Total assets Net loans Deposits Equity and related capital

Transcription

1 FOUR th QUARTER 2009

2 Key Financial Figures (Group) 3 Profit MNOK % of aver. MNOK % of aver. MNOK % of aver. total assets total assets total assets Interest income % % % Interest costs % % % Net interest and credit commission income % % % Other operating income % % % Operating costs % % % Operating profit before losses % % % Losses % % % Operating profit after losses % % % Tax % % % Result from ordinary activities after tax % (20) -0.06% % Balance sheet Total assets Net loans Deposits Equity and related capital Capital adequacy ratio 15.7 % 12.7 % 12.1 % No. of man-labour years worked in the Group

3 4 FOUR th QUARTER 2009 GENERAL INFORMATION The Sparebank Sør Group conducts banking operations in 28 different locations and estate agency business in 11 locations in Aust- Agder, Vest-Agder and Telemark. The estate agency business is managed through the bank s subsidiary ABCenter Holding AS. FOURTH QUARTER 2009 There is increasing activity in the Norwegian economy, but there is still room for more. House prices are continuing to rise and there is growing consumer demand. Exports are also rising faster than expected, while petroleum investments may be lower than estimated. The number of unemployed is relatively low, but employment figures have fallen a little more than anticipated. Norges Bank raised the reference rate of interest to 1.75 per cent in December, but kept this unchanged at its board meeting at the beginning of February this year. The positive profit performance the bank had in the 3 rd Quarter has continued in the 4 th Quarter. Underlying operations in particular have shown a good, steady trend. In the 4 th Quarter, profit before deduction of losses was MNOK 138, which is much better than the average for the previous quarters. The losses are higher in the 4 th Quarter than in the previous quarter, but they are still not higher than was expected. In the 4 th Quarter, credit margins for Norwegian banks were much more stable than in the previous periods. There has been little impact on the accounts in the 4 th Quarter, as the bank reports securities-related debt at market value. The bank s bond and share portfolio have had a positive value trend. At the end of the 4 th Quarter, losses and loan defaults are moderate, despite the current financial climate, but these could change in future depending on the cyclical development. There is still a high level of activity in the retail banking market, albeit at a slightly lower level than at the end of the 3 rd Quarter. Annual lending growth has fallen from 11.1 per cent to 9.4 per cent at the end of the 4 th Quarter. In the corporate market, activity is still at a lower level than before. Sør Boligkreditt AS is an important means of obtaining favourable funding for the bank. At the end of the quarter, BNOK 5.3 in mortgage loans has been transferred to the company. At the end of November, the bank received a capital injection of MNOK 400 through subscription for MNOK 400 in sub-ordinated bonds. This will strengthen the bank s core capital and will allow positive growth and development. There has been a positive trend in the estate agency business, which is managed through subsidiary ABCenter Holding AS, but the aggregate profit is still weak and therefore, work continues to improve earnings. PROFIT At year-end 2009, the Group s pre-tax profit was MNOK 206, which corresponds to 0.58 per cent of the average total assets. Profit is MNOK 188 up on the previous year. The most important reason for the improved profit is the net profit effect of value changes in financial instruments. Quarterly results have shown a marked improvement through the year. Return on net capital is 6.6 per cent for the year as a whole. NET INTEREST At year-end 2009, net interest is MNOK 624, which is down MNOK 5 from the previous year. As a percentage of the average total assets, this corresponds to 1.76 per cent, compared with 1.98 per cent the previous year. The negative trend began primarily in the 1 st Quarter this year, due to deferred high financing costs in relation to the terms and conditions on customers deposits and loans. The financing costs were gradually reduced through the 2 nd Quarter. In the second half of the year, the bank has achieved a net interest that is ahead of what was budgeted for this period. The margins in both the retail banking and the corporate market have shown a steady level in the last months of the year. OTHER (NON-INTEREST) INCOME In total, other (non-interest) income is MNOK 220, compared with MNOK 57 in the same period last year. In relation to average total assets, this corresponds to 0.61 per cent, compared with 0.18 per cent in the previous year. Net income from financial instruments at market value is the most important reason for the significant increase in other (noninterest) income. In 2009, this was MNOK -33, compared with MNOK -138 in Considerably lower credit margins on securities-based debt at year-end, compared with at the beginning of the year, have resulted in a higher market value for securitiesbased debt with corresponding charging against income as a result. These factors add up to a total charge of MNOK 200. On the other hand, lower credit margins mean an increase in the value of the bonds on the asset side and there has also been a positive trend in the share value. In total, this has had a positive impact on profit of MNOK 165. Net fees and commissions fell by MNOK 4, due to lower income from payment transfer services and investment products and also from the Bank s real estate broker business. OPERATING COSTS Group costs totalled MNOK 529, which is 1.48 per cent of the average total assets. This is down MNOK 25 or 0.26 percentage points compared with the previous year. The most important single reason for the reduction in costs is reduced costs in the estate agency business. However, there have also been much lower costs associated with refurbishment of business properties in 2009.

