ALM. BRAND BANK A/S INTERIM REPORT - FIRST HALF OF YEAR 2008

Transcription

1 ALM. BRAND BANK A/S 7 MIDTERMOLEN DK-2100 COPENHAGEN Ø REGISTRATION NUMBER CVR-NR ALM. BRAND BANK A/S INTERIM REPORT - FIRST HALF OF YEAR ALM.SUND FORNUFT

2 CONTENTS COMPANY INFORMATION 2 Company information 2 Group structure MANAGEMENT S REVIEW 3 Financial highlights and key ratios 4 Report SIGNATURES 7 Statement by the Board of Directors and the Executive Board FINANCIAL STATEMENTS Group 8 Accounting policies 9 Income statement 10 Balance sheet 12 Statement of changes in equity 13 Cash flow statement 14 Notes to the financial statements Parent company 19 Accounting policies 20 Income statement 21 Balance sheet 23 Statement of changes in equity 24 Notes to the financial statements APPENDIKS A 28 Lending portfolio and credit losses Page 1 of 29

3 COMPANY INFORMATION Alm. Brand Bank First half-year of 2008 BOARD OF DIRECTORS Christian N.B. Ulrich, Chairman Jørgen H. Mikkelsen, Deputy Chairman Christian Hjorth-Andersen Søren Boe Mortensen Ole Bach, elected by the employees Mark Oswald, elected by the employees AUDITOR Deloitte, Statsautoriseret Revisionsaktieselskab INTERNAL AUDIT Poul-Erik Winther Nielsen, Head of Internal Audit EXECUTIVE BOARD Henrik Nordam, Chief Executive Peter Reedtz, Managing Director REGISTRATION Alm. Brand Bank A/S Registration Number CVR ADDRESS Alm. Brand Huset Midtermolen 7, DK-2100 Copenhagen Ø Phone: Fax: Internet: bank@almbrand.dk GROUP STRUCTURE ALM. BRAND BANK ALM. BRAND FINANS 100% 20% 41% 50% ALM. BRAND PANTEBREVE ALM. BRAND FORMUE INVEST ADMINISTRATION The bank has three subsidiaries: Alm. Brand Finans A/S Alm. Brand Pantebreve A/S Alm. Brand Formue A/S In addition, the bank acts as depositary bank for: Investeringsforeningen Alm. Brand Invest Specialforeningen Henton Invest The bank also has investments in a joint venture: Invest Administration A/S The consolidated financial statements of Alm. Brand Bank A/S are a component of the consolidated financial statements of Alm. Brand A/S and Alm. Brand af 1792 fmba. Page 2 of 29

4 FINANCIAL HIGHLIGHTS AND KEY RATIOS PRO RATA GROUP DKK million Q Q Year Q Q Year INCOME STATEMENT Interest receivable , ,237 Interest payable Net interest income Net fee and commission income and dividends etc Net interest and fee income Value adjustments Other operating income Profit on ordinary activities before expenses Operating expenses and depreciation Write-downs of loans, advances and receivables etc Profit/loss on participating interests Profit on activities before tax Tax Profit for the period Profit attributable to minority interests Profit after tax exclusive minorities Profit before tax exclusive minorities BALANCE SHEET Loans and advances 18,114 16,305 18,114 16,305 18,006 17,608 15,823 17,608 15,823 17,116 Deposits 11,791 9,993 11,791 9,993 11,759 11,791 9,992 11,791 9,992 11,758 Shareholders' equity 1,287 1,292 1,287 1,292 1,365 1,717 1,826 1,717 1,826 1,917 Of which attributable to minority interests Total assets 25,291 22,996 25,291 22,996 25,048 25,900 23,757 25,900 23,757 25,785 KEY RATIOS ETC. Average number of employees, fulltime equivalents Net interest margin p.a % 1.7% 1.8% 1.7% 1.7% Income/cost ratio Impairment ratio 0.1% -0.1% 0.0% -0.1% -0.3% 0.1% -0.1% 0.0% -0.2% -0.3% Solvency ratio % 12.8% 11.3% 12.8% 11.7% Return on equity before tax p.a % 4.6% -14.8% 17.5% 15.2% -35.7% 4.6% -14.8% 17.5% 15.2% Return on equity after tax p.a % 0.7% -11.8% 12.1% 11.5% -26.2% 0.7% -11.8% 12.1% 11.5% Return in excess of the money market rate -40.9% 0.6% -19.8% 12.1% 10.7% -40.9% 0.6% -19.8% 12.1% 10.7% Financial highlights and key ratios have been calculated in accordance with the executive order on the presentation of financial reports by credit institutions and investment companies etc., the guidelines issued by the Danish Financial Supervisory Authority and recommendations from the Danish Society of Financial Analysts. Page 3 of 29

