SG FINANS AS 2014 QUARTERLY REPORT SECOND QUARTER

Transcription

1 SG FINANS AS 2014 QUARTERLY REPORT SECOND QUARTER

2 CONTENTS REPORT OF THE BOARD OF DIRECTORS 3 INTERIM FINANCIAL STATEMENT INCOME STATEMENT 5 ASSETS 6 LIABILITIES & EQUITY 6 STATEMENT OF CHANGES IN EQUITY 7 CASH FLOW STATEMENT 8 NOTES 1. ACCOUNTING PRINCIPLES 9 2. IMPORTANT ACCOUNTING ESTIMATES AND DISCRETIONARY EVALUATION NET INTEREST MARGIN NET FEES AND INCOME ON OTHER ACTIVITY NET GAINS ON FINANCIAL INSTRUMENTS AT FAIR VALUE OPERATING EXPENSES LOSSES AND ALLOWANCES RECOGNISED IN THE PROFIT AND LOSS ACCOUNTS LEASING (FINANCIAL LEASING ASSETS) RISK CLASSIFICATION DOUBTFUL LOANS INCOME TAX 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 18 AUDITOR'S REPORT 19 ADDRESSES 20

3 Report by the Board of Directors as of June 30 th, 2014 Business activities In the first half of 2014 SG Finans has established new financing in Scandinavia of MNOK compared to MNOK for the same period in This is an increase of 12,4 %. Margins for new financing are in average higher compared to The market share within Equipment leasing in Norway is 26,1% at June 30 th, which is a decrease compared to year end The decrease is in all business segments. Within Factoring, SG Finans is market leader in Norway with a market share of 39,0%. In Equipment Finance in Denmark the company maintains its market shares, while the market share in Sweden is increasing somewhat after a drop in market share through Total assets are at June 30 th MNOK ,5 which is 6,1 % higher than MNOK ,6 in the same period in people were employed in SG Finans at the end of the quarter. Since year end 2013 the number of employees has decreased by two. Results Conditions in capital markets have stabilized through 2013, and SG Finans has strengthened Net Interest Margin and Net Banking Income. For the period ending June 30 th, Net Banking Income is MNOK 614,1 compared to MNOK 578,1 in first half year Decreased costs of funding and increased provision income have contributed to the growth in income. Operating expenses amount to MNOK 269,8 in the period ending June 30 th 2014, compared to MNOK 247,0 in the same period in The increase in operating expenses is due to an increase in administrative expenses and group services. Total loan losses year to date amount to MNOK 63,7. This represents 0,48% of average funded assets, which is at the same level as previous year. Total loan losses for the same period in 2013 were MNOK 62,9. Increased Net Banking Income contribute to the MNOK 12,4 improvement from last year in operating result before tax, in spite of higher operating expenses and a slight increase in loan losses. Net result after tax of SG Finans AS from January 1 st to June 30 th, 2014 amounted to MNOK 173,9 compared to MNOK 193,1 in Risk management and Capital adequacy The Board considers that the entity has a satisfactory capital situation and access to funding from its parent company. In addition, as part of the strategy to diversify sources of funding SG Finans has raised a loan of MEUR 80 from the European Investment Bank and a loan of MEUR 250 from a Japanese bank. The loan from EIB is part of the EIB initiative to facilitate financing of equipment to SME's in Denmark and Sweden. With effect from 1 January 2014, SG Finans has been validated to compute 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 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 80% 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. 3

4 The regulatory capital as of 30 th of June is 4 332,6. The regulatory capital consists of MNOK 3 298,3 tier one capital and MNOK 1 034,3 tier two capital. The basis for the calculation of capital requirements and adequacy at the end of June, was MNOK ,9. The capital adequacy at end of June 2014 was 18,30%. 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 is evaluated. The capital adequacy is considered satisfactory also considering the results of the performed stress tests. Lysaker, August 15 th, 2014 Marie-Christine Ducholet Chairman Karin Cecilie Kullmann Five Board Member Tommy Pedersen Board Member Jacques Bensen Board Member Håkon Schei Staff representative Jean-Marc Mignerey Board Member Carsten Thorne Managing Director 4

5 INCOME STATEMENT Amounts in NOK thousand Note Total interest income 3, Total interest expenses 3, Net interest margin Commission and fees income Commission and fees expenses Net commission and fee income Net gains/losses on financial instruments at fair value Net change in value and gains on foreign currency Total income on other activity Net banking income Total payroll, fees and other staff costs Total other operating expenses Gross operating proft Losses on loans Operating profit Taxes Profit for the period Other comprehensive income Items that could be reclassified Exchange differences on translation of foreign operations Taxes Items that can not be reclassified Actuarial gains and losses Taxes Other comprehensive income for the period Attributable to: Equity holder of the parent Total comprehensive income of the period

