Sparebanken Møre - the Group. Presentation Preliminary results 2012

Transcription

1 Sparebanken Møre - the Group Presentation Preliminary results 2012

2 Results The best result ever in 2012 NOK million Favourable operating environment a strong county in a strong Norwegian economy Stable development in net interest income Low loan losses and low volume of loans in default Growth in all areas total assets above NOK 51,5 billion by year end Good solvency and strong liquidity Still high funding cost due to market uncertainty and strong competition in the deposits market Positive one off effect on costs related to amendments in the Pension scheme 2

3 Results ROE per cent 25, , ,0 14,0 20,2 17,7 16,5 14,9 15,0 17,1 16,4 19,2 17,3 11,5 10,1 10,2 14,0 13,4 15,6 14,1 12,8 16,0 12,2 16,4 5 5,3 0 0, ,5 3

4 Area of operation 3

5 Area of operation Founding and vision Sparebanken Møre was established in 1985 through a merger of several local savings banks. The oldest of these savings banks was established in 1843 Sparebanken Møre is a fully independent bank, and the bank follows the contract banking principle The bank has 23 district banks, with a total of 30 branches The bank's head office is located in Ålesund in Møre og Romsdal county, and the county is defined as Sparebanken Møre's operating area Sparebanken Møre has been listed at Oslo Stock Exchange since 1989 (Primary Capital Certificates/PCCs, now Equity Certificates ECs) Sparebanken Møres`s vision is described within the framework Møre a vision based on an extensive effort throughout the organisation - where the bank aims to be the leading financial institution in Møre og Romsdal 5

6 Area of operation Sparebanken Møre a brief overview Sparebanken Møre is the 6th largest Norwegian bank the bank serves customers from the county of Møre og Romsdal The population of Møre og Romsdal is close to , and the population in the municipalities where the bank is located is The bank serves about customers, whereof customers in the retail market customers in the corporate market The activity is based on traditional banking services Loans to the retail market: 63.3 % Deposits from the reail market: 56,2 % Sparebanken Møre is a fully fledged foreign exchange bank Sparebanken Møre is rated A3 (stable) by Moody`s 6

7 Area of operation Contract Banking Lev. Prov. av of prod/tj prod/serv. ä nst Kontrakt Contract Lev. Prov. av of prod/tj prod/serv. ä nst Kontrakt Contract Prov. Lev. of av adm.supp. adm.st ö d Kontrakt Contract Kontrakt Contract Prov. Lev. of av adm. adm.st supp. ö d Prod,/serv. Prod/tj ä nster in-house i egen regi Bankens Bank s own egna resources resurser Kontrakt Contract Advisor Kund - Kontrakt Contract ansvarig Relation Relationship v ä rde Kontrakt Contract Adm.st Adm.supp. ö d i in-house egen regi Bankens Bank s total totala resources resurser Customer The business model Contract Banking means that the Bank has opted to conduct operations and manage all development inhouse or together with partners/providers based on what is best for the Bank`s customers and what provides the best revenue generation for the Bank. Contract Banking requires: - Competence to identify partners when this creates value both for our customers and the Bank - Competence to identify partners, enter into agreements with these partners, develop, maintain and discontinue relationships with partners 7

8 Area of operation Dominant industrial and commercial sectors in Møre og Romsdal Fisheries Fish and fish products/ Foodstuff industry Chemical industry Shipbuilding/Ship equipment industry Furniture industry Shipping/Offshore Oil Tourism 8

9 A strong county in a strong Norwegian economy 9

10 Economic environment The Norwegian economy is developing strongly The Norwegian economy is characterised by: - Low unemployment - Record high house prices - Increased private demand - High activity in the oil sector - Public sector growth - Low inflation and interest rates Factors contributing to growth: Expansionary Fiscal policy Expansionary Monetary policy High oil prices Credit policy measures Some growth abroad side 10

11 Economic environment Norway has a well balanced economy side 11

12 Economic environment High household debt is the main risk factor side 12

13 A strong county in a strong Norwegian economy The business sector in Møre og Romsdal is also doing well The most important drivers of growth and activity in 2012 and forward: Private consumption Public expenditures The construction sector Oil production and investment Food production and fish exports The maritime cluster Main reasons for higher growth: - Low interest rates - Expansionary fiscal policy - High oil prices - A competitive business sector - Some export market growth The Private Service Sector in M & R Production Employment *Investments The Public Sector in M & R Production Employment Investments side 13

14 A strong county in a strong Norwegian economy However, the outlook for the manufacturing sector is somewhat weaker The outlook for the manufacturing industry is somewhat weaker due to: - Low export market growth - A high level of costs - A relatively strong NOK Unemployment in M&R will stabilise around 2 ½ per cent in the coming years or rise slightly Increased demand for labour due to increased production of goods and service and limited productivity growth will keep unemployment low ,0 30,0 25,0 20,0 15,0 10,0 5,0 0,0 Manufacturing in M & R Production Employment Investments Per cent of total production and employment in M&R Production Employment Prim Constr. Public s. Priv. serv. Manuf. Others side 14

