INTERIM REPORT Q3 2017

Transcription

1 INTERIM REPORT Q3

2 Third quarter Strong pre-tax profit: NOK 513 million (NOK 453 million*) Return on equity: 12.2% (11.9%*) Net interest: 1.50% (1.44%) Higher nominal net interest: NOK 650 million (NOK 592 million) Good cost development: NOK 346 million (NOK 339 million*) Low write-downs on loans and guarantees: NOK 22*) Profit per equity certificate: NOK 1.52 (NOK 2.44) Core Tier 1 capital ratio: 14.9%, including 75% of the profit Key figures Q3 Q3 YtD YtD Pre-tax profit 513 MNOK 769 MNOK 1381 MNOK 1595 MNOK MNOK Profit per equitiy certificate 1,52 kr 2,44 kr 4,06 kr 5,15 kr 6,24 kr Net interest (annualised) 1,50 % 1,44 % 1,49 % 1,48 % 1,47 % Cost ratio 40,0 % 11,8 % 42,9 % 36,3 % 39,7 % Return on equity (annualised) 12,2 % 20,0 % 11,2 % 14,7 % 13,1 % Core Tier 1 14,9 % 14,8 % 14,9 % 14,9 % 14,9 % Core Tier 1 (IRB) 18,9 % 17,2 % 18,9 % 17,2 % 16,9 % The capital adequacy figure for the third quarter includes 75% of the profit for the period * The third quarter of is affected by the lwinding up of a pension scheme, MNOK 245, the sale of a monitored portfolio of MNOK 58, and a NOK 14 million dividend income from VISA. 2

3 Report for the third quarter Table 1: Key accounting figures Q3 Q3 YtD YtD NOKm Net interest income and credit commissions Commissions receivable and income from banking services Commissions payable and cost of banking services Net banking services Income from owner interests in group companies Net gain/(loss) on financial instruments Other operating income Net operating income Net operating income Salaries and general administration expenses Depreciation Other operating expenses Total operating expenses Profit before write-downs and tax Net gain on fixed assets Write-downs and losses on loans and guarantees Profit before tax Taxes Profit for the period Third quarter Sparebanken Vest recorded a strong pre-tax profit of NOK 513 million (NOK 453 million, incl. non-recurring effects of NOK 769 million) in the third quarter, and a return on equity of 12.2% (11.9%, incl. non-recurring effects: 20.0%). The profit performance shows strong growth in nominal net interest, good cost development and low losses. Associated companies, as a whole, also contributed with good profits. Net interest income in the quarter amounted to NOK 650 million (NOK 592 million), corresponding to an increase of 9.8% compared with the same quarter last year. The growth is due to a high level of customer activity and lower financing costs. The profits from associated companies continue to show positive development, and contribute a share of profits of NOK 39 million (NOK 35 million) in the quarter. The subsidiary Eiendomsmegler Vest delivered a pre-tax profit of NOK 4.1 million (NOK 2.4 million) in the quarter. The Core Tier 1 capital ratio is 14.9%, including 75% of the profit for the period. This is in line with the bank s capital goal. The return on equity increased to 12.2% (11.9%, incl. non-recurring effects: 20.0%) for the quarter seen in isolation. Operating expenses amounted to NOK 346 million (NOK 339 million excl. non-recurring effects). In the third quarter, NOK 245 million was taken to income in connection with the winding up of the bank s defined benefit pension scheme. The positive trend of low losses continued in the third quarter with losses of NOK 18 million (NOK 22 million, corrected for the sale of the monitored portfolio). 3