6 STATEMENT OF FINANCIAL POSITION Amounts in NOK thousand Notes Assets Cash and deposits with central banks Deposits with financial institutions Loans to financial institutions Financial derivatives 15, Loans to customers Repayment loans Factoring receivables Factoring loans Financial lease agreements 8, Total loans before allowances Allowances on doubtful loans 7, Net loans to customers Repossessed assets Shares and primary capital certificates Deferred tax asset Other intangible assets Machinery, tools and equipment, means of transport Other assets Prepayments and accrued income Total assets Amounts in NOK thousand Notes Liabilities Loans and deposits from financial institutions with agreed maturity Deposits from and debt to customers with termination rights Financial derivatives 15, Retention of margin and other customer accounts Other liabilities Accruals and deferred income Pension liabilites Current tax liability Subordinated debt Total Liabilities Equity Share capital Share premium account Other equity including profit for the year Total equity Total liabilities and equity Lysaker, August 15th,

7 STATEMENT OF CHANGES IN EQUITY Amounts in NOK thousand Share capital Share premium Other equity Dividend/ Group contribution Profit for the period Total comprehensive income of the period Total equity

8 CASH FLOW STATEMENT Operations Interest income Interest costs Other receipts Operating expenses Receipts on previous losses Paid taxes Net cash flow from operations New investments leasing Proceeds from sale of leasing 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 Decrease ( increase ) of fixed assets Net cash flow from investment activity Increase (decrease) in deposits from customers Payment of dividends Increase (decrease) in equity 0 0 Increase (decrease) subordinated debt 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 Net cash flow Cash at the 1st of January Cash at end of period Reconciliation cash at end of period Cash and deposits with central banks Deposits with financial institutions Cash at end of period

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, 5 offices in Sweden and 2 in Denmark. SG Finans AS forms a part of 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 30th, 2014 were authorised for issue by the Board of directors on August 15th, 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 6 month period ending June 30th, 2014 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 IFRS, IFRIC interpretation and amendments applied by SG Finans AS as at Januar 1st, 2014 Adoption date by the European Union Effective date Accounting standards, amendments or interpretation Amendments to IAS 32 "Offsetting Financial Assets and Financial Liabilities" IFRS 10 "Consolidated Financial Statement" IFRS 11 "Joint Arrangements" IFRS 12 "Disclosure of Interest in Other Entities" Amendments to IAS 27 "Separate Financial Statements" Amendments to IAS 28 "Investment in Assiciates and Joint Venture" Transition guidance (Amendments to IFRS 10,11 and 12) 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 30, These accounting standards and interpretations are required to be applied from annual periods beginning on January 1, 2015 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 June 30,

10 Accounting standards, Amendments or interpretation adopted by the European Union on June 30, 2014 Accounting standards, amendments or interpretations Adoption date by the European Union Effective date Accounting standards, amendments or interpretations not yet adopted by the European Union on June 30, 2014 Accounting standards, amendments or interpretations Adoption date by the IASB Effective date IFRS 9 Financial Instruments and subsequent amendments (amendments to IFRS 9 and IFRS 7: Mandatory Effective Date and Transition Disclosures issued on 16 December 2011; Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39 issued on 19 November 2013) IFRS 14 Regulatory Deferral Accounts (issued on 30 January 2014) Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (issued on 21 November 2013) Annual Improvements to IFRSs Cycle (issued on 12 December 2013) Annual Improvements to IFRSs Cycle (issued on 12 December 2013) IFRIC Interpretation 21 Levies (issued on 20 May 2013) SG Finans consider possible effects on the financial statements of changes in existing standards and future standards as not material. Regarding IFRS 9 SG Finans has not yet concidered possible effects on the financial statement as the standard is not yet adopted by EU. 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. 10

11 3. NET INTEREST MARGIN Interest income from financial institutions, valued at amortised cost Interest income from customers financial leases and loans, valued at amortised cost Other interest income 0 19 Total interest income Interest expenses to financial institutions, valued at amortised cost Interest expenses on deposits and debt to customers, valued at amortised cost Interest expences on subordinated debt Other interest expenses Total interest expenses Net interest margin NET FEES AND INCOME ON OTHER ACTIVITY Commission and fees income from loans and similar to customers Other commission and fees income 0 0 Commission and fees income Commission and fees expenses from loans and similar to customers Other commission and fees expenses Commission and fees expenses Net commission and fees income Sales gains Income from extension of leasing contracts Other income Total income other activity NET GAINS ON FINANCIAL INSTRUMENTS AT FAIR VALUE Net gains/losses on financial derivatives, trading Change in fair value on financial derivatives, hedging Change in fair value on hedged fixed interest contracts Net gains/losses on financial instruments at fair value through P&L

