January June 2017 Interim Report for Sparbanken Skåne AB (publ)

Transcription

1 January June 2017 Interim Report for Sparbanken Skåne AB (publ) Lund, 26 July 2017 Sparbanken Skåne reported a profit (excluding goodwill amortisation and before tax) of SEK 168m for the second quarter of The bank's cost controls are solid, and net interest income has gained strength. During the quarter, preparations continued towards the goal of completing the first issue of covered bonds after summer.

2 Q2 financial summary, April June 2017 The bank's operating profit for the quarter came in at SEK 61m (50) Operating profit excluding goodwill amortisation for the April June period totalled SEK 168m (157) Net interest income increased by 3%, coming in at SEK 215m (208) Net fee and commission income rose by 2%, totalling SEK 143m (140) The bank s expenses were down 1% in the quarter, ing to SEK 308m (312) Credit losses totalled SEK +8m (+5) The transaction volume was up 1%, coming in at SEK 189bn (187) The total capital ratio was 19.3% (19.2) The LCR ed to 187% (181) (Comparative figures in parentheses refer to Q1, January March 2017) Key events in Q Profit improved in the quarter. The strong performance of net interest income and continuing low credit losses are the main reasons for this improvement. The transaction volume increased by 1 percent in the quarter driven by a strong stock market trend, increased savings in funds and insurance, and strong growth in the bank s deposits and loans. The preparations for issuing covered bonds continued during the quarter, with the bank planning to conduct the first issue after the summer. The bank has begun to implement the new Internet Bank as the standard interface for when customers log in. We've also upgraded our mobile app. The Swedish central bank s (Riksbanken) large-scale replacement of banknotes and coins with new designs placed high demands on both deposit ATMs and tellers late in the quarter. Sparbanken Skåne s three foundation owners, Sparbanksstiftelsen Färs & Frosta, Sparbanksstiftelsen 1826 and Sparbanksstiftelsen Finn, awarded various project grants during the quarter. Three hundred local projects run by clubs and associations across Skåne were awarded a total of SEK 18m. Financial summary, January June 2017 The bank's operating profit for the January June 2017 period reached SEK 111m (31) Operating profit excluding goodwill amortisation for the period totalled SEK 325m (245) The transaction volume at 30 June 2017 was SEK 189bn (176) The total capital ratio was 19.3% (18.4) The CET1 capital ratio equalled 17.5% (16.6) The leverage ratio reached 7.7% (7.2) The LCR ed to 187% (407) (Comparative figures in parentheses refer to January June 2016) 2

3 A strong quarter for Sparbanken Skåne The second quarter of 2017 continued in the same positive direction as the start of the year. Profit excluding goodwill amortisation and before tax came in at SEK 168m for the quarter. The Swedish economy is expanding, and interest rates are historically low. The Stockholm Stock Exchange performed well, which contributed to Sparbanken Skåne s 1 percent second quarter transaction volume gain to SEK 189bn. In addition to savings in funds and equities, we have also seen volume gains in the bank's deposits and loans. Excellent financial performance Operating profit before tax came in at SEK 61m for the quarter. The goodwill item from when the bank was founded in 2014 is amortised over a period of five years. Amortisation for this goodwill was charged to the operating profit for the period in the of SEK 107m. New sales of products and services are meeting the bank s targets. The quality of the bank s loan portfolio is excellent, and risks remain at a low level. At the end of the period, the total capital ratio was 19.3 percent, the leverage ratio was 7.7 percent and the LCR was 187 percent. We are now poised to issue covered bonds. The bank plans to issue the first bonds after the summer. This will further diversify the bank's borrowing. Market stability In the private segment, residential mortgage volumes are performing well. We are starting to see the effects of the region s aggressive growth plans, especially in Lund. In the corporate segment, one of the sectors showing strong growth is the agriculture sector. However, we have observed that the demand for new investment appears somewhat cautious. We have launched several solutions during the period that make the everyday lives of our customers easier. The bank has begun implementing the new Internet Bank as the standard interface for when customers log in, providing a user-friendly environment that works equally well on computers, mobile phones and tablets. One new feature is that customers can directly apply for consumer loans online. We also upgraded our mobile app for private customers and partnered with Swedbank to launch a social platform for equity trading, SprinkleBit. We experienced significantly increased contact with customers during the quarter as a result of the Swedish central bank's large-scale replacement of banknotes and coins. The old 100 and 500-kronor banknotes and the 1, 2 and 5-kronor coins became invalid after 30 June This placed high demands on our deposit ATMs and tellers during the period leading up to the invalidity date. We ve also focused on ensuring that the bank is fully compliant with the Know Your Customer (KYC) requirements of government agencies over the past months. Specifically, this means that the bank will ask customers in-depth questions about money, accounts and exposure as a routine part of conducting business. The purpose is to combat money laundering and other illegal activities. Digital payment services are the sustainable solution One of our bank branches was robbed in early June. A masked perpetrator forced the teller to hand over cash. A suspect was taken into custody only a couple of days later but experiencing such a lifethreatening situation can leave lasting scars on a person. The risk of robbery is one of the many reasons why we will devise a clear plan to serve our customers without manually handling cash. We have observed a significant decline in the use of banknotes and coins in society for several years. In light of this, we cannot expose our employees or our customers to the risk of robbery. Digital payment services now provide numerous excellent alternatives to banknotes and coins. Our collaboration with Bankomat covers the occasions when private customers may need to withdraw our deposit cash. Today few customers regularly use manual cash handling services over the counter. We collaborate with UtbildningsForum to make it easier for our customers to get started with digital services. UtbildningsForum holds courses on how to use services such as bank cards, the Internet Bank (Internetbanken), Mobile BankID and Swish. Collaboration with foundation owners UtbildningsForum is funded by the bank s three foundation owners, Sparbanksstiftelsen Färs & Frosta, Sparbanksstiftelsen 1826 and Sparbanksstiftelsen Finn. Sparbanken Skåne s collaboration with the foundations is one of the things that makes it unique. The foundations stimulate local community development by reinvesting dividends from the bank into projects and various grants. Here is a selection of our joint activities with the foundations during the period: Spending the Day with Farm Animals. This is a school project where local second graders are given an opportunity to experience the everyday lives of farmers and get to know both the animals and the machinery. In partnership with LRF Skåne and three agricultural upper-secondary schools in Skåne. Sports Leader Gala. A gala evening in mid-may was held to award 200 grants and five special awards to the leaders and clubs that have made extraordinary contributions to youth sports within the region. In partnership with Skåneidrotten (Skåne Sports Federation). Awarding of project grants. In the spring application round, the foundations awarded a total of SEK 18m to 300 local projects run by clubs and associations across Skåne. In addition, Sparbanken Skåne entered into a new collaboration agreement with the Swedish men s and women s national handball teams, and the foundation owners made a contribution to the Swedish Handball Federation in an effort to make the sport accessible to more people. In conclusion, we see this as an exciting time for Skåne. Several areas in the region have expansion plans and this means great possibilities. Some challenges include the low interest rates, which in all likelihood are on the way up again, and for the bank to adapt to all the regulatory changes implemented by the authorities. But we are well prepared when customers choose Sparbanken Skåne, they get both a bank which is unique in how it partners with its foundation owners to give back to the community and a bank that is one of Europe's most secure. Bo Bengtsson CEO 3