15 Norwegian housing prices will stay high... 15

16 Norwegian housing market Continue to outperform The development of house prices combined with high growth in debt are probably the most important risk factors for Norwegian households The strongest segment continues to be apartments, up 10.2 % in 2012, vastly outperforming other segments The rolling 12 month growth, 7.7 % in 2012, seems to be trending slightly down 16

17 Norwegian housing market Imbalances to disappear? The unsold stock remains at very low levels, and has been low since early In December houses sold outnumbered houses put on the market Housing starts rose from 2010 after lows during the financial crisis On an annual basis new home construction is up from the record lows in 2009 and 2010, but 2012 ended only slightly above

18 Norwegian housing market Housing prices will remain high Growth in housing prices will probably level out due to uncertainty abroad and gradually rising interest rates in Norway. A downward correction seems likely at some point, nevertheless we believe that housing prices will remain high in the coming years due to the following factors Interest costs in Norway are tax deductible at 28% of interest paid Interest rates will stay low in the foreseeable future 4 out of 5 households own their own home Strong growth in population Unemployment will stay low Good social benefits will help service debt when unemployed Personal liability for debt, gives strong incentive to service debt There are considerable differences in levels- and also developement in prices, both regional, within regions, and between different housingtypes 18

19 Deposits and loans 20

20 Deposits and loans Stable growth NOK mill Growth during the last 12 months Total assets 6.4 % Loans (net) 7.8 % Deposits 6.9 % Total assets Loans Deposits 20

21 Deposits and loans Breakdown of gross lending Mill. kroner Annual net lending growth : 12.7 % 2009: 1.6 % 2010: 5.1 % 2011: 7.0 % 2012: 7.8 % Lending growth last 12 months Gross, retail banking 9.3 % Gross, corporate 4.4 % Gross, public sector - 0 Public sector Retail banking Corporate banking 21

22 Deposits and loans Loans by sector Other 12.7 % Property 13.0% Supply 3.7% Fisheries 7.4% Retail 63.2% Other 12.7 % Private and public services 3.5 Building/construction 1.6 Financial servives Fishing Industry 1.6 Agriculture 1.1 Other 1,6 1.2 Restaurant/ hotel Retail/wholesale trade 1.3 Ship Yards 0.6 Furniture

23 Deposits and loans Breakdown of deposits NOK mill Annual deposit growth 2008: 6.6 % 2009: 5.4 % 2010: 12.7 % 2011: 3.2 % 2012: 6.9 % Deposit growth during the last months 0 Corporate banking Retail banking Public sector Retail banking 6.4 % Corporate banking 8.0 % Public sector 1.6 % 23

24 Funding and hedging 24

25 Dec 07 mar.08 jun.08 sep.08 Dec 08 mar.09 jun.09 sep.09 Dec 09 mar.10 jun.10 sep.10 Dec. 10 mar.11 jun.11 sep.11 Dec. 11 mar.12 jun.12 sep.12 Dec. 12 Funding and hedging Long term funding in place 110 % 105 % 100 % 95 % 90 % 85 % 80 % Long term financing as a percentage of illiquid assets (defined by the Norwegian FSA) has been the main quantitative target in Sparebanken Møre`s funding strategy since December The bank`s target is to stay above 100 % By the end of 2012 the indicator stands at % We have reported LCR and NSFR to the Norwegian FSA since March 2011 Status by year end LCR: 87,7 NSFR: 105,9 LBI (Target Norwegian FSA): 136,2 Internal targets by year end 2012: LCR >80 NSFR >100 Indicator Minimum 25

26 Funding and hedging Unrest, but good access to the market Margins Covered Bonds issued by Møre Boligkreditt AS has replaced senior bonds as the Group`s main source of long-term market financing Unrest in the financial markets contributed to higher margins early in The spread development in Q3 and Q4 has been positive both for Covered and Senior bonds Sparebanken Møre`s refinancing the coming years can primarily be met by issuing Covered Bonds Sparebanken Møre is rated A3 (stable) and Covered Bonds issued by Møre Boligkreditt AS are rated Aaa by Moody's 26

27 Funding and hedging High deposit to loan ratio - total financing by year end High deposit to loan ratio, 83.1 % in the bank (62.3 % in the Group) - focus on long term market funding Total market funding close to NOK 18.3 billion approximately 75 % with remaining maturity of more than one year (20-30% of market funding is renewed annually) Senior Bonds: Weighted average maturity of 2.03 years Deposits Covered Bonds Senior Bonds CDs Subordinated Loans Long Term FX Covered Bonds with a weighted average maturity of 3.90 years Other 27

