PRE-TAX PROFIT OF DKK 193 MILLION AND ROE OF 12.7% BEST PERFORMANCE FOR 6 YEARS. Spar Nord - Q1 2013

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1 PRE-TAX PROFIT OF DKK 193 MILLION AND ROE OF.7% BEST PERFORMANCE FOR 6 YEARS Spar Nord - 213

2 KEY MESSAGES 1 Core income up 17% (y/y): NII up 17% and net fees and commissions up 29% 2 Costs a fraction lower than expected Cost/Income Ratio improved to.57 3 Core earnings of DKK 321 million 21% from 2 4 Loan impairments in line with 2 and in line with guidance 5 Very solid capital and liquidity position: CET1 of.8 and liquidity surplus of DKK 16.8 billion 6 Merger progressing according to plans credit quality, synergies and costs in line with the expected Page 2

3 HIGHLIGHTS FROM THE INCOME STATEMENT SPAR NORD BANK Realized Realized Change Realized DKKm 213 Q4 2 in pct. 2 Change in pct. Net interest income Net fees, charges and commissions Market-value adjustments Other income Core income Staff costs Operating expenses etc Costs Core earnings before impairment Impairments of loans and advances, etc Core earnings Investment income Profit/loss on ordinary activities Sector Fund Cost related to merger Profit from continuing operations Profit from discontinued operations Profit before tax side 3

4 HIGHER VOLUMES DRIVE GROWTH IN NII Net interest income and volume trend Net interest income of DKK 451 million up 17 % on 2 DKKm Net interest income and loans volume DKKb Positive trends Full quarter contribution from volume taken over in connection with merger Lower funding costs due to solid liquidity position Continued expansion of lending margin Negative trends Demand remains modest bank lending down DKK.5 billion Low market interest level deposit margin remains negative 2 Q2 2 Net interest income Q3 2 Interest margin Q4 2 Loans, banking activities 213 Outlook Lending margin could come under pressure from increasing competition Deposit margins expected to improve slightly as long-term fixed-rate deposits are re-priced Pct Interest margin Continuing operations Q21 Q31 Q41 11 Q211 Q311 Q411 Q2 Q3 Q4 13 Interest margin (Deposits) Interest margin (Loans) Interest margin side 4

5 STRONG GROWTH IN ACTIVITY-DRIVEN INCOME Net fee and commission income of DKK 196 million 29 % up on 2 Securities trading etc. Asset management Significant portion of the growth is attributable to increase in business volume post-merger DKKm Værdipapirhandel Y/Y: 31% Mio. kr. Y/Y: 31 pct Kapitalforvaltning Y/Y: 62% Y/Y: 62 pct. But organic growth is also strong Strong trend in asset management driven by customers move from bank deposits to investment products Activity level in the mortgage-credit area remains high Q2 Q3 Q Q2 Q3 Q Net fee and commission income Loan transaction fees Other fees Mio. kr Nettogebyrindtægter / 13: 29 pct. Lånesagsgebyrer Andre gebyrer DKKm Mio. kr. Y/Y: 34% Y/Y: 11% Y/Y: 34 pct. Y/Y: 11 pct Q2 Q3 Q Q2 Q3 Q side 5

6 MARKET-VALUE ADJUSTMENTS AT HIGHLY SATISFACOTRY LEVEL Markets-value adjustments of DKK 76 million on par with 2 and up 58% on Q4 2 Bond portfolio continues to perform spread between Danish mortgage-bonds and interest swaps remains favourable Customers interest and FX related activity is reappearing DKKm Market-value adjustments Market-value adjustments Market-value adjustments and dividends on portfolio of shares in financial-sector companies at a level equivalent to 2 2 Q2 2 Q3 2 Q Breakdown on types Change DKKm Market-valued adjustments in Trading, Financial Markets & The International Division Tangible assets Currency trade and -agio Total side 6

7 LOWER COST GROWTH THAN EXPECTED Total costs and Cost/Income Ratio Total costs of DKK 427 million 14% up on 2 - Growth is entirely attributable to merger - Growth is slightly lower than expected Payroll costs 18% up on last year - Total headcount (FTE) 241 higher than months ago DKKm 1, 75 5 Costs and Cost/Income ratio Operating expenses 9% up - Driven by merger, especially higher IT-costs Improvement of Cost/Income Ratio to Improved efficiency: Since 29, the number of customers per staff member in the retail banking division has grown by 22% Costs (DKKm) Change in pct. Staff costs Operating expenses Depreciation Costs Operating expenses (DKKm) Change Staff-related expenses 13-1 Travel expenses Marketing costs IT expenses Cost of premises Other administrative expenses Operating expenses side 7

