Sparebanken Vest Report for the year and the fourth quarter 2010

Transcription

1 Sparebanken Vest - tredje kvartal Sparebanken Vest Report for the year and the fourth quarter Key developments in 0 Best ever profit before write-downs and tax: NOK 927 million Net operating revenues exceed NOK 2 billion Assets under management more than NOK 105 billion Improved return on equity (ROE): 11.3% Good development in nominal net interest and good growth in other operating revenues Improved financial strength satisfies Basel III Key developments in the fourth quarter Profit performance improved by NOK 20 million Improved risk profile and accumulated profit boost our financial strength Good underlying growth in earnings from product companies Good return on the share portfolio Year 2009 Fourth quarter 2009 Operating profit/loss before write-downs and tax Pre-tax profit Profit/diluted profit per equity certificate Net interest Cost ratio Annualised return on equity (ROE) The Board s proposed dividend per equity certificate The Board s proposed donations for the public benefit Deposits/loans ratio (year end) Liquidity indicator (year end) Core capital adequacy, year end Capital adequacy, year end Core capital adequacy, year end (Basel II fully implemented) Total capital adequacy, year end (Basel II fully implemented) NOK 927 mill. NOK 800 mill. NOK % 1.20 % 11.3 % NOK 3.50 NOK 30.0 mill % % 10.8 % 11.6 % 13.9 % 15.0 % NOK 770 mill. NOK 500 mill. NOK % 1.27 % 8.0 % NOK 2.00 NOK 25.0 mill % % 10.6 % 11.8 % 11.8 % 13.2 % NOK 215 mill. NOK 168 mill. NOK % 1.26 % 8.3 % NOK 213 mill. NOK 148 mill. NOK ,58 % 1.23 % 10.0 % Dividend, donations and capital adequacy presume that profit is allocated in acc. with the Board's proposal Sparebanken Vest (SVEG) Interim report 4/ - revised Page 1 of 21

2 Report for the year and the fourth quarter Main Figures NOKm Q 4 Q Q 3 Q 2 Q 1 Net interest income and credit commissions Commissions receivable and income from banking services Commissions payable and cost of banking services Net banking services Income from owner interests in group companies Net gain/(loss) on financial instruments Other operating income Net operating income Net operating income Salaries and general administration expenses Depreciation Other operating expenses Total operating expenses Profit before write-downs and tax Write-downs and losses on loans and Profit before tax Taxes Profit for the period Sparebanken Vest recorded its best ever profit before writedowns and tax in, at NOK 927 (770) million. The pre-tax profit is up by NOK 300 million compared with This growth in profit is the result of an overall increase in revenues of NOK 209 million, increased operating expenses of NOK 52 million and a reduction of NOK 143 million in writedowns and losses on loans and guarantees. In, net operating revenues exceeded NOK 2 billion for the first time, largely as a result of good growth in other operating income. The group s net interest in amounted to NOK 1,516 (1,453) million. The increase of NOK 63 million is mainly related to volume growth. The banks paid the full fee to the Norwegian Banks Guarantee Fund in. The cost to Sparebanken Vest was NOK 56 million. Net interest for the year was 1.49% (1.58%). Net other operating income amounted to NOK 635 million, an increase of NOK 146 million compared with Net earnings from banking services were NOK 297 (305) million. In 2009, the bank took to income part of the final settlement from former insurance suppliers, at the same time as the income from former sales of savings products with guaranteed principal sums was higher than in. The underlying growth in other income from the product companies is good. The net book gain on financial instruments amounted to NOK 212 (77) million. Gain on financial instruments NOKm Cumulative Cumulative Q 4 Q Quarters Quarters Q 3 Q 2 Q 1 Dividends Gain/loss(-) on commercial papers and bonds Gain/loss(-) on shares and securities Net gain/loss(-) on other financial instruments Net gain/loss(-) on credit spread changes FVO portfolio Product margin, amortised Net gain on financial instruments The return on equity instruments was NOK 202 (48) million, of which the gain from the merger between Nordito and PBS was taken to income in the amount of NOK 105 million. Sparebanken Vest values fixed-interest loans to customers and fixed-interest debt at market value. This principle means that, in addition to changes in interest rates, changes in value as a result of a change in the credit spread are also recognised in the income statement. This accounting principle has an equalising effect on earnings in that credit spreads recognised in the income statement under the FVO portfolio are offset against the opposite value/ income development for the other elements in the group's financial instruments. The change in value of the interest portfolio amounts to minus NOK 33 (+138) million and the book gain relating to the change in the credit spread for the FVO portfolio amounts to NOK 35 (minus 240) million. Specifications of total other income are shown in Note 4. The total operating expenses for the year amounted to NOK 1,224 (1,172) million, NOK 962 (945) million of which are payroll and general administrative expenses. The growth in total operating expenses is NOK 52 million (4.4%) and NOK 17 million (1.8%) in payroll and general administrative expenses. Cost developments reflect the strong focus on raising competence and the fact that the group is still in a build-up phase in relation to strategic decisions. The costs also reflect good access to customers and growth in the volume of business. Operating expenses are 1.20 (1.27)% of the average assets under management. The cost-income ratio for is 56.9 (60.4)%. In nominal terms, the costs are influenced by the taking to income of the provision of NOK 62 million relating to AFP (earlyretirement scheme) and the provision of NOK 57 million for performance bonuses. The number of full-time equivalents employed by the group increased from 835 to 838 as of 31 December. Seven of them are additions from acquired businesses. The expenses are specified in more detail in Note 5. Write-downs on loans and losses on guarantees amount to NOK 127 (270) million. The total loss cost for was 0.15 (0.30)% of average gross lendings. Actual write-downs and changes in them are for the most part linked to individual writedowns in the bank s corporate portfolio. Group write-downs in increased by NOK 8.0 million. See also the chapter on risk and capital factors, and Notes 6, 8, 9 and 10. The return on equity for the year is 11.3 (8.0)% per annum. The credit spread effect of the valuation of the bank s fixed-rate debt and fixed-rate lendings has a positive effect of about 0.5 percentage points on the year s return on equity. The issuing of new equity certificate capital in the amount of NOK 613 million in the second quarter reduced the percentage return on equity for the year. Adjusted for this issue, the year s return on equity is 11.9%. The parent bank s profit after tax is NOK 616 (457) million. Adjusted for changes in the reserve for unrealised gains, the basis for dividend is NOK 666 million. The Board of Directors proposal for cash dividend for is NOK 3.50 (2.00) per equity certificate, a total of NOK 75.5 million. The Board also proposes transferring NOK 29.1 million to the equalisation reserve and allocating NOK 30 million to donations for the public benefit. NOK million will be transferred to Sparebanken Vest s primary capital. After allocation of the profit for the year, the owner fraction is 18.1%. Fourth quarter The group s pre-tax profit in the fourth quarter amounted to NOK 168 (148) million. The profit is the result of good growth in operating revenues, moderate growth in operating expenses and moderate write-downs on loans and guarantees. Sparebanken Vest (SVEG) Interim report 4/ - revised Page 2 of 21

