Interim report for Q1-Q3 2017

Transcription

1 Interim report for of Spar Nord Bank A/S Net profit of DKK 799 million and return on equity of 13.1 %

2 Spar Nord Contents 2 Company announcement no. 9, Contents MANAGEMENT S REVIEW Performance indicators and financial ratios... 3 Executive Summary... 5 Management commentary on... 6 Spar Nord shares held by members of the Management team Overview of group companies INTERIM REPORT FOR SPAR NORD GROUP Performance indicators and financial ratios Management s statement on the Interim Report Income statement Balance sheet Capital position Cash flow statement Notes Notes without reference Contact: Ole Madsen, Senior Vice President, Communication & Business Development, tel.:

3 Spar Nord Performance indicators and financial ratios 3 Group Performance indicators and financial ratios Group CORE EARNINGS QUARTERLY INCOME STATEMENT Net interest income *) Net income from fees, charges and commissions Market value adjustments and dividends Other operating income Profit/loss on investments in associates and group enterprises Core income Salaries Operating expenses Depreciation, amortization and impairment Costs and expenses Core earnings before impairment Loan impairment charges etc. *) Profit/loss before tax Tax Profit/loss Of which, share attributable to interest expenses to holders of Additional Tier 1 (AT1) capital Change in % Q3 Q2 1, , , , , , , , , , , , , , Q1 Q4 Q3 BALANCE SHEET Total assets Loans and advances Deposits Lending, banking and leasing activities Lending, reverse repo transactions Deposits, banking activities Deposits, repo transactions Deposits in pooled schemes Subordinated debt Holders of Additional Tier 1 (AT1) capital instruments Equity Contingent liabilities Total risk exposure amount Tier 1 capital **) Impairment account and discount on commitments taken over ***) Contractual non-performing loans Business volume 80,372 78, ,372 79,595 78,329 78,473 78,957 78,473 45,471 39, ,471 42,407 41,189 41,346 39,697 41,346 36,630 35, ,630 36,351 35,761 35,093 35,106 35,093 8,841 4, ,841 6,056 5,428 6,253 4,591 6,253 63,296 60, ,296 62,782 60,455 61,005 60,926 61,005 48,092 47, ,092 47,610 45,581 46,464 47,046 46, ,204 13, ,204 15,016 14,874 14,541 13,880 14,541 1,086 1, ,086 1,089 1,090 1,093 1,095 1, ,920 7, ,920 7,702 8,072 7,765 7,669 7,765 11,742 11, ,742 12,304 11,935 12,334 11,885 12,334 49,243 47, ,243 49,672 47,741 47,485 47,778 47,485 7,777 6, ,777 7,369 7,374 7,427 6,943 7,427 1,708 2, ,708 1,901 1,992 1,994 2,020 1, , , , , , , , ,113 *) In the core earnings format, an amount was reclassified between the items Net interest income and Loan impairment charges etc., which relates to the part of the discount on commitments taken over recognized as income. See note 3. **) Tier 1 capital for the first and second quarters of is exclusive of recognition of profit/loss for the period. ***) Spar Nord s impairment account amounts to DKK 1,651 million (Q2 : DKK 1,839 million) (note 10) and the discount on commitments taken over amounts to DKK 57 million (Q2 : DKK 62 million).

4 Spar Nord Performance indicators and financial ratios 4 Group Performance indicators and financial ratios Group CORE EARNINGS QUARTERLY FINANCIAL RATIOS OWN FUNDS Own funds ratio *) Tier 1 capital ratio *) Common equity tier 1 capital ratio *) Q3 Q Q1 Q4 Q3 EARNINGS Return on equity before tax excl. Additional Tier 1 (AT1) capital, % **) Return on equity after tax excl. Additional Tier 1 (AT1) capital, % **) Cost share of core income Cost share of core income - incl. loan impairment charges etc. Return on assets, % MARKET RISK AND LIQUIDITY Interest rate risk, % Foreign-exchange position, % Foreign-exchange risk, % Liquidity Cover Ratio (LCR), % CREDIT RISK Loans and advances plus impairment account and discount hereon as % of deposits, % Loans and advances as % of equity Increase in loans and advances for the period, % Sum of large exposures, % Impairment ratio, % EMPLOYEES AND BRANCHES Number of employees (full-time equivalents, end of period) Number of branches 1,557 1,548 1,557 1,555 1,528 1,540 1,548 1, SPAR NORD SHARE DKK PER SHARE OF DKK 10 Share price, end of period Net asset value (NAV), **) Profit/loss for the period **) Dividend Return Price/earnings **) *) Own funds for the first and second quarters of is exclusive of recognition of profit/loss for the period. **) Financial ratios have been calculated as if the Additional Tier 1 (AT1) capital were treated as a liability for accounting purposes.