4 Financial information At Sparbanken Skåne we have a clear philosophy to be there for the people, businesses and communities of our customers. With this clear goal driving us, we created our new bank by bringing together the best of Sparbanken 1826, Färs & Frosta Sparbank and parts of Sparbanken Öresund. Ownership structure Sparbanken Skåne AB (publ) s company registration number is The ownership structure of Sparbanken Skåne AB is shown below: Sparbanksstiftelsen Färs & Frosta 26% Sparbanksstiftelsen % Sparbanksstiftelsen Finn 26% Swedbank AB (publ) 22% The board is headquartered in Lund. The administrative centre is based in Kristianstad. Transaction volume The comparative figures are for the volume at 31 December The bank s total transaction volume at 30 June 2017 was SEK 189,552m (183,966). The transaction volume increased by 3 percent for the January June period. Deposits from the general public increased in the first half of 2017 by SEK 1,514m. Deposits from the general public at 30 June 2017 totalled SEK 47,185m (45,671). The market value of total brokered fund and insurance volumes was SEK 41,727m (38,491). The stock market performed well in the first half of Along with positive net savings in both funds and insurance, this had a positive effect on volumes. The positive performance of loans to the general public for the entirety of 2016 continued throughout the first half of Loans to the general public at 30 June 2017 came in at SEK 54,458m (51,058). This increase is the result of moving residential mortgages from brokered volumes to loans to the general public in the bank s balance sheet and issuing new loans to both private and corporate customers. The bank's loans continue to maintain excellent credit quality. The total loan portfolio brokered to Swedbank Hypotek at 30 June 2017 ed to SEK 26,996m (28,878). Borrowing and liquidity The bank s liquidity is solid. The bank s main source of funding is deposits. To diversify its funding, the bank has a medium term note (MTN) borrowing programme for long-term funding and a certificate of deposit programme for short-term funding. The bonds are listed on the Nasdaq OMX Nordic Stockholm. More information about the MTN programme can be found at se. The bank applied for and received authorisation to issue covered bonds as a further step in our efforts to strengthen our position on Skåne's residential mortgage market. The bank expects to commence the bond programme within three months. The bank s issued bonds at 30 June 2017 totalled SEK 6,700m (total programme SEK 10,000m), and its issued certificates of deposit ed to SEK 1,950m (total programme SEK 4,000m). The bank regularly issued both bonds and certificates of deposit on the Swedish capital market during the year. The bank issued SEK 1,000m in the first half of the year. Outstanding certificates of deposit increased by SEK 1,000m in the same period. Subordinated liabilities, in the form of fixed-term subordinated loans, totalled SEK 500m at 30 June The bank has a partnership with the Nordic Investment Bank (NIB), and the loan programme totalled SEK 500m for on-lending to SMEs, small mid-caps, and environmental projects. The bank s liquidity reserves at 30 June 2017 ed to SEK 6,936m (6,031). The liquidity reserves consist of assets that can generate liquidity quickly at predictable values and meet the Liquidity Coverage Ratio (LCR) eligibility requirements of Finansinspektionen (FFFS 2012:6). These assets include shortterm loans to credit institutions, funds deposited in tax accounts and fixed-income securities. The liquidity reserves combined with agreed borrowing limits give the bank excellent payment readiness. The loan-to-deposit ratio at 30 June 2017 came in at 115 percent (112 percent at year-end 2016). More information about liquidity reserves and liquidity management is provided in periodic disclosures at www. sparbankenskane.se/om-sparbanken-skane/finansiell-information/ likviditet. Rating Sparbanken Skåne is rated A- with a negative outlook by credit rating agency S&P Global. Profit The comparative figures refer to the January June 2016 period. Operating profit for the first half of 2017 reached SEK 111m (31). Goodwill amortisation continues to impact year-to-date profit in the of SEK 214m, and profit is in line with expectations. Goodwill arising on the merger of the three banks in 2014 resulted in a goodwill item of SEK 2,140m. The bank prepares its financial statements in accordance with IFRS subject to restrictions under Swedish law (lagbegränsad IFRS). Under these restrictions, goodwill is amortised over a period of five years. The goodwill item thus impacts profit in the of SEK 428m per year. Net interest income improved by 13 percent in the first half of 2017, reaching SEK 423m (375). The lending volume gains have had a positive impact on net interest income during the first half of the year, while the historically low interest rates have negatively affected net interest income, with a lower liquidity reserve yield and lower margins on deposits. The resolution fee and deposit insurance were charged to net interest income in the of SEK 32m (23). Net fee and commission income for the period came in at SEK 283m (258). Loan commissions ed to SEK 92m (94) and are mainly attributable to commissions from Swedbank Hypotek. Securities fees came in at SEK 111m (99). This improvement in securities fees was mainly driven by the strong stock market trend and positive net savings in our funds in the first half of Other fee and commission income reached SEK 111m (104). Fee and commission expenses totalled SEK -32m (-38). The market value of derivatives held for risk management had a positive impact on the net gain from financial transactions. Other income ed to SEK 3m (6). Other income includes a capital gain on the disposal of the bank s property in Knislinge. The bank plans to sell off the rest of its property holdings in 2017 as well. 4

