Länsförsäkringar Bank Year-end report 2013

Transcription

1 FEBRUARY 10, Länsförsäkringar Bank Year-end report The year in brief, Group Operating profit rose 16% to SEK 647 M (555) and the return on equity was 6.7% (6.3). Net interest income increased 8% to SEK 2,230 M (2,071). Loan losses remained very low and amounted to SEK 126 M (91), corresponding to loan losses of 0.08% (0.06). Business volumes increased 11% to sek 314 billion (283). Deposits rose 11% to SEK 69 billion (62). Lending increased 8% to SEK 162 billion (150). On December 31,, Core Tier 1 ratio according to Basel II amounted to 14.7% and Core Tier 1 ratio according to Basel III* amounted to 14.4%. The number of customers increased 4% to 879,000, the number of bank cards rose 12% to 388,000 and the number of deposit accounts increased 10% to 1,292,000. Rikard Josefson, President Länsförsäkringar Bank: The bank is growing on a broad front in all areas and is strengthening its position as Sweden s fi fth largest retail bank. Our success is based on proximity to customers where each customer meeting is unique and personal. We hold a leading position in digital services, where more and more customers are meeting us, and we have very satisfi ed customers. In January 2014, we were awarded, for the second consecutive year, the price for the best mobile app by Web Service Award. Our loan portfolio continues to have very high credit quality and our funding and liquidity situation is very strong. Figures in parentheses pertain to. * According to Länsförsäkringar Bank s current interpretation of the regulations. CUSTOMER TREND BANK CARD TREND OPERATING PROFIT AND RETURN ON EQUITY Number of customers, 000s 1,000 Number of bank cards, 000s %

2 Key figures Group Income statement, quarterly Market commentary Both the stock markets and fixed-income markets experienced major fluctuations during the year. Performance was affected by the highly expansive monetary policies of several central banks, while economic trends remained weak. Global growth was hampered by debt reduction in both the public sector and among households. Several countries pursued an austere fiscal policy while private consumption was impeded by high savings. The purchase of government and mortgage bonds by the Federal Reserve continued to impact the market. Bond interest rates were low at the start of the year and subsequently rose gradually, in line with, for example, expectations that Q 3 Return on equity, % Return on total capital, % Investment margin, % Cost/income ratio before loan losses Cost/income ratio after loan losses Core Tier 1 ratio according to Basel II, % Tier 1 ratio according to Basel II, % Capital adequacy ratio according to Basel II, % Core Tier 1 ratio according to Basel III*, % Tier 1 ratio according to Basel III*, % Capital adequacy ratio according to Basel III*, % Percentage of impaired loans, gross, % Reserve ratio in relation to loans, % Loan losses, % * According to Länsförsäkringar Bank s current interpretation of the regulations. Group, Q 3 Q 2 Q 1 Net interest income Net commission Net gains/losses from financial items Other operating income Total operating income Staff costs Other expenses Total operating expenses Profit before loan losses Loan losses, net Profit from participations in associated companies Operating profit the Federal Reserve would reduce its bond-buying stimulus. At the end of, the Federal Reserve announced that it planned to reduce its bond buying from January Improved economic indicators from the US, and also from Europe, lent support to rising interest rates. However, short-term market interest rates remained low as a result of low key interest rates and also promises from central banks that monetary policy will be kept expansive for a long period of time. The Swedish economy displayed a weaker performance during the year and unemployment remained relatively high. At the end of the year, the Riksbank lowered its key interest rate again to 0.75% due to the very low inflation. The difference between government bond rates and the interest rate for mortgage bonds and other loans declined during the year. Deposits from households in the Swedish market rose 6% during the year and loans to households increased 5%. was a strong year for mutual fund savings. New savings in funds amounted to SEK 105 billion and the total fund assets in Sweden increased SEK 432 billion to SEK 2,481 billion at the end of the year. Housing prices in Sweden increased 7% during the year according to Valueguard s HOX index, which was largely due to rising prices for tenant-owned apartments. Prices of single-family homes rose 4%, while prices of tenant-owned apartments increased 13%. compared with Increased business volumes Business volumes increased 11%, or SEK 31 billion, to SEK 314 billion (283). Lending rose 8%, or SEK 12 billion, to SEK 162 billion (150). Retail mortgages in Länsförsäkringar Hypotek increased 11%, or SEK 11 billion, to SEK 112 billion (101). Deposits rose 11%, or SEK 7 billion, to SEK 69 billion (62). The volume of managed funds increased 18%, or SEK 13 billion, to SEK 83 billion (70). Stable inflow of customers and growing digital customers The number of customers rose 4% to 879,000 (847,000). The number of customers with Länsförsäkringar as their primary bank increased 10% to 319,000 (290,000) and the number of products per customer rose to 4.9 (4.8). Some 94% of those customers who have the bank as their primary bank are also existing insurance customers. Länsförsäkringar had 4.5 million mobile logins via its mobile app in December, up 92% compared with December. Fund trading accounts for a significant percentage of the mobile app s services. Earnings and profitability Profit before loan losses increased 20% to SEK 773 M (647) and operating profit rose 16% to SEK 647 M (555), due to higher net interest income and increased commission income. Return on equity strengthened to 6.7% (6.3). 2 Länsförsäkringar Bank Year-end report

