Full-year 2 TIME FOR CUSTOMERS 9 February 211
Performance compared to guidance Core earnings before impairment Guidance: DKK 8-1,m. Revised guidance (/9/3): DKK 9-1,m. Performance: DKK 933m. Impairment of loans etc. Guidance: 1. 1.25 percent of loans and guarantees. Revised guidance (/6/3): approx. 1. percent of loans and guarantees Performance:.99 percent (DKK 454m.) Costs Guidance: Zero-growth in 2 and 211 Performance: Zero-growth in 2 achieved 2
Macroeconomics and market trends: Cautious return to growth Danish GDP growth driven by export Investments and consumption still at moderate level moderate demand for financing Unemployment stabilised household customers have made through the crisis well Continued challenges for several industries 3
Full-year key performance indicators NII under pressure High customer activity net fee income at record level Zero-growth in costs achieved Declining impairment charges Satisfactory result before expenses regarding sector-targeted solutions SPAR NORD BANK Realized Realized 29 2 Change in pct. Net interest income 1.768 1.68-9 Netfees, charges and commissions 417 56 21 Market-value adjustments 34 268-12 Other income 86 12 39 Core income Ex. operational leasing 2.575 2.52-3 Earnings from operational leasing 49 74 49 Core income 2.624 2.575-2 Staff costs 915 948 4 Costs ex. depriciations from operational leasing 1.581 1.583 Depriciations from operational leasing 41 59 46 Total costs 1.621 1.642 1 Core earnings before impairment 1.3 933-7 Impairments of loans and advances, etc. 584 454-22 Core earnings 419 479 14 Investment income 17-22 Profit/loss on ordinary activities 436 457 5 Sector Fund -291-324 -11 Profit before tax 145 133-8 4
key performance indicators Share of sector-loss on Amagerbanken booked in (DKK 8m.) NII sustained at Q3-level Hike in interest level leads to reduction in market-value adjustments Extraordinary expenses relating to repurchase and resale of distressed structured bond -effect on impairment charges SPAR NORD BANK Realized Realized Change Q3 2 2 in pct. Net interest income 42 42 Netfees, charges and commissions 122 134 Market-value adjustments 78 3-62 Other income 23 46 3 Core income Ex. operational leasing 625 613-2 Earnings from operational leasing 26 6-75 Core income 651 619-5 Staff costs 21 242 2 Costs ex. depriciations from operational leasing 343 414 21 Depriciations from operational leasing 15 18 26 Total costs 358 432 21 Core earnings before impairment 294 187-36 Impairments of loans and advances, etc. 1 123 21 Core earnings 192 64-67 Investment income -9-3 64 Profit/loss on ordinary activities 183 61-67 Sector Fund -81-8 2 Profit before tax 1-18 -118 5
NII under pressure from different sides Reduced net interest income from bonds portfolio Higher interest expenses relating to hybrid core capital Pct. 6, 5,5 5, 4,5 4, Interest margin (DKK) (3 mth. moving ave.) 5,44 5,44 5,44 5,52 5,5 5,53 5,44 5,41 5,35 5,3 5,35 5,35 5,38 3,5 Low interest-level in general 3, Dec 9 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Net interest income and loans volume DKKb Net interest income 2.5 4,5 43,2 38,3 38,4 5 6 32,4 1.11 1.15 1.52 1.768 1.68 366 479 466 476 416 4 393 411 42 42 26 27 28 29 2 Net interest income Bank loans Q3 8 8 Q1 9 Q2 9 Q3 9 9 Q1 Q2 Q3 6
High activity level on housing loans and investment Netfees, charges and commissions Positive trend in pooled pension schemes and asset management Growth in service to institutional customers High activity in housing area Remortgaging Net provision of mortgage-loans: DKK 4.bn. Securities trading and custody accounts Q3 / : 8 pct. Assets management Q3 / : 17 pct. 2 55 Q3 / : pct. 417 56 8 128 122 122 134 9 Q1 Q2 Q3 9 Loan transaction fees Other fees, charges and commissions Q3 / : 2 pct. 2 Q3 / : -6 pct. 6 75 72 94 147 161 138 175 16 9 22 23 17 13 Q1 Q2 Q3 9 28 21 21 22 24 9 Q1 Q2 Q3 9 37 36 4 41 42 9 Q1 Q2 Q3 9 54 33 37 44 41 9 Q1 Q2 Q3 9 7
Market-value adjustments: A good year for bonds Market-value adjustments Growth in market-value adjustments in the Markets division primarily attributable to bonds Market-value adjustments on shares in sector-companies at satisfactory level, e.g. Danish Ship Finance, DLR Kredit and PRAS 35-15 192 284 168 255-83 26 27 28 29 2 Declining activity in customers hedging of interest risk and FX risk 29 2 Change Market-valued adjustments in Trading, Financial Markets & The International Division 136 147 11 Tangible assets 47 38-9 Currency trade and -agio 1 7-31 Total 284 255-29 8
Financial credit risk kept at low level 99 percent of bonds portfolio attributable to investment grade issuers No exposure to Portugal, Italy, Ireland, Greece or Spain Receivables from credit institutions markedly reduced AA 26% A 8% 2 BB 1% A 14% Not rated % 2 Not allocated 1% AAA 34% AAA 65% AA 41% Bonds shown by rating () * 29 2 AAA 7.19 8.97 AA 3.724 3.221 A 417 984 BBB 2 BB 123 CCC 11 CC 12 Not rated 2 Bonds 11.342 12.441 * Incl. spots and forwards Receivables from credit institutions shown by rating () 29 2 AAA 3.667 989 AA 739 1.213 A 113 4 BBB 1 Not rated 16 291 Not allocated 91 17 Receivables from credit institutions 4.626 2.921 9
Strong focus secures zero cost-growth Phase 1 (2) Approx positions cut General cost consciousness Management focus 2.5,63 Costs and Cost/Income ratio,71,65,62,64,8 Phase 2 (211-) Revision of work flows and processes Assessment of product portfolio Management focus 1.14 1.261 1.35 1.581 1.583 26 27 28 29 2, Goal of zero-growth in 211 re-iterated Goal of a Cost/Income Ratio of.55 in 213 Costs () 29 2 Change in pct. Staff costs 915 948 4 Operating expenses 594 569-4 Depriciations from other assets 71 66-7 Costs ex. depriciations from operational leasing 1.581 1.583 Depriciations from operational leasing 41 59 46 Total costs 1.621 1.642 1
Staff costs 4 percent up in spite of staff cuts 96 positions cut in Q1 full effect from 211 Net reduction of 59 positions (FTE) continued growth in some business areas Extraordinary severance pay and disestablishment costs amount to DKK 11m. 1.5 Staff costs 915 948 29 2 Collective agreement pay-rises of 3.7 percent Full-time employees 29 Q3 2 2 Difference Local Banks 995 957 931-26 Trad. Fin. Markets & Int. Div. 67 71 73 2 Finans Nord 7 7 111 4 Business development 264 257 251-6 Others 97 7 4-3 Total 1.53 1.5 1.471-29 11
Operating expenses reduced by 4 percent launched initiatives are paying off Decline or zero-growth in most categories of operating expenses Growth in attributable to repurchase and resale of distressed structured bond Operating expenses () 29 2 Change Staff-related expenses 47 37 - Travel expenses 19 15-4 Marketing costs 82 69-13 IT expenses 239 242 3 Cost of premises 82 84 3 Other administrative expenses 126 121-5 Operating expenses 594 569-26 Operating expenses Operating expenses 8 Y/Y: -4 pct. 25 Q/Q: 25 pct. 594 569 124 154 29 2 Q3 2 2 12
Impairment charges reduced but still at high level Impairment and impairment in pct. Pct. Overall impairment of loans etc. of DKK 454m. (29: DKK 584m.) 8 6, Impairment percentage of.99 (29: 1.22) -173-111 236 584 454 Impairment charges attributable to corporate customers: DKK 397m. impairment percentage of 1.3. Hereof DKK 7m. attributable to agriculture -5 -,45 -,26 1,22,49,99 26 27 28 29 2 Impairment -,6 25 Impairment charges attributable to household customers: DKK 45m. impairment percentage of.4 197 133 144 142 165 123 7 1 123 39 Q3 8 8 Q1 9 Q2 9 Q3 9 9 Q1 Q2 Q3 13
Non-performing loans at low level comfortable cover ratio 1.5 13 157 Impairment of loans, advances and guarantee debtors Y/Y: -7 pct. 191 224 3 Impairment in % of loans, adv. and guarantees 969 993 1.3 1.17 1.27 Pct. 2,4 2,4 2,5 2,6 2,2 9 Q1 Q2 Q3 9 Q1 Q2 Q3 Spar Nord ex. sector fund Sector fund Provision for loss re. Bank Package I written off at end-2 2 Non-performing loans Y/Y: 2 pct. 15 Cover-ratio (ex. impairments related to sector-targeted solutions) 3 122 124 151 5 9 8 8 7 9 Q1 Q2 Q3 9 Q1 Q2 Q3 14
