Enthusiasm Clarity Initiative. For the North of Norway. Presentation of preliminary report and accounts 2003

Transcription

1 Enthusiasm Clarity Initiative For the North of Norway Presentation of preliminary report and accounts 2003

2 Corporate vision SpareBank 1 Nord-Norge shall be a customer-orientated, profitable and leading financial services group for the north of Norway - in the North of Norway.

3 Organisation of the financial services group Group Parent Bank Fiskerikreditt AS Credit instutution Equity stake 100% SpareBank 1 Gruppen Fin. Services group Equity stake 14% SpareBank 1 Finans Nord-Norge AS Leasing/factoring Equity stake 100% Tromsø Bodø Sandnessjøen Hammerfest Eiendomsdrift AS Real estate management Equity stake 100% SpareBank 1 Nord-Norge Securities ASA Securities firm Equity stake 65% EiendomsMegler 1 Nord-Norge AS Real estate brokerage Equity stakel 100% Tromsø Harstad Bodø Alta Hammerfest

4 Svalbard SpareBank 1 Nord-Norge SpareBank 1 Midt-Norge SpareBank 1 SR-Bank SpareBank 1 Oslo NOK Total assets: approx. 210 billion Number of local offices: approx. 290 Number of employees: approx Number of customers: ca 1.6 million. Number of customers using Internet-linked bank: approx As at Co-operating saving banks: SpareBank 1 Vestfold SpareBank 1 Ringerike SpareBank 1 Moss SpareBank 1 Hallingdal SpareBank 1 Gran SpareBank 1 Gudbrandsdal SpareBank 1 Jevnaker Lunner SpareBank 1 Nordvest SpareBank 1 Kongsberg Halden SpareBank 1 GS-banken Modum Sparebank Sparebanken Grenland Lom og Skjåk Sparebank Nøtterø Sparebank Other: Sparebanken Vest

5 SpareBank 1 Gruppen AS Bank 1 Oslo (100%) SpareBank 1 Skadeforsikring (100%) SpareBank 1 Livsforsikring (100%) SpareBank 1 Fondsforsikring (100%) Eiendoms- Megler 1 (Kjede) Odin Forvaltning (100%) First Securities (33,3%) SpareBank 1 Bilplan (100%) Owners SpareBank 1 SR-Bank SpareBank 1 Nord-Norge SpareBank 1 Midt-Norge Sparebanken Vest Samarbeidende Sparebanker LO og fagforbund Förenings- Sparbanken 14,08% 14,08% 14,08% 8,67% 14,08% 10% 25%

6 SpareBank 1 Gruppen AS Preliminary accounts 2003

7 SpareBank 1 Gruppen AS Management s focus in 2003 The following points were addressed (mentioned) at the presentation of the annual accounts for 2002: Strong focus on profitability, market orientation and professionalism Conclude (complete) started-up efficiency procedures 2003 will display a clear improvement in underlying operations, while measures have simultaneously been implemented which have reduced the risk level Increased focus on capital allocation and capital optimisation

8 SpareBank 1 Gruppen AS Highlights in 2003 Result after tax and before goodwill depreciation showed an improvement of MNOK 525,6 to MNOK 108,4 Return on equity before goodwill depreciation came to 5,7 % Capital adequacy increased to 10,3 % (8,4 %) Cost reduction programme accomplished with MNOK 243 lower cost base as a result (15 % cost reduction and app. 10 % workforce reduction) Reduced goodwill depreciation MNOK -143,9 (-870,1) Structural adjustments in Sales gains of MNOK 73,9 (64,6) SpareBank 1 Livsforsikring achieved a result before tax of MNOK 161,7 (-265,7) Buffer capital has risen to MNOK 555 (126) Good premium growth of 15,2 % SpareBank 1 Skadeforsikring showed a result before tax of MNOK 82,7 (-226,2) Combined ratio of 98 % (105,2 %) Reduced operating costs Bank 1 Oslo had a result before tax of MNOK 24,4 (-199,8) Interest margin of 1,96 % (1,88%) Comprehensive examination of the portfolio brought about a high loss in 2003, in total MNOK 140,2 (422,6)