3 NET INTEREST INCOME 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1, Income Operating income increased 12% to SEK 2,104 M (1,882), due to higher net interest income and increased commission income. Net interest income strengthened 8% to SEK 2,230 M (2,071) due to higher lending volumes and margins, while deposit margins and the return on equity had a negative impact on net interest income. The investment margin strengthened to 1.06% (1.11). Net gains from financial items declined to a loss of SEK 86 M (gain: 5) due to the negative effects of changes in fair value and the repurchase of own debt. Commission income increased 16% to SEK 1,140 M (984) due to higher income from fund, card and securities business. The number of bank cards rose 12% to 388,000 (346,000). Net commission resulted in a decrease in expense of SEK 253 M (385) due to increased commission income. Expenses Operating expenses rose 8% to SEK 1,331 M (1,235), primarily due to the fund company s higher administrative expenses, higher staff costs attributable to the finance-company operations, higher depreciation and costs for building up a shared backoffice function in the banking operations. The cost/income ratio before loan losses strengthened to 0.63 (0.66) and the cost/income ratio after loan losses strengthened to 0.69 (0.70). COST/INCOME RATIO BEFORE LOAN LOSSES Loan losses Loan losses remained very low and amounted to SEK 126 M (91), net, corresponding to loan losses of 0.08% (0.06). Reserves totalled SEK 422 M (325), corresponding to a reserve ratio in relation to loans of 0.25% (0.21). Impaired loans, gross, amounted to SEK 393 M (298), corresponding to a percentage of impaired loans of 0.23% (0.19). For more information regarding loan losses, reserves and impaired loans, see notes 8 and 9. BUSINESS VOLUMES SEK billions Business volumes, total Funds Agricultural loans Retail mortgages 2011 Other loans, bank and Wasa Kredit Customer deposits Deposits and savings Deposits from the public increased 11%, or SEK 7 billion, to SEK 69 billion (62). Deposits from small businesses grew to SEK 8.6 billion (7.5) and the number of deposit accounts rose 10%. On December 31,, the market share strengthened to 4.5% (4,3) according to Statistics Sweden. Fund volumes increased 18%, or SEK 13 billion, to SEK 83 billion (70). Monthly savings in funds performed well, as did fund transfers, Individual Pension Savings (IPS) and the number of securities depositories. Loans Loans to the public rose 8%, or SEK 12 billion, to SEK 162 billion (150). All loans are granted in Sweden and in SEK and have a well-diversified geographic distribution. Retail mortgages in Länsförsäkringar Hypotek increased 11%, or SEK 11 billion, to SEK 112 billion (101). On December 31,, the market share for household and retail mortgages strengthened to 5.0% (4.9) according to Statistics Sweden. On December 31,, the market share for retail mortgages was 4.9% (4.8). The percentage of retail mortgages in relation to the total loan portfolio was unchanged at 71%. Agricultural lending showed a lower rate of increase and rose 7% to SEK 20.7 billion (19.3), of which firstlien mortgages for agricultural properties accounted for SEK 18.3 billion (16.7). First-lien mortgages, mainly to familyowned agricultural operations, accounted for 89% (86) of agricultural lending, and the average agricultural commitment was low at SEK 1.8 M (1.7) on December 31,. Loans to small businesses totalled SEK 1.7 (1.6) billion on December 31,. Loan portfolio Lending segment, % Dec 31, Dec 31, Retail mortgages 71 % 71 % Agriculture 13 % 13 % Multi-family housing 3.5 % 2.5 % Industrial and office properties 0.5 % 0.5 % Total 88 % 87 % Leasing 4 % 4 % Hire purchase 3 % 4 % Total 95 % 95 % Personal loans 4 % 4 % Other 1 % 1 % Total 100 % 100 % Funding Debt securities in issue rose 8% or SEK 9 billion to SEK 124 billion (114), of which senior funding accounted for SEK 22 billion (18) and covered bonds for SEK 99 billion (91). The Group has a low refinancing risk and the maturity structure is highly diversified. Long-term financing takes place in the capital market through covered bonds and senior unsecured bonds. During the year, the bank increased the percentage of senior funding and reduced the percentage of covered funding. Issuances took place on average with longer maturities. Funding is diversified by issuances in SEK, EUR, CHF as well as in NOK. Covered bonds were issued at a volume corresponding to a nominal SEK 23.5 billion (28.5), with repurchased covered bonds amounting to a nominal SEK 7.2 billion (16.0) and matured covered bonds to a nominal SEK 8.4 billion (6.6) for the period. 3 Länsförsäkringar Bank Year-end report