5 Spar Nord Executive Summary 5 Executive Summary The first nine months of was a period in which the Danish economy finally started to show signs of a recovery and thus a more sustainable improvement in investment appetite and demand for funding. Interest margins remain under pressure, but we are now witnessing decent growth in lending volumes and good progress in our activity-driven income. Combined with a reversal of impairment charges of some DKK 50 million, this has ensured that our overall financial performance is more than satisfactory, says Spar Nord s CEO Lasse Nyby. Spar Nord achieved a profit after tax of DKK 799 million in, which corresponds to an annualized return on equity of 13.1%. The profit is DKK 109 million, or 16%, higher than in the year-earlier period and is considered satisfactory by Management. Core income amounted to DKK 2,377 million, which is on a level with the same period of last year. Net interest income fell 4% to DKK 1,173 million, net income from fees, charges and commissions rose 8% to DKK 837 million, while market value adjustments fell 8% to DKK 303 million. Net income from fees, charges and commissions developed in line with the preceding quarters, while the decline in market value adjustments from Q2 to Q3 was especially due to non-recurring factors as the value of Spar Nord s ownership interest in the data centre BEC was adjusted due to impairment of development assets. Total costs and expenses amounted to DKK 1,411 million, which is DKK 57 million, or 4%, higher than in. As was the case in the first two quarters of the year, costs were affected by investment in strategic measures, including in the IT area, that are intended to lead to the realisation of gains in the upcoming period. Investments have also been made in a refurbishment of the Bank s branches in accordance with the strategy The Personal Bank in a Digital World. Core earnings before impairment were DKK 966 million, which is DKK 65 million, or 6%, lower than in. Loan impairment charges etc. were a net income of DKK 51 million, which is notably better than expected at the beginning of the year and should be compared with impairments of DKK 188 million in the year-earlier period. Impairment of BEC development assets In order to comply with the new guidelines from the Danish FSA triggered by the MREL requirements concerning costs of withdrawal from data centres, the board of directors of Spar Nord s data centre, BEC, has resolved to carry out an extraordinary write-down in of BEC s development assets of DKK 483 million. Furthermore, it was resolved to expense development projects in progress on an accelerated basis. The effect of these matters for Spar Nord is that the Bank s investments in BEC were written down by DKK 54 million in Q3. Positive business volume developments At 30 September, Spar Nord s total business volume was DKK 8.7 billion, or 4%, higher than at end-. Of this amount, DKK 1.5 billion was attributable to growth in lending to the Bank s retail and business customers, which corresponds to a satisfactory 4% increase in lending. The volume of mortgage-credit loans arranged grew DKK 3.1 billion, equal to an increase of 4%. Outlook Based on developments in Q3 and due to the negative market value adjustment relating to BEC, Spar Nord forecasts core earnings before impairment of around DKK 1,200 million, against the previous forecast of around DKK 1,250 million. Also, full-year impairment charges are now expected to be around DKK 0, and Spar Nord maintains its full-year pre-tax financial guidance.

6 Spar Nord Management commentary on 6 Management commentary on Spar Nord achieved a profit after tax of DKK 799 million in, which corresponds to an annualized return on equity of 13.1%. The profit is DKK 109 million, or 16%, higher than in the year-earlier period and is considered satisfactory by Management. Core income amounted to DKK 2,377 million, which is on a level with the same period of last year. NET INTEREST INCOME AND NET FEE INCOME (DKKM) Net interest income Net income from fees, charges and commissions 1,924 1,947 2,102 2, , Net fee income at a satisfactory level Net income from fees, charges and commissions amounted to DKK 837 million, which is DKK 59 million, or 8%, higher than in the year-earlier period. Net income from fees, charges and commissions thus accounted for 42% of total net interest and fee income in the period. The increase was attributable especially to continued growth in income from mortgage loans arranged driven by both volume growth and price adjustments. In addition, there was a decent increase in net fee income relating to insurance, the daily banking area and payment services. Net fee income from securities trading and asset management fell by a total of DKK 13 million relative to the same period of, reflecting lower income from unit trusts, among other things as a consequence of MiFID II. The fall was partly offset by higher income from securities trading and asset management. From Q2 to Q3 net income from fees, charges and commissions fell from DKK 279 million to DKK 264 million. One of the reasons for the decline is that fees regarding Netbank Erhverv are collected in Q2. 1,392 1,322 1,311 1,226 1,173 Market value adjustments marked by BEC writedown Market value adjustments and dividends amounted to DKK 303 million, which is DKK 26 million, or 8%, lower than in the same period of. Persistent pressure on net interest income Net interest income was DKK 1,173 million in, against DKK 1,226 million in the same period of. Adding to this income was a DKK 1.5 billion (4%) increase in bank and leasing lending since 1 January, while a 34 basis point decline in the lending margin and a 30 basis point decline in the overall interest rate margin since 1 January year weighed on this item. Of the total decline in interest income of DKK 89 million relative to the same period of last year, DKK 31 million was attributable to the Bank s bond portfolio. Interest expenses on deposits were reduced by DKK 37 million relative to. The reduction was driven by a lower interest rate on deposits, partly due to the expiry of high-interest deposits, partly due to interest changes implemented. From Q2 to Q3, net interest income fell 1% from DKK 393 million to DKK 388 million. In Q3, net interest income was positively impacted by DKK 10 million in non-recurring income from a previous impairment exposure, against a DKK 9 million impact in Q2. MARKET VALUE ADJUSTMENTS AND DIVIDENDS (DKKM) Market value adjustments on the Bank s equity and bond portfolio improved by DKK 35 million relative to the same period last year. Market value adjustments were adversely impacted by a DKK 54 million writedown on the investment in the BEC data centre (see more on page 9). From Q2 to Q3, market value adjustments and dividends fell from DKK 121 million to DKK 18 million. The decline was primarily attributable to the BEC writedown and lower market value adjustments on bonds.