9 SpareBank 1 Gruppen AS Result 4. Q 3.Q 2.Q 1.Q 4. Q Year Amount in NOK mill Share of result from subsidiaries before tax: - SpareBank 1 Livsforsikring AS 54,8 35,6 31,4 40,0 2) 76,6 161,7-265,7 - SpareBank 1 Skadeforsikring AS -19,7 31,2 46,0 25,2-124,9 82,7-226,2 - Bank 1 Oslo AS 1,1 13,1 24,8-63,4-404,2-24,4-199,8 - Other companies -2,3 0,2-6,5-16,2-11,4-24,8-24,5 Total result subsidiary is before tax 33,9 80,1 95,7-14,4-464,0 195,2-716,0 Total operating expenses and eliminations -34,3-17,6-16,1-21,4-35,2-89,4-84,7 Net finance SpareBank 1 Gruppen AS 1) 11,7-11,9-12,0 31,4-21,7 19,3-59,4 Result before goodwill, depreciation and tax 11,3 50,6 67,6-4,3-520,9 125,2-860,1 Goodwill-, depreciation etc. -36,6-34,2-36,6-36,6-36,6-143,9-870,1 Result before tax -25,3 16,5 31,0-40,9-557,5-18, ,3 Tax -1,3-11,5-14,9 11,0 224,7-16,7 443,0 Result after tax -26,6 5,0 16,1-30,0-332,8-35, ,3 1) Including SpareBank 1 Gruppen s result share after tax from First Securities ASA. 2) Additional provisions in the group as per 3 quarter 2002 are assumed included in the Life company s figures in 4 Quarter 2002.

10 2002 Year of crises Cleaning up SpareBank 1 Gruppen AS Status at the beginning of 2004 Weak capital markets New management recruited Re-establishment of strategic platform for alliance Turnaround operation Costs trimmed by 15 %, workforce by 10 % New risk management system Repricing of products Positive capital market Sale of companies in line with re-established strategy Good improvements in Bank co-operation Normal year Result in accordance with required rate of return Good and stable operations Further strengthening of risk management system Delivery of projects in Bank co-operation and high ambitious level for joint projects Well established and co-ordinated management in the Group and the Alliance

11 Key financial statistics Nord-Norge: No.of inhabitants: Rating A3 (Moody s) and A- (Fitch Ipca) Assets NOK 41 billion Loans NOK 37 billion Deposits NOK 22 billion Number of branches: 93 Number of customers: Retail banking: 250,000 (184,000) Corporate 17,000 Clubs/associations 24,000 Insurance 86,000

12 Our overall financial aims and targets Financial strength SpareBank 1 Nord-Norge s targeted capital adequacy ratio is 12%, of which core capital is to be 9%. On quarterly reporting dates, the Bank s core capital must amount to at least 8 per cent, including 50 per cent of the profit so far that year. Profitability SpareBank 1 Nord-Norge s return on equity capital is to reflect the risk relating to its operations and the general level of interest rates. The targeted return after tax is minimum 6 per cent above the yield on long-term government bonds.

13 CORE CAPITAL/ EQUITY AND SUBORD. DEBT CAPITAL % of weighted assets Statutory reqt. Bank s target As at end of 2003 Core capital 5,3 (7,0) 9,0 9,26 Equity and subord. debt capital 2,7 3,0 2,98 Capital adequacy ratio 8,0 12,0 12,24

14 Capital Adequacy (AMOUNTS IN NOK MILLION) PARENT BANK GROUP Core capital Supplementary capital in addition to the core capital Deduction items: Subord. loan-and equity cap. participations in other fin.inst Capital adequacy reserves Net equity and related capital resources Total risk-weighted assets base ,66 % 11,29 % 12,24 % Capital adequacy ratio 11,82 % 9,99 % 10,58 % 8,25 % 8,02 % 9,26 % Core capital adequacy ratio 9,03 % 7,87 % 8,44 %

15 OUR OVERALL FINANCIAL AIMS AND TARGETS Financial strength SpareBank 1 Nord-Norge s targeted capital adequacy ratio is 12 per cent, of which core capital is to account for 9 per cent. On quarterly reporting dates, core capital must be at least 8 per cent, including 50 per cent of the profit so far that year. Profitability SpareBank 1 Nord-Norge s return on equity capital should reflect the risk relating to its operations and the general level of interest rates. The targeted after-tax return is minimum 6 per cent above the yield on long-term government bonds.

