168th year. Quarterly Report nd quarter

Transcription

1 168th year Quarterly Report nd quarter

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3 Contents Comments to the accounts page 2-7 Profit and Loss Account page 8 Balance Sheet page 8 Changes in equity page 9 Cash Flow Statement page 10 Profit - quarterly page 11 Accounting policies page 12 Losses on loans and guarantees page 12 Losses on loans and guarantees to credit institutions page 12 Customer defaults page 13 Defaults by credit institutions page 13 Operational segments page 14 Divided by sector and industry page 15 Debt securities and subordinated debt page 15 Capital adequacy page 16 Guarantees and pledges page 16 Additional information for cash flow statement page 17 Profit per equity certificate page 18 Fractional ownership parent bank page 18 Equity certificates page 19 Statement under the Securities Trading Act page 20 Financial highlights - Group Average equity, excl. dividends (NOK mill.) Average total assets (NOK mill.) Post-tax profit as %-age of average total assets Profit before losses as % of average bank total assets Net interest as %-age Return on capital (%) Net loans (NOK mill.) Deposits (NOK mill.) Capital adequacy as %-age Core capital adequacy as %-age Fulltime equivalent positions , , , , , , , ,9 1,97 1,05 1,25-1,69 2,32 1,47 1,81-1,15 1,90 2,09 2,05 1,91 27,81 20,91 21,92-29, , , , , , , , ,4 15,43 13,92 17,11 11,51 12,92 10,80 14,15 8,

4 Interim Report Q Sparebanken Øst The return on equity for the first half of 2010 is percent. The Group's results are characterised by a strong customer-oriented banking and financial business where the level of net interest and credit commissions have been maintained in the second quarter, at the same time as loans to customers shows moderate growth. Net commissions are in line with the budget. There is full cost control, with total operational costs coming in under budget and marginally lower than for the same period last year. Losses on loans to customers have been limited in the first half of Extraordinary items show a significant positive effect on the results for the first half of The effect of the change to the AFP scheme was recognised as income in the first quarter. In the second quarter the effects of the merger between Nordito (Teller and BBS) and the Danish company PBS, will be recognised as income. PROFIT The Group achieved NOK million in profit before tax after Q2 2010, NOK million for the same period last year. The improved profit is owed to dividends from Eksportfinans ASA being recognised as income, and significant ingoing linked to the merger between PBS Holding AS and Nordito AS. Additionally, Q saw the yields from the changes to the AFP pension scheme. Net interest is back to the level it was at prior to the financial crisis. Losses on loans to companies are still limited. Losses on loans to private customers are almost non-existent. In percentage of average total assets, profit before tax amounts to 2.35 percent as compared to 1.45 percent for the same period last year. Profit after tax shows a surplus of NOK million compared to NOK million for the same period last year, and gives a percent return on equity. Net interest income Net interest income and credit commissions amounted to NOK million, showing a reduction of NOK 36.6 million compared with the same period last year. Growth in loans to customers and funding taken with higher credit spreads creates pressure on the net interest income, so that the net interest income in Q2 is only NOK 2.1 million lower than in the Q1. Net interest income and credit commissions corresponds to 1.90 percent of the average total assets as compared to 2.09 percent at the end of Q2 2009, translating into a reduction of 0.19 percentage points. Operating income Dividends received from equity instruments amount to NOK 53.7 million at the end of Q as compared with NOK 1.3 million for the same period last year. The largest single entry concerns dividends from Eksportfinans ASA of NOK 33.9 million. The reduction of the share premium account in Nordito AS, in connection with the merger, with repayment to shareholders, was also recognised as income of NOK 11.3 million. The bank also received ordinary dividends of NOK 5.5 million from PBS Holding AS. Commission income and income from banking services amount to NOK 41.2 million and are at the same level for the corresponding period last year. Commission income arises through traditional banking services and insurance. Net value changes and gains/losses on financial assets gives an income of NOK 73.9 million at the end of Q2 2010, as compared to NOK 33.8 for the same period last year. The improvement is due to recognising gains of NOK 68.1 million linked to the merger between Nordito AS and PBS Holding AS in the profit and loss accounts. Both the gains from realisation of shares in Nordito AS and those dividends received are included in the tax exemption model and are 2

5 taxed at 0.84 percent (3 percent of 28 percent). The tax effect of these entries is included in the accounts for Q2 and contributes to low tax costs in Q2. Other operating income makes up NOK 8.1 million and shows a decline of NOK 0.3 million compared to the same period last year. Operating costs In line with recommendations from the Norwegian Accounting Standards Board, the bank recognised NOK 29.2 million in Q1 by reducing salary costs as a result of the reorganisation of the AFP pension scheme. As a consequence, total operating expenses amount to NOK million. Excluding recognition of AFP, total operating expenses amount to NOK million, corresponding to 1.40 percent of average total assets. For the Parent Bank in isolation, the total operating expenses excluding recognition of AFP obligations, amount to NOK million and corresponds to 1.24 percent of the average total assets in the Parent Bank. In comparison, total operating expenses for the Group amounted to NOK million at the end of Q This development shows that the bank has costs under the required control. Commission costs and costs from banking services amounts to NOK 11.9 million, which shows a decrease of NOK 0.5 million compared with the same period last year. The difference between the Parent bank and the Group is entirely due to agency fees in AS Financiering. Salaries and general administration costs, excluding income recognised from the AFP scheme, amount to NOK million against NOK million same time last year. The number of FTEs at the end of Q was 275, compared to 273 for the same period last year. In Q1 2010, approximately NOK 0.6 million linked to a surplus in allocations for profit sharing for 2009 was recognised. Furthermore, there is a higher refund in sick pay than for the same period last year of NOK 0.9 million. Other operating income amount to NOK 28.4 million, which is an increase of NOK 1.9 million compared with the same period last year. Losses on loans and guarantees There is net reversed (income) of NOK 2.7 million for losses on loans and guarantees by the end of Q Settlement from Finance Credit AS is recognised by more than NOK 6.0 million. Individual impairment losses on loans and guarantees to customers increased by NOK 7.1 million from the end of the year, and amounted to NOK million at the end of Q Write-down on groups of loans to customers amount to NOK 49.4 million at the end of 2. Q2 2010, a reduction of NOK 8.6 million since the end of the year. Total write-down for Icelandic banks amounted to NOK million as at Losses have not been recorded on loans and guarantees to credit institutions by the end of Q Gross defaults and non-performing loans amount to NOK million as opposed to NOK million at the end of the year. Net defaults and non-performing loans amount to NOK million, showing an increase of NOK 61.7 million compared with BALANCE SHEET Bank total assets have increased by NOK 1,634.4 million since the end of the year and amounts to NOK 23,603.6 million by the end of Q The increase is mainly due to growth in customer loans, and to increased liquid reserves. Cash and receivables at central banks, as well as treasury bills, have increased by NOK million since the beginning of the year. As part of the bank's refinancing programme for outstanding bond debt, cash and receivables at central banks will fluctuate somewhat compared to the norm, which we see to be around NOK million. Net loans to credit institutions have declined by NOK million since , and amount to NOK million as at Syndicated loans excluding Denmark and Norway amounted to only NOK 25.5 million at the end of June. Net loans to customers amounted to NOK 17,573.9 million, which represents growth of NOK million since the beginning of the year. Gross loans to private customers made up 75.1 percent of total loans to customers. The stock certificates and bonds show a decrease of NOK 25.2 million since last year 3

