Sparebanken Vest. Key developments. Key figures. Third quarter 2012

Transcription

1 Sparebanken Vest Third quarter 2012 Key developments Sound third quarter pre-tax profit of NOK 303 (135) million o Return on equity after tax of 12.5% (5.5%) for the quarter Contribution to profits from product companies up NOK 60 million so far this year compared with the same period last year Increased net interest and credit commission for the quarter: NOK 458 (416) million Tightening of credit spreads leads to considerable gain on the bond portfolio High level of activity characterises cost developments. Improvement programme on schedule Improved financial strength Core Tier 1 capital adequacy of 9.7%, compared with 9.5% the previous quarter o Mainly driven by good profit for the quarter and lower growth in lendings in the corporate market Key figures 3Q Q Q 2012 Acc. 3Q 2011 Acc Operating profit / loss before write-downs and tax 329 mkr 167 mkr 812 mkr 604 mkr 858 mkr Pre-tax profit 303 mkr 135 mkr 708 mkr 533 mkr 732 mkr Net interest (annualised) 1,46 % 1,52 % 1,43 % 1,46 % 1,46 % Cost ratio (annualised) 54,1 % 65,6 % 58,5 % 61,6 % 60,9 % Deposits / Loans ratio 55,3 % 56,3 % 55,3 % 56,3 % 53,5 % Liquidity indicator 106,6 % 103,8 % 106,6 % 103,8 % 102,6 % Common equity 9,7 % 9,5 % 9,7 % 9,5 % 9,6 % Total capital 11,6 % 11,5 % 11,6 % 11,5 % 11,6 % Common equity (Basel II) 13,3 % 12,5 % 13,3 % 12,5 % 12,9 % Total capital (Basel II) 16,0 % 15,2 % 16,0 % 15,2 % 15,6 % Common equity / Total capital includes 50% of operating profit for the period, except for Sparebanken Vest (SVEG) Third quarter 2012 Not audited 24 October 2012

2 A modern bank with local, historical roots Banking and insurance services are a key part of society s infrastructure. With more than 251,000 retail customers and 10,000 corporate customers, Sparebanken Vest is the leading financial services group founded and rooted in Western Norway. Every quarter, our systems handle almost 22 million customer transactions. Sparebanken Vest continuously adapts to new user patterns, and it is now possible to carry the bank in your pocket and visit it any time you like. About 80% of the bank s customers use online banking, 78% of whom are active users who visit the online bank six times a month on average. This means that, for many people, the online bank is by far the bank s most visited branch. Sparebanken Vest recently launched its self-developed mobile banking solution. During the first two weeks alone, as many as 11,000 customers downloaded the mobile banking application. The bank has previously also launched SMS banking services and an online shop for purchasing insurance. More than 50,000 customers have activated the SMS banking service, and 18,000 have visited the online shop. A good, safe framework Sparebanken Vest is a local full service bank with 64 branch offices in Hordaland, Rogaland and Sogn og Fjordane. We also have customer centres with extended opening hours, a Facebook page and an office in Bergen that is open on Saturdays. The core of the bank s operations is personal customer advisers. Our advisers are educated and trained to help and guide customers in both their day-to-day priorities and the big financial questions in life. The trend is towards a modernisation of the bank office, where the main task is providing financial advisory services, while traditional banking services are performed by the customers themselves. In the past year, the number of over-the counter transactions performed with the help of bank office staff has been reduced by 25%. At the same time, the time freed up for advisory services has increased the sale of other products that the bank offers. A consequence of this development is that Sparebanken Vest reduced the number of branch SIMPLER DAY-TO-DAY BANKING: With the new mobile banking solution, customers can check their balance, pay bills or make transfers between own accounts in just a few keystrokes. All they need to perform banking services on their mobile phone are their personal ID number and a self-selected PIN code. The token can be left at home from now on. offices by four in 2012, and even more offices have discontinued over-the-counter handling of cash. This development is expected to continue. Sound position The competition for customers is tough. However, market data show that Sparebanken Vest s market position remains stable. In total, the bank has a market share of 24% in our areas of Western Norway. Market share in Bergen is 26%, and in Hordaland excluding Bergen it is 45%. In Sogn og Fjordane, the bank has a market share of 30%, while in Rogaland, where the bank is still in the development phase, the market share is 9%. To ensure that the bank has satisfied customers, customer satisfaction (CSI) is measured on a regular basis. The most recent survey shows that the bank maintains its high CSI level in the retail market of 74 points in the third quarter. The number of housing loan customers is high, and more than 95% of the retail market portfolio consists of loans secured by residential mortgage. Combined with few defaults and acceptable loan-to-asset value ratios, it means that the bank has low risk relating to its housing loans. Broad range of services Sparebanken Vest is a complete supplier of financial services, such as loans, insurance, leasing, saving and investments etc. Among other things, the bank offers insurance products from Frende Forsikring, our coowned insurance company, which was established just over five years ago. Already after three years, Sparebanken Vest had recouped the volume of general insurance premiums it had with its former supplier, and growth continues at a good pace. Frende Skadeforsikring has already established a position in the Norwegian insurance market. Its market share for the country as a whole is estimated to be more than 3%. In Hordaland county, where most of the distribution network is found, the market share is estimated to be 15%, and in some municipalities, it is more than 30%. Since the third quarter 2011, the bank has gained 21% more general insurance customers and 18% more life insurance customers. The number of customers with a credit card also increased by 15% in the same period. 2 Sparebanken Vest (SVEG) Third quarter 2012 Not audited 24 October 2012

