INTERIM REPORT Q1 2016

Transcription

1 INTERIM REPORT Q1 2016

2 First quarter 2016 Pre-tax profit: NOK 322 million (NOK 407 million) Weaker performance by financial instruments: NOK -35 million (NOK 50 million) Higher nominal net interest: NOK 609 million (NOK 586 million) Net interest as a percentage: 1.51 (1.63) Good underlying cost development: NOK 358* million (NOK 356 million) Low write-downs on loans and guarantees: NOK 26 million (NOK 39 million), group provisions increased by NOK 157 million last five quarter Return on equity: 8.8% (13.6%), 9.8% excl. financial instruments Profit per equity certificate: NOK 0.99 Book equity per equity certificate: NOK 45.6 Capital accumulation according to plan, Core Tier 1 capital 13.8% (12.3%)** Key figures Q Q Pre-tax profit NOK 322 mill. NOK 407 mill. NOK 1,386 mill. Profit/diluted profit per equity certificate NOK 0.99 NOK 1.88*** NOK 6.32 Net interest (annualised) 1.51% 1.63% 1.55% Cost ratio 51.5% 44.4% 48.9% Return on equity (ROE), annualised 8.8% 13.6% 11.0% Core Tier 1 capital adequacy ratio (Basel I floor) 13.8% 12.3% 13.7% Core Tier 1 capital adequacy ratio (IRB) 15.7% 12.8% 15.1% * Excl. restructuring and non recurring costs ** The capital adequacy figure for the first quarter includes 80% of the profit for the period *** The profit/loss and book equity per equity certificate are not comparable due to the issue of equity certificate capital in

3 Report for the first quarter 2016 Main Figures NOKm Q Q Net interest income and credit commissions Commissions receivable and income from banking services Commissions payable and cost of banking services Net banking services Income from owner interests in group companies Net gain/(loss) on financial instruments Other operating income Net operating income Net operating income Salaries and general administration expenses Depreciation Other operating expenses Total operating expenses Profit before write-downs and tax Net gain on fixed assets Write-downs and losses on loans and guarantees Profit before tax Taxes Profit for the period First quarter 2016 Sparebanken Vest achieved a pre-tax profit of NOK 322 million (NOK 407 million) in the first quarter, and a return on equity of 8.8% (13.6%). The profit was positively affected by higher nominal net interest, good cost control, low losses and growth in line with the target. The negative contribution from financial instruments pulls in the opposite direction. The Group s cost development is good and in line with targets. Total expenses amounted to NOK 370 million in the first quarter (NOK 356 million). Combined, associated companies contribute a share of profit of NOK 8 million (NOK 14 million) for the first quarter The Core Tier 1 capital ratio is 13.8% (12.3%), and Sparebanken Vest is on schedule with its capital plan for the period up until Net interest income in the first quarter amounted to NOK 609 million (NOK 586 million). The bank is periodising the fee for the Norwegian Banks Guarantee Fund as previous years.the increase of NOK 23 million can be ascribed to repricing in the corporate market and a reduction of NIBOR by four basis points. Reduced lending margins in the retail market pull in the opposite direction. Net interest as a percentage of average assets under management was 1.51% (1.63%) for the first quarter. That is an increase of five basis points compared with the fourth quarter The lending margins in the retail and corporate markets measured against the average 3-month NIBOR were 1.90 (2.36) and 3.04 (3.09) percentage points, respectively, in the first quarter, a reduction of 46 and 5 basis points for the retail and corporate markets, respectively. Compared with the fourth quarter 2015, the lending margins in the retail market were reduced by 11 basis points, due to the reduction of average NIBOR and a decrease in customer interest rates of 15 basis points. During the same period, there was an increase of 21 basis points in the corporate market mainly due to the effect of a previously announced repricing of the lending portfolio. The deposit margins in the retail and corporate markets in the first quarter measured against the average 3-month NIBOR were 0.15 (0.47) and 0.21 (-0.06) percentage points, respectively. Compared with the fourth quarter 2015, the deposit margins in the retail market increased by 13 basis points, due to the reduction in the average NIBOR by 4 basis points and the increase in customer interest rates of 17 basis points. During the same period, there was an increase of 10 basis points in customer interest 3

