REPORT FOR THE FIRST HALF OF 2010 Terra BoligKreditt AS

Transcription

1 REPORT FOR THE FIRST HALF OF 2010 Terra BoligKreditt AS

2 Key figures Semi-annual Report 2010 Pre-tax operating revenues of NOK 21 million for the first half of 2010, compared with pre-tax operating revenues of NOK 28.8 million for the same period in Operating revenues include realised and unrealised gains from trading in securities of NOK 1.6 million, against NOK 9.5 million during the first half of Total lending reached NOK 25,949 million, an increase of 18 per cent year to date and 63 per cent over the past 12 months. Total borrowing was NOK 29,209 million, an increase of 16 per cent year to date and 45.5 per cent over the past year. Net interest income at the end of the second quarter is NOK 86 million, representing an increase of 43 per cent compared with the same period in During the first half-year, savings banks and OBOS received distributor commissions amounting to NOK 47.5 million, which is more than double the amount received in the same period in 2009 (NOK 23.6 million) The capital adequacy ratio was per cent at the end of the first half of 2010, compared to per cent at the end of The capital adequacy ratio is calculated according to the standard method in Basel II. No complete or limited external auditing of the semi-annual report and semi-annual accounts has been undertaken. Page 2 of 14

3 Rapport for the first half-year of 2010 Introduction Terra BoligKreditt plays an important role in funding the lending activity of the savings banks and OBOS. The company is licensed as a credit institution and is entitled to obtain loans in the market by issuing covered bonds (CB). By gathering the funding activity related to covered bonds in Terra BoligKreditt, the savings banks and OBOS have gained an indirect entry to the market for covered bonds, which in the course of a few years has become an important funding source for banks and credit institutions. Since the start of its lending activity in February 2005, the company has grown and had net assets exceeding NOK 30 billion at the end of the second quarter of The size of the company makes it an active issuer in both the Norwegian and international markets for covered bonds. At the end of the first half of 2010, the company's lending portfolio had grown to NOK 25,949 million, which represents an increase of NOK 3,908 million (18 per cent) year to date and NOK 10,106 million (63 per cent) since the end of the first half-year of The company's pre-tax operating revenue for the whole of the first half-year was approximately NOK 21 million, which is somewhat weaker than the operating revenue for the same period in 2009, which amounted to NOK 28.8 million. The operating revenue includes realised and unrealised gains of NOK 1.6 millions from trading in securities, which during the same period in 2009 amounted to NOK 9.5 million. During the first half-year, the company paid a total of NOK 47.5 million in distributor commissions to the savings banks and OBOS, representing an increase of NOK 23.9 million, or 101 per cent compared with the corresponding period in At the end of the first half-year of 2010, Terra BoligKreditt has net assets of NOK 30,166 million, compared with NOK 20,823 million at the same time in The company's borrowing portfolio, which essentially consists of covered bonds (CB), was NOK 29,209 million at the end of the first half-year of Of this amount, NOK 23,075 million are issued in the Norwegian market and NOK 6,134 million in the Euro market and in Switzerland. Although the financial markets have been characterised by unrest and volatility during the period, the company has been able to obtain loans on favourable terms, and its liquidity was sound at the end of the first half of In April 2010, the Terra-Gruppen AS general meeting consented to OBOS converting its shares in Terra BoligKreditt to shares in Terra-Gruppen AS. After the conversion, Terra BoligKreditt is once again a fully owned subsidiary of Terra-Gruppen AS. Profit and loss account for the first half-year Revenues The company's net interest and commission revenues amounted to NOK 40.4 million in the second quarter 2010, compared to NOK 32.7 million for the corresponding period in Net interest income for the first half-year of 2010 was NOK 86 million, an increase of NOK 25.8 million, or 43 per cent compared with the corresponding period in The increase in the net interest and commission income is attributable to the company's substantial lending growth, and to the company's distributors (the savings banks and OBOS), which have increased the margin of their lending portfolios in Terra BoligKreditt in Distributor commissions During the second quarter of 2010, the company paid out a total of NOK 26 million in distributor provisions to the savings banks and OBOS, which is more than double the amount from the second quarter of For Page 3 of 14

