INVESTOR PRESENTATION SPAREBANKEN VEST BOLIGKREDITT AS BERGEN, NORWAY FEBRUARY 2018 EGIL MOKLEIV, CEO

Transcription

1 INVESTOR PRESENTATION SPAREBANKEN VEST BOLIGKREDITT AS BERGEN, NORWAY FEBRUARY 2018 EGIL MOKLEIV, CEO

2 EXECUTIVE SUMMARY Sparebanken Vest Sparebanken Vest Boligkreditt AS The third largest savings bank in Norway with a strong market position in Western Norway Capital ratio 18.7 %* - Core Tier 1 ratio 15.0 %* - Leverage ratio 7.3 % at 31st December 2017 Rated A1 (negative outlook) by Moody s Strong asset quality 76 % total lending to retail customers, of which 96% is residential mortgages 100% owned and dedicated covered bond subsidiary of Sparebanken Vest Cover pool consisting of 100 % prime Norwegian prime residential mortgages High quality cover pool reflected by the weighted average LTV of 55.4 % at 30 December 2017 Covered bonds rated Aaa by Moody s with five notches leeway Strong legal framework for covered bonds in Norway Good position in the well-functioning domestic covered bond market which mitigates refinancing risk Besides domestic issuances, regular benchmark covered bonds issues in EUR-market Norwegian economy Western Norwegian economy Higher growth ahead. Growth in business and petroleum investments and exports expected to increase GDP-growth in 2018 Improved cost competitiveness and increasing mainland export helped by NOK depreciation Low unemployment House-prices expected to decline in first half of 2018, before stabilising. Still major regional differences Excellent financial position of the Norwegian government with large budget surplus and the government pension fund accounting for over 300 % of GDP The most diversified business region in Norway with industrial structure including oil and gas industry, metal industry, engineering, fisheries, fish farming, shipping, ship building and tourist industry Unemployment in Western Norway is falling rapidly Housing market expected to regain positive growth in second half of * With Basel I floor under transitional scheme 2

3 SPAREBANKEN VEST

4 SPAREBANKEN VEST Market Area Brief Information about Sparebanken Vest Established in 1823 and listed on Oslo Stock Exchange since 1995 Norway s second oldest savings bank Third biggest Norwegian-owned bank Head office in Bergen, Hordaland Sogn og Fjordane Market share*: 16,9% Hordaland Market share*: 26.8% Rogaland Market share*: 5.6% Thirty-four branch offices in Hordaland, Sogn og Fjordane and Rogaland The Group offers a wide range of services, incl. insurance, stockbroking and estate agency activities Over NOK 175 billion in assets under management, and approximately 273,000 retail customers and 11,900 corporate customers Return on equity target: > 11% * Market share in retail market 4

5 KEY DEVELOPMENTS Return on equity as a percentage* Profit per equity certificate** Dividend per equity certificate** Core Tier 1 capital as a percentage Write-downs in NOK millions* Donations in NOK millions *) For 2016, corrections have been made for the winding up of the pension scheme in the amount of NOK 243 million, the sale of a monitored portfolio of NOK 58 million, the taking to income of NOK 108 mill. in dividend from VISA and NOK 68 mill. in restructuring costs. **) An equity certificate issue whereby 27.3 million new equity certificates were issued was carried out in

6 STRONG POSITION IN THE RETAIL MARKET - WELL-DIVERSIFIED IN THE CORPORATE MARKET Loan portfolio NOK bill. Breakdown by sector in the corporate market, NOK 35.9 bill. 24 % 76 % Corporate Retail 6

7 SOLID GROWTH -IN BOTH RETAIL AND CORPORATE MARKETS Retail market Lending NOK billion Corporate market Lending NOK 35.9 billion 7

8 A MORE PERFORMANCE-ORIENTED BANK -SOUND OPERATIONS RESULT IN STRONG PROFIT PERFORMANCE Return on equity as a percentage Costs as % of average assets under management 8

9 STABLE DEFAULTS AND POTENTIAL BAD DEBT* % % NOK million % 2% ,92% 0,96% 0,97% 0,96% 0,92% Q Q Q Q Q Retail Corporate % of total 1% 0% *) Includes all defaults, not just defaults of payment. Includes commitments with individual write-downs, calculated as a percentage of the total lending volume. 9