28 Funding and hedging The quality of the liquidity portfolio is good Rating Market Value (NOK 1000) Country Market Value (NOK 1000) AAA Norway AA Sweden AA Germany AA Finland A Luxembourg A Denmark A Great Britain BBB Int`l organisations BBB Austria BBB Netherlands Total Total and no exposure towards the most vulnerable European economies 28

29 Funding and hedging Off-balance activity - quarterly NOK MLN Moderate risk profile in the interest rate, equity and FX markets Sparebanken Møre has no trading portfolio in these or other similar markets/instruments Client's positions are hedged in the market The bank's positions are hedged 0 IRS (NOK & Curr.) Forward FX Cross Currency Swap FRA (NOK & Curr.) Caps/Floors FX-Options 30

30 Funding and hedging Payments No of SWIFT Commercial payments No of outgoing SWIFT commercial payments pr currency Outgoing Incoming THB; 2137 GBP; 2500 LTL; Others; DKK; 4371 PLN; 5197 SEK; 5322 USD; 6252 NOK; EUR;

31 Results 31

32 Results Main figures Change during last 12 months From the Profit and Loss Account NOK mill. % NOK mill. % NOK mill. P. points % Net interest income/av. int. margin Net return, financial investments Other income Total income 1, , Personnel costs Pension Other costs Total ordinary operating costs Result before credit losses Losses on loans and guarantees Result before tax cost Tax cost Result after tax cost From the Balance Sheet Total assets 51,590 48,468 3, Net lending 43,435 40,305 3, Deposits 27,080 25,325 1, Capital adequacy ratio 4, , Core capital ratio Pure Core Capital Percentage return on equity capital Percentage return on equity capital (corr.) Costs as a percentage of income Costs as a percentage of income (corr.) Earnings per EC (the Bank)

33 Results Result as a percentage of average assets 2,25 2,2 1,95 1,93 1,75 1,25 1,65 1,09 1,10 1,68 1,34 1,54 1,44 1,41 1,32 1,40 1,44 1,35 1,27 1,32 1,15 1,52 1,45 1,23 1,14 1,63 1,53 Result from ordinary operations before losses Result before taxation 0,75 0,86 0,83 0,25 0,55 0,34 0,1 0-0,01 0,17 0,2 0,07 0,09 0,1 Losses -0,25 33

34 Results Stable and high net interest income 3,00 AS A PERCENTAGE OF AVERAGE ASSETS Net interest income in 2012 was higher than in ,50 2,00 2,17 1,97 2,03 1,96 1,93 Lower measured against average assets, 0.03 p.p. Changes: 1,50 Strong competition on loan and deposits 1,00 More liquidity on the balancesheet with higher quality 0,50 Unrest and still high margins in the funding market Low interest rate level: Less return on free capital 0,00 34

35 Results Other operating income 1,00 AS A PERCENTAGE OF AVERAGE ASSETS Higher other operating income, NOK 290 million against NOK 214 million in ,75 0,72 Higher income 0,50 0,52 0,63 0,46 0,6 Mark to market evaluation of the liquidity portfolio FX and IRS business Payment services Gains on sale of buildings 0,25 Lower income e.g. from Dividend 0,00 Part of fair value valuation - IFRS 35

36 Results Strong Cost/Income ratio ,4 46,7 44,8 49,5 48,

37 Results Losses at a very low level Losses totalled NOK 47 million 0,40 Corporate NOK 56 million Retail NOK -3 million Group of loans NOK 9 million Other NOK -15 million 0,20 Total provisions amounted to NOK 306 million by ,17 0,2 0,00 0,07 0,09 0,1 37

38 Results Losses - details

39 Results Problem Loans and loan loss reserves Problem loans & Provisions 3,5 % 52.7 % 60,0 % The volume of Problem loans has declined over the last years 3,0 % 2,5 % 50,0 % 40,0 % As a percentage of gross loans this figure ended up at 1.34 % by year end ,0 % 1,5 % 1,0 % 1,34% 30,0 % 20,0 % The Bank`s loan loss reserve coverage ratio shows a similar positive development from 50.3 % by YE 2011 up to 52.7 % by YE ,5 % 10,0 % 0,0 % ,0 % Problem loans % of gross loans Provisions in % of bad and doubtful

40 Equity and ECs 40

41 Equity Equity and related capital: Strong capital NOK mill. 4,790 4, ,925 3, , Miscellaneous Supplementary capital Capital Bonds Savings Bank's Fund Dividend Equalisation Fund Premium Fund ECs % 15,00 14,00 13,00 12,00 11,00 10,00 9,00 8,00 7,00 6,00 5,00 4,00 3,00 2,00 1,00 0, ,27 0,28 0,90 0,16 0,18 1,67 1, ,75 3,06 1,68 1,61 1,70 1,69 0,71 5,27 5,45 5,53 5,60 4,80 1,43 1,27 1,57 1,81 1,13 0,65 0,68 0,61 0,57 0,44 2,09 2,36 2,74 2,64 2,39 Target ratio for core capital: 11.0 % - Q4 2012: Actual Core Capital 13.70% 41