3 The net interest for the quarter is NOK 382 (377) million, which corresponds to 1.44 (1.58)% per annum of the average assets under management. The increase in the nominal net interest in the quarter can largely be explained by an increase in the volume of lendings and deposits. A higher interest rate increases the contribution from equity. Net other operating revenues amounted to NOK 166 (146) million in the quarter, NOK 70 (79) million of which was net earnings from banking services and NOK 34 (26) million income from estate agency business. Net earnings from financial instruments amounted to NOK 60 (37) million in the quarter. The return on the bank s share portfolio was NOK 61 (29) million and the change in the credit spread for the FVO portfolio was minus NOK 12 (+1) million. Other financial instruments make a positive contribution in the amount of NOK 11 (7) million. Operating expenses were NOK 333 (310) million. The expenses in the quarter include one-off project costs of NOK 10 million. Operating expenses were 1.26 (1.30)% per annum of the average assets under management in the fourth quarter. The cost-income ratio in the fourth quarter was 60.8 (59.3)%. Write-downs on loans and losses on guarantees amounted to NOK 47 (65) million in the fourth quarter. The return on equity in the fourth quarter was 8.3 (10.0)% per annum. Adjusted for the issue in the second quarter, the return on equity in the fourth quarter was 9.0%. Developments in deposits and lendings Deposits at the end of the fourth quarter amounted to NOK 48.7 (44.9) billion. Of the total deposits, NOK 27.6 (26.1) billion was from retail customers and NOK 21.1 (18.8) billion from corporate customers. The growth in deposits for the year is 8.6 (10.9)%: 5.5 (2.8)% from retail customers and 12.8 (24.5)% from corporate customers. Lendings amounted to NOK 88.5 (82.3) billion, NOK 64.8 (60.1) billion to retail customers and NOK 23.7 (22.2) billion to corporate customers. The growth in lendings for the year is 7.5 (7.9)%, 7.8 (9.0)% to retail customers and 6.6 (5.3)% to corporate customers. The group s total credit commitments amount to more than NOK 101 billion. Assets under the group s management amounted to more than NOK 105 billion at the end of the fourth quarter. Risk and capital factors Credit risk More than 70% of the credit portfolio (commitments) in Sparebanken Vest consists of loans to the retail market. Of the retail market portfolio, 95% consists of loans secured by mortgage with a low loan-to-asset-value ratio. The credit quality in Sparebanken Vest is thereby satisfactory. The risk profile in the retail market portfolio is unchanged from the previous quarter, but somewhat improved compared with the end of the previous year. The low interest rate and good developments in the Norwegian economy make a positive contribution. The improved economic situation, higher activity in business and industry and good credit management on the bank s partcontributed to a positive overall development in the risk profile of the corporate market portfolio in the fourth quarter. The profile is also improved in relation to the same quarter in (see FIG. 3 below) Expected losses (based on debt-servicing ability and security The bank s market risk is moderate. Interest risk, credit spread coverage) show that more than 80% (compared with 75% at risk and currency risk are stable and low. In its management of year end 2009) of the portfolio has a low risk profile in the stock market exposure, the bank focuses on total exposure and Board s assessment. concentration in companies and industries. Sparebanken Vest (SVEG) Interim report 4/ - revised Page 3 of % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % [FIG. 3] The default percentage in the corporate market portfolio (percentage of the volume of loans in default of payment for more than 90 days) increased somewhat in, however. This is largely due to two commitments in the property industry. At the end of the fourth quarter, the bank had NOK 200 (224) million in defaulted loans (more than 90 days) in the retail market, and NOK 234 (170) million in the corporate market. The change in the corporate market is mainly due to a few commitments in different industries. Confirmed losses on loans and guarantees in the fourth quarter were NOK 50 (16) million, NOK 22 (3) million of which were covered by previous write-downs. The total loss cost in the fourth quarter amounted to 0.22 (0.30)% per annum of average gross loans. Potential bad debts not defaulted on fell from NOK 877 million to NOK 781 (904) million as of 30 Sept.. They largely relate to commitments in industries exposed to cyclical fluctuations. The figure below (FIG. 4) shows capitalised write-downs and the percentage provided for in relation to gross loans. Capitalised write-downs NOKm [FIG. 4] ,8 % 5,7 % 5,7 % 6,8 % 5,9 % 5,4 % 5,7 % 6,4 % 14,8 % 78,4 % 15,7 % 78,6 % Market risk and operational risk 17,1 % 77,1 % 16,8 % 76,4 % 1Q Q Q Q Q 2Q Q3 Q4 0 0,28 % ,21 % ,22 % ,23 % ,24 % ,0 % 78,0 % < 0,2 % 0,2 % > < 0,75 % > 0,75 % 0,29 % ,43 % ,49 % ,51 % ,60 % ,63 % ,62 % ,63 % ,9 % 79,7 % 0,64 % ,64 % Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Individual write-downs Group write-downs Percentage provided for 14,2 % 80,1 % 0,70 % 0,60 % 0,50 % 0,40 % 0,30 % 0,20 % 0,10 % 0,00 % Provisions in % of loans 12,9 % 80,7 %