3 Board of directors report for the third quarter 2012 Main Figures The accounts have been prepared in accordance with International Financial Reporting Standards (IFRS). Pursuant to IFRS, all financial derivatives shall be capitalised at fair value. Sparebanken Vest has also chosen to recognise fixed-interest financial assets and liabilities at fair value. This includes fixed-interest lendings, deposits and securities debt. The selected accounting principle is called Fair Value Option (FVO), the purpose of which is to counteract major effects on profit for balance sheet items that are managed together. Holdings of certificates, bonds and shares are also valued at fair value. Third quarter 2012 Q Q NOKm 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 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 a pre-tax profit of NOK 303 million in the third quarter, compared with NOK 135 million in the same quarter last year. The result was positively affected by an increase in the net nominal interest of NOK 42 million, improvement in the profit/loss from associated companies of NOK 15 million and an improvement in the return on financial instruments of NOK 171 million. An increase in the value of the Group s holding of certificates and bonds accounts for NOK 136 million of the return on financial instruments. These revenues vary with developments in the financial markets. The result was negatively affected by higher operating expenses, mainly related to the business acquired from Sparebanken Hardanger, nonrecurring expenses and IT. The nominal net interest increased by NOK 42 million. The increase is due to a combination of a growth in volume and higher lending margins as a result of decreased borrowing costs. The deposit margins have been reduced. The Group s average borrowing costs in the quarter are down by approximately 40 basic points (bp) compared with the third quarter The average 3-month NIBOR fell by approximately 90 bp in the same period. The issuing of new long-term bonds with a higher credit mark-up has reduced the effect on profits of the fall in the money market interest rate and must be seen in conjunction with the Group s policy for long-term refinancing. The lending margin for the corporate market measured at average 3-month NIBOR was 2.87% in the third quarter, an increase of 0.18 percentage points on the second quarter. The lending margin for the retail market was 1.96%, an increase of 0.07 percentage points on the second quarter. The deposits margin for the corporate market fell by 0.12 percentage points to -0.28%. Correspondingly, the deposits margin for the retail market fell by 0.06 percentage points to -0.23%. The net interest as a percentage of average assets under management was 1.46% and has increased by 0.02 percentage points from the second quarter. Ordinary income from commissions and fees and income from insurance show a positive development compared with the third quarter The share of profit/loss from associated companies increased by NOK 15 million, of which the profit from Frende Forsikring contributed with an increase of NOK 13.8 million. The net profit from financial instruments amounted to NOK 116 million in the quarter. The result was affected by an improved financial market with increased share-related revenues and a tightening of credit spreads. The contribution from share-related revenues has increased by NOK 44 million compared with the third quarter The increase in the value of the Group s holding of certificates and bonds amounted to NOK 136 million. Lower credit spreads also affected the Group s fixed-interest lendings, deposits and securities debt (the FVO portfolio), with a total negative effect on revenues of NOK 53 million compared with the third quarter Finansielle instrumenter Q Q NOKm Utbytte Gevinst/(tap) på sertifikater og obligasjoner Gevinst/(tap) på aksjer Gevint/(tap) andre finansielle instrumenter Gevinst/(tap) endring kredittspread FVO portefølje Netto gevinst/(tap finansielle instrumenter Investments in the development, operation and management of online self-service solutions such as online banking, mobile banking and SMS banking services led to an increase in IT costs of NOK 7 million compared with the third quarter New measures have been initiated to reduce the IT costs, among other things by hiring 15 new IT employees who are set to replace the same number of advisers. Operating expenses in the third quarter 2012 amounted to NOK 388 million, compared with NOK 318 million in the third quarter Of the increase in expenses, NOK 12 million is related to the takeover of Sparebanken Hardanger, as expected. Personnel expenses have increased by NOK 56 million. Of the increase in expenses, NOK 7 million can be attributed to the takeover of Sparebanken Hardanger. Non-recurring 3 Sparebanken Vest (SVEG) Third quarter 2012 Not audited 24 October 2012