12 6. OPERATING EXPENSES Payroll Pensions Social security costs Total payroll, fees and other staff costs Administrative expenses Rent and other operating expenses on leased property Other operating expenses Intergroup services Ordinary depreciation Total other operating expenses Total operating expenses LOSSES AND ALLOWANCES RECOGNISED IN THE PROFIT AND LOSS ACCOUNTS Allowances on doubtful loans Allowances on doubtful loans as of Exchange rate adjustments (opening balance) Actual losses that are covered by previous allowances Reclassification of previous allowances Allowances on doubtful loans in the period = Allowances on doubtful loans at end of period Losses on loans Write-downs for loan losses at end of period Exchange rate adjustments (opening balance) Write-downs for loan losses as at Total actual losses Income on actual losses = Losses on loans

13 8. LEASING (FINANCIAL LEASING ASSETS) Purchase cost Exchange rate difference (opening balance) Inflow during the year Outflow during the year Purchase costs at end of period Accumulated ordinary depreciation 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 receivables Goodwill/badwill 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 to 5 years Future minimum finance lease rental Average interest 4,83 % 4,95 % Present value of minimum lease payments Unearned finance income

14 9. RISK CLASSIFICATION Amounts in NOK thousand Days outstanding status Net loans to customers Whereof past due, nondoubtful Not past due > > 1 year Total Amounts in NOK thousand Days outstanding status Net loans to customers Whereof past due, nondoubtful Not past due > > 1 year Total Credit exposure: 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 INCOME TAX The company calculates the tax payable based on an estimated effective tax rate. For 2013 the effective tax rate was 0,8 % at year end and the expected effectiv tax rate for 2013 was 28 %. For 2014 this is expected to be 38 %. 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 recognized by 50 % for the period ending 30 June The main contributer 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

15 12. INFORMATION ON RELATED PARTIES Assets/interest income Loans to Group companies Interest income Liability/interest expense Loans from Group companies Other liabilities Interest expense Subordinated debt Interest expense on subordinated debt EMPLOYEE BENEFITS For the period ending 30 June 2014, 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 30 June At year end 2013 the actuarial gains and losses recognised in other comprehensive income MNOK giving a positive effect on the equity of MNOK

16 14. CAPITAL ADEQUACY * Core capital Deductions: Other intangible assets Deferred tax assets Profit for the year 0 0 Net expected loss IRB portfolios (50%) Common Equity Hybrid capital tier one 0 0 Tier one capital Tier two capital (subordinated debt) Net expected loss IRB portfolios (50%) Total regulatory capital Risk weighted assets -credit Adjustmentfactor A-IRB transition rule Risk weighted volume operational risk Risk weighted volume market risk 0 0 Basis of calculation Capital requirement -common equity tier one Capital requirement - tier one Capital requirement - total regulatory capital Capital conservation buffer System risk buffer Countercyclical buffer 0 Capital requirement Core tier one capital Tier one capital Total regulatory capital Capital buffer to minimum regulatory capital Pilar II additional capital requirement Capital buffer after Pillar two Capital adequacy ratio Common Equity 13,93 % 10,92 % Tier one capital 13,93 % 10,92 % Total regulatory capital 18,30 % 15,10 % SG Finans has been validated to compute 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 80% 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. * The calculation of capital requirement and capital adequacy has been done following the Standard Method. 16

17 15. 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 markeds 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) Amounts in NOK thousand Financial assets Level 1 Level 2 Financial derivatives Financial lease agreements Total assets Amounts in NOK thousand Financial liabilities Level 1 Level 2 Financial derivatives Total liabilities Amounts in NOK thousand Financial assets Level 1 Level 2 Financial derivatives Financial lease agreements Total assets Amounts in NOK thousand Financial liabilities Level 1 Level 2 Financial derivatives Total liabilities SG Finans has no financial instruments recorded at fair value in level 3. 17

18 16. OFFSETTING The company has established CSA agreements (collateral securety 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 0 0 Net amount in financial position Financial instruments on balance sheet Cash collateral in the balance sheet Net position 0 0 Financial derivatives -liabilities Gross amount Amounts that are offset 0 0 Net amount in financial position Financial instruments on balance sheet Cash collateral in the balance sheet Net position 0 0 SG Finans has set-off rights for leasing agreements where customers also have entered into factoring arrangements with the company. 17. CONTINGENCIES SG Finans AS had no major legal disputes pending at the end of the reporting period. SG Finans AS has a contract with maturity December 2014, where there is an option for the lessee to prolong the contract period. In connection to this option there is a discount element. SG Finans consider this as a contingent liability. The liability is etimated to MNOK ASSETS PLEDGED AND RECEIVED AS SECURITY In June SG Finans signed a collateral secured loan drawn over a 2 and 4 year funding period with an aggregate value of 250 MEUR. The lender holds encumbrance, MEUR 335 in our transport portfolio. At the end of the reporting period, the loan was not yet disbursed. 19. EVENTS AFTER THE REPORTING PERIOD The company is at the date of issue,15 August 2014, not familiar with matters that are likely to change the assessment of the financial position as at 30 June

19 19

20 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 50 years history and 22 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 30 billion and 360 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 - SKELLEFTEÅ - STOCKHOLM - SUNDSVALL OFFICES IN DENMARK COPENHAGEN - VEJLE 20