4 At the end of the fourth quarter, the exposure in shares (excluding subsidiaries and associated companies) was NOK 714 (604) million, compared with NOK 693 million at the end of the third quarter. Identification, analysis and follow-up of operational risk are addressed at an overriding level through expert assessments, management confirmation and events. During the quarter, annual processes and the continuous registration of events have not uncovered material factors that are critical to the bank s operations. Liquidity and financing At the overriding level, the group s liquidity risk is managed using liquidity indicators, structural liquidity and the financing ratio. The group s liquidity situation is still good. At the end of the quarter, the group s holdings of certificates and bonds amounted to approximately NOK 13.4 (11.8) billion. The group s liquidity indicator was (100.4)%, while structural liquidity was 14 (12) months. The total capital market financing amounted to NOK 49.1 (46.4) billion, NOK 18.6 (10.5) billion of which consisted of financing through covered bonds. In spring, Sparebanken Vest Boligkreditt carried out a EUR 500 million issue in the European market. This was followed up by a new issue in February 2011 in the amount of EUR 500 million. Both issues were very well received by the market. This contributes to increasing the diversification of the bank s sources of financing. The issuing of covered bonds through Sparebanken Vest Boligkreditt is an important tool if the group is to achieve competitive financing costs. The bank still has a good potential for transferring new loans to Sparebanken Vest Boligkreditt. In line with normal seasonal fluctuations, the deposits/loan ratio is slightly down, but at the end of the quarter, it has improved compared with the previous year: 55.0 (54.1)%. Rating Sparebanken Vest has been rated by Moody s and Fitch Ratings. The bank s rating for long-term borrowings is A- from Fitch, with a stable outlook. The bank s long-term rating from Moody s is A2, and in October, the rating agency raised its rating of the outlook from negative to stable. Bonds issued by Sparebanken Vest Boligkreditt AS have an AAA rating. Financial strength and equity certificates The development in the group s capital adequacy/financial strength is shown in the following figures: (FIG. 5 and FIG. 6) for capital adequacy: 2009 Q4 Q1 Q2 Q3 Q4 Total Kapitaldekning Capital 11,8 % 11,6 % 11,4 % 11,6 % 11,6 % Additional Tilleggskapital Capital 1,2 % 1,2 % 1,0 % 0,9 % 0,8 % Tier Kjernekapital 1 Capital Capital Kapitaldekning Ratio transitional - overgangsordning scheme Tilleggskapital Fondsobligasjon Ren kjernekapital Additional Capital Hybrid Capital Common Equity (Tier 1) 11,8 % 11,6 % 11,4 % 11,6 % 11,6 % 1,2 % 1,2 % 1,0 % 0,9 % 0,8 % 2,6 % 1,4 % 1,4 % 1,4 % 2,5 % 8,0 % 7,9 % 9,0 % 9,3 % 9,4 % 10,6 % 10,4 % 10,4 % 10,7 % 10,8 % Hybrid Fondsobligasjon Capital 2,6 % 2,5 % 1,4 % 1,4 % 1,4 % Common Ren kjernekapital Equity 8,0 % 7,9 % 9,0 % 9,3 % 9,4 % [FIG. 5] [FIG. 6] The group s capital adequacy based on the transitional arrangement is unchanged in the fourth quarter. Measured in accordance with BASEL II, the capital adequacy is strengthened. The development in financial strength is explained by lower risk weights in the retail customer segment and the accumulated profits. The Basel Committee published new capital requirements in the fourth quarter (BASEL III). The new requirements will be phased in from 2013, and shall be fully implemented by The group meets all known new requirements by a good margin. In April, Sparebanken Vest raised NOK million in new equity certificate capital. In addition, a perpetual subordinated bond loan of NOK 400 million has been issued in the market. The proceeds have been used to refinance NOK 960 million of the subordinated bond issued by the State Finance Fund. The owner fraction increased from 9.5% to 19.7% as a result of the issues. The transactions do not entail any changes in the bank s capital adequacy. However, the overall quality of the bank s own funds will increase. In addition to an increase in outstanding market capital, the bank implemented several measures in to contribute to increasing the liquidity of its equity certificate: a split 1:2 and market-maker agreements with Norne Securities and Fondsfinans. The daily trading (compared with before the issue in ) has more than doubled, and the liquidity of the equity certificate has improved. Adjusted dividend policy 2009 Q4 Q1 Q2 Q3 Q4 Kapitaldekning Total Capital 13,2 % 13,4 % 13,8 % 14,7 % 15,0 % Tilleggskapital Additional Capital 1,4 % 1,3 % 1,2 % 1,1 % 1,1 % Kjernekapital Tier 1 Capital Capital Kapitaldekning Ratio Basel - Basel II II Tilleggskapital Additional Capital Fondsobligasjon Hybrid Capital Ren kjernekapital 13,2 % 13,4 % 1,4 % 1,3 % 2,8 % 2,9 % 9,0 % 9,1 % Hybrid Fondsobligasjon Capital 2,8 % 2,9 % 1,7 % 1,8 % 1,7 % Ren Common kjernekapital Equity 9,0 % 9,1 % 10,9 % 11,8 % 12,2 % Sparebanken Vest has previously stated that it will consider whether new legislation means that the bank should organise its affairs differently than at present. In the second half-year, the bank carried out a thorough process to define opportunities and challenges facing the bank in light of new framework conditions and the bank s long-term strategy. The bank s main stakeholders (equity certificate holders, customers, employees and private and public sector institutions etc.) have been involved in the work, and their feedback has been taken into account when formulating the adjusted dividend policy. Sparebanken Vest (SVEG) Interim report 4/ - revised Page 4 of 21 (Tier 1) 13,8 % 1,2 % 1,7 % 10,9 % Common Equity 14,7 % 15,0 % 1,1 % 1,1 % 1,8 % 1,7 % 11,8 % 12,2 % 11,8 % 12,0 % 12,6 % 13,6 % 13,9 %