4 the whole of the six month period, the savings banks and OBOS collectively received NOK 47.5 million in distributor commissions compared with NOK 23.6 million for the corresponding period in The significant increase in earnings on the part of the savings banks and OBOS was driven both by the growth of the company's lending during the past year (63 per cent) and by the distributors being able to obtain a higher margin on their lending portfolios in Terra BoligKreditt. Balance Sheet and liquidity Balance Sheet The assets shown on the company s balance sheet totalled NOK 30,166 million at the end of the second quarter of 2010, an increase from NOK 20,823 million the previous year. Borrowing The company s total borrowing was NOK 29,209 million at the end of the second quarter 2010, which is an increase of 45.5 per cent compared to the same period in During the first half of 2010 Terra BoligKreditt has issued securities in both the Norwegian market and the Euro market. In early March 2010, the company executed a major issue in the Euro market by issuing a new covered bond with a nominal value of EUR 600 million with a tenor of 2.5 years. The issue attracted a great deal of interest in the investor communities, and a total of 115 investors participated in the transaction, primarily from Germany, the Nordic region, Austria and Switzerland. Acting as lead managers of the EUR issue were Danske Bank, Commerzbank, UniCredit and UBS. In addition to the Euro market issue, the company issued and sold covered bonds and other loans a total of NOK 3,605 million in the Norwegian market. The average tenor of these issues has been approximately 5 years, with variations between 18 months and 10 years. DnB NOR Markets, Argo Securities and SR Markets have acted as leads for the company s issues. The following table shows the distribution of the company s borrowing between various instruments. Amounts in million NOK 30 June June December 2009 Covered bonds 17,092 13,170 12,873 Swap agreement with the Government 10,365 5,445 10,365 Other bond debt Certificates/Short-term borrowing Subordinated loan capital Total borrowing 29,209 20,068 25,190 Liquidity Although the financial market so far in 2010 have been less volatile than during the first half of 2009 market conditions have at times been characterised by considerable uncertainty. Given this situation, Terra BoligKreditt has decided to maintain a higher liquidity reserve than would have been the case in a normal situation. In the first half-year of 2010, the company issued and sold covered bonds and other loans totalling NOK 8,435 million. During the same period, the loan portfolio grew by NOK 3,908 million, loans fell due and there were early redemptions amounting to NOK 4,058 million. Page 4 of 14

5 Risk management and capital adequacy Terra BoligKreditt s only activity is offering residential mortgage loans secured by up to 60 per cent of the value of the mortgaged property. The company s risk-weighted assets have increased in line with the growth in its loan portfolio, and at the end of the second quarter of 2010 amounted to NOK 9,424 million. In order to fund further growth and comply with current capital adequacy requirements the company executed a private placement towards Terra-Gruppen AS in April The total subscription amount was NOK 150 million, divided between NOK 36.8 million in increased share capital and NOK to the share premium reserve. The following table shows the distribution of the company s borrowing between various instruments. Amounts in million NOK 30 June June December 2009 Weighted calculation basis 9,424 6,087 7,905 Equity 1, Subordinated loan capital % % % The capital adequacy ratio is calculated according to the standard method in accordance with Basel II. Outlook The company expects the strong growth in the loan portfolio to continue. This is despite the expectation that the general credit growth in the savings banks and OBOS will stay at a moderate level in As an issuer of covered bonds with an international rating, Terra BoligKreditt has access to borrowing both in the Norwegian and the international markets. Compared with the general price level for savings banks and OBOS, Terra BoligKreditt's borrowing terms are advantageous. Furthermore, the company also has better opportunities than the savings banks and OBOS to obtain loans with longer tenors in the market. In line with the fact that supervisory authorities and rating agencies have increased their focus on the redemption profile in banks and credit institutions, it is expected that the savings banks and OBOS will to a greater degree use Terra BoligKreditt to secure longer-term funding. Although the bond market, both in Norway and internationally, continue to be marked by fluctuations that are stronger than was usual before the financial crisis, there are several signs that indicate market conditions are returning to normal. In addition to the issues in both the Norwegian and the Euro markets during the first halfyear of the year, the company plans to be an active issuer of covered bonds both in the Norwegian and the international markets in Oslo, 16 August 2010 The Board of Directors of Terra BoligKreditt AS Stein Ole Larsen Chairman of the Board Martin Mæland Bjørn Riise Gabriel Block Watne Tom Høiberg Managing Director Page 5 of 14