10 STABLE LEVELS OF PROVISIONS Write-downs as % of gross lending 0,9 % 0,8 % 0,7 % 0,6 % 0,5 % 0,4 % 0,3 % 0,2 % 0,1 % 0,77% 0,75% 0,77% 0,77% 0,70% Capitalised write-downs (MNOK) 0,0 % Q416 Q117 Q217 Q317 Q417 0 Individual write-downs Group write-downs Write-downs as % of gross lendings 10

11 MOODY S RATING - SENIOR UNSECURED DEBT RATING: A1 (NEGATIVE OUTLOOK) Main takeaways Moody`s emphasises the bank s strong regional retail franchise, good capital metrics, strong asset quality and resilient earnings performance in Emphasis has also been placed on the bank s strong financial fundamentals and low Loss Given Failure score (LGF). Ratings Recent developments On the 10th of July 2017, Moody s changed the outlook for Sparebanken Vest s rating to A1 Negative from A1 Stable. The reason given by Moody s for the change in outlook is the implementation of the Bank Bank Recovery and Resolution Directive in Norwegian law. The rating decision affected all Norwegian banks who already had an expectation of government support in times of distress implemented into their ratings. Bonds issued by Sparebanken Vest Boligkreditt AS are rated by Moody s and have an Aaa rating with stable outlook. Senior Unsecured Debt A1/P-1 Negative LT Bank Deposits A1/P-1 Negative Baseline credit assessment (BCA) baa1 11 Source: Moody s, Sparebanken Vest, Cicero Consulting 11

12 REGULATORY CAPITAL -REQUIREMENTS MET BY A GOOD MARGIN Core Tier 1 capital. Percent Leverage ratio. Percent 7,3 7,1 7,2 7,3 7,3 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 The dotted line shows regulatory capital requirements. 12

13 GROWTH AMBITIONS IN 2018 Expected credit growth in the retail market (C2) Expected credit growth in the corporate market (C2) 5.3% 4.0% Our growth target 9.0% Our growth target 6.0% 13

14 SPAREBANKEN VEST BOLIGKREDITT AS

15 SPAREBANKEN VEST BOLIGKREDITT AS Market Area Brief Information about Sparebanken Vest Boligkreditt Wholly owned subsidiary of Sparebanken Vest - and a dedicated covered bond company Revolving credit facility provided by Sparebanken Vest to cover payment obligations in covered bonds for a rolling 12 month period less amounts already disbursed under the facility Loans transferred to Boligkreditt as true sale on a nonrecourse basis Cover pool 100 % prime, Norwegian residential mortgages Covered bonds rated Aaa by Moody s five notches leeway Approval from the Norwegian FSA to report capital according to AIRB methods 15

16 ELIGIBILITY CRITERIA FOR THE COVER POOL Customer criteria Credit criteria Collateral Type of properties Type of products Employed retail clients and independent self employed individuals Resident in Norway No negative credit history Probability of default max 1.25% Not in arrears Not delinquent 31 days or loss write-down Max LTV 75% Recent valuations (less than 3 months) Quarterly valuation from independent AVM provider Primary residences Cooperative housing loans No holiday homes Principal repayment loans Revolving credits (flexi-loans) Fixed and variable rate loans Source: Sparebanken Vest Boligkreditt 16

17 COVER POOL (1/2) Cover pool as of Total cover pool NOK 78,7 bn Total loan balance (mortgages) NOK 76.2 bn Average loan balance NOK 1,333,010 No. of loans 57,142 No of properties 48,403 WA seasoning (in months) 43 WA remaining terms (in months) 281 WA indexed LTV (based on limits) 55.40% WA indexed LTV (on drawn amounts) 53.54% Variable rates 83.00% Defaults (Basel) NOK 64.6 m OC level (eligible)* 29.0% OC level if house prices drop 20% 21.7% OC if house prices drop 30% 13.9% 40 % 35 % 30 % 25 % 20 % 15 % 10 % 5 % 0 % Distribution according to LTV (indexed) 37,33% 18,10% 17,83% 13,99% 10,90% 1,85% 0 40% 40 50% 50 60% 60 70% 70 80% >80% 100% prime Norwegian residential mortgages 3.2% substitute assets in the cover pool 99.92% performing loans Moody s TPI of High CB rated Aaa with leeway of five notches** Regulatory minimum OC-requirement: 2.0% Cover Pool Collateral Score: 5.0% * Based on hedged value of bonds ** Sparebanken Vest is rated A1 by Moody s (negative outlook) 17