5 The carrying of owner-occupied properties at 30 June 2017 was SEK 102m. General administrative expenses for the first half of 2017 were up 2 percent year-on-year, totalling SEK 364m (356). Higher IT expenses were mainly responsible for this increase. Personnel expenses ed to SEK 223m (231), and IT expenses were SEK 87m (72). The total for both the depreciation of tangible assets and the amortisation of intangible assets was SEK 229m (229), and amortisation of intangible assets (goodwill) accounted for SEK 214m (214) of this item. Credit losses for the first half of the year resulted in revenue of SEK +13m (+4). See Note 9, Net credit losses, for more information. Profit/loss for the period after appropriations and tax came in at SEK 80m (22). Capital ratio The bank strengthened its capital base by adding SEK 266m during the year, resulting in the total value of the capital base reaching SEK 5,521m (5,255) at 30 June Goodwill is deducted when calculating the bank's capital base. Fixed-term subordinated loans totalled SEK 500m and are included in Tier 2 capital. Common Equity Tier 1 (CET1) capital was bolstered during the quarter via a lower deduction for goodwill and the verified profit for the period. The Risk Exposure Amount (REA) was SEK 28,655m (27,761). The REA for exposures secured by mortgages on immovable property increased during the year, as residential mortgages were transferred from brokered loans to loans in the bank's own portfolio. The REA for institutions increased during the year due to higher excess liquidity. The REA for credit risk at 30 June 2017 totalled SEK 26,523m. SEK 9,536m of this item was calculated using the Internal Ratings- Based (IRB) approach to credit risk and SEK 16,987m was calculated using the standardised approach to credit risk. The REA for operational risk at 30 June was SEK 2,146m (2,325) and the REA for credit valuation adjustment was equal to SEK 1m (2). The total capital ratio was thus 19.3 percent at 30 June 2017 (18.9) and the CET1 capital ratio was 17.5 percent (17.1). The bank's capital situation thus gained strength during the year. The leverage ratio reached 7.7 percent (7.8) at 30 June For more information about capital adequacy calculations, see Note 13, Capital adequacy analysis. Risks and uncertainties The bank's business is exposed to various risks such as credit risk, market risk, liquidity risk and operational risk. The bank's board, which has ultimate responsibility for the bank s internal controls, has put policies and instructions in place for the bank s business to limit and monitor risk-taking in its operations. The bank s level of risk-taking should be low and limited to what is financially sustainable in relation to the bank's capital buffer and long-term capital targets. The board has adopted a separate policy which describes the risk appetite which will shape the bank's activities and the risk limits applicable in each risk area. The bank's direct losses attributable to operational risk remained low in the second quarter of One of the bank's branches was robbed in June. The crisis and support organisation did a satisfactory job, and the operating costs were low. The bank commands a sufficient level of capital, which is suited to the risks posed by the bank's activities and which exceeds the minimum statutory requirements. In October 2016, Finansinspektionen (The Swedish Financial Supervisory Authority) started an investigation into the compliance of several banks with money laundering regulations, including Sparbanken Skåne. The bank received a letter (avstämningsskrivelse) from Finansinspektionen in February outlining a number of deficiencies. Efforts to ensure the bank has effective procedures in place to prevent money laundering and other types of illegal activities are highly prioritised. Finansinspektionen has not yet announced a decision on this case, which is currently up for consideration by the Legal Department. Development and implementation activities in relation to rules, systems and procedures for covered bonds progressed during the second quarter. The project was wrapped up at the end of the first half of the year, and the management organisation appointed for covered bonds has now assumed responsibility. Events after the reporting period No events of material significance have taken place after the end of the reporting period. 5

6 Financial ratios 6/2017 3/ /2016 9/2016 6/2016 Volume Transaction volume, millions of SEK 189, , , , ,375 Capital and liquidity CET1 capital ratio 17.5% 17.4% 17.1% 16.9% 16.6% Total capital ratio 19.3% 19.2% 18.9% 18.7% 18.4% Leverage ratio 7.7% 7.7% 7.8% 7.8% 7.2% Loan-to-deposit ratio LCR 187% 181% 186% 197% 407% NSFR 139% 141% 143% 144% 149% Profit Cost/income ratio before credit losses Cost/income ratio after credit losses Cost/income ratio after credit losses excluding dividends, capital gains and goodwill amortisation Return on equity 2.9% 2.6% 1.5% 1.3% 0.8% Return on equity excluding dividends, capital gains and goodwill amortisation 8.5% 8.3% 7.1% 7.0% 6.5% Impaired loans and credit losses Loan loss ratio excluding brokered volumes 0.0% 0.0% 0.0% 0.0% 0.0% Loan loss ratio including brokered volumes 0.0% 0.0% 0.0% 0.0% 0.0% Percentage of impaired loans 0.1% 0.2% 0.3% 0.2% 0.2% Other disclosures Average number of employees The financial ratios are defined on page 23. 6

7 Quarterly comparison Income statement Q Q Q Q Q Net interest income 214, , , , ,059 Dividends received ,400-7,940 Net fees and commissions 142, , , , ,943 Net gain/loss from financial transactions 1,029 6,899 9, ,964 Other operating income 1, ,891 1,699 2,011 Total net interest income and operating income 360, , , , ,917 General administrative expenses -181, , , , ,627 Depreciation and amortisation -114, , , , ,355 Other expenses -11,544-15,290-16,822-11,803-14,546 Credit losses 8,081 4,909-12, ,505 Impairment losses on financial assets ,786 Total expenses -299, , , , ,809 Operating profit/loss 60,966 49,621 38,799 42,526 31,108 Appropriations , Taxes -17,010-13,914-10,416-12,710-5,762 Profit/loss for the period 43,956 35,707 24,183 29,816 25,346 Balance sheet 30/6/ /03/ /12/ /9/ /6/2016 Loans to credit institutions 1,694,512 1,564, ,340 1,200,947 3,899,512 Loans to the general public 54,457,885 52,773,784 51,058,129 49,080,451 46,868,563 Fixed-income securities 4,469,515 4,466,090 4,684,788 4,706,713 4,702,648 Goodwill 805, ,936 1,019,898 1,126,859 1,233,821 Other assets 1,783,814 1,517,129 1,565,331 1,464, ,833 Total assets 63,211,700 61,234,356 59,097,486 57,579,155 57,240,377 Liabilities to credit institutions 581, ,100 77, , ,958 Deposits from the general public 47,184,932 45,608,373 45,671,408 45,076,560 44,356,313 Debt securities issued and subordinated liabilities 9,145,103 8,744,141 7,144,597 6,146,190 6,445,315 Other liabilities 352, , , , ,732 Equity 5,947,947 5,896,511 5,898,184 5,871,604 5,835,059 Total liabilities, provisions and equity 63,211,700 61,234,356 59,097,486 57,579,155 57,240,377 7

8 Income statement Income statement Note Q Q Change Jan Jun 2017 Jan Jun 2016 Full year 2016 Change SEK thousand Interest income 246, ,586 4% 483, , ,067 13% Interest expenses -31,729-28,660 11% -60,389-51, ,135 18% Net interest income 3 214, ,926 3% 422, , ,932 13% Dividends received % 1,016 8,490 12,890-88% Fee and commission income 4 159, ,306 3% 314, , ,836 6% Fee and commission expenses 5-16,828-14,938 13% -31,766-38,474-73,978-17% Net gain/loss from financial transactions 6 1,029 6,899-85% 7,928 3,090 13,560 - Other operating income 1, % 2,539 6,374 9,964-60% Total net interest income and operating income 360, ,630 1% 717, ,630 1,351,204 10% General administrative expenses -181, ,208 0% -364, , ,995 2% Depreciation of tangible assets and amortisation of intangible assets -114, ,420 0% -228, , ,578 0% Other operating expenses -11,544-15,290-24% -26,834-31,933-60,558-16% Total expenses before credit losses -307, ,918-1% -619, ,449-1,222,131 1% Profit/loss before credit losses 52,885 44,712 18% 97,597 34, ,073 - Net credit losses 7 8,081 4,909 65% 12,990 4,072-9,295 - Impairment losses on financial assets ,786-6,986 - Operating profit/loss 60,966 49,621 23% 110,587 31, ,792 - Appropriations ,200 - Tax on profit for the period -17,010-13,914 22% -30,924-9,570-32,696 - Profit/loss for the period 43,956 35,707 23% 79,663 21,897 75,896 - Statement of comprehensive income Q Q Change Jan Jun 2017 Jan Jun 2016 Full year 2016 Change Profit/loss for the period 43,956 35,707 23% 79,663 21,897 75,896 - Other comprehensive income Items that are or may be reclassified to profit or loss for the period Net change in fair value of available-for-sale financial assets Change in fair value of available-for-sale financial assets reclassified to profit or loss for the period Tax attributable to financial assets that may be reclassified to profit or loss for the period. 10,031-4,335-5,696 20,967 37,273-73% ,443-3, , ,156-4,930-7,504-77% Other comprehensive income for the period 7,480-3,381-4,099 17,480 26,606-77% Comprehensive income for the period 51,436 32,326 59% 83,762 39, ,502-8