7 Spar Nord Management commentary on 7 Decent increase in other income Other operating income amounted to DKK 36 million, against DKK 28 million in and profit on investments in associates and group enterprises came to DKK 27 million, up from DKK 23 million last year. Costs and expenses influenced by strategic initiatives The Group s total costs and expenses amounted to DKK 1,411 million, which is DKK 57 million, or 4%, higher than in the year-earlier period. TOTAL COSTS (DKKM) Costs were generally affected by Spar Nord s implementation of its new strategy launched at the end of, which is still at a stage of investment in measures, including in the IT area, that are intended to lead to the realization of gains in the upcoming period. Investments have also been made in a refurbishment of the Bank s branches in accordance with the strategy The Personal Bank in a Digital World. From Q2 to Q3, costs fell from DKK 502 million to DKK 434 million. The decline was mainly driven by the usual adjustment of holiday pay obligations during the summer holiday period. Net reversal of loan impairment charges Loan impairment charges etc. were an income of DKK 51 million, which compares to an expense of DKK 188 million in the year-earlier period. 1,290 1,313 1,373 1,354 1, Depreciation, amort. and impairmanet IMPAIRMENTS (DKKM) Operating expenses Wages and salaries Wages and salaries accounted for DKK 850 million of total costs and expenses. Realized payroll costs were DKK 15 million, or 2%, higher than in the year-earlier period, which is ascribable to pay rises under collective agreements and increasing payroll taxes and the fact that included a positive one-off effect of DKK 17 million concerning the outcome of a legal action. At 30 September, the Group employed 1,557 employees, which is 9 more than at the same time in. The Bank has 51 branches, which is 15 fewer than a year ago. The reason the number of employees has not been reduced concurrently with the number of branches is, among other things, that resources have been channelled to areas such as the central customer service centre and IT & Processes as part of the strategic projects referred to below. Other operating expenses came to DKK 515 million, which is DKK 47 million, or 10%, higher than in. Expenses were favourably impacted by the lack of last year s non-recurring costs for IT migration and a drop in ongoing IT expenses. Weighing on expenses were a number of new costs related to strategic IT projects in BEC and at sector level and an increase in items such as marketing expenses because customer-facing activities in were lower than usual because of the efforts to prepare and implement the IT migration from SDC to BEC. Individual impairment charges were an income of DKK 50 million, while collective impairment charges rose by DKK 133 million. The collective impairment charges consist of a decline in rating-based and calculated collective impairment charges totalling DKK 17 million and Management estimates of DKK 85 million concerning retail customers and a total of DKK 65 million concerning agricultural and business customers, of which DKK 40 million relates to Q3. Finally, DKK 132 million was recovered on previously impaired receivables in, which is notably higher than in the year-earlier period. THE GROUP S LOANS, ADVANCES AND GUARANTEES *) BREAKDOWN BY INDUSTRY Industry % Agriculture, hunting and forestry Fisheries Industry and raw materials extraction Energy supply Construction and engineering Trade Transport, hotels and restaurants Information and communication Financing and insurance Real property Other industries Total business customers Public authorities Retail customers Total *) Excl. reverse repo transactions Impairment account and discount on exposures Loans and guarantees taken over