5 REPORT In order to increase the transparency of Alm. Brand Bank s financial statements, the bank publishes pro rata consolidated figures (i.e. excluding minorities). The numbers are set out in the financial highlights and key ratios above and, unless otherwise indicated, the comments provided in the text below are for pro-rata numbers. Banking group numbers (i.e. not pro rata) are commented on only when found relevant. Financial results The bank posted a pre-tax loss of DKK 98 million in 2008, as compared with a profit of DKK 110 million in the year-earlier period. The performance fell significantly short of expectations and was primarily attributable to large capital losses on the bank s portfolio of securities as a result of the rising level of interest rates and the volatile financial markets in the first six months of the year and to some extent to provisions for bad and doubtful debts. The performance was not satisfactory. The return on equity before tax was negative at 15% p.a., as compared with a positive return of 18% p.a. in the first half-year of. Net interest and fee income Net interest and fee income totalled DKK 323 million, a 9% increase from DKK 297 million in. Interest income was favourably influenced by growth in the bank s lending activities and by the bank raising its lending rates to increase profitability and to cover the growing funding costs. Accordingly, net interest income rose from the first to the second quarter without any growth in loans and advances. The banking group s interest margin rose from 1.6% p.a. in the first quarter to 2.0% in the second quarter, equivalent to 1.8% p.a. for the half-year as a whole. The bank continues its efforts to improve its net interest income. Fee income performed satisfactorily, posting a slight increase relative to the year-earlier period. The positive performance was mainly attributable to the sustained strong performance of Alm. Brand Markets, which recorded satisfactory trading income in spite of difficult market conditions. Value adjustments Value adjustments in 2008 amounted to a loss of DKK 153 million, against a gain of DKK 25 million in the year-earlier period. Of the total capital loss, an amount of DKK 32 million was attributable to impairment of mortgage deeds as a result of actual or anticipated losses, while the remaining amount of DKK 121 million was attributable to losses on securities, etc. The losses on securities were triggered by rising interest rates, a flattening of the yield curve and illiquidity in the Danish mortgage bond market. The bank has a relatively large exposure to Danish mortgage bonds, while at the same time making investments in anticipation of declining interest rates a scenario that did not materialize. Accordingly, most of the negative value adjustments were attributable to the bank s portfolio of bonds and mortgage deeds which, as a result of the rise in interest rates, sustained a total capital loss of more than DKK 100 million. The bank s exposure to market risks was higher than intended during the first six months of 2008 due to its ownership interest of around 40% in the investment company Alm. Brand Formue A/S. The bank therefore sought to hedge this risk through financial instruments. These hedging positions were not sufficiently effective due to widening yield spreads and substantial market turmoil. In a move to reduce this risk going forward, the bank reduced its exposure considerably through a targeted capital reduction in Alm. Brand Formue in July 2008 and lowered the market risks on the bank s own investment portfolio. The banking group s overall value adjustments, which include minority interests, amounted to a loss of DKK 284 million in 2008, against a gain of DKK 23 million in the year-earlier period. Of this amount, capital losses in Alm. Brand Formue totalled DKK 181 million in Expenses Total costs for 2008 amounted to DKK 278 million, against DKK 258 million for the same period of last year. The increase in costs was partly attributable to the growing number of employees and partly to higher salaries. The bank does not expect the number of employees to increase any further in The higher level costs should be seen in light of the fact that, despite increased funding costs and a generally lower level of activity in the market, net interest and fee income rose by 9%. Page 4 of 29

6 REPORT The bank has launched a number of efficiencyenhancing activities to reduce costs. The income/cost ratio was 0.65 in, against 1.50 in the first half-year of. The corresponding figures for the banking group were 0.23 in 2008 and 1.51 in, respectively. Impairment of loans, etc. As a result of the bank s policy to maintain a moderate level of credit risk, the loan portfolio generally performs satisfactorily. However, due to the changed economic scenario in the property market, the bank saw an increased delinquency and reduced financial strength in a few lending segments. These segments include commercial mortgage deeds and property development projects, as market developments in the second quarter triggered increased impairment needs. These segments total approximately 5% of the aggregate loan portfolio. In all other lending segments, private customers, commercial customers and agricultural customers alike continue to display financial strength. The bank s mortgage deed portfolio mainly comprises senior-ranking, geographically diversified mortgage deeds secured against ordinary homes. In 2008, the mortgage deed portfolio posted a loss of DKK 6 million and additional provisions of DKK 26 million against expected future losses on commercial mortgage deeds. The total amount of DKK 32 million is included in the financial statements under value adjustments. In addition, the bank expensed an amount of DKK 4 million for Impairment of loans, advances and receivables etc. in the first half-year of Provisions for bad and doubtful debts charged to the income statement in the first six months of the year thus totalled DKK 36 million, corresponding to 0.2% of the average lending and guarantee portfolio. Appendix A includes a detailed breakdown of the bank s lending portfolio indicating lending volumes and credit loss per segment. The bank s accumulated impairment charges on loans and guarantees totalled DKK 126 million at 30 June 2008, corresponding to an accumulated impairment ratio of 0.6 against 0.5 at 30 June and 0.7 at 31 December. Balance sheet Loans, advances and deposits The bank s loans and advances totalled DKK 18 billion at 30 June 2008, which was on a par with 31 December and an increase of DKK 2 billion, or 11%, since 30 June. Accordingly, the bank slowed down growth in loans and advances during the past six months to reflect the subdued growth in the Danish economy and to ensure continued, well-defined and moderate risk in the bank s lending portfolio. The bank s total lending is not expected to grow during the remainder of However, the bank expects increased diversification of the lending portfolio, partly due to the declining level of activity in the property market and partly to the bank s higher level of activity within agriculture, small and medium-sized enterprises, funding of corporate finance activities and the bank s sustained increased commitments with several of the Alm. Brand Group s private customers. The bank s deposits totalled DKK 12 billion at 30 June 2008, which was on a par with 31 December and an increase of DKK 2 billion, or 18%, since 30 June. Capital The bank s equity stood at DKK 1.3 billion at 30 June The capital base was DKK 1.9 billion. Similarly, the banking group s equity stood at DKK 1.7 billion at 30 June 2008, whereas the capital base totalled DKK 2.3 billion. The banking group had a solvency ratio of 11.3 and a tier 1 ratio of 8.8. Major events Continued growth in private lines During the first half-year of 2008, the bank experienced a net inflow of 5% in the private customer segment, bringing the total number of private customers in the bank to more than 85,000. The Alm. Brand Group s multiproduct customer concept, the dobbeltkunde concept, also recorded growth. Accordingly, the number of multiproduct customers rose by more than 23% as compared with 30 June. Lending rates raised As a result of the sustained increase in interbank rates, the bank raised a number of lending rates by up to 0.50 percentage point in early April and by up to 0.25 percentage point in early May. The deposit rate was also raised by up to 0.25 percentage point in early May. In April, the majority of the bank s loans and advances to both existing and new customers were furthermore converted to CIBOR terms. Page 5 of 29