4 Länsförsäkringar Bank issued senior unsecured bonds in the nominal amount of SEK 10.7 billion (11.4) during the period. Liquidity The liquidity reserve totalled a nominal amount of SEK 45.9 billion (40.6) at December 31,, according to the Swedish Bankers Association s definition. The liquidity reserve is invested in securities with very high credit quality and that are eligible for transactions with the Riksbank and, where appropriate, with the ECB. A total of 76% of the liquidity reserve comprises Swedish covered bonds, 11% other Swedish bonds with a credit rating of AAA/Aaa, 8% Swedish government bonds, 4% Finnish government bonds in EUR and USD and German bonds guaranteed by the government and 1% deposits with the Swedish National Debt Office. By utilising the liquidity reserve, contractual undertakings for about 1.5 years can be met without needing to secure new funding in the capital market. The Group s Liquidity Coverage Ratio (LCR) amounted to 230% (277) on December 31, and was an average of 253% (248) during the fourth quarter of. The LCR in EUR amounted to 1,847% (158) on December 31,. Rating Länsförsäkringar Bank s credit rating is A/Stable from Standard & Poor s and A3/ Stable from Moody s. Länsförsäkringar Hypotek s covered bonds have the highest rating of Aaa from Moody s and AAA/ Stable from Standard & Poor s. Company Agency Long-term rating Short-term rating Länsförsäkringar Standard & Bank Poor s A/Stable A 1(K 1) Länsförsäkringar Moody s Bank A3/Stable P 2 Länsförsäkringar Standard & Hypotek 1) Poor s AAA/Stable Länsförsäkringar Moody s Aaa Hypotek 1) 1) Pertains to the company s covered bonds Capital adequacy The Group applies the Internal Ratingsbased Approach (IRB Approach). The advanced IRB Approach is used for all retail exposure and for company and agricultural exposures up to SEK 5 M. The foundation IRB Approach is used for counterparty exposures to corporates and the agricultural sector in excess of SEK 5 M, and the Standardised Approach for other exposures. On December 31,, 88% (88) of the loan portfolio comprised retail credits in accordance with the Advanced IRB Approach The bank is continuously monitoring developments in relation to the implementation of CRR and CRD IV in Sweden and can state that there continues to be uncertainty surrounding a number of areas. A high level of preparedness is in place for the introduction of these regulations. In December a subordinated loan from the Parent Company of SEK 290 M was converted into owner s equity, which strengthened the bank s capital base. Core Tier 1 ratio according to Basel II strengthened to 14.7% (13.1). Tier 1 capital amounted to SEK 7,441 M (6,612) and Tier 1 ratio strengthened to 14.7% (13.7). The capital base increased to SEK 9,436 M (7,546) and the capital adequacy ratio strengthened to 18.7% (15.6). According to Basel III, Core Tier 1 ratio amounts to 14.4%, Tier 1 ratio amounts to 14.4% and the capital adequacy ratio amounts to 19.1%. All of the key figures for Basel III are calculated based on the bank s current interpretation of the regulations. For more information on the calculation of capital adequacy, see note 14. Interest-rate risk On December 31,, an increase in market interest rates of 1 percentage point would have increased the value of interest-bearing assets and liabilities, including derivatives, by SEK 42 M (70). Risks and uncertainties The operations are characterised by a low risk profile. The Group and the Parent Company are exposed to a number of risks, primarily comprising credit risks, refinancing risks and market risks. The macroeconomic situation in Sweden is critical for credit risk since all loans are granted in Sweden. Market risks primarily comprise interest-rate risks. Loan losses remain low and the refinancing of business activities was highly satisfactory during the year. A detailed description of risks is available in the Annual Report. No significant changes in the allocation of risk have taken place compared with the description provided in the Annual Report. Fourth quarter of compared with third quarter of Operating profit increased 1% to 175 (174). Return on equity strengthened to 6.9% (7.1). Operating income rose 1% to SEK 547 M (541). Net interest income increased 4% to SEK 579 M (557) and the investment margin was 1.09% (1.05). Commission income rose 3% to SEK 298 M (288), due to increased income from the fund and card business. Commission expense declined 1% to SEK 347 M (351). Net losses from financial items amounted to SEK 36 M (6) due to the negative effects of changes in fair value and the repurchase of own debt. Operating expenses increased 2% to SEK 341 M (335) and the cost/income ratio before loan losses remained unchanged at OPERATING PROFIT AND RETURN ON EQUITY Q4 Q4 Q1 Q1 Q2 Q2 Q3 Q3 Q4 OPERATING EXPENSES AND COST/INCOME RATIO Q % Events after year-end No significant events took place after the close of the year. 4 Länsförsäkringar Bank Year-end report

