SG FINANS AS 2017 Interim Financial Statements for second quarter and first half of 2017 1
Report of the Board of Directors as of June 30 th, 2017 In the first six months of 2017, SG Finans has: - established new financing to clients for MNOK 7 084 (MNOK 7 056 for the same period in 2016), an increase of 0,4 %. - net banking income of MNOK 761 (MNOK 647). - total loan losses of MNOK -1,5 or -0,01 % of average funded assets (MNOK 30,0 / 0,20 %). - total comprehensive income of MNOK 353 (MNOK 241). - total assets of MNOK 36 059 (MNOK 36 983). - capital adequacy ratio of 16,4 % (14,7 %) for tier 1 capital and 20,4 % (19,1 %) for total capital. Business activities In the first six months of 2017 SG Finans has established new financing in Scandinavia of MNOK 7 084 compared to MNOK 7 057 for the same period in 2016. This is an increase of 0,4 %. Margins for new financing are broadly at the same level as in the same period in 2016. We have established 15 670 new financing contracts in the first six months compared to 14 932 by end June 2016. The market share within equipment finance in Norway is 26 % at June 30 th, i.e. at the same level as at year-end 2016. SG Finans increases the market share within financing of high-tech and transport equipment, while the market share is slightly lower for financing of industrial equipment. SG Finans maintains its position as market leader in equipment finance in Norway. We see continued growth in new financing of equipment in Denmark, and we maintain a market share above 10% in the Danish market. In Sweden new financing volumes are lower compared to first half of 2016, further to changes in the sales organisation. We expect financing volumes to pick up again in Sweden. Within Factoring, SG Finans is market leader in Norway with a market share of 40 % in ordinary factoring. Total assets are at June 30 th MNOK 36 059,1 which is 2,5 % lower than MNOK 36 983,2 at end June 2016. The main change in total assets comes from the reversal of fixed rate investments while new financing continues growing. 342 people were employed in SG Finans at the end of the second quarter. This is a reduction of 14 staff since year end 2016. Results SG Finans has Net Banking income of MNOK 760,8 in the first six months of 2017 compared to MNOK 646,6 in the same period in 2016. The main reason for the increase in Net Banking Income is the Net Interest Income from the realisation of fixed rate investments. Operating expenses amount to MNOK 298,1 in the period ending June 30 th 2017, compared to MNOK 291,4 in the same period in 2016. The increase in operating expenses is mainly due to increased costs related to fees and temporary staff. In the first half of 2017, we have had reversals of previous allowances and write-downs resulting in positive Losses on loans of MNOK 1,5. This represents 0,01% of average funded assets. The reversals of allowances are linked to the solving of a few larger previously defaulted leasing 2
contracts, which have been terminated. Total loan losses for the same period in 2016 were MNOK -30,0 and -0,20% of average funded assets. Reversals of provisions and income on contracts previously written down, together with increased net interest income, are the main contributors to the MNOK 139,1 increase in operating profit from MNOK 325,2 in the first six months of last year to MNOK 464,2 in the first six months of 2017. Net result after tax of SG Finans AS from January 1 st to June 30 th, 2017 amounted to MNOK 352,2 compared to MNOK 241,0 in the same period for 2016. Risk management and Capital adequacy Based on the capital situation and buffers compared to tier 1 level targets at the end of 2016, the Board initiated measures to strengthen tier 1 ratio during 2017. As part of these measures, SG Finans has reversed fixed rate investments linked to asset and liability management. The reversal of these investments leads to a reduction