16 2003 main features Pre-tax operating result NOK 273 million (2002: NOK 158 mill.) Increased loss provisions at NOK 318 mill. (2002: NOK 245 mill.) Staff numbers reduced by 107 man-years Significant savings growth: Deposits up by NOK 1,484 mill. Sale of other savings products up by NOK 358 mill. Strong loan growth within the retail banking market 15.5 per cent up on 2002 Strong improvement in SpareBank 1 Gruppen AS s result 9.04 per cent after-tax return on equity capital NOK earnings/profit per PCC (Primary Capital Certificate) NOK proposed cash dividend per PCC

17 Return on PCCs and equity capital 60,0 % 40,0 % 20,0 % 0,0 % Direct rate of return on PCCs 10,1 % 9,8 % 10,9 % 8,6 % 7,8 % 7,60 % PCC ratio overall 53,0 % 50,6 % 47,8 % 45,5 % 43,9 % 41,7 % Return on equity capital after tax 9,84 % 16,72 % 19,22 % 9,36 % 2,76 % 9,04 %

18 Key figures balance sheet (Amounts in NOK million) BALANCE SHEET Change Change % Total assets ,95% Gross lending ,81% Deposits ,35%

19 Group deposits according to markets 11 % % Retail Corporate 32 % 57 % Public 31 % 57 % (NOK Million) Change Change % Retail ,02 % Corporate ,44 % Public ,30 % TOTAL ,35 %

20 Profit and Loss Account - Group (Amounts in NOK million) Change Net interest- and credit commission income ,64 % 2,79 % Total operating income ,93 % 0,48 % Total net income ,57 % 3,27 % Total costs ,07 % 2,17 % Result before losses and write-downs ,50 % 1,10 % Losses on loans, guarantees etc ,81 % 0,67 % Net losses and write-downs ,81 % 0,67 % Result before tax ,69 % 0,43 % Tax payable on ordinary result ,16 % 0,26 % Tax payable on ordinary result ,00 % 0,00 % Result from ordinary operations after tax ,54 % 0,17 %

21 Group results - overview The main factors of the changed result compared with 2002 are: Increase in net interest income + NOK 17 mill. Increase in other (non-interest) income + NOK 31 mill. Net gains/return and value changes - securities + NOK 5 mill. Share of SpareBank 1 Gruppen s loss + NOK 156 mill. Increased costs - NOK 21 mill. Increase in net loan losses - NOK 73 mill.

22 Group results NOK mill th Q.01 1st Q.02 2nd Q.02 3rd Q.02 4th Q.02 1st Q.03 2nd Q.03 3rd Q.03 4th Q.03 Res.before lo./wr.d. Res.after lo./wr.d 4th Q.01 1st Q.02 2nd Q.02 3rd Q.02 4th Q.02 1st Q.03 2nd Q.03 3rd Q.03 4th Q.03 Res.before lo./wr.d Res.after lo./wr.d

23 Net interest- and credit commission income - Group NOK million Perc.of aver.tot.ass. 4,00 % 3,00 % 2,00 % 1,00 % 0,00 % NOK million Perc.of aver.tot.ass. 3,13 % 2,96 % 2,72 % 2,79 % 2,64 %

24 Basic income* *Result excl.share of resulat SpareBank1 Gruppen and net gains/losses securities P/L account Corr. Basic inc.p/l account Corr. Basic inc. Net interest income SpareBank1Gruppen Net gains/losses sec. and Odin Pengemarkedsfond Net income/losses exchange Other income Total operating income Total net income Total costs Res. before losses/tax Losses on loans Result before tax