5 Annual Report The Annual Report will be available on the website lansforsakringar.se/financialbank from February week 8, Parent Company Subsidiaries compared with All of the Group s deposits are conducted by the Parent Company. Most of the Group s lending and funding operations are conducted through the subsidiary Länsförsäkringar Hypotek. Loans to the public rose 2%, or SEK 1 billion, to SEK 36 billion (35). Deposits from the public increased 11%, or SEK 7 billion, to SEK 69 billion (63). Debt securities in issue rose 6%, or SEK 2 billion, to SEK 25 billion (23). Operating profit amounted to SEK 2.1 M ( 34). Operating income rose 22% to SEK 791 M (649) largely a result of increased commission income. Net interest income increased 7% to SEK 796 M (743) attributable to higher volumes. Commission income increased 25% to SEK 298 M (238) due to higher income from securities, card and payment business. Commission expense amounted to SEK 552 M (554). Operating expenses rose 7% to SEK 708 M (660), primarily due to higher depreciation and costs for building up a shared backoffice function in the banking operations. Loan losses remained low at SEK 80 M (22), net. Länsförsäkringar Hypotek compared with Retail mortgages in the bank s mortgage institution increased 11%, or SEK 11 billion, to SEK 112 billion (101). Retail mortgages up to 75% of the market value of the collateral on the granting date are granted by Länsförsäkringar Hypotek and the remainder by the Parent Company. Operating profit fell 4% to SEK 305 M (319), attributable to net losses from financial items due to the negative effects of changes in fair value and the repurchase of own debt. Net interest income increased 7% to SEK 852 M (796). Loan losses amounted to SEK 6.6 M (2.3), net, corresponding to loan losses of 0.006% (0.002). The number of retail mortgage customers rose 6% to 188,000 (177,000). Dec 31, Dec 31, Total assets 136, ,319 Lending volume 112, ,434 Net interest income Operating profit Wasa Kredit compared with Lending volumes increased 4% to SEK 13.9 billion (13.3). Operating profit rose 40% to SEK 250 M (178), largely a result of increased net interest income and lower loan losses. Net interest income increased 9% to SEK 581 M (531), largely due to higher margins and growth in hire purchase and unsecured loans. Operating expenses rose 5% to SEK 431 M (410) and loan losses declined to SEK 40 M (67), net. Länsförsäkringar Fondförvaltning compared with Länsförsäkringar s marketshare of the total fund volume amounted to 3.9% (3.8) as of December 31,. The volume of managed funds rose 18%, or SEK 13 billion, to SEK 83 billion (70), due to increased growth in value and a strong net flow during the year. The company manages 33 (30) mutual funds with various investment orientations. Funds are offered for direct fund savings, IPS, ISK, unitlinked insurance and through the PPM system. Operating profit amounted to SEK 91 M (87). Dec 31, Dec 31, Total assets Assets under management 83,196 70,405 Net flow 3,246 2,252 Net commission Operating profit Dec 31, Dec 31, Total assets 14,229 13,704 Lending volume 13,852 13,295 Net interest income Operating profit Länsförsäkringar Bank Year-end report

6 Income statement Group Note Q 3 Change Change Change Interest income 3 2, , % 2, % 9, , % Interest expense 4 1, , % 1, % 7, , % Net interest income % % 2, , % Dividends received Commission income % % 1, % Commission expense % % 1, , % Net gains / losses from financial items % % Other operating income % % % Total operating income % % 2, , % Staff costs % % % Other administration expenses % % % Total administration expenses % % 1, , % Depreciation / amortisation and impairment of property and equipment / intangible assets % % % Total operating expenses % % 1, , % Profit before loan losses % % % Loan losses, net % % % Loss from participations in associated companies Operating profit % % % Tax % % % Profit for the period % % % Statement of comprehensive income Group Q 3 Change Change Change Profit for the period % % % Other comprehensive income Items that cannot be transferred to the income statement Revaluation of defined-benefit pension plans Tax attributable to items that can not be reversed to the income statement Items that may subsequently be reclassified to the income statement Available-for-sale financial assets Change in fair value % Reclassification realised securities % % % Tax attributable to items that are rerouted or can be rerouted as income for the period % Other comprehensive income for the period, net after tax % Total comprehensive income for the period % % % 6 Länsförsäkringar Bank Year-end report

7 Balance sheet Group Note Dec 31, Dec 31, Assets Cash and balances with central banks Treasury bills and other eligible bills 4, ,222.3 Loans to credit institutions 5, ,852.9 Loans to the public 9 162, ,941.9 Bonds and other interest-bearing securities 35, ,684.7 Shares and participations Shares and participations in associated companies Derivatives 10 1, ,874.8 Fair value changes of interest-rate-risk hedged items in the portfolio hedge Intangible assets Property and equipment Deferred tax assets Other assets Prepaid expenses and accrued income 2, ,558.2 Total assets 213, ,159.2 Liabilities and equity Due to credit institutions 1, ,062.9 Deposits and borrowing from the public 69, ,396.3 Debt securities in issue 123, ,263.3 Derivatives 10 2, ,104.0 Fair value changes of interest-rate-risk hedged items in the portfolio hedge ,176.6 Deferred tax liabilities Other liabilities 739,9 1,282.4 Accrued expenses and deferred income 4, ,112.2 Provisions Subordinated liabilities 2, ,489.7 Total liabilities 205, ,988.3 Equity Share capital, 9,548,708 shares Other capital contributed 6, ,767.5 Reserves Retained earnings Profit for the period Total equity 8, ,170.9 Total liabilities and equity 213, ,159.2 Pledged assets, contingent liabilities and commitments 11 Other notes Accounting policies 1 Segment reporting 2 Fair value valuation techniques 12 Information about offsetting 13 Capital-adequacy analysis 14 Disclosures on related parties 15 7 Länsförsäkringar Bank Year-end report