9 Balance sheet Balance sheet Note 30/6/ /12/ /6/2016 Assets Cash 39,419 34,176 33,546 Treasury bills and other bills eligible for refinancing with central banks 1,434,110 1,482,361 1,479,075 Loans to credit institutions 1,694, ,340 3,899,512 Loans to the general public 8 54,457,885 51,058,129 46,868,563 Bonds and other fixed-income securities 3,035,405 3,202,427 3,223,573 Shareholdings and investments 47,442 44,712 42,879 Shareholdings and investments in group companies Derivatives Intangible assets 805,974 1,019,898 1,233,821 Tangible assets 209, , ,978 Current tax assets 1,255,396 1,049,628 45,903 Other assets 8,006 5,467 14,525 Prepaid expenses and accrued income 223, , ,323 Total assets 63,211,700 59,097,486 57,240,377 Liabilities, provisions and equity Liabilities to credit institutions 581,561 77, ,958 Deposits from the general public 9 47,184,932 45,671,408 44,356,313 Debt securities issued and related items 8,645,103 6,644,597 5,945,314 Derivatives 66,856 87, ,103 Deferred tax liabilities 9,443 10,804 8,917 Other liabilities 56,134 68,242 71,243 Accrued expenses and deferred income 173,702 93, ,462 Provisions 46,022 45,055 46,008 Subordinated liabilities 500, , ,000 Total liabilities and provisions 57,263,753 53,199,302 51,405,318 Equity Restricted equity Share capital (16,683,364 shares and quotient value SEK 100) 1,668,336 1,668,336 1,668,336 Statutory reserve 109, , ,196 Total 1,777,532 1,777,532 1,777,532 Non-restricted equity Share premium reserve 3,188,631 3,188,631 3,188,631 Fair value reserve 4, ,515 Retained earnings 897, , ,514 Profit/loss for the period 79,663 75,896 21,897 Total 4,170,415 4,120,652 4,057,527 Total equity 5,947,947 5,898,184 5,835,059 Total liabilities, provisions and equity 63,211,700 59,097,486 57,240,377 Other notes Accounting policies 1 Operating segments 2 Derivatives 10 Financial assets and liabilities 11 Pledged assets, contingent liabilities and commitments 12 Capital adequacy analysis 13 Disclosures on related parties and other significant relationships 14 9

10 Statement of changes in equity Restricted equity Non-restricted equity Total equity Share capital Statutory reserve Share premium reserve Fair value reserve Retained earnings Profit/loss for the period Balance at 1 January ,668, ,196 3,188,631-25, , ,072 5,829,903 Appropriation of profit as per AGM resolution Amount carried forward ,851-79,851 - Transactions with owners in the form of dividends ,221-34,221 Profit/loss for the period ,897 21,897 Other comprehensive income for the period , ,480 Comprehensive income for the period ,377 Balance at 30 June ,668, ,196 3,188,631-8, ,514 21,897 5,835,059 Balance at 1 January ,668, ,196 3,188,631-25, , ,072 5,829,903 Appropriation of profit as per AGM resolution Amount carried forward ,851-79,851 - Transactions with owners in the form of dividends ,221-34,221 Profit/loss for the year ,896 75,896 Other comprehensive income for the year , ,606 Comprehensive income for the year ,502 Balance at 31 December ,668, ,196 3,188, ,514 75,896 5,898,184 Balance at 1 January ,668, ,196 3,188, ,514 75,896 5,898,184 Appropriation of profit as per AGM resolution Amount carried forward ,896-41,896 - Transactions with owners in the form of dividends ,000-34,000 Profit/loss for the period ,663 79,663 Other comprehensive income for the period , ,099 Comprehensive income for the period ,762 Balance at 30 June ,668, ,196 3,188,631 4, ,410 79,663 5,947,946 Restricted equity Restricted equity may not be decreased by dividends. Statutory reserve The purpose of the statutory reserve was to save a share of the net profit not used to cover losses carried forward. The statutory reserve also includes s added to the share premium reserve before 1 January Non-restricted equity Share premium reserve When shares are issued at a premium, as in the paid for the shares exceeds their quotient value, the received in excess of the quotient value of the shares is transferred to the share premium reserve. Amounts transferred to the share premium reserve on 1 January 2006 or later are included in non-restricted equity. Fair value reserve The fair value reserve includes the accumulated net change in the fair value of available-for-sale financial assets until the asset is derecognised from the balance sheet. Retained earnings Retained earnings comprise the non-restricted equity of previous years after any dividends are paid. When combined with profit or loss for the year and the fair value reserve, this is equal to the total non-restricted equity, meaning the available for distribution to shareholders. 10

11 Statement of cash flows Indirect method 30/6/ /12/ /6/2016 Cash flows from operating activities Operating profit/loss 110, ,792 31,467 Net change in accrued cost for the period 8,717 12,610 6,300 Unrealised share of net gain from financial transactions -2,962 11,686 16,894 Depreciation and amortisation 228, , ,731 Credit losses -11,547 12,426-2,222 Group contributions - -4,200 - Tax paid -239,209-1,065,955-38,080 Cash flows from operating activities before changes in working capital 94, , ,090 Cash flow from changes in working capital Increase/decrease in loans to the general public (-/+) -3,398,840-9,811,996-5,585,276 Increase/decrease in securities (-/+) 206, , ,880 Increase/decrease in deposits from the general public (+/-) 1,513,524 3,164,095 1,849,000 Increase/decrease in liabilities to credit institutions (+/-) 503, ,448-64,320 Net change in other assets and liabilities 53,976-78,954 46,296 Net cash used in operating activities -1,026,800-6,637,385-2,823,330 Cash flows from investing activities Disposal/redemption of financial assets -1,663 44,292 47,078 Sale of tangible assets 200 1, Acquisition of tangible assets -6,664-34,796-21,025 Net cash from (used in) investing activities -8,127 11,254 26,996 Cash flows from financing activities Issue of fixed-income securities 3,499,120 8,444,018 4,846,339 Redemption of fixed-income securities -1,499,778-4,495,491-1,598,067 Dividends paid -34,000-34,222-34,222 Net cash from financing activities 1,965,342 3,914,305 3,214,050 Cash flow for the period 930,415-2,711, ,716 Cash and cash equivalents at beginning of period 803,516 3,515,342 3,515,342 Cash and cash equivalents at end of period 1,733, ,516 3,933,058 The following subcomponents are included in cash and cash equivalents Cash 39,419 34,176 33,546 Loans to credit institutions 1,694, ,340 3,899,512 Balance sheet total 1,733, ,516 3,933,058 Short-term investments have been classified as cash and cash equivalents on the basis of the following criteria They have an insignificant risk of changes in value They are easily convertible to cash They have a maximum term of three months from their acquisition date Interest paid and dividends received included in net cash from operating activities Interest received 483, , ,971 Interest paid including cost of deposit insurance and resolution/stability fee -60, ,135-51,301 Dividends received 1,016 12,890 8,490 11