7 REPORT These measures improved the bank s net interest income in the final part of the period and they are expected to feed through further during the remainder of Cash flow At the beginning of the year, the bank launched a deposit campaign targeting the retail segment which attracted new deposit funds of just over DKK 1.9 billion. The new deposits primarily came from individual private customer and thus further diversified the deposit portfolio. The bank maintains a strong cash position. Cash made up in accordance with section 152 of the Danish Financial Business Act stood at DKK 5 billion at 30 June 2008, corresponding to 203% of the statutory requirement. The bank has a stable long-term interbank funding of DKK 8.5 billion, of which an amount of DKK 560 million falls due for payment within the next 12 months (in December 2008) alone. The bank does not plan to raise additional longterm loans during the rest period of 2008, as growth in deposits is expected to exceed growth in lending. Outlook Based on the half-year results achieved and the revised guidance for the second half of 2008, expectations for the full-year results are downgraded from a profit of DKK 130 million to a loss of DKK 15 million. The overall forecast change is mainly due to capital losses on securities and mortgage deeds in the second quarter and to some extent to expected higher provisions for bad and doubtful debts and losses on mortgage deeds. The forecast reflects the effect of lending rate adjustments already implemented and resulting higher net interest income during the final two quarters of the year and cost adjustments. Disclaimer Forecasts are based on the level of interest rates prevailing at end-july All forward-looking statements are based exclusively on the information available when this interim report was released. The performance may be affected by major changes in a number of areas. Such impacts include changes in economic conditions, changes in the financial markets, legislative changes, changes in the competitive environment, loans and advances, etc. and guarantees, etc. The above-mentioned risk factors are not exhaustive. Investors and others who base their decisions on the information contained in this report should independently consider any uncertainties of significance to their decision. This interim report has been translated from Danish into English. In the event of any discrepancy between the Danish text and the English-language translation, the Danish text shall prevail. Page 6 of 29

8 STATEMENT BY THE BOARD OF DIRECTORS AND THE EXECUTIVE BOARD The Board of Directors and the Executive Board have today reviewed and adopted the interim report for the six months ended 30 June 2008 of Alm. Brand Bank A/S. The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as approved by the EU, and the financial statements of the parent company have been prepared in accordance with the Danish Financial Business Act and Danish accounting standards. In addition, the interim report has been presented in accordance with additional Danish disclosure requirements for listed financial enterprises. In our opinion, the accounting policies applied are appropriate, and the interim report gives a true and fair view of the group's and the parent company's assets, liabilities and financial position at 30 June 2008 and of the results of the group's and the parent company's operations and the cash flow of the group for the financial period ended 30 June The management's review also gives a true and fair view of developments in the activities and financial position of the group. Executive Board Copenhagen, 11 August 2008 Henrik Nordam Chief Executive Peter Reedtz Managing Director Board of Directors Copenhagen, 11 August 2008 Christian N.B. Ulrich Chairman Jørgen H. Mikkelsen Deputy Chairman Christian Hjorth-Andersen Søren Boe Mortensen Ole Bach Mark Oswald Page 7 of 29

9 ACCOUNTING POLICIES GROUP The interim report has been prepared in accordance with the International Financial Reporting Standards (IFRS) as approved by the EU. The parent company financial statements have been prepared in accordance with the provisions of the Danish Financial Business Act, including the executive order on financial reports presented by credit institutions and investment companies and Danish accounting standards. In addition, the interim report has been prepared in accordance with additional Danish disclosure requirements for listed financial companies. The accounting policies are unchanged as compared with the annual report for. The interim report for the first six months of 2008 is unaudited. Page 8 of 29

10 INCOME STATEMENT Alm. Brand Bank First half-year of 2008 Group DKK '000 Note 2008 Year Interest receivable 1 761, ,091 1,237,008 Interest payable 2 538, , ,959 Net interest income 223, , ,049 Dividend on participating interests 12,619 12,466 15,227 Fees and commissions receivable 118, , ,223 Fees and commissions payable 19,034 13,121 39,110 Net interest and fee income 335, , ,389 Value adjustments 3-283,609 22,690 51,803 Other operating income 8,236 6,062 12,498 Profit before expenses 60, , ,690 Staff costs and administrative expenses 4 281, , ,855 Depreciation, amortisation and impairment of intangible assets and property, plant and equipment 1,097 1,268 2,321 Impairment of loans, advances and receivables, etc. 5 3,823-41,757-50,240 Profit from participating interests in associated and group undertakings 5,838-1,541-5,365 Profit before tax -219, , ,389 Tax -41,409 21,656 33,876 Profit for the period -178,577 91, ,513 The profit for the period will be allocated as follows: Share attributable to Alm. Brand Bank -78,086 75, ,997 Share attributable to minority interests -100,491 15,558 8,516 Total -178,577 91, ,513 Page 9 of 29

11 BALANCE SHEET Group DKK '000 Note ASSETS Cash in hand and receivables at call from central banks 107,077 22, ,883 Receivables from credit institutions and central banks 2,862,841 2,538,573 1,711,783 Loans, advances and other receivables at fair value 2,861,955 2,557,493 2,875,667 Loans, advances and other receivables at amortised cost 14,745,899 13,265,437 14,240,784 Bonds at fair value 3,710,746 3,839,278 4,875,107 Shares etc. 755, , ,993 Participating interests in associated undertakings 56,021 2,999 24,770 Participating interests in group undertakings 3-6,316 Intangible assets 70,668 56,269 62,573 Other property, plant and equipment 11,715 10,007 9,166 Current tax assets 94,805 58,311 38,781 Deferred tax assets 60,607 96,714 73,540 Assets acquired temporarily 18,907 9,069 14,320 Other assets 534, , ,728 Prepayments 8,536 8,175 12,523 Total assets 25,899,758 23,757,322 25,784,934 Page 10 of 29