6 and amounts to NOK 3,076.4 million. Treasury bills of NOK 1,066.8 million come in addition. The Group s portfolio as at : Nominal value Market value State 350,0 356,0 Treasury bills 1.076, ,8 State guar./other public 347,0 356,2 issuer Subord. loan finance 97,5 93,4 Covered bonds 535,0 530,7 Other finance 1.070, ,2 Offshore 103,4 86,4 Oil 26,4 18,5 Shipping 92,3 65,0 Industry 119,8 103,4 Power 170,0 170,6 Property 76,0 67,8 Trade and services 36,5 34,8 Other 120,0 119,4 Total other 744,4 665,9 Total 4.219, ,2 The liquidity portfolio represents a nominal value of NOK 3,714.5 million with a market value of NOK 3,719.3 million. The investment portfolio represents a nominal value of NOK million with a market value of NOK million. In comparison the accounted investment portfolio at the end of the year, amounted to respectively NOK million nominal value and NOK million market value. The estimated weighted average maturity of the liquidity portfolio is 1.96 years, whilst it is 2.44 years for the investment portfolio. Customer deposits have increased by NOK 13.5 million and amount to NOK 7,310.3 million as at Liabilities arising from issuance of securities amounted to NOK 10,148.1 million, an increase of NOK 1,396.4 million since the beginning of the year. The bank is enjoying good access to the Norwegian bond market at prices in line with comparable banks. Other long-term loan agreements declined by NOK 10.7 million since the beginning of the year, and amounted to NOK 2,369.6 million as at the end of Q The bank has taken up a total of NOK 1,500 million in F loans from the central bank. Short-term funding (defined as funding with a remaining maturity of less than 1 year) amounted to NOK 2,820.3 million. LIQUIDITY The bank has its own framework for liquidity buffers that provide a robust liquidity strategy. This means that the bank must have sufficient liquidity to manage 12 month s normal operations without the injection of new liquidity. The bank's liquidity prognosis shows sufficient liquidity through to Q The setting up of its own housing credit company has altered the Group s funding structure through the option to issue covered bonds (OMF). This has further strengthened the bank s funding situation. FINANCIAL RISKS Credit risk linked to customer loans is stable and has remained unchanged throughout the first half of Q2 shows no clear signs of a decline in credit quality either. The volume of defaults associated with the corporate market portfolio has been relatively high, though stable so far in Credit risk is measured by classifying customers according to their ability to service their debt, their solidity and security. Credit risk linked to financial investments is being reduced mainly due to continuous downscaling of the portfolio. Securities that can be sold close to par or at purchase price are being sold on an ongoing basis. Credit risk relating to the bank's liquidity portfolio is very low and remains unchanged thus far in New liquidity rules means that the portfolio will turn more toward very low risk securities in the long term. The portfolio is managed within a conservative framework as relates to counter-parties, sector and maturity. Interest risk is kept within fixed limits and is limited since assets and liabilities have variable interest rates or have been swapped for variable interest rate terms. Currency risk is hedged through the use of forward trades or basis swaps. Exposure to equity instruments excluding the bank's subsidiary and strategic investments is limited. The limit for investments for trading is limited to up to NOK 60 million. The bank participated in the government exchange scheme to the tune of NOK million as at

