SPAREBANKEN VEST BOLIGKREDITT INTERIM REPORT Q1 2018
Income statement Notes 01/01-18 - 31/03-18 01/01-17 - 31/03-17 2017 Interest income and similar income 481 396 1 671 Interest expenses and similar expenses 258 250 944 Net interest and credit commission income 2 222 146 726 Commission expenses and expenses relating to banking services 13 106 69 344 Net gain/(loss) on financial instruments 3-27 - 59-163 Other operating income 0 0 0 Net other operating income - 133-128 - 507 Net operating income 89 17 220 Payroll and general administration expenses 3 2 11 Other operating expenses 1 0 3 Total operating expenses 4 4 3 14 Profit before write-downs and tax 85 14 206 Write-downs and losses on loans and guarantees 6 0 1 6 Pre-tax profit/loss 85 13 199 Tax expenses 20 3 49 Profit for the period 65 10 150 Profit/diluted profit per share 14,2 1,4 36,1 Statement of comprehensive income 01/01-18 - 31/03-18 01/01-17 - 31/03-17 2017 Profit for the period 65 10 150 Changes in fair value of financial instruments classified at fair value through OCI - 7 0 0 Taxes on items in other comprehensive income 2 0 0 Total profit for the period 60 10 150 2
Balance Sheet Notes 31/03-18 31/03-17 31/12-17 Assets Loans to and receivables from credit institutions 8 2 091 4 528 2 928 Loans to customers 5,6,7 76 366 60 165 76 351 Commercial papers and bonds 1 444 2 918 1 674 Deferred tax asset 63 3 31 Financial derivatives 3 106 3 032 3 956 Total assets 83 069 70 646 84 940 Liabilities and equity Liabilities to credit institutions 9 11 796 5 830 14 623 Securitised debt 10 65 660 60 198 64 711 Financial derivatives 4 198 38 Tax liabilities 67 28 71 Subordinated loan capital 500 500 500 Other liabilities 38 60 41 Total liabilities 78 065 66 814 79 984 Share capital 4 250 3 250 4 250 Total paid-in capital 4 250 3 250 4 250 Reserve for unrealised gains 1 1 1 Other equity 176 5 129 Hybrid capital 576 576 576 Total equity 5 003 3 832 4 956 Total liabilities and equity 83 069 70 646 84 940 Bergen, 31.03.2018/08.05.2018 Board of directors for Sparebanken Vest Boligkreditt AS Frank Johannesen, chairman Åsmund Bjørndal Heen Inga Lise Moldestad Egil Mokleiv, CEO 3
Statement of cash flows 01/03-18 - 31/03-18 01/03-17 - 31/03-17 2017 Cash flow from operations Interest, commission and customers fees received 477 369 1 584 Interest, commission and customers fees paid - 110-69 - 329 Interests received on other investments 11 10 62 Interests paid relating to bond debt - 266-302 - 995 Payments to other suppliers for goods and services - 1-1 - 5 Salaries and fees - 3-2 - 9 Payment of taxes - 53-124 - 150 Net cash flow from operations 56-119 158 Cash flow from investment activities Net growth in lending - 132-1 497-17 694 Payments made/received on loans to customers 221-1 180 51 Net cash flow from investment activities 89-2 677-17 643 Cash flow from financing activities Payments made/received on deposits from financial institutions - 2 822-67 8 692 Payments received related to issuing bond debt 4 829 5 955 16 442 Payments made relating to redemption of bond debt - 2 989-2 359-9 517 Payments received related to issuing of new shares 0 0 1 000 Payments of dividends/ group contributions 0-322 - 322 Net cash flow from financing activities - 982 3 207 16 295 Net cash flow for the period - 837 411-1 190 Net change in cash and cash equivalents - 837 411-1 190 Cash and cash equivalents at beginning of period 2 928 4 117 4 117 Cash and cash equivalents at end of period 2 091 4 528 2 928 4