12 BALANCE SHEET Group DKK '000 Note LIABILITIES AND EQUI TY Payables Payables to credit institutions and central banks 9,148,361 8,840,685 8,852,034 Deposits and other payables 11,790,918 9,991,769 11,758,167 Issued bonds 1,396,180 1,399,201 1,401,799 Current tax liabilities 2, Other liabilities 1,156,429 1,006,759 1,159,311 Deferred income 18,815 19,905 22,417 Total payables 23,513,163 21,258,319 23,193,728 Provisions Provisions for pensions and similar liabilities 5,736 7,180 6,210 Total provisions 5,736 7,180 6,210 Subordinated debt 6 Supplementary capital 500, , ,000 Hybrid Tier 1 capital 163, , ,028 Total subordinated debt 663, , ,028 Shareholders' equity Share capital 351, , ,000 Retained earnings 935, ,386 1,013,657 Minority interests 430, , ,311 Total shareholders' equity 1,717,417 1,826,097 1,916,968 Total liabilities and equity 25,899,758 23,757,322 25,784,934 Page 11 of 29

13 STATEMENT OF CHANGES IN EQUITY Parent company Group DKK '000 Share capital Other reserves Retained earnings Total Minority interests Total Shareholders' equity at 1 January 351, , ,697 1,216, ,672 1,785,332 Equity movements in Other change in respect of subsidiaries - -24,877-24,877 Profit for the year 15, , ,997 8, ,513 Comprehensive income in - 15, , ,997-16, ,636 Dividend paid - - Total equity movements in - 15, , ,997-16, ,636 Shareholders' equity at 31 December 351, , ,035 1,364, ,311 1,916,968 Shareholders' equity at 1 January , , ,035 1,364, ,311 1,916,968 Equity movements in 2008 Dividend subsidiaries -50,000 50, Other change in respect of subsidiaries - -20,974-20,974 Profit for the period -78,086-78, , ,577 Comprehensive income in ,000-28,086-78, , ,551 Dividend paid - - Total equity movements in ,000-28,086-78, , ,551 Shareholders' equity at 30 June , , ,949 1,286, ,846 1,717,417 Page 12 of 29

14 CASH FLOW STATEMENT Alm. Brand Bank First half-year of 2008 Group DKK ' Year Operating activities Profit for the period before tax -219, , ,389 Tax paid during the period ,685 Adjustment for amounts with no cash flow impact: Other adjustments to cash flows from operating activities 219, , ,003 Total, operating activities ,904 62,071 Working capital Loans and advances, etc. -540,009-2,648,082-3,933,408 Deposits 32, ,476 2,209,875 Bonds 1,103,896 1,110,308 37,964 Shares -35,672-37,685 67,718 Total, working capital 560,966-1,131,983-1,617,851 Investing activities Investments in associates -25, ,556 Investments in group enterprises 6, ,066 Intangible assets -8,095-4,543-10,847 Property, plant and equipment -3,647-1,028-1,239 Total, investing activities -30,841-5,398-28,708 Financing activities Payables to credit institutions 286,193 2,126,790 2,144,629 Bonds issued - 359, ,033 Hybrid Tier 1 capital - 200, ,000 Total, financing activities 286,193 2,686,078 2,671,662 Change in cash and cash equivalents 816,252 1,494,793 1,087,174 Cash and cash equivalents, beginning of period 2,153,666 1,066,492 1,066,492 Change in cash and cash equivalents 816,252 1,494,793 1,087,174 Cash and cash equivalents, end of period 2,969,918 2,561,285 2,153,666 Cash and cash equivalents, end of period Cash and balances due from central banks 107,077 22, ,883 Balances due from credit institutions less than 3 months 2,862,841 2,538,573 1,711,783 Cash and cash equivalents, end of period 2,969,918 2,561,285 2,153,666 Page 13 of 29

15 NOTES TO THE FINANCIAL STATEMENTS Group DKK ' Year NOTE 1 Interest receivable Receivables from credit institutions and central banks 31,194 32,453 66,256 Loans, advances and other receivables 589, , ,747 Bonds 112, , ,312 Total derivatives 28,278 14,895 36,613 Of which: Currency contracts 25,919 18,305 41,253 Interest rate contracts 2,359-3,410-4,640 Other interest receivable Total interest receivable 761, ,091 1,237,008 Interest receivable from genuine purchase and resale transactions: Balances due from credit institutions and central banks 4,012 12,883 17,695 Loans, advances and other receivables 6,203 6,770 10,195 NOTE 2 Interest payable Credit institutions and central banks 204, , ,721 Deposits and other payables 269, , ,725 Issued bonds 44,001 30,081 68,501 Subordinated debt 20,220 13,032 32,701 Other interest payable 659 1,302 1,311 Total interest payable 538, , ,959 Interest payable from genuine sale and repurchase transactions: Payables to credit institutions and central banks 8,219 18,838 22,483 Deposits and other payables NOTE 3 Value adjustments Loans, advances and other receivables at fair value -55,256 12,670 26,798 Bonds -129, ,601-97,877 Shares etc. -67, , ,316 Foreign exchange -33,704 16,530 15,165 Derivatives 2,014-12,420-31,269 Other commitments 474 1,700 2,670 Total value adjustments -283,609 22,690 51,803 Page 14 of 29