7 CAPITAL ADEQUACY Net subordinated capital amounted to NOK 1,913.9 million at the end of Q2 2010, of which the Group's tier 1 capital amounted to NOK 1,617.2 million. With a calculation basis of NOK 12,518.5 million, this represents a capital adequacy of percent, of which percentage points is tier 1 capital adequacy. Taking into account 50 percent of the surplus as at , tier 1 capital would have amounted to percent. Using ICAAP, the bank's management continuously assesses the need for equity. The assessments are based on the total level of risk at Group level and the development thereof over a 12 month period (capital plan). Based on planned growth of subordinated capital and budgeted results, the Board finds the bank's equity level to be satisfactory at the end of the second half of The bank has no plans at present to enter into other subordinated debt. DinBANK.no DinBANK.no is Sparebanken Øst s online service which started up on 4. September DinBANK.no is now established as a very simple, efficient and reasonable banking alternative for self-service customers. DinBANK.no has mainly provided loans for customers with security in property up to a level of 70 percent of value. Its customer base is across Norway, with a majority of customers in the counties of Oslo, Akershus and Buskerud. At the end of Q DinBANK.no showed a lending volume of NOK 1,179.1 million. Selected loans granted in DinBANK.no are transferred to Sparebanken Øst Boligkreditt AS. Customer deposits amount to NOK million. DinBANK.no results shows a profit before tax of NOK 4.7 million, against NOK 3.1 million for the same period last year. SUBSIDIARIES Sparebanken Øst Boligkreditt AS is a wholly owned subsidiary of Sparebanken Øst. The company was established on 14 April 2004 with the object of granting or acquiring home mortgage loans, property mortgage loans, loans secured by liens on other registered assets or public loans, and to finance lending business mainly through the issuing of covered bonds. The company's total assets were NOK 2,468.7 million as at , and mainly consisted of first priority mortgages in homes, which are financed through covered bonds and drawing rights on the parent company. The company's equity is NOK million, of which NOK 85.0 million is classified in the accounts as non-registered capital increase as at The capital increase was adopted in the general meeting and approved by the Financial Supervisory Authority of Norway, but not registered in the Register of Business Enterprises. Profit after tax shows a surplus of NON 1.9 million at the end of Q Thus far this year NOK million in loans has been transferred from Sparebanken Øst. AS Financiering is a wholly owned financing subsidiary of Sparebanken Øst. Its main product is car financing, with the main emphasis on used cars. The company has also enjoyed good earnings so far, and profit after tax amounted to NOK 10.9 million at the end of Q2 2010, compared to NOK 11.8 million same time last year. Subordinated capital amounts to NOK million. At the end of Q 2 the company has 26 employees representing 24 FTEs. The main objective of Sparebanken Øst Eiendom AS is standard property operations, including purchases, sales, rental and development of real estate, as well of purchases and sales of fixtures and fittings within various business areas. Operating income amounted to NOK 10.0 million at the end of Q2 2010, compared to NOK 10.3 million for the same period last year. Profit after tax shows a surplus of NOK 1.0 million at the end of Q2 2010, compared to NOK 1.9 million for the same period last year. The company has 6 employees and share capital amounts to NOK 35.1 million. Øst Prosjekt AS main object is taking over projects and undertaking industrial and commercial activities to hedge and realise exposed positions in the Parent bank. The company has no employees and the share capital amounts to NOK 12.0 million. Profit after tax shows a surplus of NOK 0.2 million so far this year, compared to NOK 0.1 million for the same period last year. GUARANTEE - EKSPORTFINANS ASA Sparebanken Øst's commitment to Eksportfinans ASA amounted to NOK million as at , of which the amount 5

8 over NOK 100 million is covered by counterguarantee against a major Nordic bank. As at the commitment was reduced to NOK 43.6 million. By the end of Q2 2010, the commitment amounts to NOK 62.2 million. MERGER BETWEEN NORDITO AS AND PBS HOLDING AS Sparebanken Øst had 2.65 percent ownership in Nordito AS. The merger was completed on 14 April and PBS Holding AS is the acquiring company. The bank's ownership in PBS Holding AS after the merger is percent and is assessed at fair value. Sparebanken Øst has received the following settlement for the shares in Nordito: Shares in PBS Holding with an estimated fair value of NOK 96.4 million. Cash remuneration in connection with closing of the share premium account in Nordito AS with a NOK 11.1 million refund to shareholders. Additional cash remuneration of NOK 0.2 million percent ownership (NOK 2.4 million) in Nordito Property AS. Total remuneration amounted to NOK million and resulted in NOK 79.5 million being recognised in the accounts for Q2, in the form of dividends and gains through sale of shares. From a tax perspective the merger between Nordito AS and PBS Holding AS is regarded as realisation. The gains and dividends are covered by the exemption model and are taxed at 0.84 percent (3 percent of the gain and dividends are taxed at 28 percent). As mentioned earlier, the tax effect of these entries are included in the accounts for Q2 and contribute to low tax costs in Q2. The demerger of property to Nordito Property AS is carried out with tax continuity. FUTURE PROSPECTS The development of the Norwegian and international economy is burdened by great uncertainty. A weak world economy affects Norwegian banks primarily through reduced income and position for export-oriented corporate customers and by the scarcity of capital in financial markets. Sparebanken Øst, through its lending to customers, is to a limited degree directly exposed to export-oriented companies. The development in financial markets in the future, be it positive of negative, will impact the bank in the same way it does other Norwegian banks. The Board of Sparebanken Øst closely follows the development. The Sparebanken Øst Group has a strong customer-oriented banking and financial environment which is expected to give good results for Growth in lending to customers will create the basis for increased earnings in the years to come. In the past few years the Group has enjoyed great growth in earnings than growth, and for this reason the bank's interest margins are high. In the short term the growth strategy will put pressure on the interest margins. Strong cost control will however give very little to no increase in the total operating expenses, at the same time as losses on loans to customers are expected to stay well within the long-term goal figures. The bank's financial investments are being downscaled in line with the amended strategy from Fluctuations in the value of remaining investments cannot be excluded however. The Group's equity is at a satisfactory level and provides the bank with the ability to cover unforeseen losses that might arise in the event of a long-term downturn in the Norwegian economy. A bank's ability to survive is not built purely on equity, but also on the bank's ability to finance maturing debt continuously. The Sparebanken Øst Group has a robust liquidity situation and can manage a 12 month period without injection of new liquidity. The establishment of Sparebanken Øst Boligkreditt AS in 2009 provides additional flexibility and access to capital resources. The Group sees this company as an important funding source moving forward. DIVIDEND POLICY Sparebanken Øst's financial goals for its activities is to achieve results that provide a good and stable return on bank equity and creating value for equity capital owners at competitive return in the form of dividends and capital appreciation on equity certificates. The profit for the year will be divided between equity certificate holders and the Savings bank fund in accordance with their share of the bank's equity. Sparebanken Øst will endeavour to pay per cent of profits allocated to the equity certificate holders as a dividend. In a 6

9 normal year around 10 per cent will be allocated for donation purposes. When determining the dividend and donations consideration will be made of the bank's profit development, market situation, dividend stability and tier 1 capital requirements. If there are insufficient funds for the payment of a competitive dividend from profits in a particular year efforts will nevertheless be made to pay a competitive dividend by the transfer of the necessary funds from the equalisation reserve. Hokksund, Drammen, 15 July 2010 Jorund Rønning Indrelid Chairman Knut Smedsrud Vice Chairman Ingebjørg Mæland Roar Norheim Larsen Sverre Nedberg Leif Ove Sørby Hanne Solem Inger Helen Pettersen Employee representative Trond Tostrup CEO 7