4 5 CREDIT LOSSES AND DEFAULTED COMMITMENTS A net total of MNOK 109 in credit losses, which corresponds to 0.37 per cent of the loan portfolio, has been charged against the accounts. The losses have been reduced by MNOK 5 compared to the previous year. The majority of the losses are associated with a few commitments in the corporate market. Increased collective write-downs constitute MNOK 23 of the total losses. Total collective write-downs were MNOK 114. Net defaulted and bad and doubtful commitments were MNOK 256, compared with MNOK 253 at year-end 2008, which is 0.87 per cent of the loan portfolio, compared with 0.89 per cent in BALANCE SHEET At the end of 2009, total assets were BNOK 35.4, compared with BNOK 33.7 the previous year, which is a growth of 5.1 per cent. Total lending growth was 3.3 per cent, where 9.4 per cent is in the retail banking market and -6.3 per cent is in the corporate market. Loans in the retail banking market now constitute 64.8 per cent of total loans. Deposit growth is 5.7 per cent, where corporate deposits rose by 4.0 per cent and retail banking deposits by 6.9 per cent. The deposit ratio is 58.1 per cent in the Group and 70.6 per cent in the parent bank. Bond and certificate holdings have increased by BNOK 1.7, mainly due to the Norwegian Government s swap arrangement for covered bonds. Funding requirements in excess of deposits have been met through long-term funding and loans in Norges Bank. RISK MANAGEMENT There are four different risk areas: credit risk, market risk, operational risk and liquidity risk. Risk is managed through powers of attorney, targets and limites imposed by the Board of Directors. The trend in the financial markets and in our own loan portfolio is monitored closely in order to identify changes in the overall risk situation. Credit risk, both in the retail banking and corporate market, has mainly developed in accordance with the macro-situation. The bank s market risk is considered to be acceptable. Changes in credit spreads on the bank s securities-based debt have the greatest impact on profit for the bank. Easier access to long-term funding, together with covered bonds, has secured the bank s liquidity situation and therefore this is very good at year-end. EQUITY AND RELATED CAPITAL CAPITAL ADEQUACY RATIO The total equity and related capital is BNOK 3.1, of which BNOK 0.3 is subordinated loan capital and BNOK 0.4 is a subordinated bonds loan. The remainder is accrued earnings, which have been assigned to the Savings Banks Fund. At year-end 2009, the bank s capital adequacy ratio was 15.7 per cent, based on the standard approach outlined in the Basel II rules. Core capital ratio was 14.1 per cent. FUTURE OUTLOOK There is still uncertainty regarding the future trend, but the outlook for the coming year seems to be more promising than at the same time in The financial crisis had a negative impact on the first half of 2009, but there has been a steady recovery in the second half of the year and we expect 2010 to be a much better year than However, new economic setbacks and turbulence in the financial markets will have a negative effect on profit. With its sound capital base, good underlying operations competitive terms and conditions the bank is well equipped to face the challenges in Arendal, 23 February 2010 The Board of Directors of Sparebanken Sør