8 Cash-flow statement in summary, indirect method Group Cash and cash equivalents, January 1 1, ,369.7 Cash flow from operating activities 2, Cash flow from investing activities Cash flow from financing activities 1, Cash flow for the period 3, Cash and cash equivalents, December 31 5, ,981.3 Cash and cash equivalents are defined as cash and balances at central banks, lending and due to credit institutions payable on demand as well as overnight loans and deposits with the Riksbank maturing the following banking day. Changes to the cash flow from operating activities are largely attributable to Debt securities in issue SEK 8,776.3 M (13,821.6), Loans to the public SEK 12,159,1 M (-15,997,5), and due to Deposits and borrowings from the public SEK 6,823.8 M (12,786.1). Changes to the cash flow from financing activities are attributable to subordinated debt received SEK M (0.0), Group contribution paid SEK M ( 563.8) and to shareholders contribution received SEK M (742.0). Statement of changes in shareholders equity Group Share capital Other capital contributed Reserves Retained earnings Profit for the period Total Opening balance, January 1, , ,332.4 Change to accounting principles due to updated IAS Updated opening balance, January 1, , ,334.3 Adjustment for the period Profit for the period Other comprehensive income for the period Comprehensive income for the period Resolution by Annual General Meeting Conditional shareholders contribution received ,0 Group contribution paid Tax on group contribution paid Closing balance, December 31, , ,170.9 Opening balance, January 1, , ,170.9 Profit for the period Other comprehensive income for the period Comprehensive income for the period Resolution by Annual General Meeting Conditional shareholders contribution received Closing balance, December 31, , , Länsförsäkringar Bank Year-end report

9 Notes Group NotE 1 ACCOUNTING POLICIES The consolidated accounts were prepared in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standard Board (IASB), and interpretations from the International Financial Reporting Interpretations Committee (IFRIC), as adopted by the EU. Furthermore, the Swedish Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL) (1995:1559), the Swedish Securities Market Act (2007:528), as well as the regulations and general guidelines of the Swedish Financial Supervisory Authority (FFFS 2008:25) were applied. The Group also applies the Swedish Financial Reporting Board s recommendation RFR 1 Supplementary Accounting Rules for Groups and statements (UFR). This interim report complies with the requirements of IAS 34, Interim Financial Reporting. The Group applies IFRS 13 Fair Value Measurement, a new accounting standard for the measurement of financial instruments, from January 1,. The standard is a collection and development of the principles for the measurement of fair value from other IFRS standards. The updated IAS 19 Employee Benefits, effective January 1,, the Group changed from recognising actuarial gains and losses to the corridor method to recognising them in their entirety in other comprehensive income in the period in which they arise. The changes were applied in the period in which they arise. The changes were applied retroactively in accordance with IAS 8 and impacted the financial statements for the current period, the preceding period and accumulated at the start of the comparative period as follows: Changed in actuarial gains/loss in other comprehensive income 3.3 Change in tax attributable to items recognised in other comprehensive income 0.7 Changes in comprehensive income for the year 2.6 Dec 31, Jan 1, Change in pension commitments Change in deferred tax liabilities Changes in retained earnings In all other respects, the year end report for the Group has been prepared in accordance with the same accounting policies and calculation methods that will be applied in the Annual Report. NOTE 2 SEGMENT REPORTING Income statement, Jan - Dec Banking operations Mortgage institution Finance company Mutual funds Eliminations / Adjustments Total Net interest income ,230.4 Dividends received Net commission Net gain / loss from financial items Intra-Group income Other income Total operating income ,103.7 Intra-Group expenses Other administration expenses ,216.4 Depreciation / amortisation and impairment Total operating expenses ,330.6 Profit before loan losses Loan losses, net Loss from participations in associated companies Operating profit / loss Balance sheet, December 31, Total assets 112, , , , ,458.8 Liabilities 104, , , , ,170.4 Equity 7, , , , ,288.4 Total liabilities and equity 112, , , , ,458.8 Income statement, Jan - Dec Net interest income ,071.1 Net commission Net gain / loss from financial items Intra-Group income Other income Total operating income ,881.9 Intra-Group expenses Other administration expenses ,133.7 Depreciation / amortisation and impairment Total operating expenses ,235,3 Profit / loss before loan losses ,6 Loan losses, net Operating profit / loss Balance sheet, December 31, Total assets 99, , , , ,159.2 Liabilities 92, , , , ,988.3 Equity 7, , , , ,170.9 Total liabilities and equity 99, , , , , Länsförsäkringar Bank Year-end report