Loan book diversified exposure Household customers account for 33 percent of exposure compared to 28 percent sector average (29) Low exposure to commercial real estate sustained Exposure to agriculture reduced and continues to be a focus point The group's loans, advances and guarantees shown by line of business Impairments Line of Business Spar Nord Bank Spar Nord Bank Share of credit exposure against the industry, "Agriculture, forestry etc." Pct. 29 2 Spar Nord 8,8 7,9 Finans Nord 3,7 4, Total 12,5 11,9 Pct. 29 2 2 Public sector 1,4 2,3, Agriculture, forestry etc. 12,5 11,9 23,4 Fishing,5,3,7 Industry and raw materials extraction 4,2 3,8 5,2 Energy supply 2,6 3,,1 Construction and civil engineering 4,4 4,9 5,5 Trade 7,7 8,4 13,2 Transportation, hotels and restaurants 7, 6,6 7,6 Information and communication,2,2,4 Financing and insurance activities 4,5 7,9 5,9 Real estate 11,,7 9,4 Other business 7,3 6,7 7,7 Corporate customers, total 63,3 66,7 79,1 Personal customers, total 36,7 33,3 2,9 Total,,, 15
Disappointing loss on liquidation portfolio Investment portfolio under continued reduction primarily made up by liquidation portfolio of structured bonds 29 2 Change Interest and currency holdings 49-11 -6 Listed shareholdings -4-8 -4 Unlisted shareholdings (Erhvervsinvest etc.) -28-3 25 Earnings from inv. portfolios 17-22 -39 29 2 Change Bonds 358 199-159 of which CDO 36-36 Spar nord issued bonds 5 5 Listed shares 7 14 7 Unlisted shares 17 36 19 Total 382 749 366 16
Modest customer demand for financing In spite of customer growth bank lending is on the same level as one year ago growth in business lending, decline in household lending Bank deposits have declined as a consequence of low interest level corporate customers place liquidity in securities Guarantees reduced in due to fewer pending mortgage registrations Growth in overall business volume driven by growth in pooled pension schemes and reverse transactions Bank loans Bank deposits Guarantees Business Volume 5 Q3 / : -1 pct. 5 Q3 / : -3 pct. Q3 / : -32 pct. Q3 / : -2 pct. DKKb 38 39 39 39 38 DKKb 32 34 33 31 3 DKKb 6 6 7 8 5 DKKb 81 85 84 83 82 9 Q1 Q2 Q3 9 Q1 Q2 Q3 9 Q1 Q2 Q3 9 Q1 Q2 Q3 17
Capital ratios comfortably above targets Solvency ratio of 13.4 (end-29: 14.2) Reduction in solvency ratio is mainly attributable to call of subordinated loan of DKK 25m. (October) Individual solvency requirement: 8.5 percent Excess coverage: DKK 2.1bn. Capital requirement DKK 3.7bn. Core capital after deduc. DKK 5.8bn. Pct. 26 27 28 29 2 Core capital 8,8 8,6 8,9 9,3 9,3 Hybrid capital,9,8,8 3,9 3,8 Core capital ratio 9,7 9,4 9,7 13,2 13,2 Subordinated debt 3, 3,4 3,1 2,6 2, Deductions -1,9-1,7-1,5-1,7-1,8 Solvency ratio,8 11,1 11,3 14,2 13,4 2 Core capital ratio 13,2 13,2 1.5 Subordinated loan capital (Maturity) Capital targets: Core capital ratio, excl. hybrid: 8, Core capital ratio, incl. hybrid: 12, Pct. 9,7 3,9 3,8 9,4 9,7,9,8,8 8,8 8,6 8,9 9,3 9,3 26 27 28 29 2 1.265 68 35 2 211 212 213 214 215 Core capital Hybrid capital Subordinated loan capital Hybrid capital 18
Focus on liquidity in spite of excess coverage of DKK 5.2bn. Excess coverage relative to strategic target reduced by DKK 2.2bn. (y/y) Growth in overall lending higher than growth in deposits Funding for DKK 2.1 falls due in 211 refinancing expected to take place in H1 Strategic target DKKb 12 8 4-4 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 6. Senior funding maturity 28 29 2 3.727 992 2.519 1.491 1. 83 22 2 211 212 213 214 215 Senior loans Step-up notes Issued bonds DKKb 28 29 2 Cash deposits 33,8 31,9 31,2 Seniorfunding 5,4 7,2 7,3 Core capital and sub. capital 5,4 6,6 6,7 Stable long term funding 44,6 45,7 45,2 Loans and advances 45,4 38,3 4, Strategic target (>) -,8 7,4 5,2 19
Outlook for 211 Another year marked by moderate socio-economic growth and modest demand for financing Growth in lending and volume to come from increase in market-share Increased competition for attracting good customers moderate pressure on margins Growth in NII driven by growth in market-share Growth in net fee income fuelled by volume growth and sustained high activity in housing and capital-market-related fees Market-value adjustments under pressure from marginally increasing interest level Zero cost growth Core earnings before impairment of DKK 85-1,5m. Impairment percentage of 1. 2
New strategy: TIME FOR CUSTOMERS Time to capitalize on recent years investment in distribution power Time make more potential people aware of Spar Nord s existence and qualities Time for more proactive customer acquisition Time to bring special competencies better into play Leasing Trading/Markets TIME FOR CUSTOMERS 21
New strategy: TIME FOR CUSTOMERS 22