18 COVER POOL (2/2) Geographic Distribution Development in Arrears and Indexed LTV 1,0 % 75% 70% Rest of Norway (5.3%) Sogn & Fjordane (6.0%) 0,8 % 0,6 % 0,4 % 0,2 % 65% 60% 55% 50% 45% 40% 35% LTV (RA) Hordaland (74.6%) 0,0 % Q4 08 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q % Rogaland (14.1%) Properties mainly located in the market area of Sparebanken Vest in Western Norway Western Norway has a very diversified industrial structure Low arrears LTVs calculated based on limit of flexible credit mortgages (i.e. undrawn portion included) 18

19 MATURITY PROFILE - AMORTISATION OF MORTGAGES VS. COVERED BOND MATURITIES EUR bn des. 17 apr. 18 aug. 18 des. 18 apr. 19 aug. 19 des. 19 apr. 20 aug. 20 des. 20 apr. 21 aug. 21 des. 21 apr. 22 aug. 22 des. 22 apr. 23 aug. 23 des. 23 Covered Bonds Planned amortisation cover pool Real amortisation cover pool (2,5% Prepayments)* Equivalent of EUR 1 bn mature in the remainder of 2018 The maturity profile of CBs matches real amortisation in mortgage portfolio in the cover pool * Refers to prepayment level of 2.5% per month, which is the long term average observed in the cover pool 19

20 RISK MANAGEMENT - LOW RISK LEVEL Credit risk Credit risk framework is set out in separate document stating which loans can be bought Board resolution required for any change in credit risk framework Framework requirements: maximum risk level (PD), type of property, objective documented LTV threshold and customer requirements Credit risk managed by IRB standards Market risk Currency risk 100 % hedged by swaps, open limit of MNOK 10 Interest rate risk hedged by swaps if any, limit of MNOK 40 (based on 1 % parallel shift in yield curves) No investments/placements in risky assets; Norwegian government or high quality fixed income securities (so far only rated Norwegian covered bonds investments) Liquidity risk The law requires positive cash flow from the cover pool to cover bond holders Soft bullet structure on all covered bonds issued Note Purchase Agreement with parent securing that Boligkreditt will be able to meet the next 12 months of maturities at all times 20

21 NORWEGIAN ECONOMY

22 KEY INDICATORS OF THE NORWEGIAN ECONOMY E 2019E 2020E Mainland GDP 1.1 % 1.8 % 2.3 % 2.2 % 1.9 % Private Consumption 1.5 % 2,4 % 2.3 % 2.2 % 2.2 % Real business investments * 4.1 % 5.4 % 6.2 % 3.0 % 0.9 % Oil investments * % -4.0 % 6.0 % 6.0 % 3.0 % Exports Mainland * -6.0 % 2.2 % 3.8 % 3.6 % -6.0 % Core inflation * 3.0 % 1.4 % 1.7 % 1.9 % 2.1 % NIBOR (Level) * 1.0 % 1.0 % 1.0 % 1.2 % 1.7 % Unemployment, LFS (Level) * 4.7 % 4.2 % 3.7 % 3.4 % 3.3 % Source: Norges Bank, Statistics Norway and Sparebanken Vest. *Mainland non-financials 22

23 VARIETY OF EMPLOYMENT IN WESTERN NORWAY - JOBS ARE SPREAD ACROSS A WIDE RANGE OF INDUSTRIES No. jobs Rogaland Hordaland Sogn & Fjordane 23 Source: Statistics Norway 23

24 UNEMPLOYMENT - FALLING IN WESTERN NORWAY Norway, Unemployment Labour Force Growth in Western Norway 5, , , Prosent 3,5 3,0 2,5 2,0 1,5 No. of Persons , , Norway Sogn & Fjordane Hordaland Rogaland Western Norway, Employed Persons Western Norway, Labour Force 24 Sources: Statistics Norway, NAV, Macrobond/Sparebanken Vest 24