in the balance sheet of NOK 2,5 bn at the end of June. Further, the reversal has given an increase in interest income in the period of MNOK 88,5. The Board assesses the capital situation as adequate further to the measures initiated, and the company has good access to funding from its parent company as well as external lenders. The regulatory capital as of 30 th of June is MNOK 5 623,5. The regulatory capital consists of MNOK 4 523,5 tier one capital, and MNOK 1 100,0 tier two capital. The basis for the calculation of capital requirements and adequacy at the end of June was MNOK 27 552,9. The capital adequacy at end of June 2017 was 20,4 %. The tier 1 capital ratio was 16,4 %. The capital coverage is satisfactory compared to regulatory minimum requirements and the company s internal requirements and guidelines for solidity and capital adequacy. As part of the company s capital management procedures, stress testing of all relevant risks are performed and the change in the capital requirement under various stress scenarios is evaluated. The capital adequacy is considered satisfactory also considering the results of the performed stress tests. Lysaker, August 11 th, 2017 Jochen Jehmlich Chairman Ellen Altenborg Tommy Pedersen Jacques Bensen Anett Carlsson Philippe Dairien Carsten Thorne Managing Director 3
INCOME STATEMENT Amounts in NOK thousand Notes Q2 2017 Q2 2016 YTD 2017 YTD 2016 2016 Total interest income 3,12 455 437 360 612 810 505 712 667 1 446 285 Total interest expenses 3,12-97 002-96 230-197 605-198 896-399 246 Net interest income 358 436 264 382 612 900 513 771 1 047 039 Commission and fees income 4 64 399 65 008 149 462 148 849 309 694 Commission and fees expenses 4-31 871-31 624-85 398-85 452-177 952 Net commission and fee income 32 528 33 384 64 064 63 397 131 742 Net gains/losses on financial instruments at fair value 5 1 099 74 1 556 606 2 277 Net change in value and gains on foreign currency 625-480 642-1 367-1 827 Total income on other activity 4 43 533 34 198 81 672 70 205 151 403 Net banking income 436 221 331 558 760 833 646 612 1 330 636 Total payroll, fees and other staff costs 6-87 966-89 914-180 079-183 075-371 742 Total other operating expenses 6-58 645-52 158-118 036-108 357-216 994 Gross operating proft 289 609 189 486 462 718 355 180 741 899 Losses on loans 7-4 113-14 782 1 528-30 026-52 603 Operating profit 285 496 174 704 464 247 325 155 689 296 Taxes 11-68 976-43 987-112 019-84 142-351 489 Profit for the period 216 520 130 716 352 227 241 013 337 807 Other comprehensive income Items that could be reclassified Exchange differences on translation of foreign operations 418-527 1 077-634 -1 969 Taxes -100 132-258 158 492 Items that cannot be reclassified Actuarial gains and losses 13 0 0 0 0-2 863 Taxes 0 0 0 0 550 Other comprehensive income for the period 216 838 130 321 353 046 240 538 334 017 Attributable to: Equity holder of the parent 216 838 130 321 353 046 240 538 334 017 Total comprehensive income of the period 216 838 130 321 353 046 240 538 334 017 4
STATEMENT OF FINANCIAL POSITION Amounts in NOK thousand Notes 30.06.2017 30.06.2016 31.12.2016 Assets Cash and deposits with central banks 8 19 10 Deposits with financial institutions 7 084 328 343 236 217 Loans to financial institutions 12 1 418 184 4 014 454 4 033 768 Financial derivatives 15,16 497 431 472 986 400 255 Loans to customers Repayment loans 3 519 116 3 477 530 3 487 976 Factoring receivables 187 455 229 290 220 612 Factoring loans 2 384 237 2 362 261 2 076 574 Financial lease agreements 8,15 28 134 831 26 104 718 26 597 360 Total loans before allowances 34 225 639 32 173 798 32 382 521 Allowances on doubtful loans 7,10-365 886-367 768-379 631 Net loans to customers 9 33 859 753 31 806 030 32 002 890 Repossessed assets 55 271 18 628 23 766 Shares and primary capital certificates 100 160 100 Deferred tax asset 11 26 467 152 198 167 Other intangible