 3Q18 Home loans 2.37 % 2.45 % 2.45 % 2.37 % 2,36 % Car loans 4.90 % 4.92 % 4.95 % 4.80 % 4,90 % Consumer loans % 9.99 % % 9.90 % 9,56 % Other credit % % % % 10,71 % Net interest income increased to NOK (331.4) million as a result of increased net lending to customers, partly offset by a decrease in the net PAGE 4/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

5 The effective funding rate in the quarter increased to 1.02 per cent, compared with 0.92 per cent in the third quarter of The rate was unchanged from the second quarter of The increase in the effective funding rate is primarily due to higher money market rates in 2018 compared with 2017, resulting in an increase in capital market funding costs for the bank. Net fee and commission income increased to NOK 62.8 (54.2) million in the third quarter, up from NOK 47.6 million in the second quarter of Income from mutual funds and securities increased by NOK 3.4 million from the third quarter of 2017 and was unchanged at NOK 22.1 million from the second quarter of Operating expenses Operating expenses amounted to NOK (147.3) million in the quarter. The increase of NOK 12.3 million from the third quarter of 2017 was primarily due to increased marketing efforts and an increase in expenses relating to ongoing initiatives to expand the bank s offering. These include increased personnel costs as well as increased system and IT-related expenses. Operating expenses NOK million % % % 39% 39.0% 3Q17 4Q17 1Q18 2Q18 3Q18 Personnel Other operating expenses C/I (right axis) IT Marketing 80% 70% 60% 50% 40% 30% 20% At the end of the quarter, outstanding consumer loans amounted to NOK (1 320) million, compared with NOK million at the end of the second quarter of This corresponds to a growth of 34.3 per cent over the past 12 months. The volume of other credit products (account credit, credit cards and custody account loans) increased by 6.7 per cent in the quarter. Loans to customers NOK billion % -0.01% -0.06% % 0.07% 0.08% 0.07% % 0.10% 3Q17 4Q17 1Q18 2Q18 3Q18 Home loans Consumer credit Loss rate (right axis) 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% -0.20% Car loans Other loans Loss rate adj. (right axis) Customer deposits increased to NOK 49.9 (47.2) billion, which is an increase of NOK 2.7 billion, or 5.7 per cent, from the third quarter of The average deposit-to-loan ratio in the quarter was 64.9 per cent, compared with 66.5 per cent in the third quarter of The cost-to-income ratio was 39.0 per cent in the quarter, compared with 38.3 per cent in the third quarter of Impairments and losses As of 1 January 2018, Sbanken implemented the IFRS9 accounting standard for calculating impairments and losses. Due to the change of standards, comparable figures for previous quarters under IAS39 are not available. For details relating to loan losses and the transition to IFRS 9, reference is made to Note 47 in the 2017 Annual Report. The net cost of losses amounted to NOK 19.7 million in the quarter, equivalent to a loan loss ratio of 0.10 per cent. Total expected credit losses amounted to NOK million at the end of the quarter, of which NOK 51.0 million related to secured loans and NOK million to unsecured loans. Customer deposits NOK billion % 65.6% 64.9% 64.0% 64.9% 3Q17 4Q17 1Q18 2Q18 3Q % 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% Taxes The estimated tax expense amounted to NOK 52.2 (52.4) million, corresponding to an effective tax rate of 22.7 (24.1) per cent. Loans to and deposits from customers Loans to customers increased to NOK 78.8 (72.0) billion, following an increase of NOK 2.0 billion in the quarter. Lending growth over the past 12 months was 9.4 per cent. Customer deposits Deposit-to-loan ratio (right axis) Savings Customers investments in mutual funds increased from NOK 9.6 billion in the third quarter of 2017 to NOK 12.5 billion in the third quarter of Customers net client cash flow amounted to NOK 258 million in the quarter, and market developments made a positive contribution in the amount of NOK 393 million. PAGE 5/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

