feeling NORWAY 2ND QUARTERLY REPORT 2009 SPAREBANK 1 BOLIGKREDITT AS

Transcription

1 feeling NORWAY 2ND QUARTERLY REPORT 2009 SPAREBANK 1 BOLIGKREDITT AS

2 FIG 1 The rowan tree is found in the wilderness all over Norway. As high as 1500 meters above sea level in the south. The berries have more Vitamin-C than oranges and appear in many old wives tales. FIG 2 The moose, a well known symbol of Norway, often helps itself to the rowan tree s bark, twigs and berries. The moose is the largest animal in our woods and is also known as the king of the forrest FIG 3 The wood of the rowan tree is tough and hard and thus provides material for musical instruments like flutes or lures. In the old days one was advised against making skis out of the rowan wood because they would be too smooth. feeling NORWAY Little, fiery berries with coats red as fire. Sour in kind but tasty when prepared. The berries are the main characteristic of the rowan tree. They paint Norwegian homes and gardens, gather under the lids of jam jars and are poured down our throats as juice or wine. The rowan tree often appears where you least expect. At the tip of a slanting roof, in the crown of another tree or in old stumps. Birds are responsible for this, they disseminate the seeds from their beaks. People also have a role in keeping this tree existing in abundance. None of our Nordic neighbours spend more on plants in- and outside the home. We like to take care of our property. Sound business is built upon mutual trust. The reports published by SpareBank 1 Boligkreditt allow you to get to know us and our culture. By letting you feel Norway. 3

3 FACT SHEET norway. KEY MACROECONOMIC FIGURES E 2010E GDP Growth 4,9 % 6,1 % 2,6 % -1,4 % 2,5 % Inflation 2,3 % 0,8 % 3,8 % 1,7 % 1,1 % Private Consumption 4,8 % 6,0 % 1,4 % 0,4 % 4,6 % Household disposable income -6,4 % 5,9 % 2,9 % 2,5 % 3,6 % Interest rate (3m Money market) 3,1 % 5,0 % 6,2 % 2,5 % 2,2 % Unemployment 3,4 % 2,5 % 2,6 % 3,8 % 4,6 % Current Account Surplus/GDP 17 % 16 % 18 % 12 % 11 % Budget Surplus/GDP 17 % 17 % 20 % 10 % 11 % Government pension fund/gdp 64 % 78 % 79 % 98 % 108 % COMMENTS ON THE NORWEGIAN MACRO ECONOMY The Norwegian Parliament, Oslo, Norway Sources: Statistics Norway, SpareBank THE PROSPECTS FOR THE NORWEGIAN ECONOMY HAVE IMPROVED CONSIDER- ABLY AFTER THE AUTHORITIES HAVE CONTRIBUTED WITH VIGOROUS EFFORTS IN THE FORM OF INTEREST RATE CUTS AND EXPANSIONARY FISCAL POLICY. IN SPITE OF WEAK DEMAND, REDUCED INVESTMENTS AND EXPORTS, WE EXPECT ONLY A SLIGHT FALL IN GDP THIS YEAR, AND THAT THE NORWEGIAN ECONOMY RETURNS TO A MORE NORMAL GROWTH RATE AROUND 2.5% THE COMING YEARS Jul Oct Jul Oct Jul Oct Jul Oct Jul Oct Juli Source: Eiendomsverdi The Norwegian authorities have responded to the financial crisis with strong efforts. Norges Bank has lowered interest rates from 5.75% to 1.25% since October The government has increased the use of oil revenues to record high NOK 118 billion, 6.5% of trend-gdp for mainland Norway. Fiscal policy has not been used this actively in more than 30 years. Furthermore the government has contributed to securing long term funding for the banks by introducing a swap arrangement in which the banks swap Covered Bonds for Treasury Bills. NOK 350 bn has been allocated and so far Treasury Bills amounting to NOK 180 bn have extracted from Norges Bank under this scheme. The demand for participation in the swap arrangement is increasing and it is expected that the banks will swap a further NOK 100 to 130 bn before the end of the year. It is likely that Norges Bank will steer the banks towards the money markets for funding by gradually increasing the price in the swap scheme. Yet another part of the Norwegian government crisis mitigation plan is two newly established funds called Statens Finansfond (The State Finance Fund) and Statens Obligasjonsfond (The State Bond Fund). Statens Finansfond will contribute core capital to banks and Statens Obligasjonsfond aims to strengthen businesses prospects in financing themselves in the bond market. Additionally, there has been given state support and guarantees to institutions like Eksportfinans and GIEK, the agency responsible for insurance of export credit. Statens Finansfond and Statens Obligasjonsfond are each allocated NOK 50 bn. Acquisition by Statens Finansfond shall take place upon application from each individual bank, and be governed by an agreement between the Fund and the bank. The type of capital provided by Statens Finansfond will be either hybrid Tier 1 securities or Tier 1 preference capital instruments. The crisis policies are both aimed at counteracting the imbalances in capital markets as a result of the financial crisis on the one side and stimulate the economy through compensating for lost demand for goods, services and investments on the other side. The imbalances in financial markets have recently seemed to be improving. This is evident, among other places, through the spread on money market rates upon the central bank rate which has come down significantly since the major turmoil last fall. The considerable cuts in interest rates and the active fiscal policy are expected to contribute to growth in the Norwegian economy at a rate of 2.5% next year. Household disposable income will increase as a result of lower interest expenses, expected growth in wages and low inflation. The government has both the ability and the will in this election year to act further towards stimulating the Norwegian economy if need be. Investments in the petroleum sector remain unchanged at record high levels from last year. This will also contribute positively to the Norwegian mainland economy. 5