4 expenses amount to NOK 39 million and are related to provisions for the bank s improvement programme and incentive schemes. Increased personnel expenses in Eiendomsmegler Vest are NOK 2 million. The lower interest rate and acquired pension obligations from Sparebanken Hardanger led to an increase in the Group s pension expenses of NOK 7 million. The bank s personnel expenses, excluding nonrecurring and acquisitions, are about unchanged compared to third quarter Write-downs of loans and losses on guarantees amounted to NOK 26 million in the quarter, which is down NOK 6 million on the third quarter See the chapter on risk and capital factors and Notes 6, 8, 9 and 10, which also shed light on developments in defaults of payment. The annualised return on equity for the quarter was 12.5%, compared with 5.5% in the third quarter Developments in deposits and lendings Developments in deposits and lendings were affected by the takeover of Sparebanken Hardanger. The net lending volume increased by NOK 12.5 billion to NOK billion compared with the third quarter 2011, corresponding to year-on-year growth of 13.4%. Gross lendings break down as NOK 77.5 billion to retail customers and NOK 28.8 billion to corporate customers. The organic growth in the last twelve months was 8.9% in the retail market and 11.1% in the corporate market. Seen in isolation, the change in lendings in the corporate market was -0.3% in the third quarter. For the retail market, the growth in the third quarter was 2.2%. Customer deposits increased by NOK 5.9 billion to NOK 58.4 billion, corresponding to year-on-year growth of 11.3%. Deposits break down as NOK 34.0 billion from retail customers and NOK 24.4 billion from corporate customers. The growth in the last twelve months was 10.4% in the retail market and 2.5% in the corporate market. Assets under the Group s management amounted to NOK 126 billion at the end of the quarter. The breakdown between deposits and lendings is further specified in Notes 11 and 12. So far in 2012 Growth last 12 months Growth excl. Hardanger Lendings in total 13,4 % 9,5 % Lendings retail market 13,0 % 8,9 % Lendings corporate market 14,7 % 11,1 % Growth last 12 months Growth excl. Hardanger Deposits in total 11,3 % 6,9 % Deposits retail market 16,4 % 10,4 % Deposits corporate market 4,8 % 2,5 % Sparebanken Vest recorded a pre-tax profit of NOK 708 million in the first three quarters of the year, compared with NOK 533 million in the same period in Operating revenues increased by NOK 386 million, primarily as a result of an improvement in the nominal net interest of NOK 140 million, improvement in profit performance of NOK 60 million from associated companies, and an increased contribution from financial instruments of NOK 174 million. Operating expenses increased by NOK 178 million, NOK 45 million of which is attributable to the acquisition and integration of Sparebanken Hardanger. The loss cost increased by NOK 33 million on the third quarter The bank s ongoing improvement programme has so far this year resulted in a reduction of 31 full-time equivalents compared with the same period last year. The accounting effect of this is expected to materialise in Net interest income increased by NOK 140 million in the period, as a result of both a growth in volume and changed margins. So far this year, the average 3-month NIBOR has fallen by 45 bp compared with the same period in The bank s average borrowing costs are virtually unchanged compared with the first three quarters of So far this year, increased borrowing costs for new long-term financing has offset the effect of a lower money market interest rate. A stronger lending margin and weaker deposit margin are therefore due to higher customer interest rates on lendings and deposits. The net interest as a percentage of average assets under management was 1.43%, compared with 1.46% at the end of the third quarter Lower interest on the liquidity portfolio as a result of a change in the composition of the portfolio had a negative effect on the net interest. Other operating revenues increased by NOK 246 million compared with the first three quarters of The increase is related to a strong improvement in the contribution to profits from associated companies and a significantly higher contribution from financial instruments. The share of profit from associated companies amounted to NOK 34 million, an increase of NOK 60 million on the same period in 2011, of which Frende Forsikring contributed NOK 51 million. NOK 14 million of this contribution to profits is related to a re-assessment of the share of capitalised security provisions in Frende Skadeforsikring. The net profit from financial instruments amounted to NOK 202 million, an increase of NOK 174 million on the same period in Lower credit spreads have increased the value of the Group s holding of certificates and bonds by NOK 186 million. The market-value valuation had the opposite effect on the net holding of fixed-interest lendings, deposits and securities debt (the FVO portfolio), with a total negative effect on revenues of NOK 78 million compared with the same period in Commission from the estate agency business followed the development in volume and amounts to NOK 149 million so far this year, a slight increase on the same period in The bank s improvement programme has so far led to a reduction of 31 full-time equivalents compared with the second quarter In addition, staff cutbacks corresponding to ten full-time equivalents have been agreed through severance packages or natural wastage, which will have effect from the second half-year. The improvement programme is not expected to have full accounting effect until The Group as a whole had 881 full-time equivalents at the end of the third quarter, a decrease of five full-time equivalents from the turn of the year. 4 Sparebanken Vest (SVEG) Third quarter 2012 Not audited 24 October 2012