25 Operating Income - Group NOK mill st Q.02 2nd Q.02 3rd Q.02 4th Q.02 1st Q.03 2nd Q.03 3rd Q.03 4th Q.03 Securities Foreign exchange Inc.Gr.comp. Other operating income 1st Q.02 2nd Q.02 3rd Q.02 4th Q.02 1st Q.03 2nd Q.03 3rd Q.03 4th Q.03 Securities Foreign exchange Inc.Gr.comp Other operating income

26 Income from foreign exchange and securities The net result - NOK 49 mill. - as at breaks down as follows: Income from f/x, interest rate instruments etc mill.kr Dividends + 3 mill.kr Net realised/unrealised gains/losses and negative value changes in respect of securities + 10 mill.kr

27 Group Companies Result before tax Sparebank1 Finans Nord-Norge AS AS Fiskerikreditt Eiendomsdrift AS Eiendomsmegler 1 Nord Norge AS Sparebank1 NN Securities AS (65%) Mynten AS ANS Bygginvestor I (52,36%) TOTAL

28 Market share SpareBank 1 Nord-Norge s aim is to have captured a market share in Nord-Norge of at least 30 per cent within all product areas by The product areas comprise credit, savings/deposits, insurance and payment transmission services. Effectiveness SpareBank 1 Nord-Norge s aim is for costs to amount to maximum 55 per cent of income in After that, the aim is to further reduce the overall cost ratio by 2005, the target being to achieve a degree of effectiveness in line with that of the best banks.

29 Group operating costs 900 4,00 % ,00 % 2,00 % 1,00 % NOK million Perc.of aver.tot.ass. 0,00 % NOK million Perc.of av.tot.ass. 2,52 % 2,59 % 2,18 % 2,17 % 2,07 %

30 Operating costs Group operating costs for 2003 totalled NOK 814 million, up by NOK 21 million on This was due to a NOK 14 million provisioning for restructuring measures, coupled with a NOK 4 million increase in pension costs. In 2003, overall manning levels were reduced by 107 man-years and 8 bank buildings were sold Cost ratio Cost ratio core operations Op. costs as a % of average assets 2.07 % 2.17%

31 Group development man-years Parent Bank Group

32 Market share SpareBank 1 Nord-Norge intends to capture a market share in Northern Norway of at least 30 per cent within all product areas by The product areas comprise credit, savings/deposits, insurance and payment transmission services. Effectiveness SpareBank 1 Nord-Norge s aim is for costs to amount to maximum 55 per cent of income in In addition, the overall cost ratio should be further reduced during the period up to 2005, in order to achieve a level of effectiveness in line with that of the best banks.

33 Market share the retail banking area SNN customers as a percentage of total inhabitants 42,6 42,4 42, ,8 41,6 41,4 41, ,8 40,6 40,

34 Market shares loans and deposits within the retail banking area SNN s share of estimated total market (incl. state banks, such as Husbanken and Laanekassen) 35 % 32,3 % 32,5 % 32,80 % 29 % 25,80 % ,7 % 23,4 % 22 % 15 % Loans Deposits

35 Market shares 35 % 31,10 % 30 % 28,0 % 25 % 20 % 15 % 24,1 % 13,6 % 16,1 % 19,70 % 17,7 % 21,80 % % 11,1 % 5 % 0 % Unit trust Unit Linked Annuity/IPA

36 Market shares non-life insurance Relating to retail banking market (total of house- and car-related business) 23 % 22 % 22,2 % 21 % 20 % 19,9 % 20,6 % % 18 % 17 % 16 % 15 %

37 NEW SALE FUND MANAGEMENT PRODUCTS q q q q q q q q NOK

38 NEW SALE NON-LIFE INSURANCE kv kv kv kv q q q q NOK Number Volume Numbers

39 Summary new sales Sales in the savings- and placement market have increased by 95% in relation to 2002 (volume). Sales of Unit Linked are up by NOK 65 million. Sales of unit trusts are up by NOK 109 million. Increased sales and improved position also in the insurance market Sales of non-life insurance up by 7.4 % (NOK 9.6 mill.) Sales of personal insurance up by 4.9 % (NOK 0.65 mill.)