5 6 Profit and Loss Account Parent BANK Group Notes Interest and similar income Interest and similar costs Net interest and credit commission income Commission receivable and income from banking services Commission costs and costs relating to banking services Net commission income Income from financial instruments at market value with change in value above the profit Write-down and profit / loss on investments valued at cost price or investments considered to be available for sale Income from other financial instruments Other operating income Total other operating income Personnel costs Depreciation and write-down of fixed and intangible assets Other operating costs Total operating costs Operating profit before losses Losses on loans, guarantees, etc Pre-tax profit Tax payable on ordinary profit Profit from ordinary operations after tax Minority interests Majority interests

6 Balance Sheet ASSETS Notes Cash in hand and claims on central banks Loans to and claims on financial institutions Net loans to customers Repossessed assets Bonds and certificates Shares Financial derivatives Equity stakes in Group companies Equity stakes in associated companies Intangible assets Assets relating to deferred tax Tangible fixed assets Other assets TOTAL ASSETS Liabilities and equity capital Debt to financial institutions Deposits from and liabilities to customers Debt incurred through issue of securities Financial derivatives Obligations related to tax for the period Deferred tax Other obligations Subordinate loan capital Subordinate bonds loan TOTAL LIABILITIES Minority interests Other reserves Savings Banks Fund Retained profit Total equity capital TOTAL LIABILITIES AND EQUITY CAPITAL OFF-BALANCE SHEET ITEMS Contingent liabilities: Guarantees Book value of assets pledged as collateral security for debt Other contingent liabilities 3 4 1

7 8 Cash Flow Statement Net cash flow from operations Change in loans Change in other assets Change in securities Change in loans to other financial institutions Change in deposits from customers Change in funding loans from financial institutions Change in other liabilities Net cash flow from current financial operations Investment in fixed assets Net invested in group and associated companies Sale of fixed assets Net cash flow from investments Change in debt incurred through issue of securities Net cash flow from long-term financing operations Net change in liquidity Liquid assets as at 01/ Liquid assets at the end of the period Equity movements Equity as at 01/ Result Donations Change in market value of equity capital instruments available for sale Other changes in equity Equity at the end of the period

8 NOTES 9 Note 1 - Accounting principles The accounts for the 2 nd quarter have been prepared in accordance with International Standards for Financial Reporting, IFRS, including IAS34. The accounting principles are the same as those which were applied to the 2008 accounts and these are described below. Note 2 - Income from financial instruments Income from financial instruments with the value change above the profit Profit / loss and value change trading port. equity instruments Profit / loss and value change certificates and bonds Value change - loans and deposits at market value Value change - associated derivatives Value change - issue securities at fixed interest rate Value change - associated derivatives Value change - issued securities at floating interest rate Value change - other financial instruments at market value Total income from financial instruments at market value with value change above profit Income from other financial instruments Dividend - equity capital instruments Foreign exchange trading Total income from other financial instruments

9 10 NOTES Note 3 - Losses on loans and guarantees Individual write-downs Individual write-downs at the start of the period Per. confirm. loss - individual write-down in previous years Increased individual write-downs in the period New individual write-downs in the period Reversal of individual write-downs in the period = Individual write-downs at the end of the period Write-down of groups of loans Write-down of groups of loans at the start of the period Period s change in group write-downs = Write-downs on groups of loans at the end of the period Loss costs for the period Period s change in individual write-downs Period s change in group write-downs Per. conf. losses - individual write-down made in previous years Per. conf. losses - individual write-down not made in previous years Carried to income as interest income Period s recoveries from previously confirmed losses = Loss costs for the period Note 4 - Defaulted, bad and doubtful commitments Defaulted commitments Individual write-downs Net defaulted commitments Other bad and doubtful commitments Individual write-downs Net defaulted commitments Defaulted commitments are the total of commitments where at least one loan has been in default for 90 days or more.