assets 2 678 1 411 968 Machinery, tools and equipment, means of transport 19 168 21 070 20 664 Other assets 135 981 139 152 109 944 Prepayments and accrued income 37 012 28 787 27 933 Total assets 36 059 138 36 983 239 36 856 682 Amounts in NOK thousand Notes 30.06.2017 30.06.2016 31.12.2016 Liabilities Loans and deposits from financial institutions with agreed maturity 12 28 580 329 30 290 877 30 184 105 Deposits from and debt to customers with termination rights 125 311 89 361 190 662 Financial derivatives 15,16 604 124 159 160 122 221 Retention of margin and other customer accounts 10 856 45 848 21 056 Other liabilities 12 668 732 925 400 618 711 Accruals and deferred income 87 703 103 810 141 521 Pension liabilities 63 232 56 617 61 312 Current tax liability 11 160 159 0 111 449 Subordinated debt 12 1 100 000 1 100 000 1 100 000 Total Liabilities 31 400 447 32 771 073 32 551 037 Equity Share capital 945 436 945 436 945 436 Share premium account 240 639 240 639 240 639 Other equity including profit for the year 3 472 616 3 026 091 3 119 570 Total equity 4 658 691 4 212 166 4 305 645 Total liabilities and equity 36 059 138 36 983 239 36 856 682 Lysaker, August 11th, 2017 Jochen Jehmlich Ellen Altenborg Tommy Pedersen Chairman Jacques Bensen Anett Carlsson Philippe Dairien Carsten Thorne 5
STATEMENT OF CHANGES IN EQUITY Amounts in NOK thousand Share capital Share premium Retained earnings Translation differences Actuarial gains and losses Total Equity 01.01.16 945 436 240 639 2 955 402 460-10 309 4 131 628 Profit for the period 241 013 241 013 Other comprehensive income -475-475 Dividends -160 000-160 000 Total equity 30.06.16 945 436 240 639 3 036 415-15 -10 309 4 212 166 Equity 01.01.17 945 436 240 639 3 133 209-1 017-12 622 4 305 645 Profit for the period 352 227 352 227 Other comprehensive income 819 819 Dividends 0 0 Total equity 30.06.17 945 436 240 639 3 485 436-198 -12 622 4 658 691 6
CASH FLOW STATEMENT Amounts in NOK thousand YTD 2017 YTD 2016 Operations Interest income 764 566 699 755 Interest expenses -197 605-198 896 Other receipts 254 215 231 923 Operating expenses -383 837-361 041 Receipts on previous losses 10 270 11 885 Paid taxes 0 0 Net cash flow from operations 447 609 383 626 New investments leasing -7 667 303-6 547 106 Proceeds from sale of leasing 1 261 224 1 172 942 Decrease in loans ( net ) 7 192 460 3 153 846 Decrease ( increase ) in other receivables -82 286 99 800 Decrease ( increase ) in advance payments -9 079 531 Net cash flow from current financial activity 695 015-2 119 987 Decrease ( increase) in tangible assets -3 037-9 166 Shares and primary capital certificates 0-60 Net cash flow from investment activity -3 037-9 226 Increase (decrease) in customers' credit balances -75 551-133 657 Payment of dividends 0-160 000 Increase (decrease) in loans from credit institutions -1 219 048 2 147 617 Increase (decrease) in debt -11 368-17 230 Increase (decrease) accrued costs -64 214-112 289 Currency exchange without cash effect 1 460-1 842 Net cash flow from long term financial activity -1 368 721 1 722 600 Net cash flow -229 134-22 988 Cash at the 1st of January 236 227 351 350 Cash at end of period 7 093 328 363 Reconciliation cash at end of period Cash and deposits with central banks 8 19 Deposits with financial institutions 7 084 328 343 Cash at end of period 7 093 328 363 7