6 Customers' investment in mutual funds (FuM) NOK billion Q17 4Q17 1Q18 2Q18 3Q18 Comments on the results for the first nine months of 2018 Sbanken recorded a net profit of NOK million in the first nine months of 2018, compared with NOK million in the first nine months of Net interest income increased by 7.2 per cent to NOK (941.0) million in the first nine months of 2018, primarily due to strong lending growth. Net fee and commission income increased by 11.5 per cent to NOK (135.8) million. The increase is primarily due to increased volumes of card transactions and customers holdings in mutual funds. Operating expenses increased by 9.1 per cent to NOK (441.1) million, mainly due to increased marketing efforts and expenses relating to ongoing initiatives to expand the bank s offering. The net cost of losses amounted to NOK 48.0 (10.2) million. The loan loss ratio was 0.09 (0.02) per cent. The net cost of losses was positively affected in 2017 by the sale of portfolios of non-performing loans. Capital adequacy, leverage ratio and risk factors Sbanken has a CET1 capital ratio target of 14.0 (13.5) per cent, a Tier 1 capital ratio target of 15.5 (15.0) per cent and a total capital ratio target of 17.5 (17.0) per cent. At the end of the quarter, Sbanken had a CET 1 capital ratio of 14.8 (14.7) per cent, a Tier 1 capital ratio of 16.2 (16.2) per cent and a total capital ratio of 17.9 (18.2) per cent. At the end of the quarter, Sbanken had a leverage ratio of 6.1 (6.1) per cent, well above the regulatory requirement of 5 per cent. The capital ratios include 90 per cent of retained earnings from the first nine months. Sbanken s financial risk mainly consists of credit risk, market risk and liquidity risk. The credit risk comprises lending to the public primarily in the form of home loans, car loans, custody account loans, consumer loans, overdrafts and credit cards. Sbanken has a high-quality lending portfolio that includes mortgages with a moderate loan-to-value ratio (LTV). At the end of the quarter, the average LTV was 53.5 (54.6) per cent. Mortgages account for 94.4 (94.2) per cent of the lending portfolio. Sbanken is exposed to market risks such as interest rate risk, share price risk and credit spread risk. The exposure to share price risk amounted to NOK (82.5) million at the end of the quarter, of which NOK million was related to the valuation of the bank s shares in VN Norge AS (Visa) and NOK 39.5 million to the valuation of the bank s shares in VBB AS (Vipps). All lending provided by Sbanken has variable interest rates. The same applies to deposits, while capital market funding mainly uses the NIBOR three-month rate as its reference rate. At the end of the quarter, Sbanken had NOK 9.6 (7.9) billion in interest-bearing securities, and the corresponding credit spread risk was estimated to amount to NOK (154.1) million, related to securities issued by sovereigns, municipalities and covered bonds. At the end of the quarter, Sbanken had a liquidity coverage ratio (LCR) of 264 (295) per cent, well above the regulatory minimum requirement of 100 per cent. The net stable funding ratio (NSFR) was 139 (137) per cent. At the end of the quarter, Sbanken had outstanding capital market funding amounting to NOK 33.8 billion (27.9). Sbanken Boligkreditt AS total nominal issue amounted to NOK 29.6 billion (22.8). At the end of the quarter, Sbanken had a deposit-to-loan ratio of 63.5 (65.6) per cent, with 94.8 per cent of deposits covered by the existing Deposit Guarantee Fund (NOK 2.0 million) and 81.7 per cent by the harmonised EU Deposit Guarantee Scheme (EUR 0.1 million). Sbanken ASA has a long-term credit rating of A3 with a stable outlook from Moody s. Covered bonds issued by Sbanken Boligkreditt AS have a long-term rating of Aaa from Moody s. Macroeconomic and regulatory developments Norges Bank hiked the key policy rate in September, for the first time since May 2011, by 25 basis points to 0.75 per cent. The September Monetary Policy Report indicates a further increase in the key policy rate of 50 basis points in The money market rates have been stable during the third quarter, with three-month Nibor at around 1 per cent. Unemployment is currently below 4 per cent, according to Statistics Norway and the latest projections suggest a further reduction over the next few years. Real wage growth is expected to increase in line with the improved economic situation. The real income growth is expected to increase household consumption although rising interest rates look set to curb the consumption growth. House prices have been stable during the third quarter, but have increased by approximately 2.5 per cent over the past twelve months and are now at the same level as in May Statistics Norway project the annual growth in house prices to follow the growth in real wage, at around 2 per cent, over the next few years. The incorporation of the Bank Recovery and Resolution Directive (BRRD) and the Deposit Guarantee Scheme Directive (DGSD) will be effective from 1 January 2019 and we expect that the final legislation will be in place during the fourth quarter. Although the outcome is still uncertain, preliminary calculations suggests that Sbanken will need an amount of Tier-3 capital corresponding to the current level of outstanding senior unsecured debt. Given the transitional period until 31 December 2022 the impact on funding costs is not expected to be significant in the short term. The proposed new methodology for calculating banks contribution to the deposit guarantee fund suggests an increase in Sbanken s contributions in relation to the current level. In addition to this, all banks must contribute to the new resolution fund. The final contribution level is not finalised, but Sbanken expects it s contributions to increase in In September, the Ministry of Finance issued a consultation paper proposing to implement the FSA s guidelines on financial institutions treatment of unsecured credit as regulations. The consultation runs until 6 December. The Ministry of Finance also introduced new regulations on anti-money laundering (AML). The regulations ensure that Norwegian AML legislation is in accordance with the EU s Fourth Anti-Money Laundering Directive and the recommendations of the Financial Action Task Force. Subsequent events No significant events have occurred after 30 September 2018 that affect the financial statements for Q PAGE 6/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