16 NOTES TO THE FINANCIAL STATEMENTS Group DKK ' Year NOTE 4 Staff costs and administrative expenses Remuneration to the Executive Board and Board of Directors: Remuneration to the Executive Board Salaries and wages 3,861 3,455 5,030 Pensions Total 4,288 3,856 5,802 Remuneration to the Board of Directors Fees Total remuneration to the Executive Board and Board of Directors 4,501 4,081 6,252 Staff costs: Salaries and wages 105,113 95, ,164 Pensions 10,199 9,351 19,089 Social security costs 11,148 9,399 18,505 Total 126, , ,758 Other administrative expenses 150, , ,845 Total staff costs and administrative expenses 281, , ,855 Number of employees Average number of employees during the period, full-time equivalents NOTE 5 Impairment of loans, advances and receivables, etc. Individual assessment: Impairment and value adjustments, respectively, during the year 47,064 8,646 66,184 Reversal of impairment in previous years 33,013 41,042 92,529 Total individual assessment 14,051-32,396-26,345 Group assessment: Impairment and value adjustments, respectively, during the year 3,131 9,089 1,415 Reversal of impairment in previous years 15,135 18,163 18,853 Total group assessment -12,004-9,074-17,438 Losses not previously provided for 6,560 4,748 11,148 Bad debts recovered 4,784 5,035 17,605 Total impairment of loans, advances and receivables, etc. 3,823-41,757-50,240 Page 15 of 29

17 NOTES TO THE FINANCIAL STATEMENTS Group DKK ' Year NOTE 6 Subordinated debt Supplementary capital Variable rate bullet loans in DKK maturing 9 May , , ,000 Variable rate bullet loans in DKK maturing 9 May , , ,000 Variable rate bullet loans in DKK maturing 9 May , , ,000 Variable rate bullet loans in DKK maturing 3 December , , ,000 Total supplementary capital 500, , ,000 Hybrid Tier 1 capital Fixed rate bullet loans in DKK with indefinite terms 175, , ,000 Total hybrid Tier 1 capital 175, , ,000 Hedging of interest rate risk at fair value -11,558-9,274-6,972 Total subordinated debt 663, , ,028 Interest on subordinated debt 20,220 13,032 32,701 Of this, amortisation of costs incurred on raising the debt As part of the risk management, the fair value of the hybrid Tier 1 capital is hedged by means of derivative financial instruments. The entire subordinated debt may be included in the statement of the capital base. NOTE 7 Off-balance sheet items Guarantees etc. Financial guarantees 1,043, , ,729 Mortgage finance guarantees 317, , ,094 Other guarantees 288, , ,872 Total guarantees etc. 1,649,661 1,539,696 1,595,695 Other commitments Other commitments 61, , ,613 Total other commitments 61, , ,613 Total off-balance sheet items 1,711,396 1,832,570 1,711,308 Page 16 of 29

18 NOTES TO THE FINANCIAL STATEMENTS NOTE 7 Off-balance sheet items - continued Contingent liabilities The bank has entered into a property lease with Henton Group A/S in respect of the headquarters at Silkeborg. The lease is non-terminable for six years and three months from 1 January In addition to rent, the lease also covers joint expenses and canteen. The capitalised value of the lease has been calculated at DKK 5 million. Being an active financial services group, the group is a party to a number of lawsuits. The cases are reviewed on an ongoing basis, and the necessary provisions are made. Management believes that these cases will not inflict further losses on the group. Collateral security Monetary-policy counterparties with the Danish Central Bank can obtain credit only against security through the mortgaging of approved securities. As part of the ongoing business, at end June 2008 the bank provided bonds as security vis-à-vis the Danish Central Bank at a market value of DKK 452 million ( : DKK 1,067million). Page 17 of 29

19 NOTES TO THE FINANCIAL STATEMENTS Group 2008 DKK '000 Retail banking Wholesale banking Alm. Brand Finans Alm. Brand Pantebreve Alm. Brand Formue Other/ Eliminations Alm. Brand Bank Group NOTE 8 Segment information Interest receivable 391, ,888 61,515 67,329 44, , ,944 Interest payable 297, ,318 39,035 48,503 50, , ,302 Net interest income 94, ,570 22,480 18,826-6,196-23, ,642 Net fee and commission income, etc. 16,454 82,847 6,247-2,562 5,374 3, ,083 Value adjustments , , ,746-59, ,609 Other operating income 29 3,128 4, ,236 Profit on ordinary activities before expenses (Net income) 110, ,235 33,239-12, ,568-78,874 60,352 Operating expenses 71,904 67,665 22,898 3,571 1, , ,353 Write-downs of loans, advances and receivables, etc. -1,885 17,119-11, ,823 Profit/loss on paticipating interests - -1,156 3, ,798 5,838 Profit on activities before tax 40, ,295 24,948-16, , , ,986 DKK '000 Retail banking Wholesale banking Alm. Brand Finans Alm. Brand Pantebreve Alm. Brand Formue Other/ Eliminations Alm. Brand Bank Group Interest receivable 239, ,197 58,864 37,323 35, , ,091 Interest payable 169, ,820 35,921 21,863 42, , ,661 Net interest income 70,197 88,377 22,943 15,460-6,423 3, ,430 Net fee and commission income, etc. 19,269 83,280 6,177-2,237 4, ,161 Value adjustments , , ,646 22,690 Other operating income - 1,796 4, ,062 Profit on ordinary activities before expenses (Net income) 89, ,933 33,386 9,449-1,526-11, ,343 Operating expenses 30,286 69,455 19,277 2,356 1, , ,619 Write-downs of loans, advances and receivables, etc. 3, , ,617-41,757 Profit/loss on paticipating interests ,465-1,541 Profit on activities before tax 55, ,130 32,355 7,093-2, , ,940 Page 18 of 29

20 ACCOUNTING POLICIES PARENT COMPANY The parent company financial statements have been prepared in accordance with the provisions of the Danish Financial Business Act, including the executive order on financial reports presented by credit institutions and investment companies, etc. and Danish accounting standards. The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU. The accounting policies of the parent company on the recognition and measurement are in accordance with the accounting policies of the group, except for the following point: Investments in group enterprises are measured according to the equity method, implying that the investments are measured at the parent company s proportionate share of the net asset value of the associates and group enterprises at the balance sheet date. The accounting policies are unchanged as compared with the annual report for. The interim report for the first six months of 2008 is unaudited. Page 19 of 29