NOTES 1. ACCOUNTING PRINCIPLES SG Finans AS is a Scandinavian finance company and its business is carried out through a broad, Scandinavian distribution network with 15 regional and sales offices in Norway, 5 offices in Sweden and 2 in Denmark. SG Finans AS forms a part of of Société Générale SA, a group listed on the stock exchange with head office in Paris, France. The Group consolidated financial statement is prepared by Société Générale SA, and is available on www.socgen.com. The company is a limited company incorporated and domiciled in Norway. Its registered office is in Strandveien 18, Lysaker. The interim financial statements for the period ended June 30th 2017 were authorised for issue by the Board of directors on August 11th, 2017. SG Finans AS's activities are neither seasonal nor cyclical in nature, its period results were not affected by any seasonal or cyclical factors. The interim financial statements for SG Finans AS for the 6 month period ending June 30th, 2017 are prepared and presented in accordance with the revised IAS 34 Interim Financial Reporting. The interim financial statements do not include all the information and disclosures required in the annual financial statement, and should be read in conjunction with the financial statement as at 31 December 2016. IFRS, IFRIC interpretation and amendments applied by SG Finans AS as at January 1st, 2017 Accounting standards, amendments or interpretation No new standards adopted. Adoption date by the European Union Effective date Accounting standards, Amendments or interpretation to be applied in the future Not all of the accounting standards and interpretations published by the IASB (International Accounting Standards Board) have been adopted by the European Union at June 30, 2017. These accounting standards and interpretations are required to be applied from annual periods beginning on January 1, 2017 at the earliest or on the date of their adoption by the European Union. Accordingly, they were not applied by SG Finans AS as of June 2017. Accounting standards, Amendments or interpretation adopted by the European Union on June 30, 2017 Adoption date by the European Union Effective date Accounting standards, amendments or interpretations IFRS 9 Financial Instruments 22.11.2016 01.01.2018 IFRS 15 Revenue from Contracts with Customers 22.09.2016 01.01.2018 Accounting standards, amendments or interpretations not yet adopted by the European Union on June 30, 2017 Accounting standards, amendments or interpretations Adoption date by the IASB Effective date IFRS 16 Leases 13.01.2016 01.01.2019 Amendments to IAS 12: recognition of Deferred Tax Assets for Unrealised losses 19.01.2016 01.01.2017 Amendments to IAS 7: disclosure initiative 29.01.2016 01.01.2017 Annual Improvements to IFRS Standards 2014-2016 Cycle 08.12.2016 01.01.2018 8
2. IMPORTANT ACCOUNTING ESTIMATES AND DISCRETIONARY EVALUATION The preparation of interim financial statements in conformity with generally accepted accounting principles requires that occasionally management must make estimates and assumptions. Estimates and discretionary evaluations are regularly assessed and are based on historic experience and other factors, including the expectations of future events that are considered to be probable under the current circumstances. The company prepares estimates and makes presumptions and assumptions connected to the future. The accounting estimates that are based on this will seldom be entirely in accordance with the final outcome. Some accounting principles are considered to be especially important to enlighten the company s financial position because they require the management to make difficult or subjective assessments and determine estimates that are, for the most part, uncertain at the time the estimates are made. 3. NET INTEREST INCOME Amounts in NOK thousand Q2 2017 Q2 2016 YTD 2017 YTD 2016 Interest income from financial institutions, valued at amortised cost 116 548 31 078 147 231 62 059 Interest income from customers, valued at amortised cost 338 889 329 054 663 274 650 128 Other interest income 0 480 0 480 Total interest income 455 437 360 612 810 505 712 667 Interest expenses to financial institutions, valued at amortised cost -84 497-84 010-172 259-173 318 Interest expenses to customers, valued at amortised cost -606-360 -1 254-978 Interest expenses on subordinated debt -11 419-11 601-23 326-23 761 Other interest expenses -479-259 -766-839 Total interest