5 The increase in IT costs accounts for NOK 35 million, and NOK 101 million can be attributed to increased personnel expenses. NOK 11 million of the growth in personnel expenses is related to an expansion of capacity and competence-raising measures in the estate agency business, NOK 37 million to non-recurring expenses relating to increased provision for the improvement programme and incentive schemes in the banking operations, and NOK 19 million to the takeover of Sparebanken Hardanger. The bank s increase in payroll and social expenses make up NOK 15 million, equivalent of 3.4%. Pension expenses increased by NOK 19 million as a result of a lower interest rate. Operating expenses so far this year amounted to NOK 1,146 million, an increase of NOK 178 million on the same period in Of the increase in expenses, NOK 45 million is as expected related to the takeover and integration of Sparebanken Hardanger. Write-downs in the first half-year amounted to NOK 104 million. See the accumulated figures in Notes 6, 8, 9 and 10, which also show developments in defaults of payment. The return on equity so far this year is 10.1%, compared with 8.5% at the end of the third quarter The profit per equity certificate for the first three quarters of the year was NOK 3.67, compared with NOK 3.31 in Risk and capital factors Credit risk The risk profile in the retail market portfolio is still affected by a low interest rate, low unemployment and good credit management. Together with a strong economic situation in Norway, this contributes to a low and stable risk. A total of 95% of the retail market portfolio consists of loans secured by mortgage. The proportion of loans with a loan-to-asset value ratio of more than 85% is being reduced in accordance with the Financial Supervisory Authority of Norway s guidelines. The risk profile in the corporate market portfolio shows continued improvement. Management and closer follow-up of existing customers improve the risk profile and contribute to lower growth in the portfolio, including by securing the adaptation to current and future capital adequacy requirements. Higher achieved price and lower financing costs relating to NIBOR interest rates in the period lead to a higher riskadjusted rate of return. The figure below shows the positive development in expected losses (based on debt-servicing ability and security coverage). At the end of the third quarter, just over 83% of the portfolio was in the category with the lowest expected losses. Figure 1 Expected losses total portfolio 100 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 5,7 % 6,4 % 5,5 % 6,0 % 6,6 % 6,8 % 8,4 % 7,0 % 7,5 % 14,2 % 12,9 % 14,1 % 14,1 % 14,7 % 14,3 % 10,6 % 10,2 % 9,4 % 80,1 % 80,7 % 80,5 % 79,9 % 78,8 % 78,9 % 81,0 % 82,8 % 83,2 % The loss cost in the third quarter amounted to NOK 26 million, compared with NOK 32 million in the third quarter Group write-downs increased by NOK 11 million, and individual write-downs increased by NOK 4 million in total. Net confirmed losses on loans and guarantees was NOK 11 million, compared with NOK 7 million in the third quarter At the end of the third quarter, the Group had NOK 225 million in defaulted loans (more than 90 days) in the retail market, and NOK 276 million in the corporate market. In total, this amounts to an increase of NOK 46 million on the third quarter Potential bad debts not defaulted on amounted to NOK 843 million, a decrease of NOK 81 million on the third quarter Potential bad debts not defaulted on largely relate to commitments in industries exposed to cyclical fluctuations. The figure below shows capitalised write-downs and the percentage provided for in relation to gross lendings. Figure 2 Write-downs Market risk and operational risk The bank s interest rate and currency risk is managed by limits adopted by the Board of Directors and is considered to be low. The bank is exposed to credit spread risk, primarily through the management of fixed-interest securities in the bank s liquidity portfolio. The portfolio mainly consists of securities issued by Norwegian banks, housing credit companies, municipalities and county authorities. The bank s credit spread risk was reduced in the third quarter, and is considered to be moderate. The bank is exposed to the stock market through companies listed on Oslo Børs and unlisted companies. In its management, the bank focuses on the total exposure and concentration in companies and industries. In the third quarter, the bank reduced its exposure to the stock market by approximately NOK 57 million by selling stocks. The bank s stock market exposure (excluding subsidiaries and associated companies) amounted to NOK 725 (648) million at the end of the third quarter. The identification, analysis and follow-up of operational risk are addressed at the overriding level through expert assessments, management confirmations and events. During the quarter, annual processes and the continuous registration of events have not uncovered matters that are critical to the bank s operations. 0 % Q Q Q Q Q Q Q Q Q < 0,2 % 0,2 % > < 0,75 % > 0,75 % 5 Sparebanken Vest (SVEG) Third quarter 2012 Not audited 24 October 2012