21 INCOME STATEMENT Alm. Brand Bank First half-year of 2008 Parent company DKK '000 Note 2008 Year Interest receivable 1 717, ,932 1,151,815 Interest payable 2 528, , ,146 Net interest income 188, , ,669 Dividend on participating interests 2,585 2,503 2,906 Fees and commissions receivable 119, , ,609 Fees and commissions payable 19,208 10,661 35,175 Net interest and fee income 291, , ,009 Value adjustments 3-73,766 26,045 79,489 Other operating income 3,370 1,795 4,345 Profit before expenses 221, , ,843 Staff costs and administrative expenses 4 253, , ,570 Depreciation, amortisation and impairment of intangible assets and property, plant and equipment 1,097 1,268 2,321 Impairment of loans, advances and receivables, etc. 5 15,234-23,783-34,671 Profit from participating interests in associated and group undertakings -50,051 31,701 22,187 Profit before tax -98, , ,810 Tax -20,250 34,127 47,813 Profit for the period -78,086 75, ,997 Page 20 of 29

22 BALANCE SHEET Parent company DKK '000 Note ASSETS Cash in hand and receivables at call from central banks 107,077 22, ,883 Receivables from credit institutions and central banks 2,862,840 2,538,568 1,711,722 Loans, advances and other receivables at fair value 1,109,914 1,382,577 1,104,178 Loans, advances and other receivables at amortised cost 17,206,663 14,878,310 17,272,269 Bonds at fair value 2,437,011 2,955,136 3,005,925 Shares etc. 246, , ,194 Participating interests in associated undertakings 56,021 2,178 23,949 Participating interests in group undertakings 524, , ,334 Intangible assets 70,668 56,269 62,573 Other property, plant and equipment 11,715 10,007 9,166 Deferred tax assets 1,633 5,498 4,863 Assets acquired temporarily Other assets 499, , ,019 Prepayments 8,536 7,738 12,386 Total assets 25,143,108 22,908,553 24,921,461 Page 21 of 29

23 BALANCE SHEET Parent company DKK '000 Note LIABILITIES AND EQUI TY Payables Payables to credit institutions and central banks 8,840,383 8,539,286 8,545,109 Deposits and other payables 11,790,946 9,993,561 11,759,307 Issued bonds 1,396,180 1,399,201 1,401,799 Current tax liabilities 2,424 22,097 18,318 Other liabilities 1,153, ,573 1,153,625 Deferred income 4,033 4,543 4,408 Total payables 23,187,359 20,943,261 22,882,566 Provisions Provisions for pensions and similar liabilities 5,736 7,180 6,210 Total provisions 5,736 7,180 6,210 Subordinated debt 6 Supplementary capital 500, , ,000 Hybrid Tier 1 capital 163, , ,028 Total subordinated debt 663, , ,028 Shareholders' equity Share capital 351, , ,000 Other reserves 286, , ,622 Retained earnings 648, , ,035 Total shareholders' equity 1,286,571 1,292,386 1,364,657 Total liabilities and equity 25,143,108 22,908,553 24,921,461 Page 22 of 29

24 STATEMENT OF CHANGES IN EQUITY Parent company DKK '000 Share capital Other reserves Retained earnings Total Shareholders' equity at 1 January 351, , ,697 1,216,660 Equity movements in Profit for the year 15, , ,997 Comprehensive income in - 15, , ,997 Dividend paid - Total equity movements in - 15, , ,997 Shareholders' equity at 31 December 351, , ,035 1,364,657 Shareholders' equity at 1 January , , ,035 1,364,657 Equity movements in 2008 Dividend subsidiaries -50,000 50,000 - Profit for the period -78,086-78,086 Comprehensive income in ,000-28,086-78,086 Dividend paid - Total equity movements in ,000-28,086-78,086 Shareholders' equity at 30 June , , ,949 1,286,571 Page 23 of 29

25 NOTES TO THE FINANCIAL STATEMENTS Parent company DKK ' Year NOTE 1 Interest receivable Receivables from credit institutions and central banks 31,194 32,369 66,249 Loans, advances and other receivables 592, , ,363 Bonds 70,519 65, ,625 Total derivatives 22,684 11,580 28,535 Of which: Currency contracts 20,325 14,990 33,175 Interest rate contracts 2,359-3,410-4,640 Other interest receivable Total interest receivable 717, ,932 1,151,815 Interest receivable from genuine purchase and resale transactions: Balances due from credit institutions and central banks 4,012 12,883 17,695 Loans, advances and other receivables 21,020 6,770 21,012 NOTE 2 Interest payable Credit institutions and central banks 194, , ,991 Deposits and other payables 269, , ,784 Issued bonds 44,001 30,081 68,501 Subordinated debt 20,220 13,032 32,701 Other interest payable 643 1,160 1,169 Total interest payable 528, , ,146 Interest payable from genuine sale and repurchase transactions: Payables to credit institutions and central banks 8,219 18,838 22,483 Deposits and other payables NOTE 3 Value adjustments Loans, advances and other receivables at fair value -39,181 23,139 40,376 Bonds -63,241-29,734-11,000 Shares etc. -5,603 46,503 53,715 Foreign exchange ,222 4,244 Derivatives 34,125-18,785-10,516 Other commitments 474 1,700 2,670 Total value adjustments -73,766 26,045 79,489 Page 24 of 29