4 FACT SHEET boligkreditt. In NOK Covered Bond details Mortgages Substitute collateral PAR-test 107,40 % Covered Bonds Company target 107,00 % EUR-deals Swaps Total Total Asset Coverage test The Asset Coverage test shows the ratio of assets to liabilities at any given time. This test is carried out on a weekly basis to ensure that the asset coverage remains above the minimum requirements and near the target ratio. Weighted average time since origination Weighted average remaining term 0,000 % 25 months 261 months Ratio of floating rate loans 100 % Weighted average interest rate 3,62 % Weighted average margin (in bps) 52 Weighted average current LTV 49,7 % Weighted average original LTV 56,1 % Maximum orginal LTV permitted by law Nominal Balance Issue date Maturity date* Interest payments Interest type XS XS XS Interest payments Interest type N-note NOK-deals ISIN Nominal Balance Issue date Maturity date* NO Quarterly Floating rate NO NO NO NO NO NO Quarterly Floating rate NO Quarterly Floating rate NO Quarterly Floating rate *All covered bonds have a one year extention clause % % of non-performing loans % Average loan size % Number of loans Substitute Collateral In addition to prime mortgages, the cover pool also consists of deposits and high grade bonds that serve as substitute collateral and liquidity reserve. The company has strict rules for what types of bonds that can be included in this reserve. All bonds have to be rated AA- or higher % Total mortgage portfolio (in NOK 1000) as of % Cover Pool details ISIN 75 % FIG 1 The see-saw illustrates the balance-related situation for SpareBank 1 Boligkreditt. There must always be a prodominance of assets in relation to debt in order to meet the legal requirement for over collateralization. 7

5 INCOME STATEMENT 1ST HALF 2009 BALANCE SHEET NOK Note NOK Note Total interest income Total interest expenses Net interest income Net gains/losses from financial instruments Net other operating income Total operating income Salaries and other personnel expenses Administration expenses Other operating expenses Depreciation on fixed assets and other intangible assets Total operating expenses Operating result before losses Write-downs on loans and guarantees Pre-tax operating result Taxes Assets Deferred tax advantage Other intangible assets Other assets Treasury bills Bonds Lending to and deposits with credit institutions Lending to customers Financial derivatives Total assets Liabilities Deferred taxes 0 0 Covered bonds Debt incurred by issuing securities Debt to credit institutions Financial derivatives 0 0 Payable taxes Other liabilities Total liabilities Profit/loss for the period Equity Contributed equity Accrued equity Profit/loss Total equity Total liabilities and equity

