third QUArtEr 2012 (unaudited)

Transcription

1 third QUARTER 2012 (unaudited)

2 2 Key figures - Group Result MNOK % of aver. MNOK % of aver. MNOK % of aver. total assets total assets total assets Interest income % % % Interest costs % % % Net interest and credit commission income % % % Other income % % % Operating costs % % % Profit before loss % % % Losses % % % Pre-tax profit % % % Balance sheet MNOK Growth (%) MNOK Growth (%) MNOK Growth (%) Total assets % % % Gross loans % % % Deposits % % % Equity and related capital Core capital adequacy 13.2 % 13.0 % 14.2 % Deposits as a % of gross loans 55.0 % 54.0 % 56.1 % Return on equity after tax 6.4 % 8.0 % 7.9 % No. of employees (FTE), group

3 THIRD QUARTER GENERAL INFORMATION Sparebanken Sør offers a full range of banking services and has branches in 30 locations and estate agency business in 12 locations in Aust-Agder, Vest-Agder and Telemark. The estate agency business is managed through estate agency chain ABCenter. General and life insurance products are supplied through insurance company Frende, where the bank is co-owner. The group is also co-owner of Norne and Brage, which provides services in securities trading and leasing products. FRAMEWORK CONDITIONS There continues to be a good trend in the Norwegian economy. The employment rate is high and unemployment remains at a stable low level. The Norwegian economy shows a significantly stronger trend than for our trading partners and inflation remains low. At its last monetary policy meeting, Norges Bank resolved to keep the key interest rate unchanged at 1.5 per cent. Uncertainty still prevails in the financial markets, but lately the credit margins on senior debt and covered bonds issued by Norwegian banks have fallen significantly. Access to funding has been good. Gross domestic debt (K2) was up 6.8 per cent on a yearly basis, measured at the end of August, with 7.1 per cent of this growth in the retail banking market and 5.6 per cent in the corporate market. THIRD QUARTER Highlights - Continued sound lending and deposit growth - Good cost discipline - Targeted efforts have reduced losses - Positive trend in underlying operations - Valuation of financial instruments has had negative impact There has been a good trend in both the retail banking and corporate market. Growth has been above the national growth indicators year-to-date. An important condition for the positive trend is that we have a high level of customer satisfaction. In a recent EPSI survey, Sparebanken Sør was presented as the 3rd best bank in Norway as regards customer satisfaction. Change in Profit in MNOK 3Q 2Q MNOK Net interest Net commission income Net income from financial instruments assoc. with liabilities Net income from financial instruments assoc. with assets Other income Costs Losses Profit after losses The group s pretax profit for the 3rd quarter was MNOK 53, which is weaker than in the previous quarter and in the same quarter last year. The most important reason for this is the net loss on financial instruments, due to the credit margins being significantly lower than at the end of the 2nd quarter. In general, operations have provided good results in the 3rd quarters. Net interest income shows a positive trend, while costs for the quarter are at the anticipated level and losses have been modest. MNOK 4 has been allocated to collective write-downs. In the 3rd quarter, the bank opened a new branch in Skien. This means that we have well represented in Telemark with offices in the main towns in the county. The focus is on continuing to develop our digital services to secure the bank s position through holding onto current customers and also attracting new ones. Credit quality in the lending portfolio has been maintained in accordance with the group s general objective. Net bad and doubtful commitments have remained virtually unchanged in the last quarter. Business in the subsidiary Sør Boligkreditt follows the planned development adapted to the group as a whole. The estate agency business has shown an improved profit trend compared with the same period last year.