Equity movements Share capital Other equity Reserve for unrealised gains Hybridcapital Equity at 31/12-2016 3 250 322 1 576 4 149 Profit/loss for the period 4 5 10 Distributed dividend - 322-322 Interest paid on hybrid capital - 7-7 Tax on interest on hybrid capital, directly against equity 0 2 2 Equity at 31/3-2017 3 250 5 1 576 3 832 Sum Equity at 31/12-2016 3 250 322 1 576 4 149 Profit 2017 129 0 21 150 Issuance of share capital 25 June 2017 250 250 Issuance of share capital 04 October 2017 750 750 Distributed dividend - 322-322 Interest paid on hybrid capital - 28-28 Tax on interest on hybrid capital, directly against equity 7 7 Equity at 31/12-2017 4 250 129 1 576 4 956 Profit/loss for the period 60 5 65 Other comprehensive income - 5-5 Implementation of IFRS 9-8 - 8 Distributed dividend 0 Interest paid on hybrid capital - 7-7 Tax on interest on hybrid capital, directly against equity 0 2 2 Equity at 31/3-2018 4 250 176 1 576 5 003 Equity as of 31/3-18 makes up NOK 4.250 millions distributed on 4.250.000 shares with nominal value NOK 1.000. All shares are owned by Sparebanken Vest. Notes Note 1 Accounting principles The accounts for the first quarter 2018 were prepared in accordance with IAS 34. The accounting principles are described in the annual report for 2017. IFRS 9 was implemented from 1 January 2018. Refer to specific notes in the annual accounts for 2017: The interim accounts have not been audited. All amounts are stated in NOK million unless stated otherwise. Note 27 Description of IFRS 9 Note 28 Description of the impairment model under IFRS 9 Note 29 Transition from IAS 39 to IFRS 9 5
Note 2 Net interest and credit commission income 01/01-18 - 31/03-18 01/01-17 - 31/03-17 2017 Interest and similar income from loans to and receivables from credit institutions valued at amortised cost 6 10 30 Interest and similar income from loans to and receivables from customers valued at amortised cost 357 338 1 405 Interest and similar income from loans to and receivables from customers valued at fair value 113 38 207 Interest and similar income from commercial papers, bonds and other interest-bearing securities 4 10 28 Interest income and similar income 481 396 1 671 Interest and similar expenses on debt to credit institutions 44 18 85 Interest and similar expenses on issued securities 211 228 845 Interest and similar expenses on subordinated loan capital 3 4 14 Interest expenses and similar expenses 258 250 944 Net interest and credit commission income 222 146 726 Note 3 Net gains on financial instruments 01/01-18 - 31/03-18 01/01-17 - 31/03-17 2017 Net gains (losses) on fixed interest rate mortgages - 110 5-18 Net gains (losses) related to interest swaps for fixed interest rate mortgages 85-9 - 19 Net gains/(losses) on commercial papers and bonds - 5 3 0 Net gain/(loss) on financial instruments designated for hedge accounting 5-58 - 126 Of which gain/loss related to basisswaps 0-54 - 113 Other gains (losses) - 2 0 0 Net gains (losses) - 27-59 - 163 Note 4 Operating expenses 01/01-18 - 31/03-18 01/01-17 - 31/03-17 2017 Fees 2 2 9 Administration expenses 0 0 2 Total 3 2 11 Rating expenses 1 0 2 Other operating expenses 0 0 1 Total other operating expenses 1 0 3 Total 4 3 14 6
Note 5 Classification of financial assets and liabilities The following table shows the classification of financial assets and liabilities under IFRS 9 on the balance sheet date. Financial assets Fair value through profit or loss Hedge accounting Amortised cost Total book value Loans to and receivables from credit institutions 0 0 2 091 2 091 Loans to and receivables from customers 16 077 0 60 289 76 366 Certificates and bonds 1 444 0 0 1 444 Financial derivatives 47 3 059 0 3 106 Total financial assets 17 568 3 059 62 380 83 007 Financial commitments Deposits from and debt to credit institutions 0 0 11 796 11 796 Securitised debt 0 38 847 26 813 65 660 Financial derivatives 4 0 0 4 Subordinated loan capital 0 0 500 500 Total financial liabilities 4 38 847 39 109 77 960 7