4 rates in the corporate market due to the effect of previously announced repricing. Operating expenses in the first quarter 2016 amounted to NOK 370 1) million (NOK 356 million). The increase of NOK 14 million is primarily due to expenses linked to the move to the new head office and organisational restructuring. The underlying expenses are at the same level as the first quarter The number of full-time equivalents in the Group is 784 (805). That is 21 fewer than in the corresponding period last year. As announced in connection with the presentation of the Q report, the bank is in the process of reducing the number of branch offices to 35 and downsizing staff by approximately 100 full-time equivalents. This is a consequence of changed customer behaviour and increased automation. Table 2: Number of full-time equivalents Quarterly Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Full-time equivalents Net commission income amounted to NOK 98 million (NOK 100 million) in the first quarter. The development in commission income from the sale of insurance products, profit commission on insurance and card sales is stable. Net commission income from savings and investments is up NOK 2 million. Net income from financial instruments amounted to minus NOK 35 million (plus NOK 50 million). The start of 2016 was marked by increased uncertainty in the market, with a broad downturn in Norwegian and European stock markets. Sparebanken Vest sold its listed holding in the fourth quarter, and has thus been relatively unaffected by this downturn. The bank s other holding of shares and high-yield bonds together show a negative development in value of NOK 18 million. A loss of NOK 185 million on financial derivatives is linked to the hedging of fixed-interest loans and bonds on the assets side. Falling interest rates result in a gain on the bank s fixed-interest portfolio and bonds of NOK 150 million. The prices for basis swaps that the bank uses to hedge the financing of covered bonds in foreign currency have increased, and the bank has recognised a gain of NOK 28 million in the first quarter. The gain must be expensed against the maturing of the covered bonds. 1) Incl. restructuring and non recurring costs Table 3: Gain on financial instruments NOKm Q Q Dividend Gain/(loss) on commercial papers and bonds Gain/(loss) on shares Gain/(loss) on financial derivatives Gain/(loss) on financial instruments, recognised at fair value Gain/(loss) on currency Net gain/(loss) on financial instruments designated for hedge accounting Of which gain/loss related to basisswaps Other Net gain on financial instruments The contribution to profit from associated companies amounted to NOK 8 million (NOK 14 million), which breaks down as follows: See the section on business in subsidiaries and associated companies for more information about the individual companies. Table 4: Associated companies NOKm Q Q Frende Forsikring Norne Securities Brage Finans Verd Boligkreditt Jonsvollkvartalet Net profit from associated companies Total write-downs on loans and guarantees amounted to NOK 26 million (NOK 39 million) in the first quarter. See the section on risk and capital factors and Notes 6 and 7, which describe the write-downs and the development in default of payment. Developments in lending and deposits Gross lending increased by NOK 9.3 billion (NOK 5 billion) to NOK 131 billion (NOK billion) from the first quarter 2015, corresponding to year-on-year growth of 7.7%. Average growth last three years is 3.1% in the corporate market and 7.9% in the retail market. Table 5: Growth in lending Growth last 12 months Growth last quarter Lending total 7,7 % 0,9 % Lending retail market 7,7 % 1,0 % Lending corporate market 7,7 % 0,5 % Of gross lending, loans to the retail market amounted to NOK 99.4 billion (NOK 92.3 billion), NOK 54.9 billion 4

5 of which were loans transferred to Sparebanken Vest Boligkreditt. Gross lending to the corporate market amounted to NOK 31.7 billion (NOK 29.4 billion), NOK 0.2 billion of which can be attributed to the exchange rate effect for the first quarter The growth in lending in the corporate market is within the SME segment, which is in line with the bank s strategy. quarter The increase in the fourth quarter is mainly due to one potential bad debt. Figure 1 Defaults and potential bad debt % 4 % 3 % Customer deposits decreased by NOK 1.4 billion to NOK 63.5 billion (NOK 64.9 billion), corresponding to a negative year-on-year growth of 2.2%. Table 6: Growth in deposits Growth last 12 months Growth last quarter Deposits total -2,2 % -0,7 % Deposits retail market 4,3 % -0,3 % Deposits corporate market -12,5 % -1,4 % Deposits break down as follows: NOK 41.5 billion (NOK 39.8 billion) from retail customers and NOK 22 billion (NOK 25.1 billion) from corporate customers. The current low-interest climate has led to an increase in savings and investment products as an alternative to bank saving. Fund savings agreements have more than doubled in the last three years and have now exceeded NOK 500 million per year in volume. Sparebanken Vest manages a total of NOK 6.4 billion on behalf of its customers, the number of whom has risen steadily in recent years. The breakdown between deposits and lending is specified in Notes 8 and 9. Risk and capital factors Credit risk The risk in the bank s retail market portfolio is stable and low. A total of 95% of the portfolio is secured by mortgages with a low loan-to-asset-value ratio. The risk-adjusted return on the portfolio is good. In 2014 and 2015, the bank completed the restructuring of a number of defaults and potential bad debt in the corporate market portfolio. The risk in the corporate market portfolio is deemed to be moderate, and the risk-adjusted return has continued to improve in Defaults and potential bad debt amounted to NOK 1,267 million (NOK 1,080 million) for the corporate market and NOK 220 million (NOK 230 million) for the retail market. This is largely unchanged from the fourth The total losses on lending and guarantees amounted to NOK 26 million in the first quarter. NOK 50 million of this amount relates to group write-downs, where the write-down reflects a somewhat more uncertain macroeconomic situation. Confirmed losses in the period amounted to NOK 0 million, while the change in individual write-downs is minus NOK 24 million. The reversals can primarily be attributed to one commitment. The total loss provision for the portfolio remains stable at 0.78%. The loss costs are specified in Note 6. Figure 2: Write-downs Write-downs as % of gross lendings 0,9 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0, ,94 % ,92 % ,87 % Q Q Q Q Q Market risk and operational risk The bank s interest rate and currency risk is managed within limits adopted by the Board of Directors and is considered to be low. The bank is exposed to credit spread risk, primarily through the management of interestbearing securities 220 Retail Corporate % of total 0,70 % 0,70 % ,72 % ,99 % 218 0,77 % ,99 % Q Q Q Q Q ,78 % Individual write-downs Group write-downs Write-downs as % of gross lendings % 1 % 0 % Capitalised write-downs (MNOK) 5