6 Liquidity and financing At the overriding level, Sparebanken Vest s liquidity risk is managed using liquidity indicators, structural liquidity and the deposits/loans ratio. The Group s liquidity situation is good. The Group s liquidity amounted to NOK 16.1 billion (14.6) at the end of the quarter. The Group s liquidity indicator (six-month rolling average) is (103.8)%, and the bank s capacity to operate under normal conditions without financing from the capital market is 18 (24) months (structural liquidity). The deposits/loans ratio is somewhat lower than at the same time last year; 55.3 (56.3)%. The total capital market financing amounts to NOK 55.7 billion (53.7), and including the swap arrangement with Norges Bank, covered bonds account for approximately 53% of this financing. The proportion of funding with a remaining term to maturity of more than three years was approximately 42%. Rating Sparebanken Vest is rated by Moody s and Fitch Ratings. The bank s rating for long-term borrowings is A- from Fitch with a stable outlook, and A2 from Moody s with a stable outlook. Bonds issued by Sparebanken Vest Boligkreditt AS are rated AAA by both Moody s and Fitch. Financial strength and equity certificates The Group s capital adequacy targets pursuant to Basel II are 10% core capital and 13% own funds. Pursuant to the transitional arrangement, financial strength should be on a par with the third quarter Figure 3 shows that the bank meets the current capital targets. Compared with the previous quarter, the bank s capital adequacy pursuant to the transitional arrangement increased by 0.2 percentage points to 9.7%. Compared with the same period last year, the bank s Core Tier 1 capital adequacy pursuant to the transitional arrangement was strengthened by 0.3 percentage points. The increase during the past quarter is a result of accumulated profits and costcutting measures. The bank s buffer in relation to the authorities recommendation of 9% Core Tier 1 capital adequacy under the transitional arrangement is now more than NOK 430 million. Pursuant to the Basel II regime, Core Tier 1 capital was strengthened by 0.4 percentage points in the previous quarter, for the same reasons provided for the transitional arrangement. Compared with the same period last year, Core Tier 1 capital adequacy pursuant to Basel II was strengthened by 0.9 percentage points. Regulatory capital adequacy figures in Note 13. Figure 3 Capital adequacy, transitional arrangement 18,0 % 16,0 % 14,0 % 12,0 % 10,0 % 8,0 % 6,0 % 4,0 % 2,0 % 12,3 % 11,5 % 11,6 % 11,4 % 1,2 % 0,8 % 0,8 % 0,3 % 1,3 % 1,2 % 1,6 % 1,6 % 0,0 % 2011 Q Q Q Q Q3 Kapitaldekning 11,5 % 11,6 % 12,3 % 11,4 % 11,6 % Tilleggskapital 0,8 % 0,8 % 1,2 % 0,3 % 0,3 % Fondsobligasjon 1,3 % 1,2 % 1,6 % 1,6 % 1,6 % Ren kjernekapital 9,4 % 9,6 % 9,5 % 9,5 % 9,7 % Figure 4 Capital adequacy, Basel II 18,0 % 16,0 % 14,0 % 12,0 % 10,0 % 8,0 % 6,0 % 4,0 % 2,0 % 11,6 % 0,3 % 1,6 % 9,4 % 9,6 % 9,5 % 9,5 % 9,7 % 15,2 % 1,1 % 1,7 % 12,4 % 15,6 % 1,0 % 16,6 % 1,6 % 15,6 % 0,4 % 1,7 % 2,2 % 2,3 % 16,0 % 0,5 % 2,2 % 12,9 % 12,8 % 12,9 % 13,3 % 0,0 % 2011 Q Q Q Q Q3 Kapitaldekning 15,2 % 15,6 % 16,6 % 15,6 % 16,0 % Tilleggskapital 1,1 % 1,0 % 1,6 % 0,4 % 0,5 % Fondsobligasjon 1,7 % 1,7 % 2,2 % 2,3 % 2,2 % Ren kjernekapital 12,4 % 12,9 % 12,8 % 12,9 % 13,3 % As specified in connection with the reporting for the first halfyear 2012, Sparebanken Vest has used deferred accounting ( the corridor method ) for the recognition of pension commitments. Following the revision of IAS 19, all listed companies must, as of 1 January 2013, recognise pension commitments immediately at fair value and enter estimate variances directly against equity and thereby own funds. Cost-cutting measures have been implemented. They contributed to the development in financial strength in the current quarter. The Board of Directors of Sparebanken Vest has recommended to the bank s Supervisory Board a change of the bank s defined-benefit pension scheme to a 6 Sparebanken Vest (SVEG) Third quarter 2012 Not audited 24 October 2012