10 NOTES 11 Note 5 - Deposits from customers according to different sectors Retail banking customers Public sector Primary industries Industry Building and construction Transport and communication Wholesale and retail trade Hotels and restaurants Real estate Financial / business services Sundry / other sectors TOTAL Note 6 - Gross lending according to the different sectors Retain banking customers Public sector Primary industry Industry Building and construction Transport and communication Wholesale and retail trade Hotels and restaurants Real estate Financial / business services Sundry / other sectors TOTAL GROSS LENDING Write-downs on loans TOTAL NET LENDING

11 12 NOTES Note 7 - Equity and subordinated capital - capital adequacy ratio (consolidated) Savings Banks Fund Subordinated bonds 400 Other core capital 15 Additions Deductions Core capital Subordinated loan capital Fund for market value reserve 12 9 Supplementary capital Equity capital in other financial institutions 0 0 Net equity and subordinated capital Weighted asset calculation basis Capital adequacy ratio 15.7 % 12.7 % Core capital adequacy ratio 14.1 % 11.1 % Note 8 - Segment reporting Reporting per segment Group Group Retail b. Corp. Estate Un- Retail Corp. Estatye Un- Profit & Loss Account (in MNOK) market Market Agency alloc. Total market Market Agency alloc. Total Net int. and cred. commission income Net other operating income Operating costs Op. profit bef. Losses by segment Losses on loans and guarantees Pre-tax profit per segment Net loans to customers Other reserves Total assets per segment Deposits from/liabilities to customers Open accts./other liabilities Total liabilities per segment Equity Total liabilities and equity per seg

12 Quarterly PROFIT PERFORMANCE 13 Parent Bank 4Q 3Q 2Q 1Q 4Q 3Q Net int. and credit commission income Net other operating costs Operating costs Operating profit before tax cost Losses on loans, guarantees, etc Pre-tax profit Tax payable on ordinary operations Profit from ordinary oper. after tax Group 4Q 3Q 2Q 1Q 4Q 3Q Net int. and commission income Net other operating costs Operating costs Operating profit before losses Losses on loans, guarantees, etc Pre-tax profit Tax payable on ordinary profit Profit from ord. operations after tax Group % of average total assets 4Q 3Q 2Q 1Q 4Q 3Q Net int. and credit commission income Net other operating costs Operating costs Operating profit before losses Losses on loans, guarantees, etc Pre-tax profit Tax payable on ordinary profit Profit from ord. operations after tax

13 14 Key figures (Group) Profit and loss account Interest and credit commission income Interest costs Net interest and credit commission income Net other operating income Operating costs Operating profit before losses Losses on loans, guarantees, etc Pre-tax profit Tax payable on ordinary profit Profit from ord. operations after tax P&L account as a percentage of average total assets Interest and credit commission income 4.43% 7.05% 5.64% 4.27% 3.75% Interest costs 2.67% 5.07% 3.64% 2.15% 1.47% Net interest and credit commission income 1.76% 1.98% 2.00% 2.12% 2.28% Net other operating costs 0.61% 0.18% 0.97% 1.02% 1.14% Operating costs 1.48% 1.74% 1.72% 1.84% 1.93% Operating profit before losses 0.89% 0.42% 1.25% 1.30% 1.49% Losses on loans, guarantees, etc. 0.31% 0.36% 0.04% Pre-tax profit 0.58% 0.06% 1.21% 1.30% 1.49% Tax payable on ordinary profit 0.15% 0.12% 0.36% 0.37% 0.41% Profit from ord. operations after tax 0.43% -0.06% 0.85% 0.93% 1.08% Average total assets From the balance sheet Total assets Net loans Deposits from customers Equity and subordinated capital Capital adequacy ratio 15.7 % 1) 12.7 % 1) 12.1 % 13.0 % 12.8 % Other key figures Deposits as a % of loans 58.1 % 56.7 % 60.8 % 66.0 % 64.2 % Return on equity 6.60% 0.88% 11.54% 11.60% 13.20% Number of man-labour years working in the Group ) Based on the Basel II standard approach.

14 Sparebanken Sør, Postal address: Postboks 782 Stoa, N-4809 Arendal, Norway Telephone: , Telefax: , S.W.I.F.T. address: AASPNO22, Company reg.no.: NO