expenses -97 002-96 230-197 605-198 896 Net interest income 358 436 264 382 612 900 513 771 4. NET FEES AND INCOME ON OTHER ACTIVITY Amounts in NOK thousand Q2 2017 Q2 2016 YTD 2017 YTD 2016 Commission and fees income from loans and similar to customers 64 399 65 008 149 462 148 849 Commission and fees income 64 399 65 008 149 462 148 849 Commission and fees expenses from loans and similar to customers -31 210-31 093-84 173-84 194 Other commission and fees expenses -661-532 -1 226-1 258 Commission and fees expenses -31 871-31 624-85 398-85 452 Net commission and fees income 32 528 33 384 64 064 63 397 Sales gains 27 856 23 319 53 421 48 979 Income from extension of leasing contracts 10 481 10 579 21 316 20 662 Other income 5 196 300 6 934 564 Total income other activity 43 533 34 198 81 672 70 205 5. NET GAINS ON FINANCIAL INSTRUMENTS AT FAIR VALUE Amounts in NOK thousand Q2 2017 Q2 2016 YTD 2017 YTD 2016 Net gains/losses on financial derivatives, trading 468 650 913 828 Change in fair value on financial derivatives, hedging 7 061 1 310 12 022-8 178 Change in fair value on hedged fixed interest contracts -6 430-1 886-11 379 7 956 Net gains/losses on financial instruments at fair value through P&L 1 099 74 1 556 606 9
6. OPERATING EXPENSES Amounts in NOK thousand Q2 2017 Q2 2016 YTD 2017 YTD 2016 Payroll -61 378-61 822-124 848-126 745 Pensions -8 568-8 497-17 641-16 802 Social security costs -8 361-8 875-19 048-20 002 Other staff cost -9 660-10 720-18 542-19 527 Total payroll, fees and other staff costs -87 966-89 914-180 079-183 075 Rent and other office costs -10 650-11 589-22 472-23 273 Fees and temporary staff -19 815-18 323-38 747-32 167 Travel and marketing -5 581-5 898-13 130-12 419 Other operating costs -3 962-4 478-7 740-8 436 Intragroup services -16 912-10 246-32 562-28 819 Depreciation and gain/loss -1 725-1 624-3 385-3 243 Total other operating expenses -58 645-52 158-118 036-108 357 Total operating expenses -146 611-142 072-298 115-291 432 7. LOSSES AND ALLOWANCES RECOGNISED IN THE PROFIT AND LOSS ACCOUNTS Amounts in NOK thousand Q2 2017 Q2 2016 YTD 2017 YTD 2016 Allowances on doubtful loans Allowances on doubtful loans as of 01.01 379 631 355 444 - Exchange rate adjustments (opening balance) -5 497 3 586 - Actual losses that are covered by previous allowances 19 557 28 761 - Reclassification of previous allowances 114 762 76 477 + Allowances on doubtful loans in the period 115 077 121 148 = Allowances on doubtful loans at end of period 365 886 367 768 Losses on loans Write-downs for loan losses at end of period 365 886 367 768 365 886 367 768 + Exchange rate adjustments (opening balance) 4 679 724-5 766 3 765 - Write-downs for loan losses as at 01.01 379 631 355 444 379 631 355 444 + Total actual losses 15 459 15 759 36 711 41 290 - Income on actual losses 2 280 14 025 18 728 27 353 = Losses on loans 4 113 14 782-1 528 30 026 8. LEASING (FINANCIAL LEASING ASSETS) Amounts in NOK thousand 30.06.2017 30.06.2016 Purchase cost 01.01 49 044 560 47 032 418 Exchange rate difference (opening balance) 678 958-510 743 Inflow during the year 6 934 142 6 547 106 Outflow during the year -5 257 034-4 834 140 Purchase costs at end of period 51 400 626 48 234 640 Accumulated ordinary depreciation 01.01 20 444 469 20 053 500 Exchange rate difference 01.01 281 417-192 711 Ordinary depreciation during the year 4 457 033 4 140 708 Reversed depreciation sold assets -4 047 277-3 733 529 Accumulated depreciation at end of period 21 135 642 20 267 968 Book value leasing assets at end of period 30 264 985 27 966 672 Customer receivables -2 194 612-1 984 896 Other accruals 64 459 122 941 Book value in the balance sheet at end of period 28 134 831 26 104 718 Customer receivables are ordinary leasing receivables and advancement on leasing rent. Up front fees constitute other accruals. 10