8 Spar Nord Management commentary on 8 AGRICULTURAL EXPOSURES BY PRODUCTION LINE Loans and advances and guarantees Cattle producers Pig producers Plant cultivation Mink farmers Leasing Andet Total AGRICULTURAL IMPAIRMENTS BY PRODUCTION LINE Nonaccrual loans Of which impaired Share impaired , , Business volume growing to DKK 239 billion The Group s total business volume (deposits, loans, advances and guarantees, mortgage credits arranged and customers custodianship accounts) amounted to DKK billion at 30 September, which was DKK 8.7 billion, or 4%, higher than at end-. Compared with end-, bank and leasing loans rose DKK 1.5 billion, or 4%, and of this increase DKK 0.4 billion was attributable to retail customers and DKK 1.1 billion to business customers. The de-facto increase in lending growth in continuing activities was DKK 1.8 billion, as there was a DKK 0.3 billion drop in the resolution portfolio which Spar Nord took over in connection with the merger with Sparbank /% Cattle producers Pig producers Plant cultivation Mink farmers Leasing Andet Total Impairment account Impaired Impairment for the year Impairment ratio of exposure Percentage impaired TOTAL CREDITS ARRANGED (DKKBN) Total Broken down by customer segment and including the Management estimates, the total impact was DKK 58 million for retail customers, DKK -100 million for business customers ex. agriculture and DKK -9 million for agriculture. Lending, mortgage credit Lending, bank loans and leasing loans Apart from a strong credit quality in Spar Nord s loan portfolio, the highly positive trends in impairments reflect the continued improvement of macroeconomic conditions, including a lower inflow of impairment exposures and better performance of loans already flagged as having weak credit quality. Loan impairment charges etc. in Q3 were an income of DKK 42 million, against an income of DKK 10 million in Q2. The positive trend was driven by amounts recovered on previously impaired receivables In, the volume of mortgage-credit loans arranged grew DKK 3.1 billion to DKK 76.6 billion, equal to 4%. In total, the volume of mortgage-credit loans arranged from Totalkredit amounted to DKK 65.3 billion and from DLR Kredit DKK 11.3 billion. TOTAL DEPOSITS (DKKBN) At 30 September, Spar Nord estimated the impact of the new impairment rules that follow from IFRS 9 and how they will affect the Bank s loan impairment charges etc. when they enter into force at the beginning of The estimate at 30 September still shows an effect of about 2-3% of shareholders equity. Total Deposits, pooled schemes Profit before tax of DKK 1,017 million and net profit of DKK 799 million Deposits, banking activities The profit before tax was DKK 1,017 million against DKK 843 million in. The Group s effective tax rate was 21%, bringing the net profit to DKK 799 million, up from DKK 690 million in the same period last year Deposits, banking activities increased by DKK 1.6 billion, or 4%, in Q1- Q3 while deposits in pooled schemes climbed DKK 0.7 billion, or 5%. Finally, customers custodianship accounts have increased DKK 2.4 billion, or 5%, since end-.

9 Spar Nord Management commentary on 9 Strategic liquidity of DKK 21.0 billion Spar Nord has defined strategic liquidity as the difference between bank and leasing lending and the long-term funding (bank deposits, senior loans, issued bonds, subordinated debt and equity). Subordinated debt, senior loans and issued bonds due within 12 months are not included in the Bank s strategic liquidity. Impairment of BEC development assets In connection with the new requirements for own funds in Danish banks (MREL), the Danish FSA has prepared an interpretation that stipulates that costs of withdrawal from data centres are considered an obstacle to resolvability in a situation in which a bank fails to comply with its capital requirement, as a result of which resolution measures must be initiated. STRATEGIC LIQUIDITY (DKKbn) Deposits, banking activities Senior loans/bond issues Equity and subordinated debt Liquidity procurement Lending, banking and leasing activities Maturity, senior issued bonds & subordinated debt <1 year Strategic liquidity, total At the end September, Spar Nord s strategic liquidity amounted to DKK 21.0 billion, up DKK 0.3 billion compared with end-. To comply with the new rules, BEC has resolved to initiate a process aimed at minimizing the future financial obligations of its members in case a member withdraws from the cooperation. The aim of the process is to ensure that banks expense developments costs closer to the period in which such costs were incurred. Specifically, BEC has resolved to carry out an extraordinary writedown in of its development assets of DKK 483 million, while ongoing development projects of DKK 54 million will be expensed on an accelerated basis. As a result, the cooperative accounts of BEC s members will be written off. The effect for Spar Nord of these measures is that the Bank s investments in BEC were written down by DKK 54 million in Q3. Spar Nord s LCR ratio at 30 September was 165%. Strong capital position At 30 September, the Common Equity Tier 1 (CET1) ratio was 14.2%, while the own funds ratio was 17.9%. This should be viewed relative to the individual solvency need calculated by Spar Nord at 9.1% plus the 1.3% combined buffer requirement, as a result of which the total capital requirement is 10.4%. Thus, Spar Nord has an excess capital coverage of 7.5 percentage points, equal to DKK 3.7 billion. On the basis of fully phased-in CRD IV rules, the current capital position would correspond to a Common Equity Tier 1 (CET1) ratio of 14.0%. The Supervisory Authority Diamond Test Model The Supervisory Authority Diamond Test Model lists a number of reference points delineating what can be basically considered a financial institution with an increased risk profile. Violations of the principles contained in the Supervisory Authority Diamond Test Model are subject to supervisory reactions by the Danish FSA. At 30 September, Spar Nord remained comfortably within all threshold values in the Supervisory Authority Diamond Test Model. At 30 September, Spar Nord could report the following values in respect of the defined reference points: In Q3, Spar Nord resumed its previous practice of consolidating its profit for the year, which is reflected in the key ratios set out above. In continuation of the description in the most recent interim report about Spar Nord s expectations of the coming MREL rules, the Danish FSA has now stated that Spar Nord will have to comply with the same MREL as the SIFI institutions. As a result of this and other factors, Spar Nord is in the process of identifying options with a view to a transition to risk-weighting based on internal, rating-based models. Spar Nord expects to be able to provide an update on its preparatory work and expectations of the further process in Annual Report. Large exposures <125 % Spar Nord: 18.7 % Funding ratio <1 Spar Nord: 0.5 Udlånsvækst <20 % Spar Nord: 4.7 % Ejendomseksponering <25% Spar Nord: 10.7 % At the beginning of Q4, Spar Nord has issued new Tier 2 capital in the amount of DKK 470 million and cancelled Tier 2 capital for DKK 400 million for repayment in November. Liqudity coverage ratio >50% Spar Nord: %