5 Following a dialogue with the bank s primary stakeholders, it is the Board s view that the equity certificate model will be the best foundation for realising Sparebanken Vest s strategic goals. To make the equity certificate (SVEG) even more attractive to investors, the dividend policy has been adjusted and the percentage distribution to equity certificates increased. The reason for the change is to achieve the flexibility required to distribute a high cash dividend and improve Sparebanken Vest s attractiveness in relation to structural changes in smaller savings banks. In addition, the bank will increase its selffinancing by retaining a higher percentage of the profits that pass to the bank s reserves. The bank s governing bodies will thereby also retain their decision-making powers in relation to donations as a differentiation factor. The new dividend policy is as follows: Sparebanken Vest s objective is to achieve results that provide a competitive return on the bank s equity. The profit for the year after tax shall be divided between the equity certificate capital and primary capital in proportion to their relative share of the bank s equity (the owner fraction). The equity certificate capital s share of the profit will be divided between dividend and the equalisation reserve. Sparebanken Vest will endeavour to ensure an attractive cash dividend for equity certificate holders that will normally amount to 50-80% of the equity certificate holders share of the profit. The proportion of the profit that is allocated to dividend and donations will be adjusted to suit the bank s equity situation. Sparebanken Vest will continually asses whether to offer dividend in the form of equity certificates (dividend shares). Business in subsidiaries and associated companies Subsidiaries Eiendomsmegler Vest (100%) has continued its positive profit development in the fourth quarter. As the leading regional player in this market, the estate agency company has strengthened its position. Eiendomsmegler Vest acquired 70% of Herland Eiendom AS in the fourth quarter. This will further strengthen its position in the estate agency market in Hordaland. Eiendomsmegler Vest recorded a pre-tax profit for the fourth quarter of NOK 5.5 (2.9) million. The Eiendomsmegler Vest Group recorded an accumulated pre-tax profit of NOK 29.8 (24.4) million. Sparebanken Vest Boligkreditt AS (100%) is fully operationally integrated with the Sparebanken Vest Group. It manages housing loans of NOK 21.7 (11.9) billion. The company s pre-tax profit for the year amounted to NOK 90.2 (70.5) million, NOK 25.8 (24.0) million of which was for the fourth quarter. Associated companies In cooperation with 13 other savings banks, Sparebanken Vest has established several product companies during the period Over time, this will enable the bank to offer a broader range of products to both retail and corporate customers. As expected, the financial performance of these new companies is still negative, but they are on schedule or ahead of their establishment plans. For the group, the investment in insurance and estate agency business contributed to growth in other income in. The share of the accumulated profit/loss from associated companies is included using the equity method in the total amount of minus NOK 42 (-42) million and minus NOK 8 (-9) million in the fourth quarter. Frende Forsikring (holding 44.3%) recorded a good increase in customers/ premiums both in general insurance and life insurance. At year end, Frende Skade had a total of NOK 600 million in premiums divided between 60,000 customers, and Sparebanken Vest has now recouped almost 85% of its previous premiums. The bank s share of total premiums in Frende Skade is 48.1% At year end, Frende Liv had NOK 328 million in premiums divided between 28,000 customers. Sparebanken Vest has recouped almost 80% of its retail market premiums, and the bank s share of total premiums in Frende Liv is 56.4%. Norne Securities AS (holding 42%) has now established four operative business areas: bond brokering, stockbroking and corporate finance. In addition, online trading in securities is offered through 12 of the owner banks online banking services. Norne Securities is still in a development phase and the number of customers continues to increase. At the end of, the company has approximately 12,500 customers and 26 employees. Verd Boligkreditt AS (holding 40%) is a housing credit company that is owned by Sparebanken Vest and eight independent savings banks. Full-scale operation began in the second quarter. The company is run by Sparebanken Vest Boligkreditt AS. Verd Boligkreditt has currently issued NOK 1.1 billion. Brage Finans AS (holding 49.9%) is a newly-launched financing company whose head office is in Bergen. Nine other independent savings banks have holdings in Brage Finans. The company started operations on 1 October. Outlook National and international Developments in the US, European and Chinese economies have been somewhat stronger than expected in the fourth quarter. Growth is expected to slacken somewhat in 2011, however. Growth rates in the new emerging economies are still high, but they will be reduced as a result of a tightening of monetary policy. In the industrialised world, the export-led upturn has contributed to spreading growth. This applies in particular to manufacturers of capital goods in Europe, with Germany being most important in this context. In the USA, there are clear positive trends in the development of private consumption and investments, but the unemployment level and the housing market will continue to put a damper on growth in private consumption. Through quantitative easing, monetary policy is being used actively to keep interest rates down, but also to increase liquidity in the private sector. Prolonged pressure on public sector budgets as a result of high unemployment is a growth-inhibiting factor throughout the OECD area, at the same time as it contributes to limiting growth in private consumption. The debt situation in Europe for the so-called PIIGS countries remains unstable, and it can spread if this leads to default on government debt with resultant bank losses and credit contraction. Even though this appears to be rather unlikely, it could inhibit growth because of lasting risk mark-ups in the money and capital markets. The Norwegian economy is expected to be driven by growth in private consumption and investments, and investments in the petroleum sector will be most important in this context. There is some uncertainty relating to the development of the savings rate, and a moderate decrease is expected in If the savings rate falls more strongly, this will lead to an upward adjustment of expectations of growth in private consumption. The growth in credit to non-financial enterprises is expected to increase to 6% in 2011, while growth of 8% is expected for private households. Norway s monetary policy is expected to be characterised by a cautious tightening in Norges Bank is expected to make two interest rate adjustments, bringing the key interest rate to 2.5% by the end of the year. Norges Bank focuses strongly on Sparebanken Vest (SVEG) Interim report 4/ - revised Page 5 of 21