42 Equity Pure Tier 1 Capital and IRB Pure Tier 1 Capital (CT1) 10,65 11,05 11,85 14,45 Sparebanken Møre has adopted the Basel II Standardised approach when reporting credit risk and market risk, the Basic Indicator Approach for operational risk. The bank has applied to the Norwegian FSA to use IRB basic methods pursuant to the requirements in the Capital Requirements Regulations. The implementation process has started The final requirements related to Core Capital is not in place 4 2 Sparebanken Møre is well within current requirements for pure Tier 1 Capital (9%) 0 Standarised Approach IRB (35 % floor, mortgageloans) IRB transition floor IRB (15 % weight mortgage loans) If the requirements for pure Tier 1 Capital is changed to 12.5% and the floor for calculating mortgage risk is changed to 35%, this means a major change in the banks operational environment side 42

43 Future prospects Summing up and outlook From the CEO: Increased growth on loans and continued strong competition on deposits Cost/income ratio less than 50% remains a key management target Low losses and low level of loans in defaults. The level of losses will be moderate also going forward Good solvency and strong liquidity. Strong focus on these areas in the future side 43

44 Appendix 44

45 Management New organisation structure The bank's management focuses heavily on underlying cost drivers One instrument in this process is the adoption of a new organisation structure in the bank. This will come into effect during spring 2013 (the new structure is shown on the next page) The organisational changes will simplify the management structure and permit an even greater focus on customers since a greater proportion of the work processes and staffing resources will become more market-oriented. Among the things this will allow Sparebanken Møre to do is improve our advice services for the corporate market 15/02/2012 side 45

46 Management Board of Directors and Senior Management Leif-Arne Langøy (Chairman) Roy Reite (Dep. Chairman) Stig Remøy Ragna B. Bjerkeset Ingvild Vartdal Elisabeth M. Støle Turid Håndlykken Sylte side 46

47 NOK min Funding and hedging Long term funding - maturity The maturity profile shows the main funding instruments for the Group in the long term market , We assume resale of Covered Bonds from the swap arrangement (CB Swaps, NOK 1,681 million) , Other market funding includes bilateral loan agreements and subordinated and hybrid instruments Covered Bonds Senior Bonds CB Swap Other mkt funding side 47

48 Equity Certificates Dividend policy Based on the fact that new legal rules relating to capital and organisation forms in the savings bank sector etc. were sanctioned at a Cabinet Meeting on on the basis of coming into force on , Sparebanken Møre changed its dividend policy with effect from the 2009 accounting year. The new dividend policy reads as follows: Sparebanken Møre s aim is to achieve financial results which provide a good and stable return on the Bank s equity capital. The results shall ensure that the owners of the equity capital receive a competitive, long-term return in the form of dividends and increase in the value of the equity capital. The equity capital owners share of the net result being set aside as dividend funds, will be adapted to the Bank s equity capital situation. Sparebanken Møre s allocation of earnings shall ensure that all equity capital owners are guaranteed equal treatment. side 48

49 Equity Certificates Dividend and EC-price The PCCs/ECs of Sparebanken Møre have been listed at Oslo Stock Exchange since 1989 Total EC capital: NOK 784 million by December 2012 Dividend pr. EC: (proposed) 12 side 49

50 Contact Head Office Keiser Wilhelmsgt P.O.Box Ålesund Tel: Telex: Reuters Dealing: spare n MORE Fax: General Management Corporate Division Retail Customers Division Treasury/Markets International Payments Treasury and Markets Division Head of Division Runar Sandanger, EVP, runar.sandanger@sbm.no Chief Economist Inge Furre, inge.furre@sbm.no Treasury Ove T. Ness, VP, ove.ness@sbm.no Aud Janne Myklebust, VP, aud.janne@sbm.no Møre Boligkreditt AS: Ole Andre Kjerstad, CEO, ole.andre.kjerstad@sbm.no Markets Martin H. Skuseth (SVP), martin.skuseth@sbm.no Louis Helge Nordstrand, louis.nordstrand@sbm.no Hilde Sveen, hilde.sveen@sbm.no Roger Lervik, roger.lervik@sbm.no Tove Lunde, tove.lunde@sbm.no Svein Arne Tynes, svein.tynes@sbm.no Discretionary Asset Management Trond Moldskred, VP, Head, trond.moldskred@sbm.no International Payments and Settlements Karl Otto Hessen, VP, Head, karl.otto.hessen@sbm.no side 50