25 HOUSING MARKET COOLING DOWN - RECORD-HIGH HOUSE-BUILDING AND MORE STRINGENT REQUIREMENTS Year-on-year growth Comments House prices peaked in March last year. Demand is slowly picking up, and prices are levelling. Since the peak, house prices have fallen by 4%, but with large regional differences: 20 % Fall of 9% in Oslo - Fall of 5.5% in Bergen - Flat in Stavanger Stavanger and surrounding area Bergen Oslo Total Record-high house-building is an important driver of the fall in prices in Oslo and Bergen, but more stringent requirements in the housing loan regulations has also affected developments, particularly in Oslo. Source: Eiendom Norge, FINN and Eiendomsverdi AS. 25

26 WESTERN NORWAY INDEX ,9 The index is created from a survey of 700 businesses in Norway s western counties. They are asked about their results the last three months and their expectations for the next six months Q112 Q312 Q113 Q313 Q114 Q314 Q115 Q315 Q116 Q316 Q117 Q317 Q1 18 Quarterly index Expectation index 61,0 The index can vary between 0 and 100, where a number above 50 indicates a positive view of the economic situation and development, while a figure below 50 indicates pessimism. 26 Source: Respons Analyse and Sparebanken Vest December

27 OIL, GAS, OFFSHORE - NORWAY S MOST IMPORTANT INDUSTRY THE LAST 40 YEARS The largest contributor to wealth creation, government income, investments and export Estimated that over 50% of our total petroleum resources are left as reserves, contingent resources, and undiscovered resources Over 185,000 employed directly or indirectly by the petroleum industry Declining since 2014 An important source of revenues for the government through various channels AQUACULTURE AND FISHING - LONG TRADITIONS ON THE WEST COAST OF NORWAY Norway is one of the world s largest producers and exporters of fish Mostly salmon and cod Approx. 5,900 people are directly employed in aquaculture production in Norway Including spin-off effects like transportation and commerce, it is estimated that about 21,000 people are employed in aquaculture related activities RENEWABLE ENERGY - THE GEOGRAPHY OF WESTERN NORWAY IS IDEAL FOR PRODUCING GREEN ENERGY Nearly all power production in Norway comes from hydroelectric power Approx. 1,500 existing hydroelectric facilities 36% located in the three western counties Potential for upgrades and extensions In 2016, 1.4 % of Norwegian power production came from wind power Norway has some of Europe s best conditions for harvesting wind power Power cables under construction to Germany and UK 27 Source: Norsk olje og gass, Norwegian Petroleum Directorate, The Norwegian Government, Norwegian Petroleum, Statistics Norway, SNL, FAO, Norwegian Seafood Counsil, fisheries.no, European Commission, Statnett, The Norwegian Water Resources and Energy Directorate 27

28 ECONOMIC CONDITIONS GDP growth Oil price and fx rate Salmon price Investments (as share of GDP-mainland) 28 Source: Sparebanken Vest / Macrobond 28

29 HOUSEHOLDS Real disposable income growth Credit growth Retail sales index Consumption growth 29 Source: Sparebanken Vest / Macrobond 29

30 HOUSE PRICES -RECORD-HIGH HOUSE-BUILDING AND MORE STRINGENT REQUIREMENTS Introduction Nominal house prices, 2003 = 100 Average price increases in 2017: +5.7% YTD in 2018: - 0,4% Large regional differences Average yearly growth rate of 6.9 percent in period The last year the growth has stagnated in Oslo Real estate transactions and volume available for sale House prices deflated w. GNDI per capita, 2000 = Source: NEF Price Statistics, Macrobond, Sparebanken Vest 30

31 NORWAY S NATIONAL WEALTH - MORE THAN OIL WEALTH Oil revenue flows into the fund A limited amount is withdrawn every year and channelled into government outlays - Public use of oil revenues is limited by a fiscal rule to 3% The fund can also be used as a counter-cyclical buffer The fund cannot invest in Norway nor Norwegian assets When the NOK depreciates towards USD and EUR, the fund s value in NOK increase The future wealth from Oil and Gas reserves makes up only about 2.6% of Norway s national wealth. The Norwegian government estimate that 75% of Norway s national wealth stems from the present value of future human capital. - In other words, the majority of Norway s wealth stems from the country s highly educated, competent working force 8.6% 2.6% 13.7% 75.0% Human capital 31 Real capital Source: Macrobond/Sparebanken Vest, Finance Norway, NBIM 31