4 Figure 1: Development in return on equity, in % % % % 10.7% % Q3 Q4 Q1 Q2 Q3 Net commission income amounted to NOK 119 million (NOK 105 million) in the third quarter. The increase of NOK 14 million is due to higher fees and improved income from savings and investments. The net contribution from financial instruments amounted to NOK 20 million (NOK 40 million) for the quarter seen in isolation. The contribution to profits must be seen in conjunction with a tightening of credit spreads on the bank s holdings of certificates and bonds in the amount of NOK 14 million, while the regulation of items valued at fair value has an opposite effect of NOK 8 million. Customer business and proprietary trading make a contribution to profits from financial instruments of NOK 13 million. The return on equity at the end of the quarter is 11.2% (11.1%, incl. non-recurring effects: 14.7%). Net interest as a percentage of average assets under management was 1.50% (1.44%) for the third quarter seen in isolation. Net interest income in the third quarter amounted to NOK 650 million (NOK 592 million), and shows a positive development due to good growth and slightly improved margins. The lending margins in the retail and corporate s measured against the average 3-month Nibor rates were 1.95 (1.70) and 3.04 (2.95) percentage points, respectively, in the third quarter. The improvement in lending margins is due to a reduction in the average Nibor. Repricing at the start of the year also had an effect on the retail. The lending margin in the retail improved by 7 basis points compared with the second quarter, while it fell by 1 basis point in the corporate. This development is due to a reduction in the average Nibor of 11 basis points for the quarter, and to slightly weaker customer interest rates. The deposit margins in the retail and corporate s measured against the average 3-month Nibor were 0.03 (0.30) and 0.03 (0.24) percentage points, respectively, in the third quarter. Compared with the second quarter, the deposit margins in the retail and corporate s decreased by 9 and 10 basis points, respectively. This can be explained by a reduction in the average Nibor of 11 basis points for the quarter, and to slightly improved customer interest rates. Table 2: Financial instruments NOKm Q3 Q3 YtD YtD Dividend Gain/(loss) on commercial papers and bonds* Gain/(loss) on shares Gain/(loss) on financial instruments, recognised at fair value* Gain/(loss) on currency Net gain/(loss) on financial instruments designated for hedge accounting Of which gain/loss related to basisswaps Other Net gain on financial instruments * Value adjustments used to control interest rate and currency risk are divided into the income lines of the financial instruments they are managed together with. Operating expenses in the third quarter amounted to NOK 346 million (NOK 339 million excl. non-recurring effects). The cost development is good, and on a par with the third quarter when corrected for financial tax of NOK 5.4 million. The number of full-time equivalents in the Group was reduced by 3 in the quarter to 694 (748). The reduction in the past year is due to the restructuring programme carried out in to adapt Sparebanken Vest to a more digital future. Table 3: Number of full-time equivalents Quarterly Q3 Q4 Q1 Q2 Q3 Full-time equivalents

5 The contribution to profits from associated companies shows a good development, with a total contribution of NOK 39 million (NOK 35 million) in the quarter seen in isolation, which breaks down as follows: Table 4: Associated companies NOKm Q3 Q3 YtD YtD Frende Forsikring Norne Securities Brage Finans Other Companies Net profit from associated companies See the section on business in subsidiaries and associated companies for a more detailed description of the development of the individual companies. Total write-downs on loans and guarantees amounted to NOK 18 million (minus NOK 36 million) for the quarter seen in isolation. A monitored portfolio of loans in default in the retail was sold for NOK 58 million in the corresponding quarter in. Corrected for this transaction, the comparable figure is NOK 22 million. See the section on risk and capital factors and Notes 6 and 7, which describe the write-downs and the development in default of payment. Developments in lending and deposits Gross lending increased by NOK 9.8 billion (NOK 7.5 billion) to NOK billion (NOK billion) from the third quarter, corresponding to year-on-year growth of 7.2%. Table 5: Growth in lending Growth last 12 months Growth last quarter Lending total 7.2% 1.6% Lending retail 6.8% 1.7% Lending corporate 8.8% 1.0% Of gross lending, loans to the retail amounted to NOK billion (NOK billion), NOK 62.3 billion of which were loans transferred to Sparebanken Vest Boligkreditt. The growth in lending in the retail was 6.8% over the past 12 months. The growth in the third quarter is on a par with the corresponding quarter last year despite more stringent regulation. 12 months, and the growth in the quarter is slightly higher than in the corresponding quarter last year, when the growth was negative. The growth is in desired segments with acceptable risk and good profitability. Total deposits from customers amounted to NOK 68.7 billion (NOK 65.6 billion), corresponding to year-onyear growth of 4.8%. Table 6: Growth in deposits Growth last 12 months Growth last quarter Deposits total 4.8% -3.4% Deposits retail 2.7% -2.1% Deposits corporate 8.9% -5.5% Deposits break down as follows: NOK 43.8 billion (NOK 42.6 billion) from retail customers and NOK 25.0 billion (NOK 22.9 billion) from corporate customers. The reduction in the retail in the third quarter is the result of natural seasonal variations, while the reduction in the corporate is in line with the comments in the half-yearly report linked to short-term deposits from two large customers. The breakdown between deposits and lending is specified in Notes 8 and 9. Risk and capital factors Credit risk At the end of the third quarter, the retail still accounted for approx. 76% of the credit portfolio, and approx. 96% of this portfolio consists of loans secured by residential mortgage. The risk profile in the retail portfolio is stable and low. The risk profile in the corporate is stable and moderate. Good portfolio management and moderate exposure in industries vulnerable to cyclical fluctuations make a positive contribution to the risk profile in this segment. Commitments in default and potential bad debt in the corporate amount to NOK 1,326 million (NOK 1,241 million). The volume in default in the corporate is mainly related to potential bad debt commitments identified in previous years, and the percentage provided for on these commitments is more than 50%. Commitments in default and potential bad debt in the retail total NOK 253 million (NOK 238 million). Gross lending to the corporate amounted to NOK 34.8 billion (NOK 32.0 bill.). The growth in lending in the corporate was 8.8% over the past 5