10 Profit and Loss Account Group Group Group (Figures in NOK mill.) Parent bank Parent bank Parent bank ,5 676, ,5 Interest income and similar income 434,9 637, ,6 266,0 426,8 682,6 Interest expenses and similar expenses 261,2 427,4 683,1 213,5 250,1 481,9 Net interest and credit commission income 173,7 210,0 397,5 53,7 1,3 6,2 Dividends and other income from securities with variable yields 53,5 1,3 6,0 41,2 41,3 83,5 Commission income and income from banking services 44,0 40,5 84,7 11,9 12,4 24,3 Commission costs and costs of banking services 7,3 8,0 15,5 73,9 33,8 171,5 Net value changes and gains/losses on financial investments 73,9 33,8 171,5 8,1 8,4 16,9 Other operating income 2,0 1,8 4,1 49,0 80,1 176,8 Payroll, etc. 38,8 70,1 153,5 33,3 33,0 67,1 Administration costs 30,2 29,9 60,5 6,2 6,6 13,1 Depreciation/writedowns and value changes to non-financial asset 4,0 4,4 8,8 28,4 26,5 52,3 Other operating costs 26,9 25,9 49,7 261,6 176,3 426,4 PROFIT BEFORE LOSSES 239,9 149,1 375,8-2,7 2,5 25,0 Losses on loans and guarantees -5,1-4,9 11,1 264,3 173,8 401,4 PRE-TAX PROFIT 245,0 154,0 364,7 42,6 48,5 107,0 Tax costs 37,2 43,0 96,7 221,7 125,3 294,4 PROFIT FOR THE YEAR 207,8 111,0 268,0 5,25 5,98 9,36 Profit per equity certificate 4,92 5,30 8,52 5,25 5,98 9,36 Diluted profit per equity certificate 4,92 5,30 8,52 Total profit/loss - extended profit and loss account pursuant to IAS 1 Group Group Group (Figures in NOK mill.) Parent bank Parent bank Parent bank ,7 125,3 294,4 PROFIT FOR THE YEAR 207,8 111,0 268,0 0,0 0,0 0,0 Changes in fair value of investments held for sale 0,0 0,0 0,0 221,7 125,3 294,4 TOTAL PROFIT/LOSS 207,8 111,0 268,0 Balance Sheet Group Group Group (Figures in NOK mill.) Parent bank Parent bank Parent bank , ,7 360,7 Cash and receivables at central banks 640, ,7 360, ,8 494,3 671,8 Treasury bills 1.066,8 494,3 671,8 436,3 734,1 547,9 Loans and receivables from credit institutions 1.717, , ,4 144,9 127,7 144,9 - Individual writedowns 144,9 127,7 144,9 1,2 14,0 1,2 - Writedowns on groups of loans 1,2 14,0 1, , , ,4 Loans and receivables with customers , , ,3 103,5 89,4 96,4 - Individual writedowns 59,9 50,5 53,0 49,4 66,6 58,0 - Writedowns on groups of loans 46,5 63,7 55, , , ,6 Certificates, bonds and other interest-bearing securities with regula 4.075, , ,6 416,3 291,8 320,6 Shares and other securities with variable return 416,3 291,8 320,6 0,0 0,0 0,0 Ownership interests in group companies 286,2 201,2 201,2 299,3 287,2 287,4 Fixed capital assets 61,8 63,5 64,3 42,2 111,2 42,2 Deferred tax assets 63,7 133,8 63,7 78,8 131,5 45,8 Financial derivatives 78,8 131,6 45,8 35,4 43,0 29,1 Other assets 18,0 32,2 15,3 83,5 105,4 87,2 Prepayments non-accrued expenses and earned income not receiv 75,5 96,9 78, , , ,2 TOTAL ASSETS , , , , , ,3 Liabilities to credit institutions 2.517, , , , , ,8 Deposits from and liabilities to customers 7.275, , ,1 915,4 493,5 915,4 Liabilities to the state, exchange of covered bonds 915,4 493,5 915, , , ,7 Liabilities incurred when issuing securities 9.399, , ,7 105,8 136,5 92,0 Financial derivatives 105,7 136,5 92,0 151,3 110,3 91,3 Other liabilities 158,7 124,7 97,1 188,8 245,1 123,5 Accruals and deferred income 178,1 237,4 114,8 41,6 67,4 70,8 Provisions for accrued costs and liabilities 36,8 63,9 66,0 659,0 663,2 660,5 Subordinate loan capital 659,0 663,2 660, , , ,3 Total liabilities , , ,9 595,1 595,1 595,1 Invested equity 595,1 595,1 595,1 896,9 695,3 989,8 Accrued equity 813,6 638,5 906,5 221,7 125,3 0,0 Unappropriated profit 207,8 111,0 0, , , ,9 Total equity 1.616, , , , , ,2 TOTAL LIABILITIES AND EQUITY , , ,5 8

11 Changes in equity group (Figures in NOK 1,000) Fund for Total Equity Share EqualisationSavings bank Endowment unrealised Other nappropriated 2nd quarter 2010 equityre certificatemium reserve fund fund fund gains equity profit/loss Equity as at Total profit/loss dividend finally adopted Dividend from the endowment fund Equity as at Fund for Total Equity Share EqualisationSavings bank Endowment unrealised Other nappropriated 2nd quarter 2009 equityre certificatemium reserve fund fund fund gains equity profit/loss Equity as at Total profit/loss Writedown of nominal value from NOK 100 to Writedown of nominal value from NOK 20 to N Rights issue Issue costs Dividend from the endowment fund Equity as at Fund for Total Equity Share EqualisationSavings bank Endowment unrealised Other nappropriated 2009 equityre certificatemium reserve fund fund fund gains equity profit/loss Equity as at Total profit/loss Writedown of nominal value from NOK 100 to Writedown of nominal value from NOK 20 to N Rights issue Issue costs Dividend from the endowment fund Equity as at This year's provision for dividend of NOK 82.9 million is part of the Cohesion Fund until it is finally adopted by the Board of Trustees. Changes in equity parent bank (Figures in NOK 1,000) Fund for Total Equity Share EqualisationSavings bank Endowment unrealisednappropriated 2nd quarter 2010 equityre certificatemium reserve fund fund fund gains profit/loss Equity as at Total profit/loss dividend finally adopted Dividend from the endowment fund Equity as at Fund for Total Equity Share EqualisationSavings bank Endowment unrealisednappropriated 2nd quarter 2009 equityre certificatemium reserve fund fund fund gains profit/loss Equity as at Total profit/loss Writedown of nominal value from NOK 100 to Writedown of nominal value from NOK 20 to N Rights issue Issue costs Dividend from the endowment fund Equity as at Fund for Total Equity Share EqualisationSavings bank Endowment unrealisednappropriated 2009 equityre certificatemium reserve fund fund fund gains profit/loss Equity as at Total profit/loss Writedown of nominal value from NOK 100 to Writedown of nominal value from NOK 20 to N Rights issue Issue costs Dividend from the endowment fund Equity as at This year's provision for dividend of NOK 82.9 million is part of the Cohesion Fund until it is finally adopted by the Board of Trustees. 9