7 Outlook Supported by continued marketing efforts, competitive pricing and an attractive range of loan products, Sbanken s volume growth is expected to increase in line with the bank s target of an annual growth rate above 10 per cent. The interest rate adjustment in September combined with the decrease in money market rates in the third quarter is expected to increase the bank s interest rate margin in the short term. In the longer term, the net interest margin could be affected by changes in the fee to the Norwegian Deposit Guarantee Scheme, changes in market rates or changes in competition. Recent volatility in the global fixed income and equity markets may lead to a reduction in the banks funds under management in the short term, which may negatively impact net fee and commission income. The upturn in the Norwegian economy is expected to continue due to increasing petroleum investments, a falling rate of unemployment and increasing wage growth. Norges Bank s projections indicate a hike in the key policy rate in the first quarter of Sbanken s prudent risk level and a high proportion of mortgage loans have historically resulted in low loan loss levels. The bank expects the average loss level to be around 0.1 per cent for Bergen, 13 November 2018 The Board of Directors of Sbanken ASA Niklas Midby (Chairman) Mai-Lill Ibsen August Baumann Hugo Maurstad Ragnhild Wiborg Cathrine Klouman Karianne Mjøs-Haugland Svein Frøystad Magnar Øyhovden (CEO) PAGE 7/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

8 Income statement (Sbanken group) In NOK thousand Note Q3 18 Q3 17 Jan- Sep 18 Jan- Sep Interest income from financial instruments at amortised cost Interest income from financial instruments at fair value Interest expense Net interest income Commission and fee income Commission and fee expense Net commission and fee income Net gain/(loss) on financial instruments Other income Other operating income Personnel expenses Administrative expenses 15, Depreciation and impairment of fixed and intangible assets Profit before loan losses Loan losses Profit before tax Tax expense Profit for the period Attributable to Shareholders Additional Tier 1 capital holders Profit for the period Earnings per share, see note 21. PAGE 8/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