10 Note 3 INTEREST INCOME Q 3 Change Change Change Loans to credit institutions % % % Loans to the public 1, , % 1, % 5, , % Interest-bearing securities % % % Derivatives Hedge accounting % % 2, , % Non-hedge accounting Other interest income Total interest income 2, , % 2, % 9, , % of which interest income on impaired loans of which interest income from financial items not measured at fair value 1, , % 1, % 5, , % Average interest rate on loans to the public during the period, including net leasing, % NOTE 4 INTEREST EXPENSE Q 3 Change Change Change Due to credit institutions % % Deposits and borrowing from the public % % , % Interest-bearing securities % % 3, , % Subordinated liabilities % % % Derivatives Hedge accounting % % 2, , % Non-hedge accounting % % % Other interest expense, including government deposit insurance % % % Total interest expense 1, , % 1, % 7, , % of which interest expense from financial items not measured at fair value 1, , % 1, % 4, , % Average interest rate on deposits from the public during the period, % Not 5 Commission income Q 3 Change Change Change Payment mediation % % % Loans % % % Deposits % 2.2 9% % Financial guarantees % % % Securities % % % Cards % % % Other commission % % Total commission income % % 1, % Classification in commission income has been adjusted compared with previous periods. The adjustment also include comparative figures. NOTE 6 COMMISSION EXPENSE Q 3 Change Change Change Payment mediation % % % Securities % % % Cards % % % Remuneration to regional insurance companies % % % Other commission % % % Total commission expense % % 1, , % Classification in commission expense has been adjusted compared with previous periods. The adjustment also include comparative figures. 10 Länsförsäkringar Bank Year-end report

11 NOTE 7 NET GAINs / LOSSes FROM FINANCIAL ITEMS Q 3 Change Change Change Change in fair value Interest-related instruments % Currency-related instruments , Change in fair value of hedged items Capital gains / losses Interest-related instruments % % % Interest compensation % % % Total net gains / losses from financial items % % Note 8 Loan losses AND IMPAIRED LOANS Mkr Specific reserv for individually assessed oan receivables Write-off confirmed loan losses during the year Reversed earlier impairment of loan losses recognised as confirmed losses Impairment of loan losses during the year Payment received for prior confirmed loan losses Reversed impairment of loan losses nolonger required Net expense for the year for individually assessed loan receivables Collective assessed homogenous groups of loan receivables with limited value and similar credit risk Provision/reversal of impairment of loan losses Net expense for the year for collectively loan receivables Net expence for the year fo fulfilment of guarantees Net expense of loan losses for the year All information pertains to receivables from the public Reserve ratios Total impaired loans reserve ratio, % Impaired loans reserve ratio excluding collective impairments, % Dec 31, Dec 31, Gross Individual impairments Collective impairments Net Gross Individual Collective impairments impairmentsv Net Impaired loans, Mkr Corporate sector Retail sector of which private individuals Total Sector distribution according to the IRB Approach definition. 11 Länsförsäkringar Bank Year-end report

12 Not 9 LOANS TO THE PUBLIC Loan receivables are geographically attributable in their entirety to Sweden. Mkr Dec 31, Dec 31, Loan to the public before reservations Public sector Corporate sector 14, Retail sector 147, Other Total 162, Reserves Loans to the public 162, Remaining term of not more than 3 months 107, Remaining term of more than 3 months but not more than 1 year 10, Remaining term of more than 1 year but not more than 5 years 43, Remaining term of more than 5 years Total 162, Definition Remaining term is defined as the remaining fixed-interest period if the loan has periodically restricted conditions. 12 Länsförsäkringar Bank Year-end report

13 NOTE 10 DERIVATIVES Dec 31, Dec 31, Nominal value Fair value Nominal value Fair value Derivatives with positive values Derivatives in hedge accounting Interest-related 68, , ,624.4 Currency-related 5, , Collateral received, CSA Other derivatives Interest-related 5, , Currency-related Total derivatives with positive values 79, , , ,874.8 Derivatives with negative values Derivatives in hedge accounting Interest-related 97, , ,403.2 Currency-related 24, , , ,619.2 Other derivatives Interest-related 9, , Currency-related 9, Total derivatives with negative values 140, , , ,104.0 NOTE 11 PLEDGED ASSETS, CONTINGENT LIABILITIES AND COMMITMENTS For own liabilities, pledged assets Dec 31, Dec 31, Pledged securities in the Riksbank 1, ,900.0 Pledged securities in Euroclear 1, Collateral provided for derivatives Loan receivables, covered bonds 104, ,529.8 Loan receivables, substitute collateral 16, ,324.1 Commitments resulting from repurchase transactions Other collateral for securities Total for own liabilities, pledged assets 124, ,195.2 Other pledged assets None None Contingent liabilities Guarantees Conditional shareholders contribution 4, ,615.0 Early retirement at age 62 in accordance with pension agreement Total contingent liabilities 4, ,702.5 Other commitments Loans approved but not disbursed 5, ,437.1 Unutilised portion of overdraft facilities 1, ,098.1 Unutilised portion of credit card facilities 1, Total other commitments 8, , Länsförsäkringar Bank Year-end report