6 Declaration in accordance with Section 5-6 of the Securities Trading Act We hereby confirm that, to the best of our knowledge, the company s semi-annual accounts for the period 1 January to 30 June 2010, have been prepared in accordance with current accounting standards and that the information contained therein provides a true picture of the company s assets, liabilities, financial position and overall results. To the best of our knowledge, the semi-annual report provides a true overview of important events during the reporting period and of their influence on the semi-annual accounts, as well as a description of the most important risk and uncertainty factors the company will face in the next reporting period.. Oslo, 16 August 2010 Board of Directors of Terra BoligKreditt AS Stein Ole Larsen Chairman of the Board Martin Mæland Bjørn Riise Gabriel Block Watne Tom Høiberg Managing Director Page 6 of 14

7 Profit and loss account Amounts in NOK '000 Q Q INTEREST INCOME AND SIMILAR INCOMES Interest from loans to and receivables from customers Interest from loans to and receivables from credit institutions Interest and similar income from securities Other interest and similar income Total interest income and similar incomes INTEREST EXPENSES AND SIMILAR EXPENSES Interest on debt to credit institutions Interest on securities in issue Other interest expenses and similar expenses Total interest expenses and similar expenses NET INTEREST AND CREDIT COMMISSIONS INCOME INCOME FROM SECURITIES WITH VARIABLE RETURN COMMISSIONS AND OTHER OPERATING REVENUE Other operating revenue 7 (7) Commissions and banking charges Total commissions and other operating revenues SALARIES AND GENERAL ADMINISTRATIVE EXPENSES Salaries, fees and other personnel expenses Administrative expenses Total salaries and administrative expenses Ordinary depreciation Other operating expenses PROFIT BEFORE TAXES Taxes PROFIT FOR Q2 AND THE YEAR Page 7 of 14

8 Balance sheet Amounts in NOK ' ASSETS Loans to and deposits with credit institutions Total cash and deposits with credit institutions LENDING TO CUSTOMERS Amortised loan Net lending Securities Fixed income instruments Equity and other securities Total securities INTANGIBLE ASSETS Deferred tax assets Other intangible assets Total intangible assets TANGIBLE FIXED ASSETS Operating equipment Total tangible fixed assets OTHER ASSETS Financial derivatives Accounts receivable Total other assets PREPAID EXPENSES AND ACCRUED INCOME TOTAL ASSETS Page 8 of 14

9 Balance sheet Amounts in NOK ' LIABILITIES AND EQUITY LIABILITIES Certificates and other short-term loans Bonds in issue Debts securities in issue Other liabilities Accrued expenses and non-earned income Pension liabilities Deferred tax Estimated tax Provisions for accrued expenses and liabilities Subordinated loan capital TOTAL LIABILITIES CALLED-UP AND FULLY PAID SHARE CAPITAL Share capital Share premium account Paid, but not registered, capital Other called-up and fully paid share capital Total called-up and fully paid share capital RETAINED EARNINGS Other equity Period's result Total earned equity TOTAL EQUITY TOTAL LIABILITIES AND EQUITY Page 9 of 14