4 4 THIRD QUARTER 2012 PROFIT YEAR-TO-DATE Highlights Change Profit in MNOK year-to-date in MNOK Net interest Net commission income Net income from financial instruments assoc. with liabilities Net income from financial instruments assoc. with assets Other income Costs Losses Profit after losses Return on equity 6.4% 8.0% Deposit growth in last 12 months 11.9% 6.1% Lending growth in last 12 months 10.0% 7.1% Core capital adequacy 13.2% 13.0% At the end of the 3rd quarter, the Group s pre-tax profit was MNOK 199, which is equivalent to 0.62 per cent of the average total assets. At the same time last year, the result was MNOK 254. The most important reason for the decline is the negative impact on profit due to valuation of financial instruments. This aside, profit in the underlying operations has improved significantly compared with the same period last year, primarily due to improved net interest and few losses. Return on equity after tax is 6.4 per cent and adjusted for valuation of debt gives a return on equity after tax of 9.6 per cent. Net interest Net interest is MNOK 510, which is up MNOK 32 compared with the same period last year. This is equivalent to 1.59 per cent of the average total assets, compared with 1.64 per cent last year. Margins have remained relatively stable in the retail banking market, but are down slightly in the corporate market compared with the same period last year. Funding costs are higher than last year and the liquid reserve has debited the net interest as there is low return on this. However, good volume growth in loans and deposits has compensate for these circumstances and in total for the year has contributed to a higher net interest measured in NOK than at the same time last year. Other (non-interest) income In total, other income was MNOK 87, compared with MNOK 184 at the same time last year. This is equivalent to 0.27 per cent of the average total assets, compared with 0.64 per cent last year. Net fee and commission income was MNOK 122, which is up MNOK 11 compared with last year. Income from sale of insurance and real estate sales represent the lion s share of this increase. Income from financial instruments year-to-date was net MNOK -45, compared with MNOK 57 last year. MNOK -101 of this is due to reduced credit margins on the bank s debt securities. Operating costs Group costs totalled MNOK 365, which is equivalent to 1.14 per cent of the average total assets. This is an increase of MNOK 21 compared with last year, but is down 0.05 percentage points when measuring the costs as a percentage of the total assets. Most of the cost growth can be referred to personnel costs and reflects strengthening of the expertise in strategic priority areas. The increase in other operating costs is mainly due to new system solutions and customer service concepts. Credit losses and defaulted commitments Looses on loans have been charged to the accounts with net MNOK 33, which is equivalent to 0.12 per cent of gross loans. The equivalent figures for last year were MNOK 64 and 0.26 per cent of gross loans. The reduction in losses is a result of dedicated work on the credity quality of the portfolio. The losses can mainly be referred to various business sectors in the corporate market. Year-to-date, collective write-downs are up by MNOK 4 and are now MNOK 128. Net defaulted and doubtful loans totalled MNOK 428, which is equivalent to 1.17 per cent of the loans. Compared with year-end, this is down MNOK 9 and 0.12 percentage points when measured as a percentage of the loans. BALANCE SHEET At the end of the 3rd quarter, total assets were BNOK 43.2 compared BNOK 40.3 last year, which is a growth of 7.1 per cent. Loans and deposits In the last twelve months, lending growth was 10.0 per cent, with 11.3 per cent in the retail banking market and 7.1 in the corporate market. The percentage of loans to the retail banking market is now 68.6 per cent. In the last twelve month period, deposits are up 11.9 per

5 THIRD QUARTER cent, with a growth of 10.9 per cent in the retail banking market and 13.6 per cent in the corporate market. Deposit-to-loan ratio is 55.0 per cent in the group and 72.7 per cent in the parent bank. Funding and securities The bank has a very satisfactory liquidity situation. The liquid reserves are reassuring and the maturity structure of borrowing is well-adapted to the business. New longterm borrowing will be carried out through issuance of covered bonds and senior debt. In the group, bond and certificate holdings totalled BNOK 5.8, which is down BNOK 0.5 compared with the 3rd quarter At the end of the quarter, the liquidity indicator was Equity and related capital capital adequacy ratio Total equity and related capital was BNOK 3.3, of which MNOK 200 was hybrid capital. The remainder is retained earnings, which have been assigned to the Savings Bank s Fund. In the 1st quarter, the bank redeemed its subordinated loan of MNOK 300. At the emd pf the 3rd quarter, the capital adequacy ratio was 13.2 per cent based on the standard approach in the Basel II rules. Core capital ratio was also 13.2 per cent and pure core capital ratio was 12.3 per cent. SUBSIDIARIES AND COOPERATING COMPANIES The most important wholly owned subsidiaries are Sør Boligkreditt AS and ABCenter Holding AS, which is the parent company in real estate chain ABCenter. Both companies are wholly owned by the bank. At the end of the 3rd quarter, Sør Boligkreditt AS had a mortgage loan portfolio of BNOK 9.0. The company had a pre-tax profit of MNOK 64.7 and a return on equity after tax of 16.1 per cent. At the end of the 3rd quarter, ABCenter recorded a profit of MNOK 1.7. The achieved profit is up MNOK 1.8 compared with the same period last year. The improvement in profit is due to higher income on real estate sales. The bank s other subsidiaries mainly manage different business areas where the bank has operations. We confirm a posive trend in our partly-owned product companies Norne, Brage and Frende. Commission income is rising due to increased sales, more customers and larger market shares. RATING Moody s has given the bank an A3 rating. Wholly owned subsidiary Sør Boligkreditt AS has a Aaa rating from Moody s for covered bonds. SUMMARY AND FUTURE OUTLOOK At the end of the 3rd quarter, the market trend as regards financial instruments has had a negative impact on the total profit. As regards the ongoing operations, the board of directors is satisfied with the result. It is gratifying to note that the bank s work on customer orientation has provided results in the form of greater customer satisfaction, as emerged in the EPSI survey. In the 2nd quarter, the board of directors resolved that the bank is to initiate the necessary preparations for applying to the Financial Supervisory Authority of Norway for IRB approval, which will mean more extensive risk management and better access to funding. This work will have top priority in future. Similarly, in light ofnew regulatory requirements, a lot of attention will be focused on deposits and the percentage of stable deposits. Aside from the uncertainty there will always be regarding valuation of financial instruments, the profit performance in the months ahead is expected to remain stable at a satisfactory level. Arendal, 30 October 2012 Torstein Moland Unni Grete Farestveit Kjell Pedersen-Rise Chairman of the Board Erling Holm Trygve Reinertsen Jill Akselsen Olav Inge Nordbø Per Adolf Bentsen Cathy Steller