40 USE OF NETTBANK - TOTAL

41 Summary payments transmission services 2003 Nettbank has become the most important payment channel. The number of active NettBank customers up by 35.5 % i 2003 NettBank is the preferred channel for payments, accounting for 32% of all giro payments. Enquiries through NettBank are up by 75 % since The number of orders to buy and sell shares up by 78 % on 2002 Reduced usage of minibank 198,877 fewer minibank transactions in the last 3 quarters of 2003 compared with the same period in 2002 During the same period, turnover fell by NOK 37.2 million. (figures for first quarter 2002 unavailable, due to change to a new system) During the last part of 2003, there was somewhat reduced usage by customers of other banks.

42 Future prospects

43 Future prospects within the Bank s market Commerce and industry Improved economic conditions, lower interest rates, a weaker krone and higher economic growth are expected to produce a favourable impact in 2004, also as far as the export industry is concerned. The current structural changes taking place within the fisheries sector will continue during 2004; this process will be painful for some areas. The retail banking market The general picture would suggest continued high growth, with private households enjoying a generally good financial position. Certain areas may be affected as a result of disruptions in production or the closing down of key businesses. The public sector The public sector will continue to be large, but there will be relatively sharp reductions especially within the regional municipalities. This means a bigger need for restructuring.

44 Future prospects relating to the Bank s internal situation Customer focus -Make the most of the business potential relating to our existing customers and new market areas - Increase our market share particularly within savings and insurance Focusing on risk - Improve the Bank s risk management systems both with regard to competence levels and systems solutions. Establish a special risk management environment within the Bank. Focus on quality and efficiency - New credit processes will be implemented in order to improve quality and reduce risk. - New distribution solutions tailored to market needs will be tested in order to respond to customer requirements at all times.

45 Economic environment - North Norway Breakdown of commercial and industrial sectors by number of employees 9 % 7 % 1 % 7 % 41 % 12 % 23 % Public se ctor Tourism Agriculture, fisheries and fish farming Energy Private se rvic e industrie s Industry and mining Building- and construction industry

46 Credit

47 Main objectives and targets within SpareBank 1 Nord-Norge s credit area The lending portfolio is to have a level of profitability which meets the Bank s overall profitability targets. The portfolio s total risk within a 6-years perspective is not to exceed -an annual risk level corresponding to 0.50 per cent of gross lending: retail banking market: 0.20 per cent losses of gross lending corporate banking market: 0,80 per cent losses of gross lending Loans to corporate clients and public entities are not to exceed 44 per cent of the Bank s total lending The share of high risk (classes 4 and 5) corporate banking commitments will be kept within a limit of 17 per cent of total corporate loans.

48 Kredittpolicy Special routines (powers of attorney/delegated lending authority) relating to the handling of: Fishing- and fish-related industry Financing of intangible rights/assets Financing of commercial and industrial property Upper volume limits for fish farming, fishing vessels and the fisheries Delegated lending authority to be exercised at arm s length

49 The credit area: Strategy Concentrate on the growth areas of the retail banking market Concentrate on smaller corporate customers Do not take on any new, large customers Reduced emphasis on particularly risk-prone business sectors There must be a systematic relationship between risk and price both within the corporate and retail banking markets.

50 The credit area: processes and pricing Introduction of new credit processes during the first half of 2004, both for the corporate and retail banking markets: Objective scoring models Price models based on risk-adjusted return, both within the corporate and retail banking markets. Special competence for the handling of complex credit matters Better management reports for the control of credit risk (joint competence centre for the SpareBank 1 banks)

51 Group lending portfolio according to markets 1 % % 44 % 55 % Retail Corporate Public 41 % 58 % (NOK Million) Change Change % Retail ,49 % Corporate ,13 % Public ,43 % TOTAL ,81 %

52 Gruop lending portfolio according to markets (NOK million) Change Agriculture and forestry Fishing vessels Fish farming Extraction of crude oil and natural gas Mining Fishing industry Other industries Power and water supply Building and construction Retail- and wholesale trade Hotel and restaurant Intern. shipping and pipeline transport Transport and communication Finance and insurance Housing cooperatives Real estate business Business services Other sectors TOTAL