10 Spar Nord Management commentary on 10 With reference to the calculation method for the reference point Large exposures specified by the Danish FSA, with the benchmark for the 20 largest exposures being fixed at 175% of the Common Equity Tier 1 (CET1), Spar Nord s 20 largest exposures amounted to 96.9% at 30 September. Outlook for At the beginning of, Spar Nord forecast core earnings before impairment of around the DKK billion mark, and after Q2 this forecast was upgraded to around DKK 1,250 million. At the beginning of the year, loan impairments were expected to be lower than in, but after Q2 this forecast was revised to substantially lower than in. Based on developments in Q3 and due to the write-down relating to BEC, Spar Nord forecasts core earnings before impairment of around DKK 1,200 million. Also, full-year impairment charges are now expected to be around DKK 0, and Spar Nord maintains its full-year pre-tax financial guidance.

11 Spar Nord Spar Nord shares held by members of the Management team 11 Overview of group companies Spar Nord shares held by members of the Management team BOARD OF DIRECTORS At At EXECUTIVE BOARD At At Kjeld Johannesen Per Nikolaj Bukh Kaj Christiansen Morten Bach Gaardboe Laila Mortensen Ole Skov Jannie Skovsen Gitte Holmgaard Sørensen John Sørensen 50,000 50,000 27,200 27,200 21,100 21,100 3,620 3, ,279 7,054 7,576 7,404 1,756 1,566 5,160 5,160 Lasse Nyby John Lundsgaard Lars Møller 48,716 47,784 71,496 71,113 66,376 65,460 The holdings comprise all shares held by all members of the household. Overview of group companies Share capital end of period*) Equity end of period*) Profit/loss *) Consolidated subsidiaries Aktieselskabet Skelagervej 15, Aalborg , *) According to the most recent annual report. The company is a wholly subsidiary in and.

12 Spar Nord Performance indicators and financial ratios 12 Group Performance indicators and financial ratios Group THE DANISH FSA S LAYOUT AND RATIO SYSTEM INCOME STATEMENT Interest income Interest expenses Net interest income Dividends on shares, etc. Fees, charges and commissions received Fees, charges and commissions paid Net income from interest, fees, charges and commissions Market value adjustments Other operating income Staff costs and administrative expenses Amortization, depreciation and impairment of intangible assets and property, plant and equipment Other operating expenses Loan impairment charges etc. Profit/loss on equity investments in associates and group enterprises Profit/loss before tax Tax Profit/loss Change in % , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , BALANCE SHEET Total assets Loans and advances Lending, banking and leasing activities Lending, reverse repo transactions Deposits Deposits, banking activities Deposits, repo transactions Deposits in pooled schemes Subordinated debt Equity Contingent liabilities 80,372 78, ,372 78,957 79,958 78,816 75,080 78,473 45,471 39, ,471 39,697 38,223 37,362 37,166 41,346 36,630 35, ,630 35,106 34,300 37,187 36,624 35,093 8,841 4, ,841 4,591 3, ,253 63,296 60, ,296 60,926 56,986 53,199 50,463 61,005 48,092 47, ,092 47,046 44,206 42,930 41,998 46, ,204 13, ,204 13,880 12,316 10,269 8,465 14,541 1,086 1, ,086 1,095 1,154 1,711 2,319 1,093 8,793 8, ,793 8,073 7,768 7,047 6,377 8,627 11,742 11, ,742 11,885 9,426 8,021 5,435 12,334 Total risk exposure amount Tier 1 capital Loan impairment charges etc. Contractual non-performing loans , ,243 47,778 47,507 48,698 43,111 47,485 7,777 6, ,777 6,943 6,865 6,619 7,400 7,427 1,651 1, ,651 1,904 1,877 1,776 1,557 1,

13 Spar Nord Performance indicators and financial ratios 13 Group Performance indicators and financial ratios Group THE DANISH FSA S LAYOUT AND RATIO SYSTEM FINANCIAL RATIOS Own funds Own funds ratio Tier 1 capital ratio Earnings Return on equity before tax, % Return on equity after tax, % Income/cost ratio Return on assets, % Market risk and liquidity Interest rate risk, % Foreign-exchange position, % Foreign-exchange risk, % Excess coverage relative to statutory liquidity requirement, % Credit risk Loans and advances as % of deposits, % Loans and advances plus impairment as % of deposits, % Loans and advances as % of equity, % Increase in loans and advances for the period, % Sum of large exposures, % Impairment ratio for the period THE SPAR NORD SHARE DKK per share of DKK 10 Profit/loss for the period Net asset value (NAV) Dividend Share price/profit/loss for the period Share price/nav