32 NORWEGIAN ECONOMY - INTERNATIONAL CONTEXT GDP Growth, 2000=100 Unemployment Index 32

33 NORWEGIAN GOVERNMENT FINANCIALS Government Net Debt, Estimate IMF Government Pension Fund 33

34 THE NORWEGIAN MORTGAGE MARKET

35 NORWEGIAN HOUSING MARKET KEY FEATURES Home ownership Social benefit system Tax incentives Personal liability Mortgage lending in Norway Among the highest in the world - around 80% of households own their own home Buy-to-let market is limited in Norway Best social security benefits for unemployed people in the world (according to OECD) On average unemployment benefit approx. 62% of previous salary Unemployment benefits paid for minimum of 104 weeks All interest expenses are tax deductible in Norway Low effective real estate tax - i.e. approx. 40 pct. of market value Capital gain on a dwelling is tax-free after one year of occupancy by the owner Borrowers personally liable for their debt - also after foreclosure/forced sale Strong incentive to service debt reflected in low arrears Transparent and reliable information about borrowers available to the lenders 95% of residential mortgage loans granted by banks Typical maturity years Around 90% of residential mortgages variable rate loans Banks allowed to increase interest rates with a six weeks notice to the borrower No sub-prime market in Norway 35

36 HOUSE PRICES - LARGE REGIONAL DIFFERENCES IN NORWEGIAN HOUSE PRICES Bergen Stavanger Oslo Norway Price change past month 3.9 % 1.0 % 2.7 % 2.0 % Price change past 12 months -2.5 % -0.9 % -9.4 % -2.2 % Price change past 5 years 15.5 % % 35.1 % 24.0 % Time on market (no of days) Figures as of September

37 CONTACT DETAILS / MORE INFORMATION Egil Mokleiv, Managing Director/CEO, Sparebanken Vest Boligkreditt AS Mobile: egil.mokleiv@spv.no Fredrik Skarsvåg, COO, Sparebanken Vest Boligkreditt AS Mobile: fredrik.skarsvaag@spv.no Websites for more information Sparebanken Vest Boligkreditt Sparebanken Vest Web-site for the Norwegian Covered Bonds Market 37

38 DISCLAIMER This material does not constitute an offering circular in whole or part and you must read the actual offering circular related to the Covered Bond program and the notes which may be issued from time to time thereunder as referred to in this material (respectively the"program" and the Notes ) before making an investment decision. The offering circular for the Program is available from the Arrangers. You should consult the offering circular for more complete information about Sparebanken Vest Boligkreditt and the Program. The Notes are not to be offered or sold in any jurisdiction in circumstances in which the distribution of this document or the Notes would be prohibited in such jurisdiction. This document must not be acted on or relied on by persons who are not eligible to invest in the Notes. Any investment or investment activity to which this communication relates is available only to person's eligible to invest in the Notes and will be engaged in only with such persons. By electing to receive this transmission, you represent, warrant and agree that you will not attempt to reproduce or re-transmit the contents of this presentation by any means. By receiving this presentation, each recipient (i) acknowledges that the offering is being made only outside the United States to non-u.s. persons in reliance upon Regulation S under the U.S. Securities Act Of 1933 and (ii) is deemed to represent that it is not a U.S. person within the meaning of Regulation S and is not accessing the presentation from a location within the United States. In addition, institutions mentioned in this material, affiliates, agents, directors, partners and employees may make purchases and/or sales of the Notes as principal or agent or may act as market maker or provide investment banking or other services in respect of the Program or the Notes which may be issued from time to time thereunder. Sparebanken Vest Boligkreditt, Sparebanken Vest, the Arrangers and the Dealers and their respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material. Although the statements of fact in this presentation have been obtained from and are based upon sources that Sparebanken Vest Boligkreditt believes to be reliable, no representation or warranty, either expressed or implied, is provided in relation to the accuracy,completeness or reliability of the information contained herein. All opinions and estimates included in this presentation constitute Sparebanken Vest Boligkreditt s judgement, as of the date of this presentation and are subject to change without notice and Sparebanken Vest Boligkreditt is not under any obligation to update or keep current the information contained herein. This presentation is the property of Sparebanken Vest Boligkreditt. 38

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