6 STATEMENT OF CHANGES IN EQUITY NOTES TO THE ACCOUNTS FOR 1ST HALF 2009 NOK CASH FLOW STATEMENT Share capital Premium reserve Other equity Total equity Incorporation Costs of incorporation -6-6 Share increase 21. November Result for the period Balance sheet as of 1. uary Share increase 22. February Share increase 22. August Share increase 02. November Share increase 20. December Result for the period Balance sheet as of 31. December Share increase 04. June Share increase 13. June Share increase 30. October Result for the period Balance sheet as of 31. December Share increase 11. February Share increase 4. June Share dividend Result for the period Balance sheet as of 30. June Cash flows from operations Interest received Payments to operations Taxes paid Net cash flows related with operations Cash flows from investments Net purchase of loan portfolio Net payments on the acquisition of government securities Net payments on the acquisition of bonds Net investments in intangible assets Net cash flows relating to investments Cash flows from funding activities Net receipt/payment from the issuance of sertificates Net receipt/payment from the issuance of bonds Net receipt/payment from the issuance of loans to credit institutions Payment of new equity capital Payment of dividend Net interest payments on funding activities Net cash flows relating to funding activities NOTE 1 GENERAL INFORMATION The accounts are prepared in accordance with International Financial Reporting Standards (IFRS), as determined by the EU. This includes interpretations from the International Financial Reporting Interpretations Committee (IFRIC), and its predecessor the Standing Interpretations Committee (SIC). NOTE 2 ACCOUNTING PRINCIPLES GENERAL A detailed description of the accounting principles applied by SpareBank 1 Boligkreditt is provided in the annual accounts for NOTE 4 NET INTEREST INCOME NOTE 3 RISK CLASSIFICATION The risk classification of the company s liabilities is completed upon the background of a complete assessment of the liabilities. This assessment is based on the following main criteria: - The client s ability to pay (income and debt) - The client s willingness to pay (poor payment records and reminders) - The size of the loan - Debt to asset ratio (only within 75 % of the estimated value) - Location Any differentiation in prices is governed by SpareBank 1 Boligkreditt, based on the recommendation given by the individual bank. Such differentiation is mainly carried out on the basis of collateral, the financial situation of the client and market circumstances. Interest income Interest income and similar income from loans to and balances with credit institutions Interest income and similar income from loans to and balances with customers Interest income from treasury bills Commission expense Total interest income Interest expense Interest expense and similar expenses to credit institutions Interest expense and similar expenses on issued bonds Interest expense and similar expenses on issued certificates Interest expense and similar expenses on deposits from and liabilities to customers Other interest expenses Total interest expense Net interest income NOTE 5 NET GAINS FROM FINANCIAL INSTRUMENTS Net gains from financial liabilities at amortised cost Net gains from financial assets at amortised cost Net gains from financial derivatives, hedging, at fair value Net gains from bonds at fair value Net gains from financial instruments Net cash flows in period Balance of cash, bank deposits and similar entities as of Net receipt/payments on cash Exchange rate effects Balance of cash, bank deposits and similar entities as of

7 NOTE 6 RECLASSIFICATION OF FINANCIAL ASSETS NOTE 8 SALARIES AND REMUNERATION As of Bonds classified as Book value New investment Amortising Exchange rate effects Amortised cost Hold to maturity Total certificates and bonds Market value for bonds in hold to maturity portfolio Bonds classified as Book value Market value incl exchange rate effects Effect on result if market value Hold to maturity Total certificates and bonds Salaries Pension expenses Social insurance fees Other personell expenses Total salary expenses Average number of man-years 6 5 5,2 NOTE 9 ADMINISTRATION EXPENSES NOTE 7 ASSET COVERAGE REQUIREMENT Covered bonds Financial derivatives Total covered bonds Lending to customers Substitute collateral Total cover pool IT operation and maintenance Management fees lending Travel Telephone and postage Training Misc other adm expenses Total NOTE 10 OTHER OPERATING EXPENSES Asset coverage 107,40 % 134,67 % 105,58 % The asset coverage is calculated according to the Financial Services Act This results in a deviation in relation to the amounts on the balance sheet because, among other things, the total amount of lending to customers is curtailed due to defaulted loans and loans with loan to value exceeding 75 % in addition to the fact that market value is utilized on bonds in the cover pool. Internal auditor, hired personnel from SpareBank 1 Group, other services Operating expenses rented offices Other losses Misc other operating expenses Total