12 Notes to the income statement and balance sheet Note 1 Accounting policies This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. In addition, the contents of the interim report are in compliance with the Annual Accounts Act for Credit Institutions and Securities Companies (1995:1559), Finansinspektionen s Regulations and General Guidelines (FFFS 2008:25) on Annual Accounts for Credit Institutions and Securities Companies, and the Swedish Financial Reporting Board's Recommendation RFR 2 Accounting for Legal Entities. Swedish savings banks (sparbank) thus apply adopted IFRS subject to restrictions under Swedish law (lagbegränsad IFRS), namely RFR 2 and FFFS. This means that all IFRS adopted by the EU are applied to the extent possible within the scope of the Swedish Annual Accounts Act and in consideration of the relationship between accounting and taxation. The accounting policies and estimates and judgements applied in this interim report are in accordance with those applied in the 2016 Annual Report. The bank plans to sell off its remaining owner-occupied property. This property will continue to be recognised at cost less depreciation in the interim report in accordance with the exemption rules of RFR2. New IFRSs and interpretations not yet effective New IFRS 9 Financial Instruments IFRS 9 will be effective for annual periods beginning on or after 1 January 2018 and contains new rules for the recognition of expected credit losses, the classification and measurement of financial assets, and hedge accounting. The bank continued working on IFRS 9 implementation during the year. The introduction of new rules for recognising expected credit losses will result in the greatest change. The bank expects that impairment for credit losses will increase, which will cause the equity reported to decrease. This in turn will have a negative impact on the bank s capital base. However, much work is being put into proposals to amend the capital adequacy rules by phasing the decrease in reported equity under the new rules into the capital adequacy calculation for a period lasting until System design and implementation make up a substantial part of the implementation of the new rules for expected credit losses. This system is being developed mainly in collaboration with Swedbank but also with other external suppliers. The bank will gain access to a customised system from system supplier Swedbank in autumn The bank has therefore not yet been able to quantify the effects of the new rules. The bank has also started a project to analyse business models and cash flows in its efforts to implement the new IFRS 9 rules on classification and measurement. Given that this project is not yet complete, the bank has been unable to come to any conclusions about how its accounting policies for 2018 onwards will be affected or if there will be any impact on the bank s capital requirements, capital base and major exposures. The bank has not made a decision about whether the IFRS 9 hedge accounting policies will be applied as of However, the bank's preliminary assessment is that the changes will not impact the s reported in the annual report nor have a material impact on the capital requirements, capital base and major exposures. New IFRS 15 Revenue from Contracts with Customers New IFRS 15 Revenue from Contracts with Customers becomes effective for annual periods beginning on or after 1 January The standard contains a single model for revenue recognition from contracts with customers not covered by other standards. The bank estimates that the standard will not have any material impact on the bank's financial statements nor its capital requirements, capital base and major exposures, except for expanded disclosure requirements. New IFRS 16 Leases IFRS 16 Leases will replace the existing IFRSs related to lease recognition starting in 2019, including IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains a Lease. According to the Swedish Financial Reporting Board, the application of IFRS 16 is not required for single-entity financial reports. Given that the bank only prepares single-entity financial statements and not consolidated financial statements, IFRS 16 will not have any impact on the s reported in the financial statements or on the capital requirements, capital base and major exposures. Changed definition of unsettled loans Unsettled loans have been defined in Note 8 since 1 April 2017 as loans for which interest, repayments and overdrafts have been overdue for more than 90 days. The previous limit was 60 days. This change has only marginally impacted the s reported. The comparative figures have not been restated. Note 2 Operating segments The bank s business is not divided into operating segments in the bank s internal reporting to its highest decision-making body (the CEO) given that its business is concentrated in banking activities within the bank s geographic area. 12

13 Note 3 Net interest income Jan Jun 2017 Jan Jun 2016 Full year 2016 Interest income Loans to credit institutions % Loans to the general public 508, , ,804 12% Fixed-income securities -3,617-2,492-6,062 45% Derivatives -22,014-26,529-52,055-17% Other interest expenses ,734 - Total 483, , ,067 13% Share of interest income from financial items not measured at fair value through profit or loss 505, , ,122 12% Share of interest income from impaired loans 3,272 3,780 8,194-13% Interest expenses Liabilities to credit institutions -5,982-6,660-12,918-10% Deposits from the general public -32,567-30,779-59,141 6% expenses for deposit insurance -24,625-19,256-38,057 28% Fixed-income securities -10,423-6,454-15,046 61% Subordinated liabilities -3,626-3,951-7,786-8% Other interest expenses -7,791-3,457-6,244 - Total -60,389-51, ,135 18% Share of interest expenses from financial items not measured at fair value through profit or loss -60,389-51, ,135 18% Total net interest income 422, , ,932 13% Note 4 Fee and commission income Jan Jun 2017 Jan Jun 2016 Full year 2016 Payment intermediation fees 44,193 44,856 90,431-1% Loan commissions 92,092 94, ,692-2% Deposit commissions 30,832 25,445 58,941 21% Commissions for financial guarantees issued 1,607 1,376 3,013 17% Securities fees 111,487 98, ,683 13% Other fees and commissions 34,751 31,878 64,076 9% Total 314, , ,836 6% Note 5 Fee and commission expenses Jan Jun 2017 Jan Jun 2016 Full year 2016 Payment intermediation fees -17,537-18,941-39,408-7% Securities fees -11,559-9,052-21,853 28% Other fees and commissions -2,670-10,481-12,717-75% Total -31,766-38,474-73,978-17% 13

14 Note 6 Net gain/loss from financial transactions Jan Jun 2017 Jan Jun 2016 Full year 2016 Shareholdings/investments 34 4,333-4,672-99% Fixed-income securities -4,093 7,949 18,503 - Other financial instruments 9,549-10,667-3,424 - Exchange rate fluctuations 2,438 1,475 3,153 65% Total 7,928 3,090 13,560 - Jan Jun 2017 Jan Jun 2016 Full year 2016 Net gain/net loss by valuation category Financial assets at fair value through profit or loss -4,534 10,839 10,668 - Capital gain on available-for-sale financial assets 475 1,443 3,163-67% Ineffective portion of fair value hedge % Derivatives intended for risk management, no hedge accounting 9,100-11,068-4,326 - Change in fair value of derivatives used as hedging instruments in a fair value hedge -10,631-5,098 17,405 - Change in fair value of hedged item attributable to the hedged risk in fair value hedges 10,631 5,098-17,405 - Exchange rate fluctuations 2,438 1,475 3,153 65% Total 7,928 3,090 13,560 - Note 7 Net credit losses Jan Jun 2017 Jan Jun 2016 Full year 2016 Specific impairment, individually assessed loans Write-off of realised credit losses for the period -21,056-17,211-60,181 22% Reversal of previous impairment of credit losses recognised as realised losses in the financial statements for the period 20,060 13,637 48,305 47% Impairment of credit losses for the period -24,638-38,248-82,945-36% Amount received for previously realised credit losses 1,236 1,714 2,888-28% Reversal of impairment of credit losses no longer necessary 51,333 59,386 80,989-14% Net cost for the period for individually assessed loans 26,935 19,278-10,944 40% Homogeneous groups of loans assessed in groups with a limited value and similar credit risk Write-off of realised credit losses for the period -1,408-1,776-4,508-21% Amount received for credit losses realised in previous years Allocation to/release of credit loss reserve Net cost for the period for homogenous loans assessed in groups ,607-3,399-67% Contingent liabilities Net cost for the period for settlement of guarantees and other contingent liabilities -13,416-13,599 5,048-1% Net cost for the period for credit losses 12,990 4,072-9,295-14