12 Cash Flow Statement Group Group Group (Figures in NOK mill.) Parent bank Parent bank Parent bank Operating activities 264,3 173,8 401,4 Profit before tax 245,0 154,0 364,7 Adjusted for: -799,3 775, ,9 Changes in assets in connection with operations -79,3 802, ,2 83,3-360,2-995,8 Changes in assets in connection with operations 199,6-289, ,4 6,1 3,8 14,6 Non-cash items included in profit before tax 3,7-4,1 0,1-68,4 0,1 0,0 Net gains from investment activities -68,2 0,1 0,0-25,0-0,9 4,7 Taxes paid for the period -22,1 0,0 5,6-539,0 591,6 897,8 Net cash flow from operating activities A 278,7 663,5 968,2 Investment activities -20,2-5,2-12,2 Purchase of fixed assets -1,8-2,1-7,4 2,3 0,4 0,7 Proceeds from sale of fixed assets 0,3 0,4 0,5-23,2 227,8 220,0 Net proceeds/expenses from sale/purchase of financial investments. -108,2 152,8 145,0-41,1 223,0 208,5 Net cash flow from investment activities B -109,7 151,1 138,1 Financing activities 1.335,6-727, ,7 Net proceeds/expenses for issue/repayment of securities 586,5-727, ,7 0,0 181,9 181,9 Proceeds from issuance of equity certificates 0,0 181,9 181,9-82,9 0,0 0,0 Payment of dividends -82,9 0,0 0, ,7-545, ,8 Net cash flow from financing activities C 503,6-545, ,8 672,6 269,5-636,5 Net change in cash and cash equivalents A+B+C 672,6 269,5-636, , , ,1 Cash and cash equivalents as at , , , , , ,6 Cash and cash equivalent reserves at end of period 1.716, , ,6 10

13 Profit per quarter - Parent bank (Figures in NOK mill.) Q2 Q1 Q4 Q3 Q Interest income and similar income 223,4 211,5 214,6 228,6 279,0 Interest expenses and similar expenses 136,5 124,7 117,0 138,7 175,6 Net interest and credit commission income 86,9 86,8 97,6 89,9 103,4 Dividends and other income from securities with variable yields 52,5 1,0 4,7 0,0 1,3 Commission income and income from banking services 23,4 20,6 22,1 22,1 20,1 Commission costs and costs of banking services 3,5 3,8 3,9 3,6 4,0 Net value changes and gains/losses on financial investments 34,2 39,7 42,7 95,0 58,3 Other operating income 1,0 1,0 1,2 1,1 0,8 Payroll, etc. 31,0 7,8 44,8 38,6 33,0 Administration costs 15,3 14,9 16,1 14,5 15,3 Depreciation/impairment/writedowns and value changes to non-financ 2,0 2,0 2,2 2,2 2,2 Other operating costs 13,7 13,2 10,4 13,4 12,7 PROFIT BEFORE LOSSES 132,5 107,4 90,9 135,8 116,7 Losses on loans and guarantees -3,0-2,1 4,3 11,7-1,9 PRE-TAX PROFIT 135,5 109,5 86,6 124,1 118,6 Tax cost (calculated at interim accounts) 8,3 28,9 18,3 35,4 31,9 PROFIT FOR THE PERIOD 127,2 80,6 68,3 88,7 86,7 Profit per equity certificate (per quarter) 3,01 1,91 2,17 2,82 2,76 Diluted profit per equity certificate (per quarter) 3,01 1,91 2,17 2,82 2,76 Profit per quarter - Group (Figures in NOK mill.) Q2 Q1 Q4 Q3 Q Interest income and similar income 245,4 234,1 236,5 251,1 299,0 Interest expenses and similar expenses 139,7 126,3 117,1 138,7 175,2 Net interest and credit commission income 105,7 107,8 119,4 112,4 123,8 Dividends and other income from securities with variable yields 52,7 1,0 4,6 0,3 1,3 Commission income and income from banking services 21,8 19,4 21,1 21,1 20,4 Commission costs and costs of banking services 5,9 6,0 6,0 5,9 6,2 Net value changes and gains/losses on financial investments 34,2 39,7 42,7 95,0 58,3 Other operating income 4,3 3,8 4,5 4,0 4,2 Payroll, etc. 35,2 13,8 52,1 44,6 37,1 Administration costs 16,8 16,5 18,2 15,9 16,5 Depreciation/impairment/writedowns and value changes to non-financ 3,0 3,2 3,3 3,2 3,3 Other operating costs 14,8 13,6 11,9 13,9 13,7 PROFIT BEFORE LOSSES 143,0 118,6 100,8 149,3 131,2 Losses on loans and guarantees -2,1-0,6 9,1 13,4 0,9 PRE-TAX PROFIT 145,1 119,2 91,7 135,9 130,3 Tax cost (calculated at interim accounts) 11,0 31,6 19,8 38,7 35,1 PROFIT FOR THE PERIOD 134,1 87,6 71,9 97,2 95,2 Profit per equity certificate (per quarter) 3,18 2,07 2,29 3,09 3,03 Diluted profit per equity certificate (per quarter) 3,18 2,07 2,29 3,09 3,03 11