6 6 Profit and Loss Account Group MNOK Notes Interest and related income Interest and related costs Net interest and credit commission income Commission income and income from banking services Commission costs and costs associated with banking services Net commission income Income from financial instruments at fair value with value change charge to P&L account Write-downs and profit/loss on investments value at cost price of investments considered available for sale Income from financial instruments Other operating income Total other operating income Personnel costs Depreciation and amortization of fixed and intangible assets Other operating costs Total operating costs Operating profit before losses Losses on loans, guarantees, etc Pre-tax profit Tax on ordinary profit Profit for the period Minority interests Majority interests Statement of net profit Profit for the period Net change in fair value of financial assets available for sale Net change in fair value of financial assets 13 available for sale transferred to the profit and loss account Total net profit for the period

7 Balance Sheet 7 MNOK GROUP ASSETS Notes Cash in hand and claims on central banks Loans to and claims on financial institutions Gross loans to customers Individual write-downs Collective write-downs Net loans to customers Repossessed assets Bonds and certificates Shares Financial derivatives Equity stakes in group companies Equity stakes in associated companies Intangible assets Assets relating to deferred tax Fixed assets Other assets TOTAL ASSETS EQUITY AND LIABILITIES Debt to financial institutions Deposits from and liabilities to customers Debt established through issue of securities Financial derivatives Liabilities relating to tax for the period Deferred tax Other obligations Subordinate loan capital Perpetual Hybrid Tier 1 Capital Total liabilities Minority interests Other reserves Savings Bank s Fund Retained earnings Total equity TOTAL EQUITY AND LIABILITIES OFF-BALANCE SHEET ITEMS Contingent liabilities: Guarantees Book value of pledged assets

8 8 Cash flow statement GROUP Incoming interest payments Outgoing interest payments Other payments Operating payments Recoveries on debts written off Tax paid for the period Paid gifts Minority share Paid group contribution Net cash flow from operations Change in loans Change in other assets Change in securities Change in loans to other financial institutions Change in deposits from customers Change in borrowing from financial institutions Change in other liabilities Net cash flow from current financial activities Investments in fixed assets Net invested in group and associated companies 4 4 Sale of fixed assets Net cash flow from investments Change in debt established through issue of securities Change in subordinated loans and -300 Perpetual Hybrid Tier 1 Capital Net cash flow from long-term financing activities Net change in cash and cash equivalents Cash and cash equivalents as at 01/ Cash and cash equivalents at the end of the period

9 Equity movements 9 Group Savings Fair value Minority Retained TOTAL Banks fund reserve interests profit Equity as at 1 Jan Profit in 3rd quarter Other change in equity -6-6 Equity as at 30 Sept Equity as at 1 Jan Profit in 3rd quarter Other change in equity -6-6 Equity as at 30 Sept Parent bank Equity as at 1 Jan Profit in 3rd quarter Other change in equity -6-6 Equity as at 30 Sept Equity as at 1 Jan Profit in 3rd quarter Other change in equity -6-6 Equity as at 30 Sept For a satement of changes in equity as at 30 December 2011, refer to the 2011 annual accounts

10 10 NOTES Note 1 - Accounting principles The 3rd quarter accounts have been prepared in accordance with International Standards for Financial Reporting, IFRS, including IAS34. The accounting principles are the same as those used in preparation of the 2011 annual accounts and are described below. Note 2 - Income from financial instruments GROUP Income from financial instruments at fair value with change in value charged to the P&L account Profit/loss and change in value of trading portfolio, equity instruments Profit/loss and change in value of certificates and bonds Change in value - loans and deposits at fair value Change in value - associated derivatives Change in value - issued securities at fixed interest Change in value - associated derivatives Change in value - issued securities at floating interest rate Change in value - other financial instruments at fair value Total income from financial instruments at fair value with change in value charged to the P&L account Net loss/profit on other investments value at cost price or investments considered available for sale Total profit/loss on investments valued at cost price or investments considered available for sale Income from other financial instruments Dividend - equity instruments Currency trading Total income from other financial instruments