Note 6 Write-down on loans, guarantees, unused credit facilities and loan approvals Changes in write-downs under IFRS 9 on loans, guarantees, unused credit facilities and loan approvals Calculated by model Total calculated by model losses Individually assessed Stage 1 Stage 2 Stage 3 Stage 3 Total Loss provision under IAS 39 at 31 Dec. 2017 17 Implementation effect, IFRS 9 11 Loss provision in opening balance, IFRS 9, at 1 January 2018 3 11 6 20 8 28 Transferred to 12-month ECL (Stage 1) 2-2 0 0 0 0 Transferred to lifetime ECL no objective evidence of loss (Stage 2) 0 1 0 1-1 0 Transferred to lifetime ECL objective evidence of loss (Stage 3) Calculated by model 0 0 0 0 0 0 Transferred to lifetime ECL objective evidence of loss (Stage 3) Individually assessed 0 0-1 -1 1 0 Net new measurement of losses -2 2 1 0 0 0 Newly issued or acquired financial assets 0 0 0 1 0 0 Financial assets derecognised 0-1 -1-2 0-2 Reversal of write-downs as a result of confirmed losses 0 0 0 0 0 0 Currency effects and other changes 0 0 0 0 0 0 Loss provision at 31 March 2018 3 11 5 19 7 27 Loan loss provision 3 11 5 19 7 27 Provision for guarantees, unused credit facilities and loan approvals 0 0 0 0 0 0 Total loss provision 3 11 5 19 7 27 Gross lending recognised at amortised cost, allocated to different stages at 1 Jan. 2018 55 217 1 668 75 56 960 23 56 983 Gross lending recognised at amortised cost, allocated to different stages at 31 March 2018 58 070 2 164 53 60 287 29 60 316 Loss cost for the period: Changes in individual write-downs for the period Currency gain and other changes 0 Confirmed loss in the period with previous individual write-down 0 Confirmed loss in the period with no previous individual write-down 0 Recoveries in previously confirmed write-downs 0 Net effect on profit/loss from individual write-downs 0 Changes in losses for the period, calculated by model (Stage 1 3) 0 Loss cost for the period 0 Gross lending recognised at amortised cost at 31 March 2018 60 316 Loss write-down -27 Net lending recognised at amortised cost in the balance sheet 60 289 Loans valued at fair value 16 077 Capitalised lending at 31 March 2018 76 366 In line with IFRS 9, Sparebanken Vest Boligkreditt AS groups its loans into three stages based on the probability of default (PD) at the time of recognition compared with the balance sheet date, and checking the watch list, forbearance and instalments paid more than 30 days after the due date. In other words, each individual loan (or commitment) is classified as Stage 1, 2 or 3. All commitments recognised at amortised cost are included in the model. Stage 1 is the starting point for financial assets covered by the general loss model, for which a provision will be made corresponding to 12-month expected losses. Stage 2 includes assets for which the credit risk has increased significantly since initial recognition, but where there is no objective evidence of a loss. Commitments at Stage 1 and 2 are assessed at portfolio level (calculated by model). Stage 3 of the model includes assets for which the credit risk has increased significantly since initial recognition, and where there has been objective evidence of a loss event on the balance sheet date. They are divided into loans that have been individually assessed and loans assessed at portfolio level (calculated by model). Transfer between the stages shows how much of expected credit losses in the opening balance have migrated from the other stages. The effect of the new measurement method and new calculation in the quarter is presented on the line Net new measurement of losses. Confirmation of the loss write-down (booked against the customer s commitment) takes place when all security has been realised and it is certain that the company will receive no further payments on the loan. The claim on the customer remains and will be followed up, unless it has been agreed with the customer that the loan is to be written off. Write-downs of guarantees, unused credit facilities and loan approvals include off-balance sheet items and are recognised as debt obligations in the accounts. Reference is made to the description of IFRS 9 in Notes 27 and 28 to the 2017 annual accounts for more information about the impairment model. 8