9 Statement of comprehensive income (Sbanken group) In NOK thousand Q3 18 Q3 17 Jan- Sep 18 Jan- Sep Profit for the period Other comprehensive income: Net change in fair value of financial instruments at fair value through other comprehensive income (OCI) Tax effect Other comprehensive income that can be reclassified to profit or loss after tax Actuarial gains (losses) Tax effect Other comprehensive income that can not be reclassified to profit or loss after tax Total components of other comprehensive income (after tax) Total comprehensive income for the period Attributable to Shareholders Additional Tier 1 capital holders Total comprehensive income for the period PAGE 9/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

10 Balance sheet (Sbanken group) In NOK thousand Note Assets Cash and receivables with central bank Loans to and receivables from credit institutions Loans to customers 5, 6, 7, 17, Net loans to customers, central bank and credit institutions Commercial paper and bonds at fair value through OCI 17, Shares and funds 17, 18, Derivatives Intangible assets Deferred tax assets Property, plant and equipment Other assets Advance payment and accrued income Total assets Liabilities Loans and deposits from credit institutions 17, Deposits from customers 17, Debt securities issued 10, 17, Derivatives 1, Taxes payable Deferred tax Pension commitments Other liabilities Subordinated loans 10, 17, Total liabilities Equity Share capital Share premium Additional Tier 1 capital Other equity Total equity Total liabilities and equity Subsequent events 23 PAGE 10/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

11 Statement of changes in equity (Sbanken group) In NOK thousand Share capital Share premium Additional Tier 1 capital Actuarial gains and losses Changes in fair value of financial instruments at fair value through OCI Other equity Total equity Balance sheet as at Profit for the period to other equity ( to ) Profit for the period to Tier 1 capital holders ( to ) Payments to Tier 1 capital holders ( to ) Issue of Tier 1 capital net of issuing cost Actuarial gains and losses for the period ( to ) Net change in fair value of financial instruments available for sale ( to ) Capital increase registered in the Register of Business Enterprises * Paid dividend to shareholders Balance sheet as at Profit for the period to other equity ( to ) Profit for the period to Tier 1 capital holders ( to ) Payments to Tier 1 capital holders ( to ) Actuarial gains and losses for the period ( to ) Net change in fair value of financial instruments available for sale ( to ) Balance sheet as at Effects from transition to IFRS 9** Balance sheet as at Profit for the period to other equity ( to ) Profit for the period to Tier 1 capital holders ( to ) Payments to Tier 1 capital holders ( to ) Actuarial gains and losses for the period ( to ) Net change in fair value of financial instruments at fair value through other comprehensive income (OCI) ( to ) Payments related to share incentive program Paid dividend to shareholders Balance sheet as at * Capital increase related to share incentive programme, see also note 22. **For further description regarding transition to IFRS 9 we refer to the annual report note 47. PAGE 11/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

12 Statement of cash flows (Sbanken group) In NOK thousand Note Jan-Sep 18 Jan- Sep Cash flows from operating activities Net payments on loans to customers Interest received on loans to customers Net receipts on deposits from customers 17, Interest paid on deposits from customers Net receipts/payments from buying and selling financial instruments at fair value 17, 18, Interest received from commercial paper and bonds Net receipts/payments on deposits from credit institutions Interest paid on deposits from credit institutions Interest received on loans to credit institutions and central bank Receipts related to commissions and fees Payments related to commissions and fees Payments related to administrative expenses Payments related to personnel expenses Taxes paid Other receipts/payments Net cash flows from operating activities Cash flows from investment activities Invested in associated company Payments on the acquisition of fixed assets Payments on the acquisition of intangible assets Net cash flows from investment activities Cash flows from financing activities Receipts on share capital and share premium net of issuing cost EQ* Paid dividend to shareholders EQ* Receipts on subordinated loans Interest paid on subordinated loans Receipts on issued additional Tier1 capital Interest paid on additional Tier 1 capital EQ* Receipts on issued bonds and commercial paper Payments on matured and redeemed bonds and commercial paper Interest paid on issued bonds and commercial paper Net cash flows from financing activities Total net cash flow Cash at the beginning of the period Cash at the end of the period Change in cash Cash Cash and receivables with central bank Loans to credit institutions Total cash EQ* = Statement of changes in equity PAGE 12/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