Overview of future minimum finance lease rental: 30.06.2017 30.06.2016 Within 1 year 7 217 778 6 728 105 1 to 5 years 22 856 296 21 305 665 Future minimum finance lease rental 30 074 074 28 033 770 Average interest 3,38 % 3,72 % Present value of minimum lease payments 27 750 977 25 660 153 Unearned finance income 2 028 746 2 068 887 9. RISK CLASSIFICATION Amounts in NOK thousand 30.06.2017 30.06.2017 Whereof Days outstanding status Net loans to customers past due, non-doubtful Not past due 32 460 715 1-29 1 034 876 961 903 30-59 120 823 110 741 60-89 170 853 133 358 90-179 66 394 2 313 > 180 4 012 161 > 1 year 2 080 1 612 Total 33 859 753 1 210 088 Amounts in NOK thousand 30.06.2016 30.06.2016 Whereof Days outstanding status Net loans to customers past due, non-doubtful Not past due 30 219 399 1-29 1 193 501 1 120 502 30-59 111 471 99 277 60-89 188 951 125 143 90-179 67 272 10 167 > 180 25 256 103 > 1 year 181 82 Total 31 806 030 1 355 272 Credit exposure: Amounts in NOK thousand 30.06.2017 30.06.2016 Net loans to customers 33 859 753 31 806 030 Positive market value derivatives 497 431 472 986 Guarantee liabilities and loan commitments 1 620 058 985 034 Total credit exposure 35 977 242 33 264 050 10. DOUBTFUL LOANS Amounts in NOK thousand 30.06.2017 30.06.2016 Gross doubtful loans 799 524 850 197 - Write-downs on impaired assets -365 886-367 768 Net doubtful loans 433 638 482 429 11. INCOME TAX The company calculates the tax payable based on an estimated effective tax rate. For 2016 the effective tax rate was 51,0 % at year end and the expected effective tax rate for 2016 was 25 %. For 2017 this is expected to be 24,1 %. Deferred tax assets are for interim based on an estimate for the year. The estimate is prepared based on previous years' development in the leasing portfolio, adjusted for year acquisitions and disposals. Expected changes in the deferred tax is recognized by 50 % for the period ending 30 June 2017. The main contributer to the fluctuation in effective tax rate is exchange rate effects from the portfolio. Amounts in NOK thousand Q2 2017 Q2 2016 YTD 2017 YTD 2016 Current income tax expense 85 236 0 144 540 2 228 Gross deferred tax expense -16 260 43 987-32 521 81 914 Income tax expense for the period 68 976 43 987 112 019 84 142 11
12. INFORMATION ON RELATED PARTIES Amounts in NOK thousand 30.06.2017 30.06.2016 Assets/interest income Loans to Group companies 1 417 800 4 014 280 Interest income 143 935 59 701 Liability/interest expense Loans from Group companies 23 054 125 26 850 544 Other liabilities 5 746 7 895 Interest expense 124 903 124 896 Subordinated debt 1 100 000 1 100 000 Interest expense on subordinated debt 23 326 23 761 Funding is primarily provided by the parent company Société Générale, on the basis of a framework agreement and limits. All transactions are made on market terms. 13. EMPLOYEE BENEFITS For the period ending 30 June 2017, it is not obtained a new actuary estimate. It is therefore not presented any effect of actuarial gains and losses in other comprehensive income. The company considers the possible effect of actuarial gains and losses as immaterial for the assessment of the financial position for the 6 month period ending 30 June 2017. At year end 2016 the actuarial gains and losses recognised in other comprehensive income was TNOK 2 863, giving a negative effect on the equity of TNOK 2 313. 14. CAPITAL ADEQUACY Amounts in NOK thousand 30.06.2017 30.06.2016 Common Equity Tier 1 capital Share capital 945 436 945 436 Share premium account 240 639 240 639 Other equity including profit for the year 3 119 570 2 785 553 Independently reviewed interim profits net of any foreseeable charge and dividend 353 046 0 Common Equity Tier 1 capital before regulatory adjustment 4 658 691 3 971 628 Common equity Tier 1 capital: Regulatory adjustment Deferred tax assets 0 0 Intangible assets (net of related tax liability) -2 009-1 058 Negative amounts resulting from the calculation of expected loss -133 