14 Spar Nord Management s statement on the 14 Interim Report Management s statement on the Interim Report The Board of Directors and the Executive Board have today discussed and adopted the Interim Financial Statements of Spar Nord Bank A/S for the period from 1 January to 30 September. EXECUTIVE BOARD The Consolidated Interim Financial Statements are presented in accordance with IAS 34 Interim Financial Reporting, as adopted by the EU. Lasse Nyby Chief Executive Officer Moreover, the Interim Financial Statements are presented in accordance with additional Danish disclosure requirements regarding interim financial statements of listed financial institutions. The interim financial statements are unaudited and have not been reviewed, but the external auditor has verified the profit. This verification included procedures consistent with the requirements relating to a review. Hence, it was ascertained that the conditions for ongoing recognition of the profit for the period in own funds were met. In our opinion, the Interim Financial Statements give a true and fair view of the Group s financial position at 30 September and of the results of the Group s operations and cash flows for the period from 1 January to 30 September. John Lundsgaard Managing Director BOARD OF DIRECTORS Kjeld Johannesen Chairman Lars Møller Managing Director Per Nikolaj Bukh Deputy Chairman of the Board of Directors In addition, we consider the Management s review to give a fair presentation of the development in the Group s activities and financial affairs as well as a description of the significant risks and elements of uncertainty that may affect the Group. Kaj Christiansen Morten Bach Gaardboe Aalborg, 1 November Laila Mortensen Ole Skov Elected by the employees Jannie Skovsen Elected by the employees Gitte Holmgaard Sørensen Elected by the employees John Sørensen

15 Spar Nord Income statement Group 15 Income statement Group Q3 Q3 NOTE 4 5 Interest income Interest expenses Net interest income 1, , , , , , Dividends on shares, etc. Fees, charges and commissions received Fees, charges and commissions paid Net income from interest, fees, charges and commissions , , , , Market value adjustments Other operating income Staff costs and administrative expenses , , , Amortization, depreciation and impairment of intangible assets and property, plant and equipment Other operating expenses Loan impairment charges etc Profit/loss on investments in associates and group enterprises Profit/loss before tax , ,028.1 Tax Profit/loss APPROPRIATION: The shareholders of the Parent Company Spar Nord Bank A/S Holders of Additional Tier 1 (AT1) capital instruments Profit/loss EARNINGS PER SHARE Earnings per share (DKK) Diluted earnings per share (DKK) STATEMENT OF COMPREHENSIVE INCOME Profit/loss for the period Other comprehensive income Items that cannot be reclassified to the income statement: Net revaluation of domicile property Other comprehensive income after tax Total comprehensive income Appropriation: The shareholders of the Parent Company Spar Nord Bank A/S Holders of Additional Tier 1 (AT1) capital instruments Total comprehensive income

16 Spar Nord Balance sheet Group 16 Balance sheet Group NOTE ASSETS 9 11 Cash balances and demand deposits with central banks Due from credit institutions and central banks Lending, banking and leasing activities Lending, reverse repo transactions Loans, advances and other receivables at amortized cost, total Bonds at fair value Shares, etc. Investments in associates Assets linked to pooled schemes Intangible assets Investment properties Domicile property Land and buildings, total Other property, plant and equipment Current tax assets Temporary assets Other assets Prepayments 1, , , , , , , , , , , , , , , , , , , , , , , , , Total assets 80, , ,473.5 EQUITY AND LIABILITIES DEBT Due to credit institutions and central banks Deposits and other payables Deposits in pooled schemes Other non-derivative financial liabilities at fair value Current tax liabilities Other liabilities Deferred income Total debt 2, , , , , , , , , , , , , , , , , ,551.4 PROVISIONS Provision for deferred tax Provision for losses on guarantees Other provisions Total provisions SUBORDINATED DEBT Subordinated debt 1, , ,093.2 Total liabilities 71, , ,846.4 EQUITY Share capital Revaluation reserves Statutory reserves Proposed dividend Retained earnings Equity Holders of Additional Tier 1 (AT1) capital instruments Total equity 1, , , , , , , , , , , ,627.1 Total equity and liabilities 80, , , OFF-BALANCE SHEET ITEMS Contingent assets Contingent liabilities Other binding commitments , , ,