13 Notes (Sbanken group) Note 1 - Accounting principles and critical accounting estimates and judgment The quarterly financial statements for the Sbanken group have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the International Accounting Standards Board and adopted by the EU. A description of the accounting principles applied in the preparation of the financial statements appears in the annual report for The quarterly financial statements of Sbanken ASA have been prepared in accordance with the Norwegian regulations on annual accounts for banks, sections 1-6 ("simplified IFRS") and IAS 34. Simplified IFRS permits recognition of provisions for dividend and group contribution through profit and loss and as a liability at the balance sheet date. A full application of IFRS would require the proposition to remain part of the equity until approved by the general meeting. For Sbanken ASA there will be no other differences between the use of simplified IFRS and full IFRS. When preparing the financial statements, management makes estimates, judgments and assumptions that affect the application of the accounting principles and the carrying amount of assets, liabilities, income and expenses. Estimates and assumptions are subject to continual evaluation and based on historical experience and other factors, including expectations of future events that are believed to be probable on the balance sheet date. A description of the critical accounting estimates and areas where judgment is applied appears in note 2 in the annual report for In Q the Sbanken group started using hedge accounting (according to IFRS 9). The principles used are described below: Hedge accounting The company uses derivative instruments to manage exposure to fixed interest rate and foreign currency relating to long-term borrowings in Euro. Upon initial recognition, derivatives and borrowings are designated as hedging instruments and accounted for as fair value hedges. Formal earmarking and documentation of the hedging relationship takes place when the hedging relationship is established. There is a clear, direct and documented connection between fluctuations in the value of the hedged item that are due to the hedged risk and fluctuations in the value of the financial derivatives. The hedging is documented with reference to the company s risk management strategy, clear identification of the hedged item and the hedging instrument, a clear description of the hedged risk and a description of why the hedging is expected to be effective. IFRS 9 simplifies the requirements for hedge accounting by linking hedge effectiveness more closely with risk management activities and leaving greater room for assessment. The requirement for a hedge effectiveness of % has been removed and replaced by more qualitative requirements, including that there must be an economic relationship between the hedging instrument and the hedged item, and that the effect of credit risk must not dominate the changes in value in the hedging relationship. Under IFRS 9, a prospective (forward-looking) effectiveness test is sufficient, while hedge effectiveness under IAS 39 must be considered both retrospectively and prospectively. Hedging documentation is still required. Hedge ineffectiveness, defined as the difference between the value adjustment of hedging instruments and the value adjustment of the hedged risks in the items, is recognised through profit or loss as it arises. The exception is the part of the value adjustment that is caused by a change in the basis swaps relating to the hedging instruments that is presented in the statement of comprehensive income. New and revised standards effective from 1 January 2018 Sbanken group has from 1 January 2018 applied the new accounting standard IFRS 9 Financial instruments. For information about effects from implementation, new accounting principles and methodology, refer to transition Note (No. 47) in the annual report for Sbanken ASA has also from 1 January 2018 applied the new accounting standard IFRS 15 Revenue. There has been no significant effects from the implementation. New and revised standards effective from 1 January 2019 or later Standards and interpretations that will enter into force for the annual periods beginning 1 January 2019 or later have not been used in the preparation of the accounts. IFRS 16 Leases Please refer to the annual report 2017 for further information. PAGE 13/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