6 house prices and it has emphasised that interest rates are on the way up. A higher key interest rate cannot therefore be ruled out. Western Norway While Western Norway s proximity to natural resources and the coast is the region s most important framework condition, it also has a deep-rooted tradition for sound business operations and international trading. Rogaland and Hordaland are Norway s two biggest exporting counties. This also makes them vulnerable to fluctuations in the international economy and trade. The improved prices for metals, fish and oil mean a general improvement in market prospects for business and industry in Western Norway. Exports from mainland Norway are expected to be characterised by moderate to weak growth among our trading partners, with the exception of Germany and Sweden, which have shown stronger growth during the past year. These countries are our biggest export markets. Unemployment in Western Norway is expected to continue to be lower than the national average, and to increase marginally. House prices are expected to follow the national average in 2011, which means an increase of around 6%, with a slightly higher increase in Bergen and Stavanger. Sparebanken Vest The group s development in 2011 is expected to continue on a par with, taking one-off effects on profits into account. Continued pressure is expected on the banks net interest as a result of keen competition and the increased cost of capital market financing. An increased contribution to profits from subsidiaries and associated companies and increased commissions on the sale of these companies products are expected to have a positive effect. Growth is expected in the volume of Sparebanken Vest s business in 2011 in step with general market growth, while the macro-situation and good credit management are expected to keep the loss level on a par with. Bergen, 21 February 2011 The Board of Directors of Sparebanken Vest Trygve Bruvik Anne Kverneland Bogsnes Yvonne Torgersen Chair of the Board Deputy Chair Marit Solberg Richard Rettedal Øyvind A Langedal Anne Marit Hope Gerd Kjellaug Berge Tone Mattsson Stein Klakegg Managing Director Sparebanken Vest (SVEG) Interim report 4/ - revised Page 6 of 21