14 Accounting policies The consolidated quarterly accounts have been prepared in accordance with the IFRS (including IAS 34 Interim Financial Reporting). Interim accounts are prepared according to the same accounting principles as those used in the annual accounts. Refer to the 2009 annual report for a more detailed description of the accounting policies. The accounts are presented in Norwegian kroner, which is also the Group's functional currency. Accounting treatment of the new pension scheme (AFP) In the first quarter the bank recognised NOK 29.2 million in income by reducing salary costs as a result of the reorganisation of the AFP pension scheme. Simultaneously with the closing and liquidation of the previous scheme, a new AFP scheme was established, which in the opinion of NRS can be regarded as a defined benefit multi-employer scheme. These types of pension schemes shall be accounted for according the the same principles used for defined benefit schemes. Should adequate information not be available for the accounting in this manner, accounting must be performed as for a defined-contribution scheme. At the present time it is felt that there is no basis for this, and that the new scheme will be accounted for as defined-contribution scheme until further. When such considerations become relevant in the future, the AFP obligation must then according to the new scheme be carried to the balance sheet as a d fi d b fit h Losses on loans and guarantees (Figures in NOK 1,000) Parent bank Parent bank Parent bank Group Group Group Individual writedowns Individual writedowns as at Actual losses for the period, where there have previously been Individual writedowns Increases in individual writedowns for the period New individual writedowns for the period Reversed individual writedowns for the period = Individual write-downs at the end of the period*) Writedowns on groups of loans Writedowns on groups of loans as at /- Changes in write-downs on groups of loans for the period = Writedowns on groups of loans at the end of the period Loss costs for the period Changes to individual writedowns for the period /- Changes in write-downs on groups of loans for the period Actual losses for the period, where there have previously been Individual writedowns Actual losses for the period where no individual writedowns were made in previous years Addition of previously identified losses for the period /- Amortisation costs for the period impairment = Losses on loans and guarantees *) Individual writedowns on guarantee commitments of TNOK 600 as at have been carried to the Balance Sheet under "allocations for costs and obligations accrued". Losses on loans and guarantees to credit institutions (Figures in NOK 1,000) Parent bank Parent bank Parent bank Group Group Group Individual writedowns Individual writedowns as at Actual losses for the period, where there have previously been Individual writedowns Increases in individual writedowns for the period New individual writedowns for the period Reversed individual writedowns for the period = Individual writedowns at the end of the period Writedowns on groups of loans Writedowns on groups of loans as at /- Changes in write-downs on groups of loans for the period = Writedowns on groups of loans at the end of the period Loss costs for the period Changes to individual writedowns for the period /- Changes in write-downs on groups of loans for the period Actual losses for the period, where there have previously been Individual writedowns Actual losses for the period where no individual writedowns were made in previous years Addition of previously identified losses for the period /- Amortisation costs for the period impairment = Losses on loans and guarantees

15 Defaults and non-performing loans customers (Figures in NOK 1,000) Parent bank Parent bank Parent bank Group Group Group Gross participations in breach (over 90 days) Industry Personal = Gross defaults Individual writedowns = Net defaults Non-performing (not defaults on) loans Industry Personal = Gross non-performing loans Individual writedowns = Net non-performing loans Gross defaults and non-performing loans Industry Personal = Gross defaults and non-performing loans Individual writedowns = Net defaults and non-performing loans Defaults and non-performing loans credit institutions (Figures in NOK 1,000) Parent bank Parent bank Parent bank Group Group Group Gross participations in breach (over 90 days) Norway Denmark Iceland Ukraine = Gross defaults Individual writedowns = Net defaults Non-performing (not defaults on) loans Norway Denmark Iceland Ukraine = Gross non-performing loans Individual writedowns = Net non-performing loans Gross defaults and non-performing loans Norway Denmark Iceland Ukraine = Gross defaults and non-performing loans Individual writedowns = Net defaults and non-performing loans

16 Operational segments Segment reporting is based on the bank s internal reporting format, where the parent bank is divided into DinBANK.no, the private and the business markets. In addition there are the subsidiaries, and a non-reportable segment with items not distributed to other segments.. (Figures in NOK mill.) DinBANK.no PM BM Housing AS Credit Financiering Spb Øst Undistribut Eiendom ed Elimination Net interest and commission income 4,5 70,6 95,4 6,8 35,3-2,3 3,2 0,0 213,5 Total other income 1,8 30,1 9,7-3,7-3,7 10,0 124,8-4,0 165,0 Total income 6,3 100,7 105,1 3,1 31,6 7,7 128,0-4,0 378,5 Group Payroll and general administration costs 1,6 32,2 8,5 0,1 10,7 2,4 26,8 0,0 82,3 Depreciation 0,0 0,0 0,0 0,0 0,4 1,8 4,0 0,0 6,2 Other operating costs 0,0 0,4 0,1 0,4 2,9 2,1 26,5-4,0 28,4 Total operating costs 1,6 32,6 8,6 0,5 14,0 6,3 57,3-4,0 116,9 Profit before losses 4,7 68,1 96,5 2,6 17,6 1,4 70,7 0,0 261,6 Losses on loans, guarantees, etc. 0,0 0,4-5,6 0,0 2,4 0,0 0,1 0,0-2,7 Profit before tax 4,7 67,7 102,1 2,6 15,2 1,4 70,6 0,0 264,3 Tax on ordinary profit 0,0 0,0 0,0 0,7 4,3 0,4 37,2 0,0 42,6 After-tax profit 4,7 67,7 102,1 1,9 10,9 1,0 33,4 0,0 221, DinBANK.no PM BM Housing AS Credit Financiering Spb Øst Undistribut Eiendom ed Elimination Net interest and commission income 3,6 95,4 99,2 1,1 41,1-2,4 12,1 0,0 250,1 Total other income 0,6 26,6 9,8-0,4-3,3 10,3 32,6-3,8 72,4 Total income 4,2 122,0 109,0 0,7 37,8 7,9 44,7-3,8 322,5 Group Payroll and general administration costs 1,0 32,1 8,9 0,0 10,8 2,3 58,0 0,0 113,1 Depreciation 0,1 0,0 0,0 0,0 0,5 1,6 4,4 0,0 6,6 Other operating costs 0,0 0,8 0,2 0,0 2,8 1,4 25,1-3,8 26,5 Total operating costs 1,1 32,9 9,1 0,0 14,1 5,3 87,5-3,8 146,2 Profit before losses 3,1 89,1 99,9 0,7 23,7 2,6-42,8 0,0 176,3 Losses on loans, guarantees, etc. 0,0-0,5 3,8 0,0 7,3 0,0-8,1 0,0 2,5 Profit before tax 3,1 89,6 96,1 0,7 16,4 2,6-34,7 0,0 173,8 Tax on ordinary profit 0,0 0,0 0,0 0,2 4,6 0,7 43,0 0,0 48,5 After-tax profit 3,1 89,6 96,1 0,5 11,8 1,9-77,7 0,0 125, DinBANK.no PM BM Housing AS Credit Financiering Spb Øst Undistribut Eiendom ed Elimination Loans and receivables with customers 1.179, , , ,2 882,2 0,0 375,8-131, ,9 Other assets 1,2 19,9 25,9 152,5 28,5 247, , , ,7 Total assets 1.180, , , ,7 910,7 247, , , ,6 Group Deposits from and liabilities to custome 396, , ,0 0,0 52,0 0,0 150,6-17, ,3 Other liabilities 928,7 42,5 106, ,9 757,4 145, , , ,6 Total liabilities per segment 1.324, , , ,9 809,4 145, , , ,9 Total equity 0,0 0,0 0,0 164,8 101,3 102, ,1-286, ,7 Total liabilities and equity 1.324, , , ,7 910,7 247, , , , DinBANK.no PM BM Spb Øst Housing AS Credit Financiering Spb Øst Undistribut Eiendom ed Elimination Loans and receivables with customers 1.163, , , ,9 847,0 0,0 331,3-116, ,1 Other assets 1,8 21,8 27,8 79,8 34,5 227, , , ,9 Total assets 1.165, , , ,7 881,5 227, , , ,0 Group Deposits from and liabilities to custome 549, , ,3 0,0 25,7 0,0 148,8-19, ,9 Other liabilities 510,7 97,3 102, ,2 774,6 126, , , ,4 Total liabilities per segment 1.060, , , ,2 800,3 126, , , ,3 Total equity 0,0 0,0 0,0 75,5 81,2 101, ,9-201, ,7 Total liabilities and equity 1.060, , , ,7 881,5 227, , , ,0 14