Note 7 Loans to customers Distribution of loans by type of receivables 31/03-18 31/03-17 2017 Overdraft facilities 14 244 14 549 14 323 Instalment loans 62 148 45 628 62 045 Gross loans to customers 76 392 60 177 76 367 Individual write-downs on loans - 7-5 - 8 Write-downs calculated by model - 19-7 - 9 Net loans to customers 76 366 60 165 76 351 Net loans distributed by main industries and retail market Retail customers 75 202 59 329 72 549 Foreign (retail clients) 0 51 82 Total - commercial sector 1 099 797 3 736 Total gross loans 76 392 60 177 76 367 Age distribution of loans in default 31/03-18 31/03-17 2017 Up to 30 days 17 157 31 31-60 days 91 43 44 61-90 days 21 9 4 More than 90 days 62 44 65 Total 190 253 143 Note 8 Loans to and receivables from credit institutions Loans to and receivables from credit institutions are classified at amortised cost and the counterpart is Sparebanken Vest (see note 13). There is no agreed maturity date or period of notice. Liquidity Coverage Ratio (LCR) amounted to 503% per 31/03-2018. Note 9 Liabilities to credit institutions Liabilities to credit institutions is classified at amortised cost, and is mainly liability to Sparebanken Vest (see note 13). Liability to Sparebanken Vest has a maturity of 13 months. 9
Note 10 Securitised debt Covered bonds ISIN CODE Currency Nominal value Interest Issue Maturity year 31/03-18 31/03-17 31/12-17 NO0010583966 NOK 0 Floating 3M Nibor + 0,55 % 2010 2017 0 2 075 0 NO0010585128 NOK 0 Fixed 4,05 % 2010 2017 0 1 300 0 NO0010607237 NOK 1 100 000 Fixed 5,20 % 2011 2021 1 100 1 100 1 100 NO0010622012 NOK 500 000 Fixed 4,96 % 2011 2022 500 500 500 NO0010634546 NOK 500 000 Fixed 4,50 % 2012 2027 500 500 500 XS0742398547 EUR 0 Fixed 2,125 % 2012 2017 0 3 118 0 NO0010646078 NOK 771 000 Floating 3M Nibor+0,67 % 2012 2018 771 4 000 3 750 XS0800025214 EUR 0 Floating 3M Euribor+0,51% 2012 2017 0 412 0 XS0969571065 EUR 500 000 Fixed 1,50 % 2013 2018 4 025 4 025 4 025 XS0971164743 EUR 70 000 Floating 3M Euribor+0,15% 2013 2018 561 561 561 NO0010695075 NOK 5 000 000 Floating 3M Nibor+0,42% 2013 2019 5 000 5 000 5 000 XS1015552836 EUR 500 000 Fixed 1,25 % 2014 2019 4 215 4 215 4 215 XS1014861253 EUR 10 000 Fixed 2,25 % 2014 2024 84 84 84 XS1057728740 EUR 26 000 Floating 3M Euribor+0,28% 2014 2021 214 214 214 NO0010710841 NOK 1 000 000 Floating 3M Nibor+2,95% 2014 2020 1 000 1 000 1 000 XS1225004115 EUR 500 000 Fixed 0,25% 2015 2022 4 223 4 223 4 223 XS1294537458 EUR 500 000 Fixed 0,38% 2015 2020 4 619 4 619 4 619 XS1373992616 EUR 500 000 Fixed 0,125% 2016 2021 4 785 4 785 4 785 NO0010748338 NOK 5 000 000 Floating 3M Nibor+ 0,60% 2015 2020 5 000 5 000 5 000 NO0010777253 NOK 5 500 000 Floating 3M Nibor + 0,53% 2016 2021 5 500 5 500 5 500 XS1550166554 GBP 50 000 Floating 3M GBP Libor + 0,38% 2017 2022 521 521 521 XS1565074744 EUR 500 000 Fixed 0,375 % 2017 2024 4 421 4 421 4 421 NO0010798044 NOK 5 500 000 Floating 3M Nibor + 0,40% 2017 2022 5 500 0 5 500 NO0010805179 NOK 5 000 000 Floating 3M Nibor + 0,42 2017 2023 5 000 0 5 000 XS1781811143 EUR 500 000 Fixed 0,750 % 2018 2025 4 829 0 0 Adjustments 3 292 3 025 4 194 Total securities issued 65 660 60 198 64 711 Financial derivatives to hedge securities debt (liabilities) 0 194 0 Financial derivatives to hedge securities debt (assets) - 3 059-3 025-3 956 Sum liabilities with preference on cover pool 62 601 57 367 60 755 Covered pool 30/03-18 30/03-17 31/12-17 Mortgages 1) 76 118 59 678 75 870 Commercial Papers and bonds 1 444 2 918 1 674 Supplementary assets 1 033 3 213 820 Total collateralised assets 78 595 65 809 78 364 Overcollateralisation in the cover pool. 126 % 115 % 129 % 1) NOK 248 million is not eligible for the cover pool. This amounts to 0,32 % of the cover pool. 10