6 Figure 2 Defaults and other potential bad debt % 4 % 3 % The bank s reported credit spread risk is somewhat reduced in relation to the end of the third quarter, at NOK 262 million (NOK 274 million). This is due, among other things, to adaptation to new regulatory requirements and a changed calculation method as a result of the Financial Supervisory Authority of Norway s circular 12/ ,96% % % % % 2 % 1 % The bank s stock exposure (excluding subsidiaries and associated companies) at the end of the third quarter amounted to NOK 437 million (NOK 440 mill.) Q3 Q4 Q1 Q2 Retail Corporate % of total 253 Q3 Default in relation to gross lending is shown in Note 6. The total losses on lending and guarantees amounted to NOK 18 million (NOK 22 million corrected for the sale of the monitored portfolio) in the third quarter. The net effect on profit/loss of individual write-downs and confirmed losses amounts to NOK 18 million for the quarter, while group write-downs amount to NOK 0 million. The total percentage provided for in the portfolio is stable. Figure 3 Write-downs Write-downs as % of gross lendings 0,9 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0,0 0,76% ,77% ,77% ,77% Q3 Q4 Q1 Q2 0,75% Q3 Individual write-downs Group write-downs Write-downs as % of gross lendings % Capitalised write-downs (MNOK) The identification, analysis and followup of operational risk is addressed at a general level through management confirmations, continuous assessments and the registration of events. No matters that are critical to the bank s operations were uncovered during the quarter. Liquidity and financing The Group s liquidity situation is good. It is managed at the overall level using LCR, liquidity indicators, stress tests (similar to LCR) and the deposits/loans ratio. The Group s Liquidity Coverage Ratio (LCR) at the end of the third quarter was 137%. The introduction of NSFR (Net Stable Funding Ratio) in Norway is expected to enter into force in The deposits/loans ratio was marginally lower than in the corresponding period last year: 48.7% (49.0%). The Group s liquidity portfolio amounted to NOK 18.9 (18.1) billion at the end of the quarter. The total capital financing amounted to NOK 81.7 billion (NOK 77.2 billion). The bank s relative proportion of covered bonds at the end of the third quarter was approximately 72% (73%) of the bank s capital financing. The proportion of financing with a remaining term to maturity of more than three years was approximately 47% (41%) at the end of the quarter. Market risk and operational risk The bank s interest rate and currency risk is managed within limits adopted by the Board and is considered to be low. The bank is exposed to credit spread risk, primarily through the management of interestbearing securities in the bank s liquidity portfolio, and to a very limited extent through proprietary trading. The portfolio mainly consists of securities issued by Norwegian banks, residential mortgage companies, municipalities, county authorities, the Norwegian state and non-financial enterprises. Rating Sparebanken Vest is rated by Moody s. On 10 July, Moody s changed the rating for Sparebanken Vest and most other Norwegian banks to A1 Negative from A1 Stable. The reason given by Moody s for the change is the implementation of the Crisis Management Directive in Norwegian law. Bonds issued by Sparebanken Vest Boligkreditt AS are rated by Moody s and have an AAA rating with a stable outlook. 6