8 NOTE 11 LENDING TO CUSTOMERS NOTE 12 FINANCIAL DERIVATIVES NOK Flexible loans - retail market Amortising loans - retail market Total loans before specified and unspecified loan loss provisions Specified loan loss provisions Grouped loan loss provisions Total net loans and claims with customers Liability Unused credit on flexible loans Total Defaulted loans Defaults * Specified loan loss provisions Net defaulted loans Other loans at risk of loss Loans not defaulted but at risk of loans Individual depreciation other loans at risk of loss Net other loans at risk of loss *The client s total engagement is considered to be in default and will be included in overviews of defaulted loans when overdue instalments and interest payments are not received within 90 days or if credit limits on flexible loans are exceeded for 90 days or more. Contract amount Fair value Distributed into NOK Assets Liabilities Hedging 1st half 2009 Interest derivatives Cashflow hedging Fair value hedging Interest rate swaps Basis swaps Total interest derivatives Hedging 1st half 2008 Interest derivatives Interest rate swaps Basis swaps Total interest derivatives All derivative contracts are for the purpose of hedging NOTE 13 CAPITAL ADEQUACY New capital adequacy regulations were introduced in Norway as of 1 uary 2007 (Basle II) SpareBank 1 Boligkreditt AS has been granted permission from the Norwegian Financial Supervisory Authority to use the Internal Rating Base Approach (IRB) for credit risk from the 2nd quarter of 2009 onwards. Transitional rules are given by regulation from the Norwegian Financial Supervisory Authority whereby the use of the IRB-approach will not have full effect of reduced regulatory capital requirements until In 2009 permission is given for a reduction in risk-weighted basis of calculation of 20 % of the old capital adequacy regulation (Basle I). For Boligkreditt these transitional rules implies that the company s assets now have a higher risk-weighting that under the standard method (in Basle II). Subordinated capital in Share capital Premium share fund Other equity capital Profit/loss Total equity capital entered into the balance sheet Intangible assets Purposed for share dividend % deduction of expected losses exceeding loss provisions IRB NA NA Core capital Supplementary capital % deduction of expected losses exceeding loss provisions IRB NA NA Total subordinated capital Minimum requirements for subordinated capital according to Basle II i Credit risk according to IRB Credit risk according to standard method NA Market risk Operational risk Depreciation on groups of loans Difference in capital requirement resulting from transitional period NA NA Minimum requirement subordinated capital Capital adequacy in Core capital ratio (%) 9,36 % 11,42 % 10,44 % Subordinated capital ratio (%) 9,28 % 11,42 % 10,44 %

9 NOTE 14 LIABILITIES INCURRED BY ISSUING SECURITIES NOTE 16 INCOME AND BALANCE SHEET DEVELOPMENT Nominal value* Nominal value* Nominal value* NOK * 2008 * Certificates and other short term liabilities Covered bonds Other bonds Own bonds Total liabilities incurred by issuing securities Book value Book value Book value Certificates and other short term liabilities Covered bonds Other bonds Own bonds Costs incurred by issuing debt entered into the balance sheet Total liabilities incurred by issuing securities Liabilities incurred by issuing securities according to maturity (nominal value) own bonds Sum Liabilities sorted by currency (book value as of ) NOK EUR Total *Amount shows nominal at exchange rate (EUR/NOK) at time of issuance and thus differs from amounts in balance which are entered at amortised cost. Income statement 2nd quarter 1st quarter 4th quarter 3rd quarter 2nd quarter NOK Interest income Interest expenses Net interest income Profit/loss on securities Net other operating income Total operating income Salaries and other personnel expenses Administrative expenses Other operating expenses Depreciation of fixed and other intangible assets Total operating expenses Operating result before losses Write-downs on loans and guarantees Pre-tax operating result Taxes Profit/loss for the period Balance sheet 2nd quarter 1st quarter 4th quarter 3rd quarter 2nd quarter NOK Assets Deferred tax assets Other intangible assets Other assets Treasury bills Bonds Lending to and deposits with credit institutions Lending to customers Financial derivatives Total assets Liabilities Deferred taxes Covered bonds Securities issued Debt to credit institutions Financial derivatives Payable taxes Other liabilities Total liabilities Equity Contributed equity Accrued equity Profit/loss for the period Total equity NOTE 15 CONTINGENCIES SpareBank 1 Boligkreditt AS is not a party to any ongoing legal proceedings.

10 SpareBank 1 Boligkreditt. DECLARATION FROM THE BOARD OF DIRECTORS AND THE CHIEF EXECUTIVE OFFICER Today the Board of Directors and the Chief Executive Officer have assessed and approved the financial accounts of SpareBank 1 Boligkreditt AS for the first half of The accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) as determined by the EU. The Board of Directors and the Chief Executive Officer hereby confirm that, to the best of their knowledge, the half-yearly for 2009 are prepared in accordance with current accounting standards and that the information in the accounts gives a true and fair view of the company s assets, liabilities and overall financial position as of The Board of Directors and the Chief Executive Officer declare that, to the best of their knowledge, the half-yearly report gives a true and fair rendition of the company s development, results and overall financial position along with an account of the most important risk and uncertainty factors encountered by the company. Stavanger, 6 August 2009 The Board of Directors of SpareBank 1 Boligkreditt AS Kjell Fordal Lisbet K Nærø Tore Anstein Dobloug Chair Merete Nygaard Kristiansen Merete Eik Per Skibeli CEO SpareBank 1 Boligkreditt AS Bjergsted Terrasse 1 PO Box Stavanger Norway boligkreditt@sparebank1.no Central switchboard: