SAVINGS BANKS GROUP FINLAND Presentation 2016
CONTENTS Basic information, values and strategy Savings Banks Group
SAVINGS BANKS GROUP Basic information, values and strategy
SUMMARY OF THE SAVINGS BANKS GROUP The Savings Banks Group is the oldest banking group in Finland consisting of 23 Savings Banks as well as entities providing products and services to the Savings Banks The Savings Banks Group The Group has close to 0.5 million customers and about 150 branch offices across Finland The main focus is on retail customers which comprise 72 % of lending and is predominantly in form of mortgages. Other target groups include SMEs (19 % of lending) and agricultural customers (9 % of lending) The Group has around 5 % market share in household lending and close to 6 % market share in household deposits. The market shares have been growing steadily over the past years At the close of 2015, the Savings Banks Group had 1,230 employees (1,161 people) The Amalgamation of Savings Banks 23 Savings Banks, CBSBF and their central institution Union Coop together with certain other product and service companies form the Amalgamation of Savings Banks (as laid down in The Amalgamations Act) Under the Amalgamations Act, Savings Banks, CBSBF and the Union Coop are jointly and severally liable for each others debts and commitments The Group s earnings before taxes amounted to EUR 69.7 mln in 2015 and return on equity was 6.7 %. Total assets were EUR 9.2bn at the end of 2015 Solid financial position Rating High quality loan book consisting mainly of residential mortgages and low loan loss impairments of 10 bps in 2015 Large and stable deposit base of EUR 5.9 bln comprising the largest part of the Group s funding Strong capital position reflected by CET 1 ratio of 17.8 % and total capital ratio of 18.8 % at the end of 2015 Solid leverage ratio of 9.6 % at the end of 2015 (Total Equity / Total Assets) Standard & Poor's has assigned BBB+/A-2 long- and short-term counterparty credit ratings to CBSBF CBSBF is the central credit institution of Savings Banks Group, and the ratings therefore reflect the wider Group's franchise and creditworthiness 1
FINLAND S OLDEST BANKING GROUP PART OF SOCIETY FOR MORE THAN 190 YEARS The first Savings Bank established in Turku on 4 January 1823 Established for people of limited means, taught thrift First operator to provide banking services to everyone Motivation: to promote the wellbeing of the individual and the community The promotion of saving is stated in the Savings Bank Act 2
OUR SIGNIFICANCE IN FINNISH SOCIETY CUSTOMER We understand the consumer s financial situation, offer solutions and expertise for handling everyday finances and for managed prosperity. SAVING We help people in the comprehensive management of finances, with the focus on saving. COMMUNITY It is important for us to promote the prosperity of the local community in our areas of operation. 3
CUSTOMERS PLAY A ROLE IN THE ADMINISTRATION OF SAVINGS BANKS Meeting of Savings Bank Trustees - Depositor customers and any equity capital shareholders - Selects the bank s Board of Directors Savings Bank Ltd annual general meeting - Savings bank trust uses power of decision - Trust represented by its Board - Selects the bank s Board of Directors Board of Directors - Steers and directs the bank s operation - Defines direction and decides on strategy and business goals - Selects Managing Director 4
OUR MISSION: SAVINGS BANKS PROMOTE SAVING AND THEIR CUSTOMERS FINANCIAL WELLBEING CLOSE TO THE CUSTOMER. 5
THIS IS WHAT WE ARE We promote saving and our customers financial wellbeing close to the customer We develop long-term customer relationships and provide solutions based on individual needs We are of exactly the right size We cherish our long history and safeguard its continuity We anticipate changes in customers service requirements We operate locally and close to people We help our customers prosper 6
THIS IS HOW WE OPERATE We offer a unique Savings Bank experience in all customer contact points We coach our customers in financial matters by offering tools for better management of their finances We know our customers and offer solutions for their banking needs We are doing just as well as the community surrounding us We are here for the customer, not the owner We are not seeking a quick profit Responsibility is part of everything we do: our funds operate responsibly and some of our profits are donated to local causes 7
Customer-drivenness Cooperation Reliability Performance OUR VALUES We listen to the customer and meet our customers in a unique way based on the customer's individual needs. Our cooperation with customers, personnel, Savings Banks and partners is open, genuine and conducive to growth. We regenerate and reform our operations. We conduct our business professionally and reliably. We exist for the customer and the local community. Our profitability and growth ensure the development of customer services and the vitality of our operational environment. 8
SAVINGS BANKS GROUP A new era