7 The bank s equity certificate (SVEG) At the end of the third quarter, the book equity and profit per equity certificate were NOK 50.1 (49.5) and NOK 4.06 (5.15), respectively. For the third quarter seen in isolation, the profit per equity certificate was NOK 1.52 (2.44). The price of the equity certificate at the same time was NOK (NOK 39.90). At the end of the third quarter, the price-to-book ratio was 1.12 (0.81). Figure 5: Capital adequacy, IRB 24 % 22 % 21.7% 21.2% 20 % 2.6% 2.5% 18 % 1.9% 1.8% 16 % 14 % 22.4% 2.6% 1.9% 22.9% 2.6% 1.9% 23.3% 2.6% 1.9% In, Sparebanken Vest has distributed a cash dividend of NOK 4.5 per equity certificate for the financial year. 12 % 10 % 8 % 17.2% 16.9% 18.0% 18.5% 18.9% Capital adequacy The bank s Core Tier 1 capital adequacy ratio, pursuant to the Basel I floor and including 75% of the accumulated profit, was 14.9% at the end of the third quarter. The bank meets the combined minimum and buffer requirement of 11.5% plus the Pillar II requirement of 1.8%, in total 13.3% Core Tier 1 capital, by a very good margin. 6 % 4 % 2 % 0 % Total Capital Tier 2 Capital Add. Tier 1 Cap. Core Tier 1 Capital Q3 21.7% 2.6% 1.9% 17.2% Q4 21.2% 2.5% 1.8% 16.9% Q1 AIRB corp. portfolio 22.4% 2.6% 1.9% 18.0% Q2 AIRB corp. portfolio 22.9% 2.6% 1.9% 18.5% Q3 AIRB corp. portfolio 23.3% 2.6% 1.9% 18.9% Figure 4: Capital adequacy, Basel I floor 20 % 18.6% 18.7% 18.4% 18 % 2.2% 2.2% 2.1% 16 % 1.7% 1.6% 1.5% 14 % 18.3% 2.1% 1.5% 18.4% 2.0% 1.5% The leverage ratio at the end of the third quarter was 7.3%, up 0.1 percentage point from the second quarter. Sparebanken Vest meets the regulatory minimum requirement (3%) and the buffer requirement (2%), in total 5%, which applies from 30 June this year, by a good margin. 12 % Figure 6: Leverage ratio 8 10 % 8 % 14.8% 14.9% 14.8% 14.7% 14.9% 6 6 % 4 % 4 6.6% 7.3% 7.1% 7.2% 7.3% 2 % 0 % Total Capital Tier Capital Add. Tier 1 Cap. Core Tier 1 Capital Q3 18.6% 2.2% 1.7% 14.8% Q4 18.7% 2.2% 1.6% 14.9% Q1 18.4% 2.1% 1.5% 14.8% Q2 18.3% 2.1% 1.5% 14.7% Q3 18.4% 2.0% 1.5% 14.9% From the second to the third quarter, the Core Tier 1 capital adequacy ratio based on the IRB method has increased from 18.5% to 18.9%. This increase is largely due to profit accumulation. 2 0 Q3 Q4 Q1 Q2 Q3 The bank s capital adequacy is specified in Note 11. Business in subsidiaries and associated companies Subsidiaries Eiendomsmegler Vest (holding 100%) recorded a pre-tax profit in the third quarter of NOK 4.1 million (NOK 2.4 million) with a top-line of NOK 48.9 million (NOK 54.4 million). The profit performance is as 7

8 expected, but the top-line is affected by lower activity in the housing, due, among other things to the UCI Road World Championships held in Bergen in September. A total of 1,561 houses were sold in Bergen in the third quarter, which is 9.4% less than in the corresponding period last year. For the year-to-date, 2.2% fewer houses have been sold than in. In the first three quarters of the year, the company recorded revenues of NOK 162 million (NOK 154 million) and a pre-tax profit of NOK 12.2 million NOK (minus NOK 5.9 million). The development has been positive during the three first quarters of the year, and the work on increasing profitability is paying off and will continue to be a major focus. Sparebanken Vest Boligkreditt AS (holding 100%) manages housing loans worth NOK 62.3 billion (NOK 54.6 billion), and, at the end of the third quarter, it had issued covered bonds in the amount of NOK 61.5 billion (NOK 54.1 billion). Associated companies The share of profit/loss from associated companies amounted to a total of NOK 39 million (NOK 35 million). It was included in the accounts in accordance with the equity method in the third quarter. Accumulated for, the contribution from associated companies amounted to NOK 87 million (NOK 82 million). Frende Holding (holding 39.7%) recorded a strong pretax profit of NOK 94.4 million (NOK 78.4 million) in the third quarter, adding to a total of NOK million (NOK million) for the year-to-date. There is positive development in both the general insurance business and the life insurance business. Sparebanken Vest s share of profits was NOK 37.4 million for the quarter (NOK 30.7 million). Frende has delivered a profit contribution of a total of NOK 72.2 million (NOK 72.5 million) for the year-to-date. Frende Holding s annualised return on equity was 19.3% (22.3%) in the third quarter. Frende Skade recorded a pre-tax profit of NOK million (NOK million) at the end of the third quarter. The company has total premiums of NOK 1,727 million (NOK 1,508 million) divided between 146,000 customers (128,100 customers). Frende Skade s share continues to grow, and it is estimated to be 3% for Norway as a whole. The loss ratio at the end of the third quarter-year was 77.7% (74.9%) and the company s combined ratio was 96.2% (92.5%). Frende Skade has delivered good actuarial results for the third quarter and the loss ratio for the quarter seen in isolation was 66.9% (72.0%). Frende Liv recorded a pre-tax profit of NOK 84.6 million (NOK 93.5 million) at the end of the third quarter. The company had total premiums incl. savings premiums of NOK 832 million (NOK 751 million), while the number of customers is 65,642 (60,570), corresponding to a growth in the number of customers of 8.4% over the past year. For the year-to-date, Frende Liv has delivered good risk results, particularly in the retail segment, and a good development in the administrative result. The return on financial assets amounted to NOK 40.3 million (NOK 28.4 million). Going forward, Frende expects a normal year in terms of claims, good cost control, and the same growth rate as it has experienced for the year-to-date, despite the strong price competition in the. Norne Securities AS (holding 47.6%) is a securities firm that offers investment services to the corporate and retail s. The company is the leading facilitator of equity certificate issues in Norwegian savings banks. The company has three business areas: corporate finance, online stockbroking and equity and bond trading, and it made a negative contribution to profits of minus NOK 0.8 million (minus NOK 1.2 million) for the third quarter. For the year-to-date, Sparebanken Vest s share of the profit was NOK 1.6 million (minus NOK 6.4 mill.). The company expects an improved profit performance in the rest of. Brage Finans AS (holding 49.9%) is a financing company that offers leasing and loans secured by the purchased object to the corporate and retail s. The company s head office is in Bergen. It mainly sells products through its 12 owner banks. Brage also offers its products through agents and makes direct sales to corporate and retail customers. During the period, the company has expanded its business in the retail by entering into a cooperation with car dealers. Brage Finans now has offices in Ålesund, Stavanger and Kristiansand. The company recorded a pre-tax profit in the third quarter of NOK 13.0 million (NOK 10.0 million). 8