15 Note 8 Loans to the general public 30/6/ /12/ /6/2016 Gross loans public sector 31,239 31,736 32,665 corporate sector 15,829,395 15,418,106 15,299,116 retail sector 38,688,913 35,728,748 31,659,868 sole proprietors 10,945,584 10,778,571 10,057,920 other sectors - - 2,669 Total 54,549,547 51,178,590 46,994,318 Sub-items of gross revenue: Unsettled loans included in impaired loans 63, , ,869 corporate sector 36,453 63,779 93,515 retail sector 27,499 39,091 50,354 Impaired loans 195, , ,228 corporate sector 155, , ,265 retail sector 39,486 53,702 64,963 Subtracted by: Specific impairment, individually assessed loans 126, , ,601 corporate sector 105, , ,460 retail sector 21,334 27,022 32,141 Impairment of homogeneous groups of loans assessed in groups 3,809 4,482 5,315 retail sector 3,809 4,482 5,315 Loans, net carrying 54,418,861 51,008,474 46,796,402 Change in fair value of hedged in portfolio hedge 39,024 49,655 72,161 Total 54,457,885 51,058,129 46,868,563 Definitions: Unsettled loans are loans for which interest, repayments and overdrafts have been overdue for more than 90 days. Impaired loans are loans for which it is probable that the payments stipulated in the contract terms and conditions will not be met and for which the value of the collateral does not sufficiently cover both the principal and interest, including late fees. Note 9 Deposits from the general public 30/6/ /12/ /6/2016 The general public Swedish currency 46,860,174 45,361,528 43,978,802 foreign currency 324, , ,511 Total 47,184,932 45,671,408 44,356,313 Deposits per customer category, excluding bank cheques Public sector 1,161,260 1,091, ,417 Corporate sector 8,944,472 8,596,321 7,791,728 Retail sector 36,308,384 35,286,339 34,772,120 sole proprietors 5,862,772 5,948,002 5,718,458 Other interest expenses 703, , ,144 Total 47,117,667 45,593,979 44,285,409 15

16 Note 10 Derivatives 30/6/ /12/2016 Sparbanken Skåne uses financial hedges to protect itself from interest rate and currency risks. Derivative instruments comprise interest rate swaps, interest rate caps and currency forwards. SEK thousand Nominal Fair value Nominal Fair value Derivative instruments with positive fair values Fixed-income contracts 499, , Total derivative instruments with positive fair values 499, , Derivative instruments with negative fair values Fixed-income contracts 2,992,719 66,856 2,114,025 87,643 Currency contracts 275, ,834 - Total derivative instruments with negative fair values 3,267,745 66,856 2,510,859 87,643 The bank has entered into interest rate swap contracts to a large extent in order to protect itself from the interest rate risk associated with the fixed-interest loans provided by the bank. Interest rate cap contracts have been used as reinsurance for loans with floating interest rates for which the bank has guaranteed the customer a maximum interest rate. Currency forwards are used in operations involving bank customers, where the currency risk is covered using reverse currency forwards with Swedbank. Note 11 Financial assets and liabilities 30/6/ /12/2016 Fair value Carrying Difference Fair value Carrying Difference Cash 39,419 39,419-34,176 34,176 - Treasury bills and other bills eligible for refinancing with central banks 1,434,110 1,434,110-1,482,361 1,482,361 - Loans to credit institutions 1,694,512 1,694, , ,340 - Loans to the general public 54,773,751 54,457, ,866 51,386,766 51,058, ,637 Bonds and other fixed-income securities 3,035,405 3,035,405-3,202,427 3,202,427 - Shareholdings and investments 47,442 47,442-44,812 44,812 - Derivatives Accrued income 202, , , ,173 - Other financial assets 79,707 79,707-5,469 5,469 - Total 61,306,978 60,991, ,866 57,096,742 56,768, ,637 Liabilities to credit institutions 581, ,561-77,830 77,830 - Deposits from the general public 47,195,135 47,184,932 10,203 45,683,959 45,671,408 12,551 Debt securities issued and related items 8,645,103 8,645,103-6,644,597 6,644,597 - Derivatives 66,856 66,856-87,643 87,643 - Other financial liabilities 42,670 42,670-50,882 50,882 - Accrued expenses 156, ,118-90,182 90,182 - Subordinated liabilities 500, , , ,000 - Total 57,187,443 57,177,240 10,203 53,135,093 53,122,542 12,551 The tables below disclose the fair value measurement approach for the financial instruments measured at fair value in the balance sheet. Fair value measurement is categorised into the following three levels: Level 1: Quoted prices in active markets for identical instruments Level 2: Inputs other than quoted market prices included within Level 1 that are observable for the instrument, either directly or indirectly Level 3: Unobservable inputs for the instrument 16 CONTINUED ON PAGE 17.

17 CONTINUED FROM PAGE /6/2017 Level 1 Level 2 Level 3 Total Treasury bills and other bills eligible for refinancing with central banks 1,434, ,434,110 Bonds and related items 2,985,759 24,270 25,376 3,035,405 Shareholdings and investments ,442 47,442 Other assets derivatives Total 4,419,869 24,355 72,818 4,517,042 Other liabilities derivatives - 66,856-66,856 Total - 66,856-66,856 31/12/2016 Level 1 Level 2 Level 3 Total Treasury bills and other bills eligible for refinancing with central banks 1,482, ,482,361 Bonds and related items 3,136,194 35,640 30,593 3,202,427 Shareholdings and investments ,812 44,812 Other assets derivatives Total 4,618,555 35,858 75,405 4,729,818 Other liabilities derivatives - 87,643-87,643 Total - 87,643-87,643 The level 3 heading Shareholdings and investments includes endowment insurance which is subject to change due to changes in value and to inflows and outflows of cash. The level 3 heading Bonds includes small-cap liquid bonds. The bank sees these holdings as long-term investments. These bonds are measured by calculating discounted future cash flows. Effect (before tax) of 10 percent increase/decrease in the USD/SEK exchange rate and long-term bond interest rates Change in fair value, thousands of SEK + 10% - 10% USD/SEK exchange rate 2,538-2,538 Discount rate The table below presents a breakdown of opening and closing balances of financial instruments measured at fair value in the balance sheet on the basis of a valuation technique based on unobservable inputs (level 3). Bonds Shareholdings and investments Total Opening balance at 1 January ,593 44,812 75,405 Disposals Cost acquisitions - 2,630 2,630 Total gains and losses recognised recognised in profit or loss -5, ,217 Closing balance at 30 June ,376 47,442 72,818 Gains and losses recognised in profit or loss for assets included in the closing balance at 30 June , ,217 Fair value measurement The main methods and assumptions used to measure the fair value of the financial instruments reported in the table above are summarised as follows: Financial instruments quoted in active markets For financial instruments quoted in active markets, fair value measurement is based on the asset s listed bid price on the balance sheet date less transaction expenses (e.g. brokerage) at the time of acquisition. A financial instrument is deemed quoted in an active market if quoted prices are easily available on a stock market, from a trader, broker, trade association or company providing current price information or regulatory authority, and these prices represent actual and regularly occurring market transactions on commercial terms. Any future transaction expenses on disposal are not taken into account. Such instruments can be found in the following balance-sheet items: Shareholdings and investments and Bonds and other fixed-income securities. 17 CONTINUED ON PAGE 18.