7 Income statement, group Notes 01/ / / /12-09 Q 4 Q Interest income and similar income Interest expenses and similar expenses Net interest and credit commission income Commission income and income from banking services Commission expenses and expenses relating to banking services Income from ownership interests in associated companies Net gain/(loss) on financial instruments Other operating income Net other operating income Net operating income Salaries and general administration expenses Depreciation Other operating expenses Total operating expenses Profit before write-downs and tax Write-downs and losses on loans and guarantees Pre-tax profit Tax Profit for the period Majority share of the profit for the period Minority share of the profit for the period Equity certificates' share of profits divided by the number of equity certificates 5,86 4,53 1,12 1,40 Diluted profit per equity certificate 5,86 4,53 1,12 1,40 Statement of comprehensive income 01/ / / /12-09 Q 4 Q Profit for the period Financial assets available for sale Total profit for the period Majority share of the total profit for the period Minority share of the total profit for the period Sparebanken Vest (SVEG) Interim report 4/ - revised Page 7 of 21

8 Balance sheet, group Notes 31/ /12-09 Assets Cash to and receivables from central banks Loans to and receivables from credit institutions Net lendings 7,8,9,10, Shares at fair value through profit or loss Commercial papers and bonds Shares available for sale Financial derivatives Shareholdings in associated companies Deferred tax asset 2 74 Other intangible assets Tangible fixed assets Prepaid expenses Other assets Total assets Liabilities and equity Liabilities to credit institutions Deposits Securitised liabilities Financial derivatives Accrued expenses and pre-paid income Pension commitments Deferred tax 0 0 Other provision for commitments Tax payable Subordinated loan capital Other liabilities Total liabilities Equity certificates Own equity certificates Premium reserve Equalisation reserve Total equity certificate capital Primary capital Gift fund Compensation fund Total primary capital Reserve for unrealised gains Other equity Minority interests 1 1 Total equity Total liabilities and equity Sparebanken Vest (SVEG) Interim report 4/ - revised Page 8 of 21

9 Cash flow statement, group 2009 Cash flows from operations Interest, commission and customer fees received Interest, commission and customer fees paid Payment received for previously written-off receivables Net payments received/maid relating to customers' instalment loans Changes in utilised overdraft facilities Net payments received/made relating to customer deposits Payments to other suppliers for goods and services Payment to employees, pension schemes, National Insurance contributions, tax withholdings etc Payment of direct and indirect taxes Net payments made on sale/purchases of securities for short-term trading purposes Net cash flow from operations Cash flows from investment activities Payments received from sales of shares and shareholdings in other companies 15 0 Payments made on purchases of shares and shareholdings in other companies Net payments made on other short-term securities Net payments received/made of short term shares Payments received from the sale of operating assets etc. 3 4 Payments made on purchases of operating assets etc Net cash effect of takeover of Sauda Sparebank 0 2 Net cash flows from investment activities Cash flows from financing activities Net payments /maid received on loans to and receivables from other financial institutions Net payments received/made on deposits from Norges Bank and other financial institutions Payments received relating to subordinated loan capital Payments made relating to subordinated loan capital Payments received relating to bond debt Payments made relating to bond debt Net new equity certificates Dividends paid / Gifts for the public benefit Net cash flow from financing activities Net cash flow for the period Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Changes in equity, group Equity Own equity Premium Equalisation Primary Reserve for Compensation unrealised Other Minority certificates certificates reserve reserve capital Gift fund fund gains 1) equity interests Total Equity 31 Dec Sale of own equity certificates 4 4 Payment of dividends and gifts Issue of equity certificates Correction deferred tax -6-6 Owner transactions and gifts Profit for the financial year Comprehensive income - change in value of shares available for sale Equity 31 Dec Profit for the accounting period Comprehensive income Equity certificates - split Issue of equity certificates Issue of equity certificates - costs Acquisition in subsidiaries -3-3 Purchase of own equity certificates Payment of dividends and gifts Equity 31 Dec Sparebanken Vest (SVEG) Interim report 4/ - revised Page 9 of 21