9 Accumulated for, the pre-tax profit is up 46% to NOK 39.9 million (NOK 27.4 million). At the end of the quarter, the company s lending portfolio amounted to NOK 5.6 billion (NOK 4.2 billion). The gross portfolio has grown by 33% over the past 12 months, which is also reflected in the company s net interest income. Brage Finans new sales are continuing to grow in both the corporate and retail s. The biggest growth has been in the retail linked to sales of car loans, and the retail portfolio now accounts for 12.8% of the total portfolio. Sparebanken Vest s share of the profit in Brage Finans was NOK 4.9 million (NOK 3.7 million) for the third quarter, while it was NOK 14.7 million (NOK 10.3 million) accumulated for the year. Balder Betaling AS (holding 36%) exercises ownership of the mobile phone payment system Vipps for the savings banks behind Frende Forsikring. Balder Betaling has a holding of around 12% in Vipps, and Sparebanken Vest is the biggest owner in Balder with a holding of 36%. The company made a contribution to profits for the third quarter, and for the year-to-date of minus NOK 3.2 million. Post balance sheet events No significant events have taken place since the balance sheet date that affect the quarterly accounts. Outlook The global economic upturn appears to be picking up. More robust global demand and optimistic financial s are important driving forces behind the cyclical upturn. Countries in Europe, Japan and emerging Asian economies are pushing the growth. Despite the robust recovery, there are still challenges. The growth is very weak in many countries, and inflation is below the central banks targets. Sparebanken Vest expects global economic growth to increase from 3.6% in to 3.7% in For the year-to-date, the average oil price has been USD 53 a barrel. The prices in the futures indicate that the oil price will remain in this bracket going forward. Norges Bank has adjusted its oil investment estimates upwards. Metal prices have fallen since February this year, due, among other things, to reduced confidence in increased infrastructure investments being made in the USA. The upturn in the global economy, particularly in China, has led to recent commodity price hikes. The downturn that followed the fall in oil prices three years ago, is now over. The fall in oil investments, which had a particularly negative effect on activity in Southern and Western Norway, is in the process of creating new growth. A weaker krone and lower wage growth have improved the competitiveness of Norwegian business and industry. Unemployment has decreased most in Western Norway and consumer confidence is growing. This has led to increased consumption growth. Houses prices are falling strongly in Oslo, while the negative trend is more moderate in Hordaland. Increasing numbers of unsold properties and a high level of house-building may help to curb the price growth going forward. A continued positive, but decreasing contribution from housing investments is expected in the second half-year. Growth in corporate investments is expected to increase going forward. This is due to increased demand and because petroleum investments are expected to increase again after falling by 40% since the peak in The growth in mainland GDP is expected to be slightly below 2% in the current year. Western Norway Unemployment is continuing to fall in Western Norway, and economic activity is picking up. Since unemployment peaked, there are now 4,400 fewer unemployed persons in Hordaland and Rogaland alone. The Western Norway Index 3/17 shows that the moderate, positive development we have seen over the past year is continuing. Demand is slightly down, while profitability and employment are contributing to the positive development. There are slightly lower expectations of demand going forward. Both the petroleum industry and companies with little or no turnover related to oil and gas have lowered their expectations for the next half-year. This suggests that the enterprises in Western Norway, both in and outside the oil sector, expect a moderate growth rate in the economy also going forward. It also indicates that the upturn is on hold. Sparebanken Vest Sparebanken Vest s long-term target is a return on equity of 11%. Based on the results as of the third quarter and the expectations for the rest of the year, this target will be reached for. The bank s target for Core Tier 1 capital is that actual capital shall be around 1 percentage point above all minimum and buffer requirements (including Pilar 2). This target was met at the end of the third quarter, and will also be met 9