17 Customer deposits divided by sector and industry (Figures in NOK 1,000) Parent bank Parent bank Parent bank Group Group Group Salaried employees Public administration Agriculture, forestry, fishing etc Industry and mining, power and water suppl Construction and civil engineering Retail, hotel and catering Transport/communication Financial service business Other service industries Real estate turnover and operations Foreign Total Gross loans to customers divided by sector and industry (Figures in NOK 1,000) Parent bank Parent bank Parent bank Group Group Group Salaried employees Agriculture, forestry, fishing etc Industry and mining, power and water suppl Construction and civil engineering Retail, hotel and catering Transport/communication Financial service business Other service industries Real estate turnover and operations Foreign Total Debt securities and subordinated debt (Figures in NOK mill.) Parent bank Parent bank Parent bank Group Group Group Debt securities Certificates, nominal value 0 500, ,0 0 Bonds, nominal value 9.346, , , , , ,0 Value adjustments (including o/u rate) 52,5 20,6-16,3 51,1 20,6-16,3 Total debt securities 9.399, , , , , ,7 Changes to debt securities Group Issued Matured/red eemed exchange rates Certificates, nominal value Bonds, nominal value 9.346, , , ,0 Covered bonds (OMF), nominal value 750,5 750,5 0 0 Value adjustments (including o/u rate) 51,1-16,3 Total debt securities , , , ,7 The difference between the parent bank and the group is covered bonds (OMF), nominal value NOK million. Changes to subordinated debt and perpetual subordinated loan capital Issued Matured/red eemed Changes to exchange rates Term subordinated loan capital, nominal val 359, ,6 362,4 Perpetual subordinated loan capital, nomina 300, ,0 Value adjustments (including o/u rate) -0,8-1,9 Total subordinated debt 659, ,6 660,5 15

18 Capital adequacy (Figures in NOK 1,000) Parent bank Parent bank Parent bank Group Group Group Equity capital certificate Premium reserve Sparebankens fund Other reserves not included in tier 1 capital Fund notes up to 15% Other tier 1 capital Deductions in tier 1 capital Core capital before 50/50 deductions Fund notes exceeding 15% Subordinate loan capital Supplementary capital before 50/50 deductions Deductions for subordinated capital in other financia Net subordinated capital Risk-weighted balance Capital adequacy 15,82% 14,25% 17,78% 15,43% 13,92% 17,11% Tier 1 capital adequacy 12,97% 10,80% 14,39% 12,92% 10,80% 14,15% Guarantee liabilities and other off Balance Sheet items (Figures in NOK 1,000) Guarantee liabilities Parent bank Parent bank Parent bank Group Group Group Payment guarantees Contract guarantees Loan guarantees Other guarantee liabilities Total customer guarantees Guarantees to the Norwegian Banks' Guarantee Fu Total guarantee liabilities Pledges Bonds, nominal value, put up as collateral for access to loans in Norges Bank Pledges *) Preference in terms of sections 2-35 of the Finan *) Debt secured against pledges are F-loans with a nominal value of MNOK issued by Norges Bank. 16