10 Key Figures Amounts in NOK 1, Balance sheet development Loans to customers Debt from issuing securities Subordinated loan capital Equity Equity in % of total assets 2,65 3,14 2,44 Average total assets Total assets Rate of return / profitability Combined average spread for lending and deposits, annualised (%) 1) 0,61 0,66 0,66 Fee and commission income in relation to average total assets, annualised (%) 0,34 0,26 0,30 Other operating expences in relation to average total assets, annualised (%) 0,03 0,05 0,05 Staff and general administration expenses in relation to average total assets, annualised (%) 0,10 0,12 0,11 Cost/income ratio (%) 2) 22,28 28,58 25,57 Return on total capital, annualised (%) 3) 0,11 0,23 0,16 Return on equity, annualised (%) 4) 4,76 6,65 5,40 Total assets per full-time position Financial strength Total Equity and subordinated loan capital Computation data capital adequacy ratio 5) Capital adequacy ratio % 5) 11,03 14,59 11,25 Delinquinces in % of gross loans 0,00 0,00 0,00 Loss in % of gross loans 0,00 0,00 0,00 Staff Number of full-time positions at end of period 12,7 9,4 10,4 1) Net interest income in % of average total assets. 2) Total operating expences in % of net interest income 3) Net profit/loss for the year in % of average total assets 4) Net profit/loss for the year in % of average equity 5) From Q the capital adequacy ratio and computation data is computed using Basel II, and is therefore not comparable with previous quarters. Page 10 of 14

11 Notes Note 1 Accounting policies The first half-year accounts have been prepared in accordance with the Norwegian Accounting Act, the annual accounts regulations for banks and finance companies and generally accepted accounting practice. The accounting principles applied by the company are described in Note 1 to the 2008 annual report. Note 2 Lending to customers Amounts in NOK 1, Repayment loans - retail market Repayment loans - housing cooperatives Total lending before specific and general provisions for losses Specific provisions for losses General provisions for losses Total net lending to and receivables from customers All lending concerns residential mortgage loans with a loan-to-value ratio of up to 60%. Guarantees furnished by the company's distributor banks result in reduced risk to Terra BoligKreditt AS. The company has no non-performing loans as of 30 June Amounts in NOK 1,000 Book value Fair value 1) Variable rate loans Fixed rate loans Total lending ) Calculation of fair value of loans: The margin on the loans is measured at market value. The market value of variable rate loans is therefore measured as equal to amortized cost. The market value of fixed rate loans is correspondingly measured as equal to amortized cost adjusted for the present value of the difference between the loans' fixed rate of interest and the interest rate at 30 June Note 3 Certificates, bonds and other securities with fixed yield Amounts in NOK 1,000 Bonds broken down by issuer sector Nominal value Cost price Market value NST09 treasury bills Total market-based bonds Total securities with fixed interest Change in value for the year charged to the profit and loss account 155 Average effective interest rate is 2.82%. The calculation is based on a weighted market value Average term to maturity 0,5 Average duration 0,5 Page 11 of 14

12 Note 4 Equity Amounts in NOK '000 Share capital Share premium account Paid, but not registered, capital Other calledup and fully paid share Other equity Total equity Equity as at 1 Jan Capital increase Profit for the period Equity as at 30 June Note 5 Capital adequacy ratio Amounts in NOK 1,000 Equity and subordinated capital Share capital Share premium reserve Paid, but not registered, capital Other called-up and fully paid capital Other reserves Total equity recognised in the Balance Sheet Intangible assets (2 515) (3 367) (2 390) Deferred tax assets (503) (259) (503) Subordinated loan capital Total equity and subordinated capital Capital adequacy ratio Weighted calculation basis Equity and subordinated capital Capital adequacy ratio 11,03 % 14,59 % 11,25 % Required capital corresponding to 8% of calculation basis Surplus equity and subordinated capital The capital adequacy ratio is calculated by using the standard method in Basel II. Weighted calculation basis Capital requirement Calculation basis Credit risk Market risk Operational risk Total Page 12 of 14