10 when the countercyclical capital buffer increases at the end of the fourth quarter. The distribution percentage for the equity certificate holders share of the profit for is expected to be in the midinterval of the bank s dividend policy. The growth in volume over the past year has been good and controlled. Good growth is also expected going forward through targeted customer selection based on profitability and efficient tyingup of capital. There is strong competition in the. Given a stable situation, the bank s net interest in the fourth quarter is expected to be on a par with the result for the year-todate, while the costs for as a whole are expected to be on a par with. The bank s overall losses for are expected to be around NOK 100 million. Sparebanken Vest will continue its work on optimising and adapting its operations to more digitalised customer behaviour, and is continuously implementing digital processes and solutions. The work has given positive results in the form of simpler and improved customer processes and more efficient use of resources. The bank s work on ensuring good customer experiences and establishing more user-friendly bank services for its customers will continue to ensure increased customer satisfaction and competitiveness. Bergen, 24 October The Board of Directors of Sparebanken Vest Trygve Bruvik Arild Bødal Birthe Kåfjord Lange Chair of the Board Deputy Chair of the Board Magne Morken Richard Rettedal Gunnar Skeie Anne Marit Hope Marianne Jacobsen Kristin Axelsen Fred David Risløw Jan Erik Kjerpeseth CEO 10

11 Financial highlights, Group Summary of profit and loss 01/ / / /09-16 CHANGE -17 vs 2Q vs -16 Net interest and credit commission income Net commission income and income from banking services Income from associated companies Net gain/(loss) on financial instruments Net other operating income Net operating income Operating expenses Net profit on tangible fixed assets Write-downs of loans and losses on guarantees Profit/loss before tax expense Tax expence Profit/loss for the period Equity certificates share of profit/loss divided by the number of equity certificates 1,52 2,44 4,06 5,15 6,24 11

12 Financial highlights, Group (cont.) Key figures 01/ / / /09-16 Profitability Return on equity after tax 12.2% 20.0% 11.2% 14.7% 13.1% Net interest as a percentage of average assets under management 1.50% 1.44% 1.49% 1.48% 1.47% Net other operating income as a percentage of net operating revenues 26.2% 28.7% 25.0% 27.1% 26.3% Operating expenses as a percentage of net operating income (cost-income) 40.0% 11.8% 42.9% 36.3% 39.7% Operating expenses as a percentage of net operating income, corrected for financial instruments 40.9% 12.4% 43.7% 38.2% 41.2% Losses and defaults Losses on loans as a percentage of gross lending 0.05% 0.00% 0.03% Commitments in default (>90days) as a percentage of gross lending 0.19% 0.21% 0.24% Potential bad debt as a percentage of gross lending (before write-down) 1.06% 1.00% 1.03% Balance sheet figures and liquidity 30/ / /12-16 Total assets Average total assets Gross loans to customers Lending growth, last 12 months 7.2% 5.8% 5.6% Customer deposits Deposit growth, last 12 months 4.8% 4.0% 4.0% Deposit coverage 47.8% 48.9% 48.9% Liquidity Coverage Ratio (LCR) 137% 139% 158% Capital adequacy Risk-weighted balance sheet total Core Tier 1 capital adequacy 14.9% 14.8% 14.9% Core capital adequacy 16.4% 16.4% 16.5% Capital adequacy, transitional arrangement 18.4% 18.6% 18.7% Core Tier 1 capital excluding non-audited profit/loss 13.9% 13.5% Capital adequacy, IRB 18.9% 17.2% 16.9% Leverage ratio 7.3% 7.2% 7.3% Personnel Number of full-time equivalents Number of branch offices The equity certificate 30/ / /12-16 Owner fraction on balance sheet date 23.2% 24.7% 23.2% Weighted owner fraction in the period 23.2% 24.7% 23.2% 24.7% 24.7% Equity cert. Capital's share of profit/loss divided by no of equity certificates (NOK) 1,52 2,44 4,06 5,15 6,24 Book equity per equity certificate 50,1 49,5 50,6 Listed price of equity certificate 56,0 39,9 48,4 Price-to-book 1,12 0,81 0,96 12