7 system based on return on pension capital. This matter will be considered by the meeting of the Supervisory Board on 25 October The final decision on whether, and when, more risksensitive capital requirement regulations should be introduced in Norway and the EU (CRD IV) has not yet been made. Although the direction of the regulations is set, the uncertainty creates challenges for Norwegian banks capital planning and lending capacity. Clear information from Norwegian authorities on how the capital requirement is to be calculated for banks that use internal calculation methods (IRB) and on when the regulations will be implemented is of great importance to the adaptation. In order to ensure equal competitive terms in the Norwegian market, it is important that the authorities of the Nordic countries manage to agree on harmonised regulations. Business in subsidiaries and associated companies Subsidiaries Eiendomsmegler Vest (100%) experienced increased activity in the third quarter. It handled 847 properties, compared with 775 in the same quarter in 2011, corresponding to growth of 9.2%. The company recorded a growth in the number of assignments of 18.3% in the third quarter compared with the same period last year. Eiendomsmegler Vest recorded a pre-tax profit for the third quarter of NOK 5.4 (4.9) million. The improvement is the result of increased sales and an adjustment of expenses. Sparebanken Vest Boligkreditt AS (100%) manages housing loans in the amount of NOK 38.7 (30.5) billion. At the end of the third quarter 2012, the company had issued covered bonds in the amount of NOK 33.7 (25.9) billion. Associated companies The bank s share of profit/loss from associated companies shows strong progress, and a total of NOK 10.0 (-5.0) million was included in the accounts in accordance with the equity method in the third quarter. The accumulated profit as of 30 September 2012 was NOK 34.0 (-26) million, an improvement of NOK 60.0 million. In Frende Forsikring (holding 44.7%), the growth in customers/premiums continued in both general insurance and life insurance. Frende Skade had a good third quarter with a total of NOK 942 million in premiums divided between 85,900 customers at the end of the quarter. The company acquired 9,600 new customers in 2012, and it has an estimated market share of more than 3% in the Norwegian private market. Its market share in Hordaland is estimated to be 15%. In some municipalities in Hordaland, its market share is more than 30%. The loss ratio in the third quarter was 71.4%, compared with 68.2% in the same period last year. The corresponding figure as of 30 September 2012 was 72.3 (75.7)%. The company s combined ratio for the first three quarters of the year was 96.2%, compared with 104.6% in the same period in The bank is satisfied with the development in Frende Forsikring, and the results are well ahead of the original operating plan. Frende Skade continues to focus on cost efficiency and expects continued growth in the time ahead. At the end of the third quarter, its assets under management amounted to NOK 1.4 billion. Frende Liv had a good third quarter, where the insurance result and cost developments, plus moderate claims payments, contributed to a pre-tax profit. The company s premiums for risk products increased by NOK 42 million to NOK 278 million in the course of the first three quarters of the year. Of the growth in premiums for risk products, NOK 32 million is related to the retail market. At the end of the third quarter, Frende Liv s total premiums amounted to NOK 502 million, an increase from NOK 383 million in the third quarter The number of customers increased by 3,748 to 38,000 in the first three quarters of the year, while assets under management amounted to NOK 1.6 billion. Sparebanken Vest s share of profit/loss in Frende Forsikring (holding) in the third quarter was NOK 13.2 (-0.6) million. Corresponding number as of 30 September 2012 was NOK 39.7 (-11.2) million. Despite a challenging market, Norne Securities AS (holding 47.6%) saw an increase in turnover in the first nine months of the year of 21% compared with the same period last year. Total operating expenses in the same period were approximately 17% lower. It is mainly earnings from Corporate Finance and the bond area that contribute to the positive development, while earnings in stockbroking continue to show a falling trend in line with market developments in general. In the third quarter, Norne completed the acquisition of parts of Terra Markets business. It now has 90 of the country s 112 savings banks among its partners. The acquisition gave Norne Securities 14,000 new customers, which constitutes a two-fold increase. Norne is setting up branch offices in Oslo and Vilnius in connection with the takeover, and now has 41 employees. Sparebanken Vest s share of profit/loss in the third quarter was NOK -3.9 (-3.5) million. Corresponding number as of 30 September 2012 was NOK -6.7 (-12.0) million. Verd Boligkreditt AS (holding 40%) is a housing credit company that is owned by Sparebanken Vest and eight independent savings banks. The company is run by Sparebanken Vest Boligkreditt AS. Sparebanken Vest s share of profit/loss in the third quarter was NOK 1.2 (0.2) million. Corresponding number as of 30 September 2012 was NOK 3.3 (0.8) million. Brage Finans AS (49.9%) is a leasing company owned by Sparebanken Vest and nine other independent savings banks. The company has been operational since autumn At the end of the third quarter 2012, the company had a portfolio of NOK 826 million. The development in sales and profit in the quarter was slightly better than expected, and the number of orders for the current quarter is good. Sparebanken Vest s share of profit/loss in the third quarter was NOK -0.3 (-1.4) million. Corresponding number as of 30 September 2012 was NOK -1.7 (-4.0) million. 7 Sparebanken Vest (SVEG) Third quarter 2012 Not audited 24 October 2012