17 Spar Nord Capital position Group 17 Capital position Group The shareholders of the Parent Company Spar Nord Bank A/S CHANGES IN EQUITY Share capital Revaluation reserve Statutory reserves Proposed dividend Retained earnings Total Additional Tier 1 (AT1) capital *) Total Equity Equity , , , ,627.1 Comprehensive income in Profit/loss for the period Other comprehensive income Net revaluation of properties Other comprehensive income, total Total comprehensive income for the period Transactions with owners Interest paid on Additional Tier 1 (AT1) capital Dividends paid Dividends received, treasury shares Reduction of share capital Disposal upon acquisition of treasury shares and Additional Tier 1 (AT1) capital Addition upon sale of treasury shares and Additional Tier 1 (AT1) capital Revaluation reserves, associates Dividends received from associates recognized at net asset value Tax Total transactions with owners Equity , , , ,792.5 The share capital consists of 123,002,526 shares with a nominal value of DKK 10. Equity Equity , , , ,887.0 Comprehensive income in Profit/loss for the period Other comprehensive income Net revaluation of properties Other comprehensive income, total Total comprehensive income for the period Transactions with owners Interest paid on Additional Tier 1 (AT1) capital Dividends paid Dividends received, treasury shares Disposal upon acquisition of treasury shares and Additional Tier 1 (AT1) capital Addition upon sale of treasury shares and Additional Tier 1 (AT1) capital Dividends received from associates recognized at net asset value Tax Total transactions with owners Equity , , , ,073.5 The share capital consists of 125,529,918 shares with a nominal value of DKK 10. TREASURY SHARE PORTFOLIO Number of shares Percentage of share capital 81,678 2,044,851 2,591, On , the share capital was reduced by a nominal value of DKK 25,273,920 through the cancellation of 2,527,392 shares of the bank s treasury share portfolio. These shares were bought back under the bank s buyback programme for.

18 Spar Nord Capital position Group 18 Additional Tier 1 (AT1) capital Principal Currency Note Interest rate Received Maturity DKK a % 2015 Perpetual DKK b % Perpetual Additional Tier 1 (AT1) capital issued under CRR, total a Issued on , with an option of early redemption as from The loan carries interest at a rate of 6.052% p.a. until , after which date interest will be fixed at CIBOR6 + a 5.400% margin. b Issued on , with an option of early redemption as from The loan carries interest at a rate of 5.500% p.a. until , after which date interest will be fixed at CIBOR6 + a 5.166% margin. If Spar Nord s Common Equity Tier 1 (CET1) ratio falls below 5 1/8%, the loans will be written down. The loans can be written up again based on the rules laid down in CRR. Additional Tier 1 (AT1) capital, specification of cash flows Cash flows, beginning of period Movement during the period: Issue of Additional Tier 1 (AT1) capital Net transaction costs Change in portfolio of own bonds Interest paid Total cash flows for the period Cash flows, end of period

19 Spar Nord Cash Flow Statement - Group 19 NOTE Cash Flow Statement - Group OPERATING ACTIVITIES Profit/loss before tax Fair value changes, investment properties and temporary assets Amortization, depreciation and impairment of intangible assets and property, plant and equipment Gains and losses on the sale of intangible assets and property, plant and equipment Adjustment of loan impairment charges etc. Provisions Profit/loss on investments in associates and group enterprises Corporate income tax paid Operating activities, total 1, , , ,060.1 WORKING CAPITAL Movement in credit institutions and central banks, net Movement in loans, advances and other receivables at amortized cost Movement in bonds at fair value Movement in equity portfolio Movement in other assets and other liabilities, net Movement in deposits and other payables Working capital, total , , , , , , , , , Cash generated from operations, total 1, , INVESTING ACTIVITIES Acquisition of activities from FIH Erhvervsbank Acquisition of associates and group enterprises Sale of associates and group enterprises Acquisition of intangible assets Sale of intangible assets Acquisition of property, plant and equipment Sale of property, plant and equipment Dividends from associates and group enterprises Investing activities, total FINANCING ACTIVITIES Subordinated debt Additional Tier 1 (AT1) capital recognized in equity (see specification in Capital position) Dividends paid, excluding dividends on treasury shares Share buyback programme Acquisition of treasury shares Sale of treasury shares Financing activities, total Movements in cash and cash equivalents for the period Cash and cash equivalents, beginning of period Movements in cash and cash equivalents for the period Cash and cash equivalents, end of period 2, , , , , ,701.1 Cash and cash equivalents, end of period Cash, cash equivalents and demand deposits with central banks Due from credit institutions and central banks within less than 3 months Total 1, , , , , , ,701.1