STEPS TAKEN TO ENSURE OUR COMPETITIVENESS First Savings Banks established in Finland 1822 Strategy work, long-term goal setting (2011-2012) Sp-Life Insurance Company s shares bought from Lähivakuutus, 100 % ownership to Savings Banks The Amalgamation of Savings Banks effective from 31.12.2014 Inaugural EUR senior benchmark issue Financial management service established (2012) Acquisition of Itella Bank to build up Savings Banks Central Bank Decision to form Amalgamation of Savings Banks on 13.1.2014 Establishme nt of EMTN Programme of Central Bank of Savings Banks S&P Rating BBB+/A-2, Stable outlook 2000 2010 2012 2013 2014 2015 Establishment of Sp-Fund Management Company (2003) and Sp-Life Insurance (2007) Real Estate franchising Sp-Home established (2010) Aktia Bank terminates issuance of new mortgage loans governed by Aktia Mortgage Bank to Savings Banks customers Aktia Bank s notice of termination of the Central Bank agreement Discussions commenced among Savings Banks on how to ensure competitiveness in the future Savings Banks mortgage loans transferred back to own assets from Aktia Mortgage Bank Sp-Mortgage Bank s licence application pending 9
STRUCTURE OF THE SAVINGS BANKS GROUP Member Savings Banks Retail banking operations Savings Banks Union Coop Central institution for the Amalgamation Strategic steering Risk management Supervision JOINT AND SEVERAL LIABILITY Central Bank of Savings Banks Finland Plc Central Bank operations Senior unsecured funding Sp-Mortgage Bank Plc Mortgage Bank business Entity to be established THE AMALGAMATION Sp-Fund Management Company Fund management Back Office companies Support functions Sp-Life Insurance Ltd Life insurance Sp-Koti Ltd Real estate agency Säästöpankkien Holding Strategic holdings THE SAVINGS BANK GROUP Associated companies Samlink (IT Services) Aktia Mortgage Bank 10
WE OFFER COMPLETE SERVICE PACKAGE Savings and investments Day-to-day banking Financing Insurance Savings and fixedperiod accounts Savings Banks Saving and life insurance Sp-Life Insurance Company Funds and asset management Sp-Fund Management Company Book-entry securities Savings Banks SEB Securities trade Account operator Nooa Savings Bank Broker S-Bank Branch and online services Savings Banks Debit and credit cards Savings Banks Central Bank of Savings Banks Nets ATMs and cash services Automatia Oy Clearing and settlement Central Bank of Savings Banks Asset loans Savings Banks Mortgage bank loans Sp-Mortgage Bank (to be established) Aktia Mortgage Bank Loan payment protection insurance Sp- Life Insurance Company Capital financing products Siemens Financial Services Risk Life insurance Sp-Life Insurance Company Non-life insurance Finnish P&C Insurance Statutory pension insurance ELO Pension Insurance company 11
THE SAVINGS BANKS GROUP OPERATES COUNTRY-WIDE A group of 23 financially solid Savings Banks as well as collectively owned product and service companies The Group operates across Finland and offers its customers a complete package of financial products and services Total assets of EUR 9.2bn, loans to customers EUR 6.3bn and total deposits of EUR 5.9bn 470,000 customers, with main focus on private customers (72 % of lending), small and medium sized businesses (19 %) and agricultural and forestry customers (9 %) Savings Banks customers have access to: 3 rd largest branch network of about 150 branches 200 automated service and payment points Online banking via net bank and mobile bank A part of European Savings Banks network (ESBG) Representing 887 savings banks in 21 countries 12
THE SAVINGS BANKS GROUP S KEY FIGURES 2015 (2014) Earnings before taxes Net interest income EUR 69.7 million (EUR 63.1 mln) EUR 125.0 million (EUR 122.0 mln) Cost-to-income Cost-to-income ratio 63.4% (64.2%) Impairments Capital adequacy Loans and receivables Total assets Personnel Loan loss impairments represent 10 bps of the loan portfolio (19 bps) The capital ratio of the Savings Banks Amalgamation 18.8% (18.6%), the CET1 capital ratio 17.8% (16.9%) EUR 6.3 billion (EUR 5.6 bln) EUR 9.2 billion (EUR 8.4 bln) At the close of 2015, the Savings Banks Group had 1,230 employees (1,161 people) 13
STRONG DEVELOPMENT IN MARKET SHARES Market share development of Savings Banks Group in different segments Sources: The Bank of Finland Deposits Mutual Funds Saving insurances Loans * Market shares including households and non-profit organisations **Market share for mutual funds is including funds which are registered in Finland and excluding funds which are in Savings Banks own investments 14
CUSTOMER-DRIVENNESS IN PRACTICE Most of our personnel s working hours are spent with customers All necessary services and products are available As a developer of customer encounters, we are an innovative forerunner We are present where our customers want us to be For customers: excellent accessibility, convenience, solutions for managing their finances according to their needs 15
RESEARCH* SHOWS THAT WE HAVE A GREAT CUSTOMER EXPERIENCE IN FINLAND = SAVINGS BANK EXPERIENCE Customer encounter We know our customers individual needs and create unique customer encounters regardless of time and place. Safeguarding financial wellbeing We understand the customers financial situation and help them in the comprehensive management of finances. Prosperity We offer solutions for managed prosperity, with the focus on saving. Responsibility We adopt an active role in our areas of operation in order to promote the prosperity and wellbeing of the customer and the local community. *Customer index 2015 16