8 Outlook International and national outlook The uncertainty and volatility that characterised both the financial markets and the global economy in the first halfyear of 2012 have somewhat abated in the third quarter. The stock exchanges went up to their highest levels so far this year, and credit spreads fell to the lowest levels of the year. Long-term interest rates increased somewhat in the quarter, but there are nonetheless expectations of low interest rates and an expansive monetary policy in leading economies for a long time. The increased belief in the future can largely be ascribed to measures implemented by the central banks in the EU and the USA to improve the situation in the money markets and the economy. European authorities must nonetheless implement necessary measures and structural changes that facilitate better budget balance, lower unemployment rates and increased financial activity. When the USA approached the debt ceiling in August 2011, it created great uncertainty in the market. It is now expected that the debt ceiling will be reached once again around the turn of the year, but that no political decisions will be made until after the presidential election in November. Both the employment market and the housing market in the USA are showing signs of improvement. The period of very high growth in China and other emerging economies seems to be over. Expected growth of 7% will nonetheless make a considerable contribution to the global economy. The authorities in China have previously shown a willingness and ability to take action to stimulate the economy using both financial and monetary policy. The situation in the Norwegian economy is good and stable. There is growth in most areas, low unemployment and political stability. The greatest risk to the Norwegian economy is a potential setback in international markets. This will probably lead to lower demand for Norwegian goods and a fall in the oil price. Capacity problems also create challenges through increased wage and production costs, which, together with a strong Norwegian krone, weaken the export industry s competitiveness. Western Norway Sparebanken Vest s Vestlandsindeks 3/2012 (Western Norway Index, available at indicates continued optimism among businesses in Western Norway, but there is a certain decline in expectations for the future. There is still considerable growth and high activity in our region. Not surprisingly, it is petroleum-related businesses and the building and construction industry that contribute the most, but also the export industry is experiencing growth despite international unrest and a strong Norwegian krone. Some of the reason for this may be that much of the export industry in Western Norway provides products relating to the oil industry. Sparebanken Vest Lower interest rates and a tightening of credit spreads are expected to lead to improved net interest in the time ahead. We also expect increased commission and increased contributions to profits from the bank s associated companies. No significant changes are expected in the risk situation for the bank s lending portfolios, unless significant changes occur in the Norwegian and international economies. Although there has been less turbulence in the global economy in the third quarter, underlying conditions indicate that this may quickly change. In terms of both liquidity and financial strength, Sparebanken Vest is well equipped to deal with uncertainty. The new regulatory regime for the bank sector (CRD IV) has not yet been adopted by the EU. In the national budget for 2013, it was stipulated that a final decision will be made by the end of November 2012 at the earliest. It is expected that these regulations will be implemented in Norway as well through the EEA Agreement. Although the direction of the regulations is set, the strength and the time of introduction are currently unclear. This makes capital planning challenging and affects the bank s lending capacity. For Sparebanken Vest, the adaptation to new regulatory framework conditions is important. The bank is planning to apply to the Financial Supervisory Authority of Norway for approval to use IRB-A in the corporate market during the fourth quarter. The Board of Directors of Sparebanken Vest has recommended to the bank s Supervisory Board a change of the bank s defined-benefit pension scheme to a system based on return on pension capital. This matter will be considered by the meeting of the Supervisory Board on 25 October Sparebanken Vest (SVEG) Third quarter 2012 Not audited 24 October 2012