14 NotE 12 Fair value valuation techniques Determination of fair value through published price quotations or valuation techniques. Level 1 includes Instruments with published price quotations, Level 2 includes Valuation techniques based on observable market prices and Level 3 includes Valuation techniques based on unobservable market price. Dec 31, Level 1 Level 2 Level 3 Total Assets Treasury bills and other eligible bills 4, ,881.4 Bonds and other interest-bearing securities 35, ,200.6 Shares and participations 1) Shares and participations in associated companies Derivatives 1, ,077.0 Liabilities Derivatives 2, ,780.3 Dec 31, Level 1 Level 2 Level 3 Total Assets Treasury bills and other eligible bills 5, ,,222.3 Bonds and other interest-bearing securities 32, ,684.7 Shares and participations 1) Shares and participations in associated companies Derivatives 1, ,874.8 Liabilities Derivatives 3, , ) Unlisted shares and participations held for business purposes are presented in level 3. These items are initially measured at cost and impaired if objective evidence exists to recognise an impairiment loss. The assessment is based on the most recent Annual Report and forcasted earnings. 14 Länsförsäkringar Bank Year-end report

15 NotE 12 Fair Value valuation techniques, continued Change in holdings in level 3. Shares and participations Opening balance, January 1, 11.0 Total profit and loss recognised: recognised in profit / loss for the year Investment of shares Investment of shares and participations in associated companies 1.1 Closing balance, December 31, 12.1 Profit and loss recognised in net profit for the period pertaining to assets included in the closing balance at December 31,. Shares and participations Opening balance, January 1, 10.4 Total profit and loss recognised: recognised in profit / loss for the year Investment of shares 0.6 Closing balance, December 31, 11.0 Profit and loss recognised in net profit for the period pertaining to assets included in the closing balance at December 31,. Dec 31, Dec 31, Book value Fair value Book value Fair value Assets Cash and balances with central banks Treasury bills and other eligible bills 4, , , ,222.3 Loans to credit institutions 5, , , ,852.9 Loans to the public 162, , , ,170.2 Bonds and other interest-bearing securities 35, , , ,684.7 Shares and participations Shares and participations in associated companies Derivatives 1, , , ,874.8 Accounts receivable Total assets 209, , , ,155.2 Liabilities Due to credit institutions 1, , , ,062.9 Deposits and borrowing from the public 69, , , ,731.8 Debt securities in issue 123, , , ,592.2 Derivatives 2, , , ,104.0 Accounts payable Subordinated liabilities 2, ,489.7 Total liabilities 199, , , ,565.9 Transfer between level 1 and level 2 There were no significant transfers between level 1 to level 2 during and no transfers during. Disclosures regarding the fair value of deposits and loans and debt securities in issue are provided in accordance with the valuation techniques based on unobservable Level 3 market data. The fair value of cash and balances with central banks, loans, accounts receivables, due to credit institutions, accounts payable, subordinated liabilities and refinancing city debts comprises a reasonable approximation of the fair value based on the cost of the assets and liabilities. When calculating the fair value of deposits and lending, anticipated future cash flows have been discounted using a discount interest rate set at the currrent deposit and lending rates applied (including discounts). The main principle for measuring the fair value of debt securities in issue is that the value is measured at prices from external parties at year-end or the most recent trading date. If external prices are not available or are deemed to deviate from market levels, a standard method or valuation technique based on the estimated or original issue spread is utilised. 15 Länsförsäkringar Bank Year-end report

16 Note 13 Information about offsetting Information per type of instrument. Financial assets and liabilities covered by a legally binding agreement regarding netting or a similar agreement but that are not offset in the balance sheet. The Group has ISDA and CSA agreements with all derivative counterparties which means that all exposures shown below are covered by the two types of agreements. Related amounts that are not offset in the balance sheet Dec 31, Recognised financial assets, gross Recognised financial, liabilities, gross, offset in the balance sheet Amount recognised in the balance sheet Financial Instruments Provided (+) Received (-) collateral securities Provided (+) Recieved (-) cash collateral Net amount Assets Derivatives 1, , , Repos , , Liabilities Derivatives 2, , , ,582.6 Repos Total 3, , , ,599.9 Related amounts that are not offset in the balance sheet Dec 31, Recognised financial assets, gross Recognised financial, liabilities, gross, offset in the balance sheet Amount recognised in the balance sheet Financial Instruments Provided (+) Received (-) collateral securities Provided (+) Recieved (-) cash collateral Net amount Assets Derivatives 2, , , Repos 1, , , Liabilities Derivatives 3, , , Repos Total , Länsförsäkringar Bank Year-end report