8 LOAN IMPAIRMENTS REDUCED BUT STILL ON A RELATIVELY HIGH LEVEL Impairments and impairment ratio Total impairments of DKK 19 million DKK 47 million lower than Q4 2 DKKm 2 Impairment and impairment in pct. Pct. DKK 86 million attributable to corporate customers (impairment percentage of 1.3) DKK 23 million attributable to household customers (impairment percentage:.5) Sparbank-portfolio performs satisfactorily New impairments of DKK 84 million (booked as impairments in official P/L) Reversal of value adjustments of DKK 79 million (booked as NII in official P/L) 2 Note: Based on average lending volume Outlook for 213 Impairments still expected in the 1% range Improved outlook for agriculture especially pork producers Impairments on household customers could increase slightly but nothing alarming Due to merger, uncertainty is somewhat higher than usual Impairment percentage recent years trend 1,5% 1,4% 1,2% 1,1% ~1.% Guidance 13 side 8

9 CAPITAL POSITION FURTHER STRENGTHENED Solvency and subordinated debt Strategic targets Core equity tier 1 ratio (CET1): % Solvency ratio:15 % (at least 3 pp above ICAAP ratio) End of 213 CET1 stands at.8 % - up from.1 % at YE 2 Pct Solvency ratio DKKm 1,5 1,2 9 Subordinated debt (Maturity) Solvency ratio stands at 16.2 % up from 15.5 % at YE 2 Individual solvency need (ICAAP ratio) of 1.1 % Capital surplus of DKK 2.7 billion (6.1 pp) Core tier 1 ratio Solvency ratio , > Hybrid capital Subordinated loan capital Capital base Pct Core tier 1 ratio Hybrid capital Deductions in hybrid capital Tier 1 ratio Subordinated debt Deductions in capitalbase Solvency ratio page 9

10 EXCESS COVERAGE RELATIVE TO STRATEGIC LIQUIDITY TARGET OF DKK 16.7 BILLION Excess coverage of DKK 16.7 billion up DKK 1.9 billion Deposit base continues to grow Reduction in leasing and bank lending Premature redemption of DKK 1.3 billion bonds issue in 213 Current liquidity buffer is sufficient to comfortably repay all senior funding maturing in 213 Strategic liquidity DKKb Deposits, banking activities Seniorfunding Core capital and sub. capital Stable long term funding Loans, banking activities Loans, leasing activities Maturity < 1 year Strategic target (>) Loan to deposit ratio Maturity profile Pct. DKKb Senior loans maturity ' > Issued bonds Senior loans page 1

11 INTEGRATION OF SPARBANK PROCEEDS ACCORDING TO PLANS IT conversion completed without any serious problems 4 of 5 branch mergers completed Synergies materialise on the expected level One-off costs in the low end of the indicated interval No serious negative surprises on the credit side Synergies original and revised guidance New marketleading position New bank areas in Viborg and Holstebro Stronger platform in Copenhagen and Aarhus 38 (24) 25 (15) 19 (19) 25 (25) 13 (11) 13 (11) Stronger presence in Herning and Randers 57 (51) 65 (55) 16 (16) 15 (15) Staff Rent Other (IT etc.) Capital Total synergies Page 11

12 OUTLOOK AND SHARE PRICE INFORMATION Outlook for 213 Share price Core earnings before impairments and nonrecurring costs related to merger still expected in the DKK million range Merger (added business plus synergies) still expected to contribute with approximately DKK 245 million Impairments still expected to hover around 1% of total loans and guarantees Non-recurring costs relating to merger: DKK 4-5 million Contribution to sector-targeted solutions in the DKK 1 million range DKK Jan-11 Apr-11 Jul-11 Oct-11 Jan- Apr- Jul- Oct- Jan-13 Apr-13 Spar Nord MSCI European Banks (indexed to Spar Nord) Small positive contribution from discontinued business (leasing) Share price 33,4 DKK Market cap 4,184 DKKm EPS (2) 1.7 DKK EPS (213) 5.3 DKK P/B (2).7 1Concensus estimate Source: Factset page