6 in the bank s liquidity portfolio, and to a lesser extent through proprietary trading. The portfolio mainly consists of securities issued by Norwegian banks, residential mortgage companies, municipalities, county authorities, the Norwegian state and non-financial enterprises. The bank s credit spread risk has been reduced by approximately NOK 100 million compared with the end of the first quarter This is due to the reduced credit risk in the liquidity portfolio as a result of adaptation to LCR. The bank s stock market exposure mainly consists of strategic investments and venture investments in its own market area. Total investments (excluding subsidiaries and associated companies) at the end of the first quarter amounted to NOK 393 million (NOK 549 million). The identification, analysis and follow-up of operational risk is addressed at a general level through management confirmations, continuous assessments and the registration of events. No matters that are critical to the bank s operations were uncovered during the quarter. Liquidity and financing The Group s liquidity situation is good. In the first quarter 2016, it has been managed at the overall level using liquidity indicators and LCR. Stable deposits (covered by the deposits guarantee scheme) and deposits from the retail market and SMEs are treated favourably in the new liquidity standards. A large proportion of Sparebanken Vest s deposits come from such sources; see the table below. Table 7: Deposits Deposit Private SMB Corporate Finance Total Over Total capital market financing. The proportion of financing with a remaining term to maturity of more than three years was approximately 52% (41%) at the end of the quarter. Rating Sparebanken Vest is rated by Moody s and Fitch Ratings. On 16 March 2016, Moody s changed Sparebanken Vest s rating from A1 Stable to A1 Negative Outlook. Fitch confirmed all the bank s ratings on 19 May 2015, including the bank s rating for longterm borrowings of A-, with a stable outlook. Bonds issued by Sparebanken Vest Boligkreditt AS are rated by Moody s and have an AAA rating with a stable outlook. Capital adequacy The bank s Core Tier 1 capital adequacy ratio, taking into account the Basel I floor, is up 0.1 percentage points from the fourth quarter 2015, at 13.8%. This is largely due to profit accumulation. The bank meets the applicable combined minimum and buffer requirement of at least 11% Core Tier 1 capital. From 1 July 2016, a countercyclical capital buffer of 1.5 percentage points will be introduced, which will increase the total requirement to 11.5%. Sparebanken Vest thus already meets this requirement. The bank wishes to meet regulatory minimum requirements through maximum use of hybrid capital (1.5%) and supplementary capital (2%). At the end of the first quarter, the level of hybrid capital was 1.3%, and supplementary capital 1.9%. The overall capital adequacy is 17.0%. After carrying out the bank s ICAAP process in the fourth quarter 2015, the bank has increased its goal for the Core Tier 1 capital adequacy ratio to 14.5% by year-end At the end of the first quarter 2016, the Group s liquidity indicator (6-month rolling average) was 105.9% (104.5%). The deposits/loans ratio was somewhat lower than in the corresponding period last year: 49% (53.7%). At the end of the quarter, the Group s holdings of bonds and certificates amounted to approximately NOK 20.6 billion (NOK 16.5 billion). The total capital market financing amounted to NOK 78.6 billion (NOK 64.4 billion). The bank s relative proportion of covered bonds at the end of the first quarter was approximately 70% (67%) of the bank s 6