26 NOTES TO THE FINANCIAL STATEMENTS Parent company DKK ' Year NOTE 4 Staff costs and administrative expenses Remuneration to the Executive Board and Board of Directors: Remuneration to the Executive Board Salaries and wages 3,861 3,455 5,030 Pensions Total 4,288 3,856 5,802 Remuneration to the Board of Directors Fees Total remuneration to the Executive Board and Board of Directors 4,501 4,081 6,252 Staff costs: Salaries and wages 104,430 94, ,129 Pensions 10,151 9,319 19,023 Social security costs 11,115 9,362 18,436 Total 125, , ,588 Other administrative expenses 122, , ,730 Total staff costs and administrative expenses 253, , ,570 Number of employees Average number of employees during the period, full-time equivalents NOTE 5 Impairment of loans, advances and receivables, etc. Individual assessment: Impairment and value adjustments, respectively, during the year 35,671 5,219 48,091 Reversal of impairment in previous years 22,618 36,425 76,990 Total individual assessment 13,053-31,206-28,899 Group assessment: Impairment and value adjustments, respectively, during the year 3,131 8,532 1,415 Reversal of impairment in previous years 1, Total group assessment 1,138 7,800 1,415 Losses not previously provided for 5,242 3,070 7,058 Bad debts recovered 4,199 3,447 14,245 Total impairment of loans, advances and receivables, etc. 15,234-23,783-34,671 Page 25 of 29

27 NOTES TO THE FINANCIAL STATEMENTS Parent company DKK ' Year NOTE 6 Subordinated debt Supplementary capital Variable rate bullet loans in DKK maturing 9 May , , ,000 Variable rate bullet loans in DKK maturing 9 May , , ,000 Variable rate bullet loans in DKK maturing 9 May , , ,000 Variable rate bullet loans in DKK maturing 3 December , , ,000 Total supplementary capital 500, , ,000 Hybrid Tier 1 capital Fixed rate bullet loans in DKK with indefinite terms 175, , ,000 Total hybrid Tier 1 capital 175, , ,000 Hedging of interest rate risk at fair value -11,558-9,274-6,972 Total subordinated debt 663, , ,028 Interest on subordinated debt 20,220 13,032 32,701 Of this, amortisation of costs incurred on raising the debt As part of the risk management, the fair value of the hybrid Tier 1 capital is hedged by means of derivative financial instruments. The entire subordinated debt may be included in the statement of the capital base. NOTE 7 Off-balance sheet items Guarantees etc. Financial guarantees 1,043, , ,729 Mortgage finance guarantees 317, , ,094 Other guarantees 288, , ,872 Total guarantees etc. 1,649,661 1,539,696 1,595,695 Other commitments Other commitments 61, , ,613 Total other commitments 61, , ,613 Total off-balance sheet items 1,711,396 1,832,570 1,711,308 Page 26 of 29

28 NOTES TO THE FINANCIAL STATEMENTS NOTE 7 Off-balance sheet items - continued Contingent liabilities The bank has entered into a property lease with Henton Group A/S in respect of the headquarters at Silkeborg. The lease is non-terminable for six years and three months from 1 January In addition to rent, the lease also covers joint expenses and canteen. The capitalised value of the lease has been calculated at DKK 5 million. Being an active part of a financial services group, the company is a party to a number of lawsuits. The cases are reviewed on an ongoing basis, and the necessary provisions are made. Management believes that these cases will not inflict further losses on the group. Collateral security Monetary-policy counterparties with the Danish Central Bank can obtain credit only against security through the mortgaging of approved securities. As part of the ongoing business, at end March 2008 the bank provided bonds as security vis-à-vis the Danish Central Bank at a market value of DKK 452 million ( : DKK 1,067million). Parent company DKK ' NOTE 8 Financial highlights and key ratios Net interest and fee income 291, , , , ,921 Value adjustments -73,766 26,045 25,165 38,766 27,459 Staff costs and administrative expenses 253, , , , ,534 Impairment of loans, advances and receivables, etc. 15,234-23,783-10,189 5,718 8,666 Profit from investments in associates and group enterprises -50,051 31,701 9,604 25,111 21,282 Profit for the financial year -98, ,853 81, ,292 72,857 Loans and advances 18,316,577 16,260,887 12,275,663 10,111,701 8,351,496 Shareholders equity 1,286,571 1,292,386 1,144,684 1,006, ,540 Total assets 25,143,108 22,908,553 17,621,358 15,494,334 12,263,342 Solvency ratio * 9.8% 10.4% 9.4% 10.5% 10.7% Tier 1 ratio * 7.2% 7.6% 7.3% 8.0% 7.6% Return on equity for the period before tax -7.4% 8.8% 7.3% 12.5% 10.2% Return on equity for the period after tax -5.9% 6.0% 5.0% 7.7% 9.9% Income/cost ratio Interest rate risk * 1.2% 2.0% 8.1% 5.6% 8.8% Foreign exchange position * 10.5% 5.0% 13.1% 3.6% 7.9% Foreign exchange risk * 0.1% 0.0% 0.0% 0.0% 0.2% Loans and advances as a percentage of deposits Gearing of loans and advances Growth in lending for the period -0.3% 14.8% 8.1% 12.6% 1.1% Excess cover relative to statutory liquidity requirement * 103.1% 159.6% 77.7% 63.3% 116.5% Impairment ratio for the period 0.1% -0.1% -0.1% 0.0% 0.1% Financial highlights and key ratios have been prepared in accordance with IFRS. * Comparative figures for 2004 have not been restated in respect of these ratios. Page 27 of 29