163-138 095 Total regulatory adjustments to Common Equity Tier 1-135 172-139 153 Common Equity Tier 1 capital 4 523 519 3 832 475 Tier 1 capital 4 523 519 3 832 475 Subordinated debt 1 100 000 1 100 000 Tier 2 capital 1 100 000 1 100 000 Total capital 5 623 519 4 932 475 Amount below the thresholds for deductions Deferred tax assets arising from temporary differences 26 467 152 198 Standardised method Local and regional authorities (including muncipalities) 236 871 220 219 Institutions 288 484 876 028 Corporate 8 496 835 6 949 541 Engagements in default 138 224 98 116 Total Credit risk, standardised method 9 160 413 8 143 904 IRB method Corporate - small and medium sized businesses 10 597 031 10 513 148 Corporate - other 4 919 215 4 611 392 Total Credit risk, IRB method 15 516 246 15 124 540 12
Credit risk weighted assets 24 676 659 23 268 444 Operational risk, basic indicator approach 2 440 098 2 348 261 Additional requirement according to Basel II floor 436 142 409 739 Total calculation basis 27 552 899 26 026 445 Capital ratios Common Equity Tier 1 16,4 % 14,7 % Tier 1 16,4 % 14,7 % Total capital 20,4 % 19,0 % Capital ratios excluding transitional rule (Basel II floor) Common Equity Tier 1 16,7 % 15,0 % Tier 1 16,7 % 15,0 % Total capital 20,7 % 19,3 % Capital ratio requirements Common Equity Tier 1 4,5 % 4,5 % Tier 1 6,0 % 6,0 % Total capital 8,0 % 8,0 % Institution specific buffer requirement 6,7 % 6,5 % of which: capital conservation buffer 2,5 % 2,5 % of which: countercyclical buffer 1,2 % 1,0 % of which: systemic risk buffer 3,0 % 3,0 %...of which: systemically important institution buffer 0,0 % 0,0 % Pilar 1 capital requirements and capital buffers Common Equity Tier 1 11,2 % 11,0 % Tier 1 12,7 % 12,5 % Total capital 14,7 % 14,5 % Capital ratios, nominal amounts Common Equity Tier 1 minimum capital requirements and capital buffers 1 436 154 969 566 Tier 1 capital above minimum capital requirements and capital buffers 1 022 860 579 169 Total capital above minimum capital requirements and capital buffers 1 571 802 1 158 640 Pilar 2 - Internal capital adequacy assesment Prudential pilar 2 capital requirement: 1,50% of calculation basis 413 293 244 600 Capital buffer above prudential pilar 2 capital requirement Common Equity Tier 1 1 022 860 724 966 Tier 1 609 567 334 569 Total capital 1 158 509 914 040 SG Finans has been validated to calculate capital requirements and capital adequacy according to Advanced Internal Rating Based Approach for the major portfolios. The capital adequacy calculations are consequently based on SG Finans internal parameters a.o. for PD ("Probability of Default"), LGD ("Loss given Default"), M ("Maturity) for these portfolios. According to the transition rule, the capital requirement shall not be reduced below 80% of the level calculated using the Basel II Standard method. The impact of the transition rule adjustment factor is presented in the note on capital adequacy. The capital requirement for Operational Risk is calculated according to the Basic Indicator / Standard Approach for operational risk. The entity does not take Market Risk positions, and the capital requirement for market risk is nil. Capital ratios excluding Basel II-floor requirements would have been 16,7 % for Tier 1 capital and 20,7 % for Total Capital compared to 15,0 % for Tier 1 and 19,3 % for Total Capital at end June 2016. 13