13 Income statement PARENT BANK 01/ / / /09-17 Notes 01/ / / / Interest income and similar income Interest expenses and similar expenses Net interest and credit commission income Commission income and income from banking services Commission expenses and expenses relating to banking services Income from ownership interests in associated companies Net gain/(loss) on financial instruments Other operating income Net other operating income Net operating income Payroll and general administration expenses Depreciation Other operating expenses Total operating expenses Profit before write-downs and tax Net gain on fixed assets Write-downs on loans and guarantees Pre-tax profit Tax Profit for the period ,26 4,04 3,57 2,19 1,28 Profit/Diluted profit per equity certificate 1,52 2,44 4,06 5,15 6,24 Statement of comprehensive income PARENT BANK 01/ / / / / / / / Profit/loss for the period Estimate variance, pensions Tax effect of estimate variance, pensions Other profit/loss elements that will not be reclassified to profit or loss after tax Other profit/loss elements that will be reclassified to profit or loss after tax Total other profit/loss elements in the period Total profit for the period

14 Balance sheet PARENT BANK 31/ / /09-17 Notes 30/ / /12-16 Assets Cash and receivables from central banks Loans to and receivables from credit institutions Net lendings 7, Shares at fair value through profit or loss Shares available for sale Commercial papers and bonds Financial derivatives Shareholdings in group companies Shareholdings in associated companies Deferred tax assets Pension assets Other intangible assets Tangible fixed assets Prepaid expenses Other assets Total assets Liabilities and equity Liabilities to credit institutions Deposits from customers Securitised debt Financial derivatives Accrued expenses and pre-paid income Pension obligation Deferred taxes Other provision for commitments Tax liabilities Subordinated loan capital Other liabilities Total liabilities Equity certificates Own equity certificates Premium reserve Equalisation reserve Total equity certificate capital Primary capital Gift fund Compensation fund Total primary capital Other equity Hybrid capital Total equity Total liabilities and equity

15 Cash flow statement Cash flows from operations 01/ / / /09-16 Interest, commission and customer fees received Interest, commission and customer fees paid Interest received on other investments Interest paid on other borrowings Payments to other suppliers for goods and services Payment to employees, pension schemes, National Insurance contributions, tax withholdings etc Payment of taxes Dividends received for securities held for trading purposes Payments made/received on purchase/sale of securities held for trading purposes Net cash flow from operations Cash flows from investment activities Payments made/received on loans to customers Payments made/received on receivables and tied-up loans to financial institutions Dividends received for securities not held for trading purposes Payments made/received on purch./sales of shares not held for trading purposes Payments made/received on purch./sales of other securities not held for trading purposes Payments received from investments in associated companies Payments made relating to investments in associated companies Payments received from sale of operating assets etc Payments made on purchases of operating assets etc Net cash flows from investment activities Cash flows from financing activities Payments made/received on customer deposits Payments made/received on deposits from Norges Bank and other financial institutions Payments received relating to subordinated loan capital Payments related to redemptions of subordinated loan capital Payments received on issuing bond debt Payments made related to redemption of bond debt Dividends paid / Donations for the public benefit Net cash flow from financing activities Net cash flow for the period Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

16 Changes in equity Equity certificates Own equity certificates Premium reserve Equalisation Primary reserve capital Gift fund Comp. fund Other equity Minority Hybridcapital interests Equity at 31 Dec Profit/loss for the periode Other comprehensive income Purchase/sale of own equity certificates Distributed dividend and donations Issuance of hybrid capital Interest paid on hybrid capital Tax on interest on hybrid capital, directly against equity Donations from gift fund Equity at 30 September Total Equity at 31 Dec Profit/loss Other comprehensive income Purchase/sale of own equity certificates 0 0 Distributed dividend and donations Issuance of new hybrid capital Interest paid on hybrid capital Tax on interest on hybrid capital, directly against equity Donations from gift fund Equity at 31 Dec Profit/loss for the periode Other comprehensive income 0 Purchase/sale of own equity certificates Distributed dividend and donations Redemption of hybrid capital Issuance of new hybrid capital Interest paid on hybrid capital Tax on interest on hybrid capital, directly against equity 9 9 Equity at 30 September

17 Changes in equity (cont.) PARENT BANK Equity certificates Own equity certificates Premium reserve Equalisation Primary reserve capital Gift fund Comp. fund Other equity Hybridcapital Reserve for unrealised gains Equity at 31 Dec Profit/loss for the periode Other comprehensive income Purchase/sale of own equity certificates Interest paid on hybrid capital Issuance of new hybrid capital Tax on interest on hybrid capital, directly against equity Donations from gift fund Equity at 30 September Total Equity at 31 Dec Profit/loss Other comprehensive income Purchase/sale of own equity certificates Tax on interest on hybrid capital, directly against equity Issuance of new hybrid capital Interest paid on hybrid capital Tax on interest on hybrid capital, directly against equity Donations from gift fund Equity at 31 Dec Profit/loss for the periode Other comprehensive income 0 Purchase/sale of own equity certificates Redemption of hybrid capital Issuance of new hybrid capital Interest paid on hybrid capital Tax on interest on hybrid capital, directly against equity 9 9 Equity at 30 September Notes Note 1 Accounting principles The consolidated accounts for the third quarter have been prepared in accordance with IAS 34. The accounts have been prepared on the basis of the same principles and with the same estimate methods as the annual accounts for. The accounting principles are described in the annual report. All amounts are stated in NOK million unless otherwise specified. 17