17 NOTE 14 CAPITAL-ADEQUACY ANALYSIS Capital base Dec 31, Dec 31, Tier 1 capital before deductions 8, ,336.0 Less intangible assets Less deferred tax assets Special deduction for IRB-exposures Tier 1 capital 7, ,612.0 Subordinated debt, perpetual Total Core Tier 1 capital 7, ,322.0 Tier 2 capital 2, ,200.0 Special deduction for IRB-exposures Total capital base 9, ,546.1 Risk-weighted assets according to Basel II 50, ,359.4 Risk-weighted assets according to transition rules 88, ,233.6 Capital requirement Capital requirement for credit risk according to Standardised Approach Capital requirement for credit risk according to IRB Approach 3, ,034.2 Capital requirement for operational risk Capital requirement according to Basel II 4, ,868.8 Adjustment according to transition rules 3, ,789.9 Total capital requirement 7, ,658.7 Capital ratio Tier 1 ratio according to Basel II, % Core Tier 1 ratio according to Basel ll, % Capital-adequacy ratio according to Basel II, % Capital ratio according to Basel II * Tier 1 ratio according to transition rules, % Core Tier 1 ratio according to transition rules, % Capital-adequacy ratio according to transition rules, % Capital ratio according to transition rules* Capital requirement Credit risk according to Standardised Approach Exposures to institutions Exposures to corporates Retail exposures Exposures secured on residential property Past due items Covered bonds Other items Total capital requirement for credit risk according to Standardised Approach Länsförsäkringar Bank Year-end report

18 NOTE 14 CAPITAL-ADEQUACY ANALYSIS, CONTINUed Dec 31, Dec 31, Credit risk according to IRB Approach Retail exposures Exposures secured by real estate collateral 1, ,537.0 Other retail exposures Total retail exposures 2, ,246.3 Exposures to corporates Non credit-obligation assets Total capital requirement for credit risk according to IRB Approach 3, ,034.2 Operational risk Standardised Approach Total capital requirement for operational risk * Capital ratio = total capital base / total capital requirement In addition to the Parent Company Länsförsäkringar Bank AB (publ) ( ), the financial corporate group includes the wholly owned and fully consolidated subsidiaries Länsförsäkringar Hypotek AB (publ) ( ), Wasa Kredit AB ( ) and Länsförsäkringar Fondförvaltning AB (publ) ( ). NOTE 15 DISCLOSURES ON RELATED PARTIES Normal business transactions between the related parties took place during. No other significant changes have occured in the company s agreements with these related legal entities since December 31,. As of December 31, the Bank Group had outstanding claims on the Parent Company Länsförsäkringar AB of SEK 26.6 M, and outstanding liabilities to the Parent Company on SEK 42.8 M. The Bank Group s remuneration to the regional insurance companies in accordance with prevailing outsourcing agreements is presented in Note 6 Commission expense. Related key persons are Board members, senior executives and close family members to these individuals. Since December 31,, no significant changes have occurred in the company s agreements with these persons. 18 Länsförsäkringar Bank Year-end report

19 Income statement Parent Company Q 3 Change Change Change Interest income % % 3, , % Interest expense % % 2, , % Net interest income % % % Dividends received Group contributions received Commission income % % % Commission expense % % % Net gain / loss from financial items % % % Other operating income % % % Total operating income % % % Staff costs % % % Other administration expenses % % % Total administration expenses % % % Depreciation / amortisation and impairment of property and equipment / intangible assets % % % Total operating expenses % % % Profit / loss before loan losses % Loan losses, net % % % Operating profit / loss % % Allocation fund Tax % % Profit / loss for the period % % Statement of comprehensive income Parent Company Q 3 Change Change Change Profit / loss for the period % Other comprehensive income Available-for-sale financial assets Change in fair value % % Reclassification realised securities % 4.1 Tax attributable to items that are rerouted or can be rerouted as income for the period % % Other comprehensive income for the period, net after tax % % Total comprehensive income for the period % Länsförsäkringar Bank Year-end report

20 Balance sheet Parent Company Dec 31, Dec 31, Assets Cash and balances with central banks Treasury bills and other eligible bills 3, ,677.4 Loans to credit institutions 44, ,260.7 Loans to the public 36, ,212.9 Bonds and other interest-bearing securities 19, ,466.0 Shares and participations Shares and participations in associated companies Shares and participations in Group companies 6, ,869.0 Derivatives Fair value changes of interest-rate-risk hedged items in the portfolio hedge Intangible assets Property and equipment Deferred tax assets Other assets Prepaid expenses and accrued income Total assets 112, ,503.0 Liabilities, provisions and equity Due to credit institutions 6, ,750.4 Deposits and borrowing from the public 69, ,535.0 Debt securities in issue 24, ,300.9 Derivatives Fair value changes of interest-rate-risk hedged items in the portfolio hedge Deferred tax liabilities - Other liabilities Accrued expenses and deferred income 1, Provisions Subordinated liabilities 2, ,489.7 Total liabilities and provisions 104, ,441.1 Untaxed reserves Equity Share capital, 9,548,708 shares Statutory reserve Fair value reserve Retained earnings 6, ,081.4 Loss for the period Total equity 7, ,061.9 Total liabilities, provisions and equity 112, ,503.0 Memorandum items For own liabilities, pledged assets 3, ,330.0 Other pledged assets None None Contingent liabilities 4, ,682.2 Other commitments 11, ,533.7 Other notes Accounting policies 1 Capital-adequacy analysis 2 Disclosures on related parties 3 20 Länsförsäkringar Bank Year-end report