15. METHOD FOR CALCULATION OF FAIR VALUE OF FINANCIAL INSTRUMENTS Regarding financial instruments recorded at fair value, see description in note 1 Accounting Principles. Lending (loans and financial leasing) to and receivables on customers: The pricing of lending (loans and financial leasing) is based on market prices. Stipulated prices include additions to cover credit risk. The value of impaired engagements is determined by discounting expected future cash flows. We therefore assess that the recorded value is a fair estimate of fair value for loans and receivables valued at amortised cost. Loans from financial institutions and deposits from customers: Fair value is determined to be equal recorded value for loans from financial institutions and deposits from customers valued at amortised cost. SG Finans uses the following hierarchy related to determining and disclosing the fair value of financial instruments: 1) Quoted (unadjusted) prices in active markeds for identical assets or liabilities (level 1) 2) Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly (level 2) 3) Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data (level 3) Amounts in NOK thousand Financial assets 30.06.2017 Level 1 Level 2 Financial derivatives 0 497 431 Financial lease agreements 0 2 863 576 Total assets 0 3 361 007 Amounts in NOK thousand Financial liabilities 30.06.2017 Level 1 Level 2 Financial derivatives 0 604 124 Total liabilities 0 604 124 Amounts in NOK thousand Financial assets 30.06.2016 Level 1 Level 2 Financial derivatives 0 472 986 Financial lease agreements 0 2 939 767 Total assets 0 3 412 753 Amounts in NOK thousand Financial liabilities 30.06.2016 Level 1 Level 2 Financial derivatives 0 159 160 Total liabilities 0 159 160 SG Finans does not have any financial instruments classified in level 3. 16. OFFSETTING The company has established CSA agreements (collateral security agreement) with its main counterparts.the agreements involve a mutual commitment to provide collateral for derivatives trading between the parties. Amounts in NOK thousand 30.06.2017 30.06.2016 Financial derivatives - assets Gross amount 497 431 472 986 Amounts that are offset 0 0 Net amount in financial position 497 431 472 986 Financial instruments on balance sheet -604 124-159 160 Cash collateral in the balance sheet -129 340-174 240 Net position -236 033 139 586 Amounts in NOK thousand 30.06.2017 30.06.2016 Financial derivatives - liabilities Gross amount 604 124 159 160 Amounts that are offset 0 0 Net amount in financial position 604 124 159 160 Financial instruments on balance sheet -604 124-159 160 Cash collateral in the balance sheet 0 0 Net position 0-0 SG Finans has set-off rights for leasing agreements where customers also have entered into factoring arrangements with the company. 14
17. CONTINGENCIES SG Finans AS had no major legal disputes pending at the end of the reporting period. 18. ASSETS PLEDGED AND RECEIVED AS SECURITY In June 2014 SG Finans signed a collateral secured loan drawn over a 2 and 4 year funding period with an aggregate value of 250 MEUR. The lender holds encumbrance, MEUR 332,5 in the transport portfolio. 19. EVENTS AFTER THE REPORTING PERIOD The company is at the date of issue,11 August 2017, not familiar with matters that are likely to change the assessment of the financial position as at 30 June 2017. 15
SG FINANS AS SG Finans AS is Norway s leading finance company within equipment leasing and factoring. The company s products are marketed under the trademarks Societe Generale Equipment Finance and Societe Generale Factoring. The company is a part of the French Societe Generale Group, one of Europe s largest financial corporations. SG Finans has a strong local presence with 50 years history and 21 offices in Norway, Sweden and Denmark. The head office for the Scandinavian businesses is located at Lysaker (Oslo/Norway). The company has total managed assets of NOK 37 billion and 360 skilled employees, all working to provide our customers and partners with solutions for their business. HEAD OFFICE SCANDINAVIA SG FINANS AS STRANDVEIEN 18 POST BOX 105 1325 LYSAKER TELEPHONE: +47 21 63 20 00 OFFICES IN NORWAY BERGEN - BODØ - DRAMMEN - FREDRIKSTAD - HAMAR - HARSTAD HAUGESUND - KRISTIANSAND - OSLO/LYSAKER (HEAD OFFICE) SANDEFJORD - SKIEN - STAVANGER - TROMSØ - TRONDHEIM - ÅLESUND OFFICES IN SWEDEN GOTHENBURG - MALMØ - STOCKHOLM - UMEÅ OFFICES IN DENMARK COPENHAGEN - VEJLE 17