10 Note 1 Accounting principles The consolidated accounts for the fourth quarter have been prepared in accordance with the requirements of the Securities Trading Act, the Financial Supervisory Authority of Norway's Regulations relating to annual reports and accounts and IAS 34. The accounts have been prepared on the basis of the same principles and with the same estimate methods as the annual accounts for The accounting principles are described in the 2009 annual report. IAS 27 Consolidated and Separate Financial Statements has been revised during. When no change in control, transactions with non-controlling interests should be booked against equity according to this standard. The consequence of this change is that the aquisitions of noncontrolling interests in Ottesen & Dreier AS and Kyte Næringsmegling AS have been recognized directly in equity. No further amendments have been made to standards that have a material bearing on the accounts for the Sparebanken Vest group from 1 January. The Group has established hedge accounting for fixed-rate bonds tied to the covered bonds program of Sparebanken Vest Boligkreditt AS. The hedge is documented with reference to the Risk Management Strategy of the Group, unambiguous identification of the hedged item and hedging instrument, unambiguous description of the hedged risk, and a description of why protection is expected to be effective. The nominal value for the two loans are EUR 500 million and NOK 600 million respectively. Changes in credit spreads are not taken into account in the assessment of hedge effectiveness. All amounts are stated in NOK million and apply to the group unless otherwise specified. Note 2 Segment information Operating income and expenses are allocated directly, with the exception of staff-related costs and depreciation. Net interest is allocated on the basis of internally calculated intra-group interest based on 3-month NIBOR. Banking operations Income statement Corporate market Retail market Capital market Estate agency business Not allocated by segment Total Net interest income Operating income Operating expenses Losses Pre-tax profit Tax -189 Profit/loss for the period Net interest income Operating income Operating expenses Losses Pre-tax profit Tax -137 Profit for the year Banking operations Balance sheet Corporate market Retail market Capital market Not allocated by segment Total 31 Dec. Net lendings Deposits Dec Net lendings Deposits Sparebanken Vest (SVEG) Interim report 4/ - revised Page 10 of 21

11 Note 3 Net interest and credit commission income 01/ /12-10 Change 01/ /12-10 vs Q4-10 vs Q4-10 vs - 31/12-09 Q 4 Q Q 3 Q 2 Q 1 31/12-09 Q4-09 Q3-10 Interest and similar income from loans to and receivables from credit institutions Interest and similar income from loans to and receivables from customers Interest and similar income from commercial papers, bonds and other interest-bearing securities Interest income and similar income Interest and similar expenses on debt to credit institutions Interest and similar expenses on deposits from and debt to customers Interest and similar expenses on issued securities Interest and similar expenses on subordinated loan capital Other interest expenses etc. 1) Fee to the Saving Banks' Guarantee Fund Interest expenses and similar expenses Net interest and credit commission income ) Interest from derivatives entered into to manage the interest rate risk attached to the bank's ordinary portfolios is classified as interest income and recognised as an adjustment of the bank's other interest income/ interest expenses. Note 4 Net other operating income 01/ /12-10 Change 01/ /12-10 vs Q4-10 vs Q4-10 vs - 31/12-09 Q 4 Q Q 3 Q 2 Q 1 31/12-09 Q4-09 Q3-10 Guarantee commissions Fees from payment transfers /interbank fee credit Other commissions and fees Commission income and income from banking services Fees payment transfers/bbs/eftpos Fees payment transfers/interbank debit Other commissions and fees Commission expenses and expenses relating to banking services Net banking services 1) Income from ownership interests in associated companies Dividend Gain/(loss) on commercial papers and bonds Gain/(loss) on shares Gain/(loss) on other financial instruments Gain/(loss) on change in credit spread FVO portfolio Product margin amortised Net gain/(loss) on financial instruments Brokerage commission Other operating income Other operating income Net other operating income ) Specification of income and expenses relating to banking services Guarantee commissions Payment transfers Insurance Funds and other placement products Other income Net banking services Sparebanken Vest (SVEG) Interim report 4/ - revised Page 11 of 21