7 Figure 3: Capital adequacy, Basel I floor 18 % 16 % 14 % 12 % 10 % 8 % 6 % 4 % 2 % 0 % Total Capital Tier Capital Add. Tier 1 Cap. Core Tier 1 Capital 15,7 % 2,0 % 1,4 % 12,3 % 2015 Q1 15,7 % 2,0 % 1,4 % 12,3 % 15,6 % 1,9 % 1,4 % 12,3 % 2015 Q2 15,6 % 1,9 % 1,4 % 12,3 % Compared with the previous quarter, the Core Tier 1 capital adequacy ratio has increased from 15.1% to 15.7%. This is due to increased profit accumulation and a reduced calculation basis. Figure 4: Capital adequacy IRB 20 % 18 % 16 % 14 % 12 % 10 % 16,3 % 2,1 % 1,4 % 16,7 % 2,1 % 1,4 % 15,3 % 1,9 % 1,9 % 1,3 % 12,2 % 2015 Q3 15,3 % 1,9 % 1,3 % 12,2 % 16,4 % 2,0 % 1,4 % 16,9 % 1,3 % 13,7 % 2015 Q4 16,9 % 1,9 % 1,3 % 13,7 % 18,6 % 2,0 % 1,4 % 17,0 % 1,8 % 1,3 % 13,8 % 2016 Q1 17,0 % 1,8 % 1,3 % 13,8 % 19,3 % 2,0 % 1,5 % this requirement. The bank s capital adequacy is specified in Note 11. Business in subsidiaries and associated companies Subsidiaries Eiendomsmegler Vest (holding 100%) sold 630 houses in the first quarter 2016, compared with 903 in the same period last year, a decrease of 30%. It recorded a pre-tax loss of NOK 8 million (plus NOK 6.3 million) in the first quarter The profit performance was affected by lower income due to a weaker property market and a general increase in competition. The first quarter was also characterised by uncertainty spreading across Western Norway, which led to less activity in the market. In Stavanger, 40.1% fewer houses have been sold compared with the first quarter 2015, while 11.8% fewer houses were sold in Bergen during the same period. The year 2016 is expected to be challenging for Eiendomsmegler Vest, but measures to cut costs and increase sales and efficiency have been initiated. The measures are expected first to give full effect towards the end of Sparebanken Vest Boligkreditt AS (holding 100%) manages housing loans in the amount of NOK 54.9 billion (NOK 50.1 billion), and, at the end of the first quarter 2016, the company had issued covered bonds in the amount of NOK 51.6 billion (NOK 41.4 billion). 8 % 6 % 4 % 2 % 12,8 % 13,2 % 13,0 % 15,1 % 15,7 % Associated companies The share of profit/loss from associated companies amounted to a total of NOK 8 million. It was included in the accounts in accordance with the equity method in the first quarter. 0 % Total Capital Tier 2 Capital Add. Tier 1 Cap. Core Tier 1 Capital 2015 Q1 16,3 % 2,1 % 1,4 % 12,8 % 2015 Q Q3 16,7 % 16,4 % 2,1 % 2,0 % 1,4 % 1,4 % 13,2 % 13,0 % 2015 Q4 18,6 % 2,0 % 1,4 % 15,1 % 2016 Q1 19,3 % 2,0 % 1,5 % 15,7 % Frende Holding (holding 39.7%) recorded a profit after tax in the first quarter of NOK 13 million, compared with NOK 16.3 million in the first quarter In the first quarter, the Financial Supervisory Authority of Norway issued its annual advice concerning which financial institutions should be regarded as systemically important. There are still three institutions that should be regarded as systemically important in Norway: DNB, Nordea and Kommunalbanken. The Financial Supervisory Authority of Norway and Norges Bank have also both recommended that a potential leverage ratio requirement should be at least 6%. Sparebanken Vest already meets Sparebanken Vest s share of profits was NOK 6.2 million for the first quarter (NOK 7.7 million). The company is expected to maintain its position and meet its growth targets in At the end of the first quarter 2016, Frende Skade had a total of NOK 1,449 million (NOK 1,303 million) in premiums, divided between 123,800 customers (112,000). The company s market share continues to 7