14 Note 2 - Segments No segment information has been prepared, as the entire operation of the Sbanken group is deemed to constitute one segment, the Private Consumer Market, under IFRS 8. Currently, the Sbanken group offers services and products intended exclusively for private individuals. In the supervisory activities performed by the board and management, the customer base is not divided into different business segments that are followed up over time. The company s products are divided into various groups: - Lending: Home loans, car loans, credit cards, overdraft facilities, personal loans and custody account lending - Deposits: All-in-one, high-interest and security deposit accounts, as well as BSU (young home-buyer s savings account) - Payment services: Invoice payments, international payments, card transactions etc. - Security: Log-in, security solutions etc. The products in these groups are followed up by management, but the focus is shifted depending on the overall situation for the business as a whole. The bank s own investment activities do not form a separate reportable segment and are therefore presented in conjunction with Private Market. Since the bank operates only in Norway, the reporting of geographical and secondary segments is not considered relevant. Important classes of assets (e.g. home loans) are, however, broken down geographically and presented in a separate note. Note 3 - Capital adequacy The capital adequacy regulations are intended to improve institutions risk management and achieve closer concordance between risk and capital. The applicable regulations for Norwegian banks are adapted to the EU s capital adequacy regulations for credit institutions and investment firms (CRD IV/CRR). Sbanken ASA uses the standard method to establish the risk-weighted volume credit risk and the basic method to establish the risk- weighted volume for operational risk. At the balance sheet date no exposure was included in the risk-weighted volume for market risk. The group mainly engages in banking business and the bank s wholly owned subsidiary, Sbanken Boligkreditt AS, is fully consolidated. There is no difference between solvency and accounting consolidation. PAGE 14/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

15 In NOK thousand Nominal exposure Riskweighted volume Nominal exposure Riskweighted volume Nominal exposure Riskweighted volume Central governments Regional governments Multilateral Development Banks Institutions Retail Secured by mortgages on immovable property Exposures in default Covered bonds Equity Other items Total credit risk, standardised method Credit value adjustment risk (CVA) Operational risk Total risk-weighted volume Capital base Share capital Share premium Other equity Additional Tier 1 capital Profit for the period Total booked equity Additional Tier 1 capital instruments included in total equity Common equity Tier 1 capital instruments Deductions Goodwill, deferred tax assets and other intangible assets Value adjustment due to the requirements for prudent valuation (AVA) Dividends payable Profit for the period, not eligible Common equity Tier 1 capital Additional Tier 1 capital Tier 1 capital Tier 2 capital Own funds (primary capital) Capital requirements Minimum requirements - common equity Tier 1 capital 4.5 % % % Capital conservation buffer 2.5 % % % Systemic risk buffer 3.0 % % % Countercyclical capital buffer 2.0 % % % Additional Tier 1 capital 1.5 % % % Tier 2 capital 2.0 % % % Total minimum and buffer requirements own funds (primary capital) Available common equity Tier 1 capital after buffer requirements 15.5 % % % Available own funds (primary capital) Capital ratio % * Common equity Tier 1 capital 14.5 % 14.1 % 14.7 % Additional Tier 1 capital 1.4 % 1.5 % 1.5 % Tier 2 capital 1.8 % 2.0 % 1.9 % Total capital ratio 17.6 % 17.6 % 18.1 % PAGE 15/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