Note 11 Capital adequacy In 2009 Sparebanken Vest Boligkreditt AS was given permission by the Financial Supervisory Authority of Norway to use internal methods to calculate credit risk (Internal Rating Based-method). The transitional scheme between the Basel I and the CRD IV regulations still apply. It stipulates that the risk-weighted volume cannot be reduced to less than 80 percent of the corresponding figure calculated pursuant to the Basel I regulations. As such, the Basel I regulations still represent a floor for minimum requirements for own funds. Risk-weighted volume 31/03-18 31/03-17 31/12-17 Credit risk IRB 14 484 10 637 13 518 Operational risk 844 967 844 Commitments under the standard method 1 617 1 822 1 457 Risk of impaired creditworthiness of the counterparty (CVA) 1 721 1 793 1 563 Total risk-weighted volume before transitional rules 18 666 15 219 17 382 Correction to the transitional arrangement 12 890 10 537 14 230 Total risk-weighted volume 31 557 25 756 31 612 Own funds Shareowner equity 4 250 3 250 4 250 Provision for unrealised gains/losses 1 1 1 Other equity 176 5 129 Total booked equity excluding hybrid capital 4 427 3 256 4 380 Deduction for expected losses IRB -149-114 -149 Fair value adjustments -18-9 -21 Year-to-date profit not included in core capital -56 0 0 Deductions for year-to-date profit not included in core capital -129-6 -129 Common Equity Tier 1 capital 4 076 3 127 4 081 Additional Tier 1 capital 575 575 575 Total Tier 1 capital 4 651 3 702 4 656 Tier 2 instruments 500 500 500 Own funds 5 151 4 202 5 156 Common Equity Tier 1 capital 12,9 % 12,1 % 12,9 % Additional Tier 1 capital 1,8 % 2,2 % 1,8 % Supplementary capital 1,6 % 1,9 % 1,6 % Capital adequacy, transitional scheme 16,3 % 16,3 % 16,3 % Common Equity Tier 1 capital 21,8 % 20,5 % 23,5 % Additional Tier 1 capital 3,1 % 3,8 % 3,3 % Supplementary capital 2,7 % 3,3 % 2,9 % Capital adequacy, Basel II fully implemented 27,6 % 27,6 % 29,7 % Minimum requirements Minimum requirement own funds, 8% 2 525 2 060 2 529 Surplus own funds 2 626 2 142 2 627 of which surplus Core Tier 1 capital to meet buffer requirement 2 525 1 954 2 525 Buffer requirement Conservation buffer, 2.5% 789 644 790 Systemic risk buffer, 3% 947 773 948 Countercyclical buffer, 2,0% 631 386 632 2 367 1 803 2 371 Surplus Core Tier 1 capital 158 151 154 11
Note 12 Leverage ratio 31/03-18 31/03-17 31/12-17 Balance sheet items 83 069 70 646 84 940 Off-balance sheet items 3 226 3 075 3 176 Regulatory adjustments -166-122 -170 Other adjustments to the calculation (leverage ratio) 1 651 505-444 Calculation basis for leverage ratio 87 780 74 104 87 502 Core Capital 4 651 3 702 4 656 Leverage ratio 5,3 % 5,0 % 5,3 % Note 13 Transactions with related parties Sparebanken Vest Boligkreditt AS is a wholly owned subsidiary of Sparebanken Vest. The parent company is defined as a related party in relation to the accounting standard regarding related party disclosures. All intra-group transactions are conducted in conformity with normal commercial terms and principles. Total intra-group transactions (NOK 1000) 31/03-18 31/03-17 31/12-17 Profit and Loss Interest and credit commission received from related parties 4 10 27 Interest paid on related parties' deposits - 44-18 - 86 Interest on subordinated debt - 3-2 - 42 Interest on covered bonds - 2 0-1 Wages/fees - 2 0-9 Management fee - 106-69 - 342 Balance Sheet Loans to related parties 2 091 4 528 2 928 Debt to related parties 10 515 4 506 13 016 Subordinated debt 500 500 500 Hybrid instruments classified as equity 576 576 576 12
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