19 Additional information for Cash Flow Statement Group Group Group (Figures in NOK mill.) Parent bank Parent bank Parent bank Cash and cash equivalents 640, ,7 360,7 Cash and receivables at central banks 640, ,7 360, ,8 494,3 671,8 Treasury bills 1.066,8 494,3 671,8 8,6 20,6 11,1 Loans to and receivables on credit insititutions that are clean placements 8,6 20,6 11, , , ,6 Total 1.716, , ,6 Changes in assets in connection with operations -4,3 2,5-18,5 Net changes in financial assets held for the purposes of trade -4,3 2,5-18,5 22,7-61,2-83,7 Net changes in financial derivatives (net assets and liabilities) 22,7-61,2-83,7 23,8-645,8 127,5 Net change in financial assets at fair value as determined by the result. 274, , ,5 114,4 315,4 474,2 Changes in gross loans to credit institutions 90,3-72,8 22,6-953, ,1 866,8 Changes in gross loans to credit institutions -462, , ,8-2,5 80,0 106,6 Net changes to other assets -0,2 79,2 109,5-799,3 775, ,9 Total -79,3 802, ,2 Changes in assets in connection with operations 13,5 15,5-341,6 Changes in customer deposits 33,5 3,0-402,8 0,0 493,5 915,4 Change in liabilities to the state, exchange of covered bonds 0,0 493,5 915,4 1,3-921, ,0 Changes in debt to credit institutions 95,5-845, ,5 68,5 52,1-74,6 Changes in other liabilities 70,6 60,2-71,5 83,3-360,2-995,8 Total 199,6-289, ,4 Non-cash items included in profit before tax 6,2 6,6 13,1 Writedowns on fixed assets 4,0 4,4 8,8 1,4 2,8 4,3 Amortisation of financial investments held to maturity 1,4 2,8 4,3-1,5-5,6-2,8 Writedown of financial assets -1,7-11,3-13,0 6,1 3,8 14,6 Total 3,7-4,1 0,1 17

20 Profit per equity certificate Profit per equity certificate is calculated by dividing that part of the profit after tax which falls to the equity capital certificate owners by the weighted average of number of outstanding certificates in the course of the year. If the annual results show a deficit this is covered by a proportionate transfer from the savings bank fund, donation fund and equalisation fund. Profit per equity certificated is calculated in such instances, based on the amount of deficit that is debited to the equalisation fund. Sparebanken Øst has not issued options or other instruments that can lead to a dilution of profit per equity certificate. Diluted profits per equity certificated is therefore not the same as profit per equity certificate. (Figures in NOK mill.) Parent bank Group After-tax profit 207,8 221,7 Profit after tax allocated to equity certificate owners 101,9 108,7 Weighted average of number of outstanding equity certificates 20,7 20,7 Profit per equity certificate 4,92 5,25 Fractional ownership parent bank (Figures in NOK mill.) Equity instruments 207,3 388,0 Premium reserve 387,8 25,2 Equalisation fund (excl. dividend) 100,8 50,7 Proportion reserve for unrealised gains - - Total numerator (A) 695,9 463,9 Total equity 1.418, ,7 Fund for unrealised gains - - Sum denominator(b) 1.418, ,7 Fractional ownership(a/b) in % 49,05 43,90 18

21 Equity instruments Various key figures equity certificates: Profit per certificate after tax (Group) NOK 1) 10,58 7,05-8,05 19,84 9,73 Profit per certificate after tax (parent bank) NOK 1) 9,91 6,42-8,15 17,95 8,97 Fractional ownership 2) 49,05 % 49,63 % 33,39 % 34,87 % 37,21 % No. of equity certificates (millions) 20,73 20,73 3,88 3,64 3,64 Book equity per certificate NOK 3) 40,78 35,56 124,47 134,14 132,05 Dividend NOK - 4,00-15,00 15,00 Turnover rate (realised/issued) 51,48 % 103,10 % 8,21 % 12,57 % 17,71 % 1) Equity certificates' share of the bank's post-tax profit (part year figures transposed into annual). Note! Annualised figures as at cannot be regarded as a strong statement as they co 2) Equity share capital+equalisation fund+share premium account in % of the parent bank's total equity allocated for annual dividends. 3) Equity share capital (group) divided by number of equity certificates. Results YTD are not included. Sparebanken Øst (SPOG) Kurs (siste ) O m satt volum (1000 ) ju n. 0 8 ju l. 0 8 a u g. 0 8 s e p. 0 8 o k t. 0 8 n o v. 0 8 d e s. 0 8 ja n. 0 9 fe b. 0 9 m a r. 0 9 a p r. 0 9 m a i. 0 9 ju n. 0 9 ju l. 0 9 a u g. 0 9 s e p. 0 9 o k t. 0 9 n o v. 0 9 d e s. 0 9 ja n. 1 0 fe b. 1 0 m a r. 1 0 a p r. 1 0 m a i. 1 0 ju n. 1 0 Volum omsatt (1.000) Kurs (siste) The 20 largest equity certificate holders as at Name Quantity % Name Quantity % 1 MP Pensjon ,00 % 11 Høibraaten, Claus Jørgen ,96 % 2 Skagen Vekst ,14 % 12 Terra utbytte VPF ,93 % 3 Directmarketing Invest AS ,82 % 13 Anna A/S ,78 % 4 Teleplan Holding AS ,37 % 14 Julius Johannessen & Sønner A/S ,72 % 5 Nordea Bank Norge AS ,16 % 15 Andersen, Gunnar ,71 % 6 Hansen, Asbjørn Rudolf ,25 % 16 Løkke, Helge Arnfinn ,67 % 7 Storetind AS ,87 % 17 Helgeland Sparebank ,64 % 8 Sparebankstiftelsen DnBNOR ,49 % 18 Tanja A/S ,61 % 9 Andenæsgården Bekkestua ANS ,02 % 19 Teigen, Hellik ,58 % 10 Hustadlitt AS ,96 % 20 Profond AS ,58 % 19

22 Statement pursuant to Section 5-6 of the Securities Trading Act We confirm that the half-year accounts for the Group and the Bank for the period 1 January to 30 June 2010, to the best of our knowledge, have been prepared in compliance with IAS 34 Interim Reporting and that the information provided in the accounts provides an accurate picture of the assets, liabilities, financial position and profits as a whole for the Group and the Bank, cf. Sections 5-6, fourth paragraph of the Securities Trading Act. Drammen, THE BOARD OF DIRECTORS OF SPAREBANKEN ØST Jorund Rønning Indrelid Chairman Knut Smedsrud Vice Chairman Ingebjørg Mæland Member Roar Norheim Larsen Member Sverre Nedberg Member Leif Ove Sørby Member Hanne Solem Member Inger Helen Pettersen Employee representative Trond Tostrup CEO 20

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24 HOVEDKONTOR Bragernes Torg 2 Postboks 54, 3001 Drammen Telefon: Fax: Fax: Epost: firmapost@oest.no