29 APPENDIKS A Lending portfolio and credit losses Pro rata 2008 DKKm Loans at 30 June 2008 Share of portfolio (%) Average loan Total loss and write-down Loss ratio Segments Retail lending 3,216 18% % Car finance 1,378 8% % Agriculture 1,057 6% % Other commercial lending 1,092 6% % Security financing 5,097 28% % Lending to Alm. Brand Formue and Alm. Brand Pantebreve 1,926 11% % Investment property 2,460 13% % Residential mortgage deeds 1,078 6% % Commercial mortgage deeds 377 2% % Property development projects 433 2% % Total 18, % % *) The items Value adjustments, Write-downs of loans, advances and recievables, ets in the Income Statement includes total loss and write-down. The table above sets out a detailed breakdown on a prorata consolidated basis of the bank s lending portfolio at 30 June Relevant comments on the individual segments: Retail customers Includes lending to the bank s private customers. The portfolio is well diversified geographically through the bank s 25 branches located across Denmark. Just over 80% of the portfolio is secured against a mortgage on real property. In the home loan portfolio, 82% of loans have a loanto-value ratio of less than 80%. For a number of years, the bank has applied credit-scoring models for this lending segment. The portfolio has a good quality and is performing satisfactorily. Car finance The car finance portfolio is operated by Alm. Brand Finans A/S, which offers car financing through car dealers. The portfolio consists mainly of marketable standard cars, typically with a 20% down payment. Alm. Brand Finans has extensive knowledge of the car market and the portfolio is characterised by being of a good quality, being well diversified and its borrowers have a stable financial strength. Agriculture The bank has built up its agricultural portfolio over the last seven years using the substantial market position and industry know-how available to the Alm. Brand Group in the agricultural sector. The target group is large, productive farms in the traditional lines of cattle and pig breeding and plant growing. The distribution among the three lines is about 40%, 40% and 20%, respectively. The bank pursues a selective credit policy and only approves loans to farms with good efficiency ratios. The bank s agricultural portfolio is performing satisfactorily in spite of the poor business conditions pig producers are currently facing. Other commercial lending The bank is currently building its commercial lending portfolio, having been an active player in this market for only the last two or three years. The portfolio consists in part of loans to small businesses typically anchored in Alm. Brand Bank s branches (the SME market) and in part of large syndicated loans to medium-sized Danish businesses. In most cases, the latter type of loans have been established as part of the bank s strategic cooperation with DMC A/S, a provider of corporate finance services. In addition, the portfolio consists of car and equipment leases established with Alm. Brand Finans. The typical debtor is a small or mediumsized enterprise. All parts of the commercial loans portfolio are performing satisfactorily. Security financing This portfolio consists of investment commitments secured against bonds, equities or mortgage deeds. The bank requires overcollateralisation by an amount that varies with the quality of the securities involved and their expected volatility. Page 28 of 29

30 APPENDIKS A Lending portfolio and credit losses The bank s risk management function monitors all commitments on an ongoing basis. In the event that overcollateralisation falls to an insufficient level, debtors are required to post supplementary security or to sell securities. The portfolio is performing satisfactorily and in spite of the substantial market volatility experienced in the first half-year of 2008, no credit losses have been recorded and there has been only a limited need for writedowns. Lending to Alm. Brand Formue and Alm. Brand Pantebreve Comprises lending to the bank s two partly-owned listed subsidiaries. The loans indicated reflect the share of the bank s lending attributable to minority shareholders. At 30 June 2008, minority interests had 59% ownership of Alm. Brand Formue and 80% ownership of Alm. Brand Pantebreve. Both companies have an investment strategy based on prudent gearing, and the bank controls the credit risk of these commitments through portfolio management agreements and its management influence on the two companies. These loan commitments are performing satisfactorily in spite of the difficult market conditions both companies faced in the first half-year of Investment property This portfolio consists of loans for prime-location investment properties with a strong cash flow. The bank s business model for this business area is based on in-depth market knowledge built up over many years. Key factors are location and reliable tenants, mainly in the retail trade and rental housing. Debtors are professional property investors and limited partnerships (K/S) provided by recognised market players. Danish properties make up some 75% of the portfolio, while 25% is made up by German properties with Danish debtors. The portfolio is developing favourably and, backed by strong cash flows and financially sound tenants, is currently not materially affected by the negative developments in the property market. Residential mortgage deeds This category represents the bank s trading portfolio of marketable mortgage deeds secured against single-family houses, freehold flats and summer houses. The portfolio is well diversified geographically as well as in terms of property types and debtors. Generally, the mortgage deeds are acquired in collaboration with estate agents throughout Denmark and the portfolio has an average turnover rate of 1.5 per year. The portfolio of mortgage deeds is marked to market on a current basis using a cash flow-based pricing model. The model considers factors such as estimated prepayments and credit losses. Currently, the model assumes average credit losses of about 1% per annum. This is believed to be a conservative assumption, as actual historical credit losses through a full business cycle have amounted to about 0.5% per annum. Delinquency rates on the portfolio have been rising since the December payment date, but it should be noted that delinquencies have been very low for a long period of time. The increase in delinquencies has prompted an upward adjustment of estimated losses in the model and, accordingly, the current valuation of the portfolio reflects expectations for an increase in credit losses on residential mortgage deeds. Commercial mortgage deeds This portfolio consists largely of mortgage deeds secured mainly against residential rental property and to a minor extent in actual commercial properties (offices, trade and industry). This is a trading portfolio generally acquired through other players in the mortgage deed market. This portfolio has a lower turnover rate than the portfolio of residential mortgage deeds does. Market terms deteriorated substantially during the first half-year. A large part of the debtors in this market have been affected by a combination of rising market rates, falling property prices and impaired financing opportunities. As a result, on a part of the portfolio, delinquencies increased and the financial strength deteriorated, especially in the second quarter of the year. As a result of these developments, the bank has taken a DKK 26 million writedown on the portfolio at 30 June The difficult market conditions are expected to prevail in the second half-year of 2008, and this is reflected in the full-year profit guidance for Property development projects This portfolio consists of a limited number of projects established within the last couple of years. It consists exclusively of prime-location freehold flat projects with small proportions of commercial property. Projects are only started up when a substantial part of the flats has been sold. Most of the projects are still at an early stage, and construction has yet to be started. One project is nearing completion and a substantial part of it has been sold. Due to the difficult market conditions prevailing for selling flats at the project stage, a DKK 12 million writedown was taken on this portfolio in the second quarter. The difficult market conditions are expected to prevail in the second half-year of 2008, and this is reflected in the profit guidance. Side 29 af 29