11 NOTES 11 Note 3 - Losses on loans and guarantees GROUP Individual write-downs Individual write-downs at start of period Per. confirmed losses previously written-down individually Increased individual write-downs in the period New individual write-downs in the period Reversal of individual write-downs in the period = Individual write-downs at the end of the period GROUP Collective write-down of loans Collective write-down of loans at the start of the period Change in collective write-downs in the period = Collective write-down of loans at the end of the period GROUP Loss costs for the period Change in individual write-downs in the period Change in collective write-downs in the period Per. Confirmed losses previously written-down individually in the period Per. Confirmed losses not previously written-down individually Carried to income as interest Recoveries of previously confirmed losses in the period = Loss costs for the period Note 4 - Defaulted and bad and doubtful commitments GROUP Defaulted commitments Individual write-downs Net defaulted commitments Other bad and doubtful commitments Individual write-downs Net bad and doubtful commitments Defaulted commitments are the total of commitments where at least one loan has been defaulted for 90 days or more

12 12 NOTES Note 5 - Deposits from customers according to sectors and industries GROUP Retail banking customers Public sector Primary industries Industry Building and construction Transport and communication Wholesale and retail trade Hotel and restaurant Real estate Financial/business services Sundry/other industries TOTAL Note 6 - Gross loans according to sectors and industries GROUP Retail banking customers Public sector Primary industries Industry Building and construction Transport and communication Wholesale and retail trade Hotel and restaurant Real estate Financial/business services Sundry/other industries TOTAL GROSS LOANS Write-down of loans TOTAL NET LOANS

13 NOTES 13 Note 7 - Equity and related capital and capital adequacy ratio GROUP Savings Bank s Fund Other reserves Perpetual Hybrid Tier 1 Capital Deferred tax, goodwill and intangible assets Over-financing of pension commitments Unrealised change in value due to increased value of debt Allocated to capital adequacy reserves Total core capital Supplementary capital over and above core capital Subordinated loans % of the fund for unrealised gains Allocated to capital adequacy reserves Total supplementary capital Net equity and related capital Minimum capital adequacy requirement calculated according to the Basel II standard approach Commitments with local and regional authorities Commitments with institutions Commitments with businesses Commitments with the mass market Commitments with mortgaged property Commitments that have matured Commitments in covered bonds Commitments in equity funds Other commitments Capital requirement for credit and counterparty risk Capit. requirement for position, currency and commodity risk Capital requirement for operational risk Deduction in capital requirement Total minimum capital adequacy requirement Risk-weighted balance (calculation basis) % 15.8 % 14.5 % Capital adequacy ratio 13.2 % 14.3 % 15.6 % 15.4 % 14.3 % 14.4 % Core capital ratio 13.2 % 13.0 % 14.2 %

14 14 NOTES Note 8 - Segmentrapportering Reporting per segment Group Group Estate Estate Capital agency Capital agency Profit & Loss Account (MNOK) RB CM markets business Unalloc. Total RB CM markets business Unalloc. Total Net int. and credit commission income Net other operating income Operating costs Op. profit bef. losses by segment Losses on loans and guarantees Pre-tax profit per segment Net loans to customers Other assets Total assets per segment Deposits from/liabilities to customers Inter-group balances/other liabilities Total liabilities per segment Equity Total equity and liabilities per seg Note 9 - Close parties NOK Group Management Board of Directors Control Committee Loans outstanding Deposits Chairman of the Supervisory Board Subsidiaries Assoc. Companies Loans outstanding Deposits

15 Quarterly profit trend 15 Parent bank 3Q 2Q 1Q 4Q 3Q 2Q Net interest and credit commission income Net commission income Net income from financial instruments Other operating income Total other operating income Operating costs Operating profit bef. losses Losses on loans, guarantees, etc Pre-tax profit Tax on ordinary profit Profit or loss on ordinary operations after tax Group 3Q 2Q 1Q 4Q 3Q 2Q Net interest and credit commission income Net commission income Net income from financial instruments Other operating income Total other operating income Operating costs Operating profit bef. losses Losses on loans, guarantees, etc Pre-tax profit Tax on ordinary profit Profit or loss on ordinary operations Group % of average total assets 3Q 2Q 1Q 4Q 3Q 2Q Net interest and credit commission income Net commission income Net income from financial instruments Other operating income Total other operating income Operating costs Operating profit before losses Losses on loans, guarantees, etc Pre-tax profit Tax on ordinary profit Profit or loss on ordinary operations after tax