12 Note 5 Operating expenses 01/ / /12-10 vs - 31/ /12-09 Q 4 Q Q 3 Q 2 Q 1 31/12-09 Change Q4-10 vs Q4-09 Q4-10 vs Q3-10 Payroll Pensions Transition to new AFP scheme Non-wage costs IT expenses Administration expenses Payroll and general administration expenses Ordinary depreciation of fixed assets Depreciation Operating expenses, real property Rent and other operating expenses for rented premises Expensed fixed assets Other operating expenses Wealth tax Other operating expenses Total operating expenses Note 6 Losses on loans and guarantees 01/ / /12-10 vs - 31/ /12-09 Q 4 Q Q 3 Q 2 Q 1 31/12-09 Change Q4-10 vs Q4-09 Q4-10 vs Q3-10 Change in individual write-downs in period Change in group write-downs in period Realised losses not covered by previous write-downs Recoveries on losses realised previously Write-downs and losses on loans Realised losses on guarantees not covered by previous provision for bad debt Change in provision for bad debt Losses on guarantees Losses on loans, guarantees etc Realised losses on loans covered by previous write-downs Realised losses on guarantees not covered by previous provision for bad debt Realised losses on loans not covered by previous write-downs Realised losses Note 7 Net lendings 31/ /12-09 Valued at amortised cost Valued at fair value with changes in value recognised in the income statement Total Fair value is calculated by discounting the loan cash flow using the required rate of return derived from the zero coupon curve. The book value of loans with fixed, short-term interest rates is virtually identical to fair value. All the bank's fixed interest loans are included in the portfolio valued at fair value. Note 8 Write-down for impaired commitments Individually assessed 31/ /12-09 Commitments in default Gross commitments in default Write-down Net commitments in default Percentage provided for 23 % 15 % Potential bad debts (in excess of 90 days) where the default amount in one of the commitment's accounts exceeds NOK 1,000. Potential bad debts not defaulted on Gross commitments assessed for impairment Write-down Net commitments assessed for impairment Percentage provided for 23 % 20 % Sparebanken Vest (SVEG) Interim report 4/ - revised Page 12 of 21

13 Note 9 Commitments in default The table shows defaults of payment exceeding 30 days where the amount in default is more than NOK 1,000 in one of the commitment's accounts. 31/ /12-09 Retail market days days More than 90 days Total Corporate market days days More than 90 days Total days days More than 90 days Total Note 10 Capitalised write-downs on commitments Changes in individual and group write-downs and provision for bad debt relating to guarantees 31/ /12-09 Individual write-downs Individual write-downs of loans at 1 January (nominal values) Realised losses on loans covered by previous write-downs Increase in write-downs of loans written down previously Write-downs of loans not written down previously Reduction in previous years' write-downs on individually assessed loans Write-downs acquired through takeover of Sauda Sparebank 0 2 Individual write-downs Group write-downs Write-downs of loan groups at 1 January (nominal values) Increase in write-downs of loan groups 8 46 Reduction in write-downs of loan groups 0 0 Write-downs acquired through takeover of Sauda Sparebank 0 4 Write-downs of loan groups Total write-downs of commitments Provision for bad debt for guarantees Provision for bad debt to cover losses on guarantees at 1 January Provision for bad debt on guarantees not provided for previously 4 8 Reduction in previous years' provision for bad debt (write-back) 0-4 Realised losses on guarantees covered by previous provision for bad debt 0 0 Specified provision for bad debt to cover losses on guarantees Sparebanken Vest (SVEG) Interim report 4/ - revised Page 13 of 21

14 Note 11 Net lendings broken down by sector and industry 31/ /12-09 Primary industries Manufacturing and mining Building and construction, power and water supply Commerce, hotel and restaurants International shipping and pipeline transport Other transport, post and telecommunications Property management Services Municipal/public sector 5 38 Abroad Total - business and industry Retail customers Total corporate and retail customers Note 12 Deposits broken down by sector and industry 31/ /12-09 Primary industries Manufacturing and mining Building and construction, power and water supply Commerce, hotel and restaurants International shipping and pipeline transport Other transport, post and telecommunications Property management Services Municipal/public sector Abroad Total - business and industry Retail customers Total corporate and retail customers Sparebanken Vest (SVEG) Interim report 4/ - revised Page 14 of 21

15 Note 13 Securities debt and subordinated loan capital Securities debt 31/ /12-09 Commercial papers, nominal value Bonds, nominal value Value adjustment Total securities debt Change in securities debt 31/12-09 Issued Fell due/ redeemed Change in exchange rate Other changes 31/12-10 Commercial papers, nominal value Bonds, nominal value Value adjustment Total securities debt Subordinated loan capital and subordinated bond loans Ordinary subordinated loan capital, nominal value Subordinated bond loans, nominal value Value adjustment Total subordinated loans and subordinated bond loans Residual time to maturity 0-1 month 1-3 months 3-12 months 1-5 years Over 5 years Total Credit institutions, borrowings Securities debt, nominal value Subordinated loans and subordinated bond loans, nominal value Total borrowings from capital market Note 14 Capital adequacy 31/ /12-09 Calculation basis Basel II: Credit risk/ Counterparty risk: Market risk: Currency risk: 0 16 Operational risk: Total exceptional segments pursuant to IRB: Deductions in calculation basis IRB reporting of lower parameters Calculation basis, transitional scheme % % Capital adequacy, transitional scheme : Subordinated capital: ,6 % ,8 % Net core capital ,8 % ,6 % Net supplementary capital 453 0,8 % 641 1,2 % Capital adequacy requirements, transitional scheme : ,0 % ,0 % Calculated regulatory surplus/deficit Capital adequacy Basel II: Subordinated capital: ,0 % ,2 % Net core capital ,9 % ,8 % Net supplementary capital 453 1,1 % 641 1,4 % Capital adequacy requirements Basel II: ,0 % ,0 % Calculated regulatory surplus/deficit Sparebanken Vest (SVEG) Interim report 4/ - revised Page 15 of 21