16 Capital ratio % (including interim profits**) Common equity Tier 1 capital 14.8 % 14.7 % 14.7 % Additional Tier 1 capital 1.4 % 1.5 % 1.5 % Tier 2 capital 1.8 % 2.0 % 1.9 % Total capital ratio 17.9 % 18.2 % 18.1 % * Including 70 per cent of the profit in 2018 and 70 per cent of the profit for the first half year of 2017, due to partial external audit. Year-end is based on actual dividend. ** Including 90 per cent of the profit for the interim period in 2018 and 70 per cent in Year-end is based on actual dividend. Note 4 - Leverage Ratio The leverage ratio requirements is a supplement to the risk-weighted minimum capital requirements and states that the capital base in financial institutions shall also comprise a defined percentage of the value of the company s assets and off-balance-sheet liabilities, calculated without risk weighting. The capital ratio target consists of Tier 1 capital and the exposure target follows the rules in the Commission Delegated Regulation (EU) The minimum leverage ratio requirement for Norwegian banks and credit institutions is three per cent and a buffer requirement of two per cent. The table below shows the calculation for the bank, on the basis of existing rule proposals and with CCFs based on the current standardised approach, subject to a CCF-floor of 10 per cent. In NOK thousand Derivatives market value 0 0 Potential future exposure on derivatives Off-balance sheet commitments Loans and advances and other assets Regulatory adjustments included in Tier 1 capital Total leverage exposure Tier 1 capital Leverage ratio % * 6.0 % 5.9 % 6.1 % Leverage ratio % (including interim profits**) 6.1 % 6.1 % 6.1 % Leverage Ratio requirements Minimum requirements 3.0 % Buffer requirements 2.0 % Total minimum and buffer requirements (Tier 1 capital) 5.0 % Available Tier 1 capital after minimum and buffer requirements* Available Tier 1 capital after minimum and buffer requirements (including interim profits**) * Including 70 per cent of the profit in 2018 and 70 per cent of the profit for the first half year of 2017, due to partial external audit. Year-end is based on actual dividend. * Including 90 per cent of the profit for the interim period in 2018 and 70 per cent in Year-end is based on actual dividend. PAGE 16/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

17 Note 5 Maximum exposure to credit risk Credit risk is defined as the risk of loss resulting from a counterparty not fulfilling its obligations, and any pledged collateral not covering the outstanding claim. The Bank s maximum credit exposure is the book value of financial assets and any associated off-balance sheet liabilities. The following table shows the Bank`s maximum credit risk exposure to financial instruments by measurement category. In NOK thousand Gross carrying amounts Off-balance sheet amounts Maximum exposure to credit risk Cash and receivables with central bank Loans to and receivables from credit institutions Loans to and receivables from central bank and credit institutions Loans to customers, secured Loans to customers, unsecured Loans to and receivables from customers Shares in associated company Other financial assets with credit risk Financial instruments at amortised cost Commercial paper and bonds Financial instruments at fair value through other comprehensive income Shares and funds Financial instruments at fair value through profit and loss Gross exposure with credit risk Impairment Total net exposure with credit risk Other assets without credit risk Na Na Total assets Na Na Note 6 - Loans to customers Gross carrying amount - Loans to customers In NOK thousand Stage 1, 12-months ECL Stage 2, Lifetime ECL (not impaired) Stage 3, Lifetime ECL (impaired) Total Opening balance gross carrying amount (before transfers) Transfers to Stage 1 (12-months ECL) Transfers to Stage 2 (Lifetime ECL - not impaired) Transfers to Stage 3 (Lifetime ECL - impaired) Net new financial assets originated Financial assets that have been derecognised Changes in interest accrual Other movements Closing balance gross carrying amount PAGE 17/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

18 Lending by geographical area In NOK thousand Percentage Gross lending Percentage Gross lending Percentage Gross lending Østfold 6.0 % % % Akershus 22.2 % % % Oslo 19.0 % % % Hedmark 1.4 % % % Oppland 1.3 % % % Buskerud 5.8 % % % Vestfold 4.3 % % % Telemark 1.1 % % % Aust-Agder 1.1 % % % Vest-Agder 1.3 % % % Rogaland 8.5 % % % Hordaland 13.9 % % % Sogn og Fjordane 0.3 % % % Møre og Romsdal 1.8 % % % Trøndelag 5.0 % % % Nordland 2.9 % % % Troms 3.1 % % % Finnmark 0.9 % % % Total gross lending by geographical area % % % Comparative figures below are presented in accordance with IAS 39 and not restated Loans to customers In NOK thousand Loans to customers Loans without agreed maturity or notice period Loans with agreed maturity or notice period Total loans to customers (gross) Write-downs for individually assessed impaired loans Write-downs for collectively assessed impaired loans Total loans to customers (net) In NOK thousands Residual time to maturity (gross loans) Upon request Maximum 3 months months - 1 year years More than 5 years Total Q Q Effective rate Home loans 2.37 % 2.45 % Car loans 4.90 % 4.96 % Consumer loans % 9.99 % Other loans % % PAGE 18/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