16 16 Key figures (group) Profit and Loss Account Interest and credit commission income Interest costs Net interest and credit commission income Net commission income Net income from financial instruments (45) Other operating income Total other operating costs Operating costs Operating profit before losses Losses on loans, guarantees, etc Pre-tax profit Tax costs Profit from continued operations Profit from discontinued operations Profit for the year Profit and loss account as a % of average total assets Interest and credit commission income 4.30 % 4.21 % 4.26 % 4.15 % 4.43 % 7.05 % Interest costs 2.71 % 2.57 % 2.65 % 2.32 % 2.67 % 5.06 % Net interest and credit commission income 1.59 % 1.64 % 1.61 % 1.83 % 1.76 % 1.99 % Net commission income 0.38 % 0.38 % 0.39 % 0.42 % 0.42 % 0.49 % Net income from financial instruments % 0.20 % 0.19 % 0.59 % 0.02 % % Other operating income 0.03 % 0.06 % 0.05 % 0.05 % 0.06 % 0.08 % Total other operating income 0.27 % 0.64 % 0.63 % 1.06 % 0.50 % 0.13 % Operating costs 1.14 % 1.19 % 1.23 % 1.26 % 1.36 % 1.65 % Operating profit before losses 0.72 % 1.09 % 1.01 % 1.63 % 0.90 % 0.47 % Losses on loans, guarantees, etc % 0.22 % 0.18 % 0.33 % 0.31 % 0.36 % Pre-tax profit 0.62 % 0.87 % 0.83 % 1.30 % 0.59 % 0.11 % Tax cost 0.18 % 0.27 % 0.27 % 0.29 % 0.16 % 0.12 % Profit from continued operations 0.44 % 0.60 % 0.56 % 1.01 % 0.43 % % Average total assets From the balance sheet Total assets Gross loans Lending growth % 10.0 % 7.1 % 8.4 % 6.2 % 3.1 % 9.8 % Deposits from customers Lending growth % 11.9 % 6.1 % 9.9 % 2.1 % 5.6 % 2.4 % Equity and related capital Capital adequacy ratio 13.2 % 14.3 % 15.6 % 15.5 % 15.8 % 12.7 % Core capital ratio 13.2 % 13.0 % 14.2 % 14.0 % 14.1 % 11.1 % Other key figures Deposits as a % of gross loans 55.0 % 54.0 % 56.1 % 55.4 % 57.6 % 56.3 % Return on net capital 6.4 % 8.0 % 7.9 % 15.0 % 6.5 % -0.9 % Costs as a % of income 61.0 % 52.0 % 54.9 % 43.5 % 60.3 % 78.0 % Costs as a % of income ex. financial instruments 56.8 % 56.9 % 60.1 % 54.7 % 60.8 % 64.7 % No. of employees (FTE) - group

17 RISK AND CAPITAL MANAGEMENT 17 Risk management ensures that the group s risk exposure is known at any time and contributes to the group achieving its strategic objectives, and also that statutes, regulations and regulatory requirements are complied with. Management objectives have been set for the group s total risk level and specific management objectives have been set within each risk area. Systems have been established for risk assessment, management and control. Capital management will ensure that the group has a good core capital ratio, financial stability and a satisfactory return in relation to risk profile. The group s capital adequacy and risk exposure is followedup through periodic reports. Credit risk Credit risk is defined as the risk of loss due to customers or counterparties not being able to meet their obligations. Credit risk is managed through the group s stategy and policy documents, credit routines and processes, scoring models and loan granting authority. Market risk Market risk is the risk of loss due to unfavourable changes in market prices for interest, exchange rates and the stock market. The market risk strategy ensures that the operations are run in accordance with the group s overall strategy plan, and that risk is reflecte in the return. Funding risk Funding risk is the risk that the group is not able to meets its obligations without increased funding costs, or at worst, not being able to meet its obligations on maturity. The group s funding risk management strategy ensures proper liquidity management, which contributes toward ensuring the group s ability to survive critical situations. Operational risk Operational risk is defined as the risk of loss due to inadequate or failing internal processes, routines r systems, human error, crime or external events. Operational risk management takes place through human resource development, good systems and routines, good internal control and quality assurance.

18 Sparebanken Sør, Postal address: Postboks 782 Stoa, N-4809 Arendal, Norway Telephone: , Telefax: , S.W.I.F.T. address: AASPNO22, Company reg.no.: NO THIRD QUARTER Photo: Øivind Berg