18 Note 2 Segment information The management has evaluated the segments that it is appropriate to report in relation to corporate governance. The segments are: Corporate Banking, Retail, Treasury and Real Estate Markets. Operating expenses are allocated, with the exception of IT costs, staff costs and depreciation. Net interest income is allocated based on internally calculated interest based on 3-month NIBOR. Banking operations Corporate Retail Treasury Estate agency business Not allocated by segment Total 01/01-30/09- Income statement Net interest income Operating income Operating expenses Loss Pre-tax profit Tax expense -319 Profit for the period /09-17 Balance sheet Net lendings Deposits /01-30/09- Income statement Net interest income Operating income Operating expenses Net gain on fixed assets Loss Pre-tax profit Tax expense -344 Profit for the period /09-16 Balance sheet Net lendings Deposits Income statement Net interest income Operating income Operating expenses Net gain on fixed assets Loss Pre-tax profit Tax expense -435 Profit for the period /12-16 Balance sheet Net lendings Deposits

19 Note 3 Net interest and credit commission income PARENT BANK 01/ / / / / / / /09-16 Interest and similar income from loans to and receivables from credit institutions Interest and similar income from loans to and receivables from customers Interest and similar income from commercial papers, bonds and other interest-bearing securities Interest income and similar income Interest and similar expenses on debt to credit institutions Note 4 Net other operating income Interest and similar expenses on deposits from and debt to customers Interest and similar expenses on issued securities Interest and similar expenses on subordinated loan capital Other interest expenses etc. 1) Fee Norwegian Banks' Guarantee Fund Interest expenses and similar expenses Net interest and credit commission income ) Interest from derivatives entered into to manage the interest rate risk attached to the bank s ordinary portfolios is classified as interest income and recognised as an adjustment of the bank s other interest income/ interest expenses. PARENT BANK 01/ / / / / / / / Guarantee commissions Fees from payment transfers Income from insurance Commission income from savings and investment products Commission income from group companies Other commissions and fees Commission income and income from banking services Fees payment transfers Expenses related to savings and investment products Other commissions and fees Commission expenses and expenses relating to banking services Net banking services Income from shareholdings in group companies and associated companies Dividend (cf. note 15) Gain/(loss) on shares Gain/(loss) on commercial papers and bonds 1) Gain/(loss) on financial instruments, designated at fair value 1) Gain/(loss) related to positions to customers and trading Net gain/(loss) on financial instruments designated for hedge accounting Of which gain/loss related to basisswaps Other Net gain/(loss) on financial instruments Brokerage commission Other operating income Other operating income Net other operating income ) The value adjustment of derivatives used to manage interest and currency risk is distributed between the financial instruments they are managed together with. 19

20 Note 5 Operating expenses PARENT BANK 01/ / / / / / / / Payroll expenses including empl.nat.ins.contributins Pension expenses Profit/loss effect related to change in pension plan Other personnel expences Eksternal fees ICT expenses Marketing Payroll and general administration expenses Depreciation Operating expenses, premises Wealth tax Other operating expenses Total other operating expenses Total operating expenses

21 Note 6 Losses and defaults on loans and guarantees PARENT BANK 01/ / / / / / / / Change in individual write-downs during period Confirmed losses in the period with previous individual write-down Confirmed losses in the period without previous individual write-down Recoveries in previously confirmed write-downs Net effect on profit/loss from individual write-downs Change in group write-downs in the period The period's net losses on loans Confirmed losses on guarantees Changes in write-downs on guarantees in the period The period's net losses on guarantees Write-downs on loans and guarantees Defaults and other problem loans The table shows the recognised defaults and other potential bad debt, where the total reported is based on definitions pursuant to the Basel regulations. PARENT BANK Retail Corporate Total Retail Corporate Total Gross loans in defaults of payment exceeding 90 days Gross other defaults and other problem loans Gross default and other problem loans Individual write-downs Net default and other problem loans Retail Corporate Total Retail Corporate Total Gross loans in defaults of payment exceeding 90 days Gross other defaults and other problem loans Gross default and other problem loans Individual write-downs Net default and other problem loans Age distribution of commitments in default The table shows the book value of loans registered in default, where the amount in default exceeds NOK 1,000 in one of the commitment s accounts and is not due to payment delays. PARENT BANK Retail Corporate Total Retail Corporate Total Up to 30 days days days More than 90 days Gross loans in default of payment Retail Corporate Total Retail Corporate Total Up to 30 days days days More than 90 days Gross loans in default of payment