18 CONTINUED FROM PAGE 17. Financial instruments not quoted in active markets Derivative instruments are measured at the fair value received from the counterparty where the fair value is measured using a valuation model established in the market for measuring the type of derivative instrument in question. Fair value measurement of OTC instruments generally uses valuation models based on observable market data. The present value of the cash flows associated with the financial instrument is calculated for measurement of fixed-interest and currency derivatives without option components. The yield curve used for discounting cash flows is based on observable market data, meaning it is derived from quoted relevant interest rates for the respective term when the cash flows are received or paid. Options are measured using generally accepted valuation models, such as Black-Scholes. The models are updated with observable market data relevant to the measurement of the option. This observable market data includes interest rates, currencies, credit risk, volatility, correlations and market liquidity. The fair value of financial instruments classified lower is also measured using valuation models mainly based on observable market data, but with some estimates the entity makes on its own which are considered significant for the fair value measurement. Structured products are measured at fair value through profit or loss. They are not traded daily in active markets. Instead, the fair values are obtained from counterparties and measured on the basis of the performance of the underlying indexes/prices of the respective instrument at the balance sheet date. The fair value of financial instruments which are not derivative instruments is measured on the basis of future cash flows of principal and interest discounted to current market interest rates at the balance sheet date. In cases where discounted cash flows have been used, future cash flows are calculated using the best estimate of the bank s management. The fair value of loans with fixed interest rates was measured by discounting expected future cash flows with the discount rate set at the current lending rate applicable. The carrying is deemed to reflect the fair value of trade receivables and payables with a remaining useful life of less than six months. The fair value of borrowings is measured on the basis of current market interest rates where the original credit spread has been kept constant if there is no evidence that a change in the bank's credit rating has led to an observable change in the bank's credit spread. The fair value of loans and deposits was measured by discounting expected future cash flows with the discount rate set at the current lending or deposit rate applicable. However, the fair value of a liability that is redeemable on demand is not recognised at an lower than the to be paid on demand and is discounted from the first date that payment of this could be demanded. Note 12 Pledged assets, contingent liabilities and commitments 30/6/ /12/ /6/2016 Pledged assets 45,818 37,351 35,499 Contingent liabilities 588, , ,974 Commitments 6,114,291 6,327,173 5,934,041 Note 13 Capital adequacy analysis Capital base 30/6/ /12/ /6/2016 CET1 capital 5,020,562 4,755,203 4,500,018 Tier 2 capital 500, , ,000 Net capital base 5,520,562 5,255,203 5,000,018 Capital requirements and Risk Exposure Amounts Capital requirement Capital requirement Capital requirement Riskweighted exposure Riskweighted exposure Riskweighted exposure IRB approach 762,293 9,536, ,127 8,901, ,380 9,017,254 standardised approach 1,358,930 16,986,626 1,322,630 16,532,870 1,262,576 15,782,195 Capital requirement for operational risk 170,532 2,131, ,988 2,324, ,988 2,324,849 Credit valuation adjustment 91 1, , ,013 Total capital requirements and Risk Exposure Amounts 2,292,434 28,655,428 2,220,916 27,761,455 2,170,185 27,127,311 CET1 capital ratio 17.5% 17.1% 16.6% Tier 1 capital ratio 17.5% 17.1% 16.6% Total capital ratio 19.3% 18.9% 18.4% Buffer requirement 4.5% 1,289,494 16,118, % 1,110,458 13,880, % 1,085,092 13,563,656 capital conservation buffer 2.5% 716,386 8,954, % 694,036 8,675, % 678,183 8,477,285 countercyclical capital buffer 2.0% 573,109 7,163, % 416,422 5,205, % 406,910 5,086,371 CET1 capital available for use as buffer 11.3% 3,228, % 3,034, % 2,329,833 Total internally assessed capital requirement (excluding buffer requirement) 3,113,325 2,896,409 2,882, CONTINUED ON PAGE 19.

19 CONTINUED FROM PAGE 18. Capital base The board's proposed appropriation of profit is included in the capital base. 30/6/ /12/ /6/2016 CET1 capital: Instruments and reserves Share capital 1,668,336 1,668,336 1,668,336 Statutory reserve 109, , ,196 Share premium reserve 3,188,631 3,188,631 3,188,631 Fair value reserve ,515 Retained earnings 897, , ,514 Verified profit less proposed appropriation of profit and predictable expenses 55,764 41,896 - CET1 capital before regulatory adjustments 5,919,338 5,863,573 5,813,162 CET1 capital: regulatory adjustments Intangible assets, deferred tax assets and value adjustments -820,491-1,033,862-1,249,699 Deduction of IRB provisions (see disclosure below) -78,285-74,508-63,445 Total regulatory adjustments to CET1 capital -898,776-1,108,370-1,313,144 CET1 capital 5,020,562 4,755,203 4,500,018 Tier 2 capital: Instruments Fixed-term subordinated loans 500, , ,000 Tier 2 capital 500, , ,000 Capital base 5,520,562 5,255,203 5,000,018 Special disclosures IRB Provisions excess(+)/shortfall(-) -78,285-74,508-63,445 Total IRB provisions (+) 16,518 31,547 21,408 IRB Expected loss (-) -94, ,055-84,853 Capital requirements and Risk Exposure Amounts 30/6/ /12/ /6/2016 Capital requirement Capital requirement Capital requirement Riskweighted exposure Riskweighted exposure Riskweighted exposure Credit risk under standardised approach Central government and central bank exposures Regional government and local authority exposures Institutional exposures 5,247 65,586 5,058 63,222 6,188 77,348 Corporate exposures 341,652 4,270, ,232 4,165, ,866 4,460,826 Retail exposures 494,761 6,184, ,491 6,306, ,874 5,698,422 Exposures secured by mortgages on immovable property 508,760 6,359, ,539 5,856, ,458 5,380,731 Defaulted items 7,921 99,010 11, ,365 13, ,868 Equity exposures 589 7, CONTINUED ON PAGE 20.