13 Note 6 Debts Covered bonds - Amounts in NOK 1,000 ISIN Nominal amounts Currency Interest rate terms Establishment Term to maturity NO NOK Floating 3M Nibor % NO NOK Fixed 5,50 % CH CHF Fixed 3,14 % NO NOK Floating 3M Nibor % NO NOK Fixed 5,75 % NO NOK Fixed 5,40 % NO NOK Floating 3M Nibor % XS EUR Fixed 4,63 % NO NOK Floating 3M Nibor % NO NOK Floating 3M Nibor % NO NOK Floating 3M Nibor % NO NOK Floating 3M Nibor % NO NOK Fixed 5,00 % NO NOK Fixed 4,40 % XS EUR Fixed 2,00 % NO NOK Floating 3M Nibor % Value adjustments (11 498) (3 791) (2 026) Total covered bonds 1) and 2) ) For covered bonds ascribed to the company's cover pool, an overcollateralization requirement of 105% applies. This means that the company must at all times have assets in its cover pool that exceed at least 105% of the total outstanding covered bonds. Bond borrowing from Norw. govt. - Amounts in NOK 1,000 Nominal Interest Term to Description amounts 1) Currency rate terms Establishment maturity Swap agreement with the Government NOK Floating 6 M Nibor % Swap agreement with the Government NOK Floating 6 M Nibor % Swap agreement with the Government NOK Floating 6 M Nibor % Swap agreement with the Government NOK Floating 6 M Nibor % Swap agreement with the Government NOK Floating 6 M Nibor % Total swap agreements with the Government ) A nominal amount of NOK is interest-bearing debt. The nominal value of covered bonds that are ascribed to the company's cover pool is NOK Terra BoligKreditt has in 2009 participated in the swap arrangement with the Norwegian State. The arrangement is administered by Norges Bank and entitles the company to swap its covered bonds with government securities. Terra BoligKreditt with its five participations in the swap arrangement, raised interest-bearing debt totalling NOK ; see the table above. The maturity term of these swap arrangements is four and five years. The swap arrangement with the State has secured the company liquidity on competitive terms. Other bond debts - Amounts in NOK 1,000 ISIN Nominal amounts Currency Interest rate terms Establishment Term to maturity NO NOK Floating 3M Nibor % NO NOK Fixed 4,68 % NO NOK Floating 3M Nibor % NO NOK Floating 3M Nibor % Value adjustments (761) 53 (860) Total other bond debt Page 13 of 14

14 Certificate borrowing - Amounts in NOK 1,000 Nominal Interest Term to ISIN amounts Currency rate terms Establishment maturity NO NOK Fast 3,23 % NO NOK Fast 3,23 % NO NOK Fast 2,95 % Value adjustments (24) (32) (88) Total certificate borrowing Subordinated loan capital - Amounts in NOK 1,000 Nominal Interest Term to Balance ISIN amounts Currency rate terms Establishment maturity NO NOK Floating 3M Nibor % 1) ) NO NOK Floating 3M Nibor % 2) ) Value adjustments (464) (673) (566) Total subordinated loan capital ) Subordinated loan of NOK 120 million with maturity date 30 June 2016, have redemption rights (call) 30 June If the redemption right is unused, interest terms are 3M Nibor %. 2) Subordinated loan of NOK 139 million with maturity date 6 March 2018, have redemption rights (call) 6 March If the redemption right is unused, interest terms are 3M Nibor %. Note 7 Cover pool Cover pool as at 30 June 2010 Amounts in NOK 1,000 Market Value 1) Mortgages Substitute assets and derivatives Total The cover pool's overcollateralization 105,24 % 1) Value adjusted only for changes in interest rates and exchange rates where credit spread is excluded. Note 8 Liquidity indicators Overview of liquidity indicators and prognosis as of Actual Prognosis As of Liquidity Indicator I 111 % 117 % 114 % 106 % 108 % Liquidity Indicator II 115 % 119 % 126 % 117 % 124 % Average of indicators 113 % 118 % 120 % 112 % 116 % Page 14 of 14