53 Losses on loans and guarantees - Group NOK mill th Q.01 1st Q.02 2nd Q.02 3rd Q.02 4th Q.02 1st Q.03 2nd Q.03 3rd Q.03 4th Q.03 Specific Non-specific 4th Q.01 1st Q.02 2nd Q.02 3rd Q.02 4th Q.02 1st Q.03 2nd Q.03 3rd Q.03 4th Q.03 Specific Non-specific

54 Group specific losses according to markets NOK mill Retail Corporate Retail Corporate

55 Net commitments in default - Group NOK mill ,50 % 2,00 % 1,50 % 1,00 % 0,50 % NOK million Percentage of gross lending 0,00 % NOK million Percentage of gross lending 1,14 % 1,32 % 2,14 % 1,75 % Net bad and doubtful commitments as at include two commitments amounting to NOK 220 million, with specific loss provisions of NOK 146 million; agreements relating to the refinancing/sale of assets entered into in this connection have been partly completed. Once the agreements have been completed, this will mean a further reduction in net bad and doubtful commitments, amounting to about NOK 75 million.

56 Group - lending key figures Net losses on loans as % of gross lending 0,86 % 0,73 % 0,45 % 0,35 % 0,37 % Loss provisions as % of gross lending 2,24 % 2,02 % 1,70 % 1,44 % 1,29 % Specific loss provisions as % of gross lending 1,36 % 1,06 % 0,79 % 0,62 % 0,53 % Non-specific provisions as % of gross lending 0,87 % 0,96 % 0,91 % 0,82 % 0,76 % Gross loans in default as % of gross lending 3,11 % 3,20 % 2,11 % 1,76 % 1,61 % Net loans in default as % of gross lending 1,75 % 2,13 % 1,32 % 1,14 % 1,08 %

57 Risk exposure (Lending - Group) Endring (mill.) NOK andel NOK andel NOK andel Low risk* ,7 % ,9 % ,2 % Normal risk ,8 % ,2 % 297-0,6 % High risk ,3 % ,8 % 455 0,5 % Bad/doubtful ,2 % ,1 % 73-0,1 % Total ,0 % ,0 % ,0 % The low risk group comprises retail-, public sector-, and corporate banking with low risk. Risk classification: Based on accounting information only. Collateral and other security are not included in the classification model. Equity capital 50% Cash-Flow 33% Working capital 17%

58 Average interest rate paid. Corporate repayment loans.

59 Market price of PCC s

60 The 20 largest PCC Holders HOLDERS NUMBER OF PERCENTAGE PCC'S SHARE OF TOTAL PCC CAPITAL Swedbank - client account ,74 % Folketrygdfondet ,40 % Wenaas Holding AS ,90 % Tine Pensjonskasse ,89 % Framo Development AS ,75 % Tonsenhagen Forretningssenter AS ,54 % Troms Fylkes Dampskibsselskap AS ,33 % SpareBank 1 Rogaland ,28 % Haugaland Kraft AS ,16 % Rasmussen Holding AS ,09 % JP Morgan Chase Bank ,96 % Bergen Kommunale Pensjonskasse ,91 % SIS Sega Intersettle ,79 % Ringerikes Sparebank ,78 % Troms Kraft AS ,70 % Warrenwicklund Utbyt ,69 % National Financial S.Citibank N.A ,68 % Olsen, Fred & Co's Pensjonskasse ,64 % Holla Sparebank ,58 % Meltzers Høyskolefond ,53 % TOTAL ,35%

61 Allocation of profit for the year 2003 PROFIT 210 MILL. 100% PCC-HOLDERS NOK 92 MILL % THE BANK 118 MILL % CASH DIVIDEND NOK 92 MILL. 44 % DIV. EQUAL. FUND 0 MILL. 0 % SAVINGS BANK S FUND NOK 103 MILL. 49 % DONATIONS NOK 15 MILL. 7 %

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