9 Bergen, 24 October 2012 The Board of Directors of Sparebanken Vest Trygve Bruvik Marit Solberg Birthe Kåfjord Lange Chair of the Board Deputy Chair Arild Bødal Richard Rettedal Øyvind A Langedal Anne Marit Hope Sivert Sørnes Tone Mattsson Stein Klakegg Managing Director 9 Sparebanken Vest (SVEG) Third quarter 2012 Not audited 24 October 2012

10 Income statement, group Notes 01/ / / /09-11 Q 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 Payroll 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 for equity certificates 3,67 3,31 1,56 0,73 4,55 Diluted profit per equity certificate 3,67 3,31 1,56 0,73 4,55 Statement of comprehensive income 01/ / / /09-11 Q Q Profit for the period Other comprehensive income Comprehensive income for the period Majority share of the total profit for the period Minority share of the total profit for the period

11 Balance sheet, group Notes 30/ / /12-11 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 Financial derivatives Shareholdings in associated companies 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 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 Other equity Minority interests Total equity Total liabilities and equity

12 Cash flow statement, group 01/ / / / 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/made 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 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 Payments made on purchases of operating assets etc Net cash effect of takeover of Sparebanken Hardanger Net cash flows from investment activities Cash flows from financing activities Net payments /made 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

13 Changes in equity, group Equity Own equity Premium Equalisation Primary Comp. Other Minority certificates certificates reserve reserve capital Gift fund fund equity interests Total Equity 31 Dec Purchase/sale of own equity certificates Distributed dividend and donations Issue of eqiute certificates Owner transactions and donations Profit for the financial year Comprehensive income 0 Equity 31 Dec Profit for the accounting period Other comprehensive income 0 Purchase/sale of own equity certificates -2-2 Payment of dividends and gifts Issue of eqiute certificates - dividend Equity 30 Sept Note 1 Accounting principles The consolidated accounts for the third quarter 2012 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 2011 annual report. The group has not applied new standards and amendments or implemented changes in existing standards and amendments in the current period. All amounts are stated in NOK million and apply to the group unless otherwise specified.

14 Note 2 Segment information The management has evaluated the segments that it is appropriate to report in relation to corporate governance. The segments are: Corporate Banking, Retail, and Real Estate Markets. Operating expenses are allocated, with the exception of IT costs, staff costs and depreciation. Net interest income is allocated based on internally calculated interest based on 3-month NIBOR. Corporate market Banking operations Retail market Capital market Estate agency business Not allocated by segment Total 01/01-30/ Income statement Net interest income Operating income Operating expenses Losses Pre-tax profit Tax -185 Profit for the period sept 2012 Balance sheet Net lendings Deposits /01-30/ Income statement Net interest income Operating income Operating expenses Losses Pre-tax profit Tax -146 Profit for the year sept 2011 Balance sheet Net lendings Deposits Income statement Net interest income Operating income Operating expenses Losses Pre-tax profit Tax -184 Profit for the year Dec Balance sheet Net lendings Deposits

15 Note 3 Net interest and credit commission income 01/ / / /09-11 Q Q Change 30/9-12 vs 30/9-11 Q3-12 vs Q3-11 Q3-12 vs Q2-12 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) 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/ / / /09-11 Q Q Change 30/9-12 vs 30/9-11 Q3-12 vs Q3-11 Q3-12 vs Q2-12 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 Badwill related to the acquisition of Sparebanken Hardanger 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