20 Spar Nord Notes Group 20 NOTE 1 Notes to the financial statements ACCOUNTING POLICIES The Interim Financial Statements of the Spar Nord Group covering the period from 1 January to 30 September have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU, and additional Danish disclosure requirements for interim reports of listed financial institutions. Other than as set out below, the Group has not changed its accounting policies from those followed in Annual Report, which provides a full description of the Group s accounting policies. Accounting policy changes The Spar Nord Group has implemented the IFRS standards and interpretations taking effect in the EU for. The implementation of these standards and interpretations has not materially affected recognition and measurement. Information about standards not yet in force The analysis of the expected effect of implementing IFRS 9 has not yet been completed. IFRS 9 Financial Instruments, replacing IAS 39, changes the classification and related measurement of financial assets and liabilities. IFRS 9 introduces a more logical approach to the classification of financial assets that is based on the Bank s business model and the characteristics of the underlying cash flows. Based on the current business model and management of returns, IFRS 9 is not expected to materially affect the Bank s financial reporting. Moreover, the standard introduces a new impairment model for all financial assets. The new impairment model means that impairment losses must be recognized on all the Bank s loans, advances and guarantees based on the losses statistically expected (expected credit loss model). Based on the existing rules, impairment losses are not recognized until there is objective evidence of impairment (incurred loss model). IFRS 9 uses a three-stage impairment approach, meaning that expected credit losses (ECLs) are allocated to either stage 1, 2 or 3, depending on the risk of credit loss. The classification into stages and the calculation of expected credit losses will largely be based on the Bank s existing rating models and credit control. Systems and models for determining impairment in accordance with IFRS 9 are being developed and will be adjusted in step with the Danish FSA giving more specific instructions about the interpretation of the standard. The new impairment models are being developed in cooperation with the Bank s data processing centre and support the calculation of expected credit losses according to models based on loss ratios and the concepts of PD (Probability-of-Default), LGD (Loss-Given-Default) and EAD (Exposure-at-Default). Overall, the changed method for determining credit losses is estimated to result in an increase of the Bank s impairment account for loans, advances and provisions on guarantees in the region of DKK million, corresponding to a reduction of shareholders equity after tax of 2-3%. The effect after tax will be recognised as a reduction of shareholders equity at 1 January Finally, the standard introduces new rules for hedge accounting. Compared to the existing rules, the new model will provide a better link between an entity s accounting treatment and risk management strategy. The new rules on hedge accounting are not expected to materially affect the Bank s financial reporting. 2 JUDGMENTS AND ESTIMATES Measuring certain assets and liabilities requires Management to make an estimate of how future events will affect the value of such assets and liabilities. Estimates considered material in presenting the financial statements are, among other things, those made when determining loan impairments, the fair values of unlisted financial instruments as well as provisions. The applied estimates are based on assumptions deemed reasonable by Management but which are inherently uncertain. In the presentation of the condensed condensed Interim Financial Statements, the critical judgments made by Management in the application of the Group s accounting policies, and the considerable uncertainty related thereto, are identical to those applying to the presentation of the Financial Statements at 31 December.

21 Spar Nord Notes Group 21 NOTE 3 Segment information BUSINESS SEGMENTS INCOME STATEMENT Net interest income Net income from fees, charges and commissions Market value adjustments and dividends Other operating income Profit/loss on investments in associates and group enterprises Core income/revenue, total Operating expenses, depreciation and amortization Core earnings before impairment Loan impairment charges etc. Profit/loss before tax Spar Nord s Local Banks Trading, Financial Markets & the International Division Other Areas Core earnings*) Reklassifications**) Group, total 1, , , , , , , , , , ,016.5 *) The core earnings column corresponds to the Group figures in the Management s review. **) The relation to the Group is specified in the column Reclassifications. Reclassifications have impacted the items Net interest income and Loan impairment charges etc. in the amount of DKK 29.5 million. BALANCE SHEET Loans, advances and other receivables at amortized cost Investments in associates and group enterprises Intangible assets and property, plant and equipment *) Other assets **) Allocated assets, total Spar Nord s Local Banks Trading, Financial Markets & the International Division Other Areas Group, total 36, , , , , , , , , , ,372.2 Deposits and other payables Equity (allocated capital) Other liabilities Allocated equity and liabilities, total 47, , , , , , , , , , , , ,372.2 Disclosures income/revenue, total Internal income/revenue Internal income and eliminations, offset against costs Income/revenue, external customers Income/revenue, total , , , ,406.0 Financial ratios Return on equity, % ***) Cost share of core income Total risk exposure, end of period Number of employees (full-time equivalents, end of period) ,932 7,177 2,134 49,243 1, ,557 As in previous years, the Group uses core earnings as a performance measure. The reporting segments correspond to the Group s organizational entities, and an internal follow-up is carried out in this regard. DESCRIPTION OF BUSINESS AREA ACTIVITIES: - For a description of the activities of Spar Nord s Local Banks and Trading, Financial Markets & the International Division, please see page 55 of Annual Report. - The activities of the Local Banks include the Group s leasing activities, and the activities of Other areas include central staffs and support functions. Intra-group settlement is determined based on the same principles as in previous years and expresses contributions to earnings from the activities carried out by the respective business areas. Internal management takes place based on a net-interest consideration, and accordingly interest income and expenses are not disclosed. *) All assets are located in Denmark. **) Temporary assets amount to DKK 23.1 million, of which DKK 10.1 million relates to the Group s leasing activities and DKK 13.0 million relates to Other areas. ***) The rate of return on equity per annum has been calculated on allocated capital, which amounts to 12% of the average total risk exposure amount until and including , and 13% after this date.