19 Note 7 Credit risk exposure and collateral Credit risk is defined as the risk of loss resulting from a counterparty not fulfilling its obligations, and any pledged collateral not covering the outstanding claim. The Bank s maximum credit exposure is the book value of financial assets and any associated off-balance sheet liabilities. The Bank s customer exposures comprises the bulk of the Bank s total credit exposure. A high percentage of the Bank s lending is collateralised. Collateral in the private retail market essentially comprise fixed property and vehicles. The table below shows the relationship between total credit exposure and the associated collateral distributed to exposure class. Lending secured by mortgages includes the percentage distributed of exposure relating to the various loan-to-value levels. The property values on which the calculations are based are updated in the last month of each quarter and are therefore representative of the current market value. The calculation of loan-to-value does not take into account any additional collateral. In NOK thousand Loan-to-value, secured loans Number of loans Distribution as percentage Gross carrying amounts Unutilised credit lines 0 % - 40 % 23.9 % % - 60 % 34.9 % % - 80 % 31.7 % % - 90 % 7.2 % % % 1.2 % > 100 % 1.1 % Home loans, secured by fixed property % < 50 % 12.7 % % - 80 % 36.4 % % % 31.5 % > = 100 % 19.4 % Car loans, secured % Custody account credit (Average LTV of 26.9 %), secured % Loan and funding commitments, secured loans Total loans to customers, secured The table below shows the percentage allocation of exposures for home loans for various loan-to-value levels. Where the entire exposure in the table above is placed at a related loan-to-value level, the relative share of the loan exposure at each level is shown in the table below. In NOK thousand Loan-to-value, home loans (relative distribution) Distribution as percentage Gross carrying amounts 0 % - 85 % % % % 0.31 % > 100 % 0.19 % Home loans, secured by fixed property % In NOK thousand Distribution by type of security object, home loans Distribution as percentage Gross carrying amounts Apartment 23.2 % Detached house 51.2 % Semidetached house 22.3 % Vacation home 3.3 % Total home loans secured by fixed property % PAGE 19/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED

20 Comparative figures below are presented in accordance with IAS 39 and not restated In NOK thousand Loan-to-value, home loans Distribution as percentage Number of loans Gross carrying amounts Off-balance sheet amounts Maximum exposure to credit risk 0 % - 40 % 19.9 % % - 60 % 32.7 % % - 80 % 35.5 % % - 90 % 9.4 % % % 1.4 % > 100 % 1.0 % Home loans, secured by fixed property Loan- and funding commitments, home loans Car loans, secured Custody account credit, secured Consumer credit, unsecured Other loans, unsecured Exposure to customers Loans to and receivables with central bank Loans to and receivables from credit institutions Commercial paper and bonds available for sale Shares and funds Derivatives at fair value through profit and loss Other assets Exposure to others Gross exposure In NOK thousand Loan-to-value, home loans (relative distribution) Distribution as percentage Gross carrying amounts 0 % - 85 % % % % 0.34 % > 100 % 0.19 % Home loans, secured by fixed property In NOK thousand Loan-to-value, car loans Distribution as percentage Gross carrying amounts 0 % - 80 % % % % % Car loans, secured In NOK thousand Loan-to-value, custody account credit Number of loans Carrying amounts Fair value of collateral Average LTV Custody account credit % Total loans secured with collateral in securities % PAGE 20/56 THIRD QUARTER 2018 SBANKEN GROUP UNAUDITED