20 CONTINUED FROM PAGE 19. Capital requirement Capital requirement Capital requirement Riskweighted exposure Riskweighted exposure Riskweighted exposure Credit risk under IRB approach Institutional exposures 51, ,115 31, , ,624 1,320,300 Corporate exposures 386,505 4,831, ,073 4,600, ,426 3,980,325 Retail exposures 298,118 3,726, ,919 3,548, ,779 3,334,734 mortgage loans 170,208 2,127, ,125 2,026, ,619 1,907,734 other loans 127,910 1,598, ,794 1,522, ,160 1,427,000 Non-credit obligation asset exposures 26, ,121 28, ,078 30, ,895 Total 2,121,812 26,522,646 2,034,756 25,434,456 1,983,956 24,799,449 Credit valuation adjustment 91 1, , ,013 Operational risk 30/6/ /12/ /6/2016 Capital requirement Capital requirement Capital requirement Riskweighted exposure Riskweighted exposure Riskweighted exposure Standardised approach 170,532 2,131, ,988 2,324, ,988 2,324,849 Total capital requirement for operational risk 170,532 2,131, ,988 2,324, ,988 2,324,849 Total capital requirements and Risk Exposure Amounts 2,292,434 28,655,428 2,220,916 27,761,455 2,170,185 27,127,311 Note 14 Disclosures on related parties and other significant relationships The bank s subsidiary 1826 Försäkra AB was discontinued in The insurance activities previously conducted in the subsidiary were transferred from the subsidiary to the bank effective 1 October 2015 and are now an integral part of the bank. The bank s related key personnel are directors, senior executives and the close family members of these individuals. Transactions with related key personnel have been made on market terms. The bank collaborates on a large scale with Swedbank AB. This collaboration is governed by a collaboration agreement which is currently valid until 30 June The agreement covers brokering of mortgage loans to Swedbank Hypotek and brokering of fund & insurance savings, shares, international services and the procurement of IT services. The three savings bank foundations, 1826, Färs & Frosta and Finn as well as Swedbank provided credit loss guarantees for the loan portfolios included in the new bank when Sparbanken Skåne was formed. The credit loss guarantees from savings bank foundations 1826 and Färs & Frosta have expired. The guarantee from savings bank foundation Finn expires on 31 December

21 Signatures of board and CEO The board and CEO hereby affirm that the January June 2017 Interim Report gives a true and fair view of the bank s business, financial position and results of operations, and describes material risks and uncertainties faced by the bank. Lund, 25 July 2017 Bertil Engström Chair Agneta Erfors Deputy Chair Bo Lundgren Deputy Chair Pär Frankenius Director Helene Hartman Director Tomas Hedberg Director Jan Larsson Director Johanna Okasmaa Nilsson Director Hans Nilsson Employee representative Catarina Regebro Employee representative Bo Bengtsson CEO 21

22 Auditor s Report on Review of Condensed Interim Financial Information (Interim Report) in Compliance with IAS 34 and the Annual Accounts Act for Credit Institutions and Securities Companies Introduction I have reviewed the condensed interim financial information (interim report) of Sparbanken Skåne AB (publ) at 30 June 2017 and the six-month period ended on that date. The board and CEO are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and the Annual Accounts Act for Credit Institutions and Securities Companies. It is my responsibility to express an opinion on this interim report based on my review engagement. Focus and extent of review engagement I have conducted my review engagement in accordance with the International Standard on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review engagement involves making enquiries, mainly to those responsible for financial and accounting issues, performing an analytical review, and taking other review engagement measures. A review engagement has a different focus and is significantly smaller in scale in comparison to the focus and extent of an audit in accordance with the ISA and generally accepted auditing standards. The review procedures performed within the scope of a review engagement do not enable me to obtain assurance that I am aware of all material circumstances that may have been identified if an audit were to be conducted. Consequently, the opinion expressed on the basis of a review engagement does not have the same level of certainty as the opinion expressed on the basis of an audit. Opinion On the basis of my review engagement, I have not found any circumstances that give me reason to believe that the interim report has not been prepared in all material respects in accordance with IAS 34 and the Annual Accounts Act for Credit Institutions and Securities Companies. Lund, 25 July 2017 Jan Palmqvist Authorised Public Accountant 22

23 Definitions Transaction volume The bank s transaction volume mainly consists of loans to the general public, brokered loans and credit that has been granted but not yet utilised. Transaction volume also includes savings volumes in the form of deposits from the general public, brokered funds, insurance and customer custody accounts. CET1 capital ratio The bank s Common Equity Tier 1 (CET1) capital ratio is the CET1 capital of the bank expressed as a percentage of the Risk Exposure Amount (REA). The CET1 capital is equal to the bank s equity less goodwill and IRB provisions. Total capital ratio The bank s total capital ratio is the capital base of the bank expressed as a percentage of the REA. The capital base comprises the CET1 capital and subordinated liabilities. The regulatory requirement including capital conservation and countercyclical buffers for 2017 is 12.5%. Leverage ratio The bank s leverage ratio is the CET1 capital of the bank expressed as a percentage of the bank s total assets, pledged assets and contingent liabilities. As opposed to the CET1 capital ratio and the total capital ratio, risk weighting of certain assets and memorandum items is not taken into consideration. Instead, all exposures are recognised at their nominal s. Loan-to-deposit ratio Loans to the general public expressed as a percentage of deposits from the general public. LCR The Liquidity Coverage Ratio (LCR) is calculated according to the Capital Requirements Regulation (CRR) and Directive (CRD IV). The regulatory requirement for 2017 is 80% but is increasing gradually and will be 100% starting in The LCR measures the bank s unencumbered high-quality liquid assets (liquidity reserves) expressed as a percentage of the bank s estimated liquidity needs in a 30 calendar-day liquidity stress scenario. NSFR The Net Stable Funding Ratio (NSFR) assigns a weight to the bank s assets and funding based on their maturity. Less liquid assets have a more negative impact on the ratio than those that are more liquid. Funding with a longer maturity has a more positive effect on the ratio than funding with a shorter maturity. The main aim of the ratio is to measure the bank s ability to cope with a stress scenario over a one-year time horizon. If the ratio is over 100%, it means that long-term less liquid assets are funded satisfactorily with stable long-term borrowing. Cost/income ratio before credit losses The bank s costs (excluding credit losses) expressed as a percentage of the bank s income. Cost/income ratio after credit losses The bank s costs (including credit losses) expressed as a percentage of the bank s income. Cost/income ratio after credit losses excluding dividends, capital gains, impairment losses and goodwill amortisation The bank s costs excluding impairment losses on financial assets and goodwill amortisation expressed as a percentage of the bank s income excluding dividends and capital gains on disposal of branch offices. Return on equity Operating profit net of tax (22%) expressed as a percentage of average equity. Return on equity excluding dividends, capital gains, impairment losses and goodwill amortisation The bank s operating profit net of tax (22%), excluding dividends, capital gains on the disposal of branch offices, impairment losses on financial assets and goodwill amortisation, expressed as a percentage of average equity. Loan loss ratio excluding brokered volumes Credit losses as a percentage of the opening balance of loans to the general public. Loan loss ratio including brokered volumes Credit losses as a percentage of the opening balance of loans to the general public and brokered volumes. Percentage of impaired loans Net impaired loans (i.e. taking into account provisions recognised as expenses) as a percentage of loans to the general public. Average number of employees The average number of employees (1,730 hours per employee) has been calculated on the basis of the number of hours worked for the bank. 23

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