RESPONSIBILITY EVERY STEP OF THE WAY We treat our customers equally, finance the operation of local businesses, and promote awareness of saving and use of money. We share our profit to support the wellbeing of the local community, growth and the development of customer services We do not grant excessive loans that our customers cannot manage or that force them to keep too tight a budget We support the local culture and cooperate with schools and educational institutions We are also a sponsor We actively promote the wellbeing of the local community 17
THE BASES FOR THE FUTURE The core of our operations is low-risk retail banking. Our products and services are available both at physical branch offices and through supporting electronic channels. From us, you can get all retail banking products and services, part of which are provided by partners sharing our values. Digitalisation and online banking open up new opportunities. 18
THE GOALS OF TOMORROW Outstanding customer satisfaction and loyalty The most apt multitalents of the digi age in the finance sector Profitable, sustainably growing and more able to bear a risk More and more Finns choose us as their primary bank Stable and reliable investment alternative Appealing brand 19
THANK YOU! www.saastopankki.fi
SAVINGS BANKS GROUP Appendices
STRONG UNDERLYING BUSINESS PERFORMANCE Income statement 2015 2014 Change, % EUR 1,000 Net interest income 125 018 122 022 +2.5% Net commissions and fees 68 850 63 490 Net trading income -1 350 602 Net investment income 20 526 23 417 Net income from Life Insurance 15 178 9 876 Other operating income 2 309 4 497 Total net income 230 531 223 903 +3.0% Expenses -156 865-152 981 Impairment losses on receivables -6 127-10 619 Share of the profit of associated companies 2 160 2 834 Profit before tax 69 699 63 137 +10.4% Tax -12 080-16 527 Net profit 57 619 46 619 +23.6% Key points, 2015 vs. 2014 Net interest income grew by 2.5% Total net income grew by 3% Net income from Life Insurance was EUR 15.2 mln (9.9 mln) Life insurance premium income grew by 46.2% to EUR 148.8 million (EUR 101.9 million) Fund capitals managed by the Group grew to EUR 1.6 billion (EUR 1.2 billion). Taking into account the assets managed in accordance with asset management agreements, the total assets managed amounted EUR 2.2 billion (EUR 1.5 billion). Profit before tax totalled EUR 69.7 million and represented 23.4% of revenue (EUR 63.1 million, 21.4%). Its growth was 10.4% from the comparison period. Net profit was up by 23.6%
STRONG CAPITAL ADEQUACY AND CAPITAL BASE Capital position of the Amalgamation of Savings Banks was at a very strong level at the end of 2015 Tier 2 capital base amounted to EUR 49.7 million and total capital base was EUR 874.3 million Own funds (EUR million) 31.12.2015 31.12.2014 31.12.2013 Common Equity Tier 1 (CET1) before adjustments 849.8 796.8 698.2 Regulatory adjustments to CET1-25.3-59.2-53.2 Common Equity Tier 1 (CET 1) capital 824.5 737.6 645.0 Additional Tier 1 (AT1) capital 0 0 0 Tier 1 capital (T1 = CET1 + AT1) 824.5 737.6 645.0 Tier 2 (T2) capital before regulatory adjustments 44.8 26.9 195.8 Tier 2 capital 49.7 76.8 159.1 Total capital (TC = T1 + T2) 874.3 814.3 804.1 CET1 ratio was 17.8% and total capital ratio was 18.8 % Capital adequacy will be kept at strong levels also going forward Capital ratios 31.12.2015 31.12.2014 31.12.2013 Common Equity Tier 1 ratio, % 17.8 % 16.9 % 15.8 % Tier 1 ratio, % 17.8 % 16.9 % 15.8 % Total capital ratio, % 18.8 % 18.6 % 19.6 %
THE SAVINGS BANKS GROUP S STRATEGY IN BRIEF Our target: more prominent position and bigger role as an operator in Finland, with an increasing number of Finns choosing us as their primary bank. Based on a close relationship with their customers, the fundamental task of the Savings Banks is to promote saving and the financial well-being of their customers. The Savings Banks experience Differentiation Being there for the customer Availability Personal finance Local community Business model Outcome Creators of added value Enablers Initiators Visions & Goals: Customer, Business, Market Share, Image, Risk Management, Employees, Profit Analysis of business and organisational requirements Megatrends in the operating environment
THE AMALGAMATION OF SAVINGS BANKS The Amalgamation of Savings Banks is an amalgamation defined in the Act on the Amalgamation of Deposit Banks ( Amalgamations Act, Laki talletuspankkien yhteenliittymästä 599/2010). Under the Amalgamation Act, the Union Coop as the central institution has the obligation to supervise the operations of the member credit institutions and issue instructions to them on risk management, good corporate governance and internal control to secure liquidity and capital adequacy, as well as instructions on compliance with uniform accounting policies in the preparation of the amalgamation's consolidated financial statements. The Union Coop may confirm general operating policies for the member credit institutions to be followed in their operations that are significant for the Amalgamation. The minimum capital requirement and liquidity of the companies within the Amalgamation of Savings Banks is controlled on a consolidated basis.
CENTRAL BANK OF SAVINGS BANKS FINLAND PLC Became the Central Bank of Savings Banks in 2013 Wholly owned by Savings Banks Personnel: 23 The main emphasis of operations is on the Savings Banks central credit institution functions: Management of the Savings Banks Group s liquidity Short- and long-term funding Savings Banks payment traffic Card issuing services Other centralised services, such as management of interest subsidised housing loans
THE ROLE OF THE CENTRAL BANK IN THE AMALGAMATION Payment traffic Savings Banks Group Central Bank of Savings Banks ECB operations Shortterm funding Capital markets Longterm funding Counterparties Investors The Central Bank sees to the Group s liquidity management, settlements and the optimisation of treasury operations. If offers diverse Treasury services to the Savings Banks Group Responsible for the liquidity and funding of the Group Implements the Savings Banks Group s liquidity strategy Operates in the money and capital markets If necessary, acts as the Lender of Last Resort for the Group
SP-FUND MANAGEMENT COMPANY LTD IN BRIEF Own portfolio management since 2011 and asset management licence in 2012 Managed capital in funds exceeds EUR 1.6 billion and in individual asset management amounts to approximately EUR 0.6 billion Over 140,000 unit holders The sixth largest fund management company in Finland when measured in the number of customers Personnel 30 Established in 2003 Owned by Savings Banks Manages 18 funds
SB LIFE INSURANCE LTD Domestic life insurance company Personnel: approx. 30 Domestic, wholly owned by Savings Banks (Oma Savings Bank owns approx. 20%) Established in 2007 under the name Henkivakuutusosakeyhtiö Duo, the name changed to Sb Life Insurance Ltd in 2014 Local service and long-term partnership offered through the sales channel A clear service function A key part of the Savings Banks service range Services designed for domestic private persons and companies 33
LIFE INSURANCE SERVICES AND PRODUCTS Risk insurance Insurance saving Loan insurance Death Permanent incapacity for work or Permanent incapacity for work caused by accident Permanent handicap caused by accident Unemployment Loan insurance for companies 1 2 key persons Death Permanent handicap caused by accident Savings insurance Asset management policy Pension insurance Pension insurance for companies Group pension insurance Capitalisation agreement Capitalisation agreement with asset management 34
APARTMENTS AND PROPERTIES FROM THE SP-KOTI CHAIN Started real estate agency operations in 2011 Real estate agency chain operating with a franchising principle, with the network consisting of independent local entrepreneurs Sp-Koti Oy, the central unit of the chain, is owned by independent Savings Banks Measured by offices and housing units sold, it is the fourth largest real estate brokerage chain in Finland In 2015: Sp-Koti included 35 companies, one own unit and seven entrepreneurs using a trading name Over 150 employees Over 50 offices Over 2,600 transactions (2015)
SAVINGS BANKS ASSOCIATION COOPERATIVE THE SAVINGS BANKS CENTRAL INSTITUTION Established in 1906, changed into a cooperative in 2014. Ensures the Group s competitiveness and operating conditions. Acts as the central institution of the Savings Banks Amalgamation pursuant to the Act on the Amalgamation of Deposit Banks. Cooperates with domestic and foreign banking organisations. Obligated to supervise the operations of member credit institutions and to provide guidance to safeguard liquidity and capital adequacy. Takes care of the Savings Banks common business development, training, marketing, communications and safety. Sees to the Amalgamation s risk management. Prepares the Group s financial statements. Maintains contact with authorities and exercises influence with regard to the conditions for banking and related legislation.
SAVINGS BANKS RESEARCH FOUNDATION Established in 1968 to support research and publishing activities related to money markets and saving. The foundation s goal is to support research related to money markets and to safeguard the history of the Savings Bank s operations.