8 grow and is estimated to be 3% for Norway as a whole. The loss ratio at the end of the first quarter (month of March) was 65.6% (82.4%). The company s combined ratio for the first quarter was 85.1% (99%). Frende Liv recorded a pre-tax profit of NOK 13.9 million (loss of NOK 2.6 million) in the first quarter. The return on financial assets in the first quarter amounted to NOK 6.6 million (NOK 7.6 million). Premiums in Frende Liv increased by NOK 48 million in the first quarter compared with the corresponding period in 2015 and amounted to NOK 743 million at the end of the first quarter (NOK 695 million). Norne Securities AS (holding 47.6%) made a negative contribution to profits of minus NOK 2.7 million (NOK 0.8 million). Sales are evenly distributed between the business areas, but with a preponderance in Corporate Finance. The capital markets are still characterised by uncertainty and unrest, which have led to challenging market conditions so far in At the end of the first quarter, Norne had been mandated to take on more arrangement assignments, which is expected to contribute to increased earnings and profit improvement. Norne s board of directors has initiated efforts to find a new managing director for the company. Verd Boligkreditt AS (holding 40%) is a housing credit company that is owned by Sparebanken Vest and eight independent savings banks. The company is run by Sparebanken Vest Boligkreditt AS and manages housing loans in the amount of NOK 5.8 billion (NOK 4.7 billion). The share of profit/loss from Verd Boligkreditt in the first quarter amounted to NOK 2.4 million (NOK 2.1 million). Brage Finans AS (holding 49.9%) is a financing company that offers leasing and loans secured by the purchased object to the corporate and retail markets. The company recorded a pre-tax profit of NOK 7.2 million (NOK 7.8 million) in the first quarter The first quarter of 2015 was positively affected by a relatively large realised gain on an acquired asset. At the end of the first quarter 2016, the company had a gross portfolio of NOK 3,527 million (NOK 2,654 million). The company has experienced growth of 25% in new sales and increased interest income, which corresponds to NOK 28 million (NOK 22.4 million). Sparebanken Vest s share of the profit in Brage Finans amounted to NOK 2.5 million (NOK 3.2 million) in the first quarter. Post balance sheet events No significant events have taken place since the balance sheet date (31 March 2016) that affect the quarterly accounts. Outlook Macroeconomic developments According to figures from Statistics Norway, growth in the Norwegian mainland economy only increased by 1.0% in 2015, which is the weakest growth since the financial crisis in The fall in the oil price has had a significant negative effect on the Norwegian economy. Norway s economy will probably see a further slowdown in growth in 2016 as a result of the continued reduction in oil-related investments. The effects of the lower activity level and prospects of lower earnings in oil-related businesses are now spreading to other sectors where growth has not been affected until now. Unemployment is therefore expected to increase, while the growth in employment is expected to be very modest. Lower growth has resulted in increased unemployment and weaker wage growth. Last year, wage growth was at its lowest level for more than 20 years. This development is expected to continue. Low wage growth will probably reduce the growth in housing prices and consumption and further reduce domestic inflation. On the other hand, the weakening of the exchange rate has improved industry s competitiveness, and exports from mainland Norway increased last year. Exports from mainland Norway, excluding exports from suppliers to the oil industry, are expected to continue to rise in the time ahead. The traditional export sector and public sector demand will thereby help to maintain growth in the mainland economy. A more expansive monetary and fiscal policy will also stimulate activity. The likelihood of Norges Bank cutting the key interest rate two more times has increased during Western Norway The year s first Western Norway Index, 1/2016, shows 8

9 that the negative trend in Western Norway has stopped temporarily. Enterprises in Western Norway report a development that is more or less identical to the preceding three months. A few more enterprises in the counties of Hordaland, Sogn og Fjordane and Møre og Romsdal are expecting a positive growth trend in the coming six months, however. By comparison, the negative trend in Rogaland continues. There are still negative expectations of the development of oil-related enterprises over the next six months, while the weakening of the Norwegian krone and the low interest rate improve the outlook for more traditional industries in Western Norway. Sparebanken Vest The issue of equity certificate capital amounting to NOK 750 million in the fourth quarter 2015, together with the profit from ordinary operations, will help Sparebanken Vest to meet its target of 14.5% Core Tier 1 capital by the end of Developments in the first quarter show that the bank is accumulating capital in line with the capital plan. The bank s financial target of a return on equity of more than 11% still applies. However, as announced in connection with the issue, a slightly lower return on equity is expected in During the first quarter, the bank has continued its work on the Customer 2016 project, which is a restructuring project that involves ambitious measures aimed at addressing future trends. New service concepts, the establishment of a new direct bank, increased automation and utilisation of robot technology shall contribute to a simplification of the bank s work processes, changed distribution, a shift in expertise and downsizing. Tighter regulation and a more uncertain macroeconomic situation are also a strong influence on the restructuring process. The work on implementing the changes in the organisation is going according to plan. The bank maintains its estimate that the process will entail NOK 110 million in restructuring expenses in 2016, and expects to be able to say more about the restructuring process when the results for the second quarter are presented. The bank s net interest has increased in the first quarter, as a result of positive effects from repricing in the corporate market in particular. At the same time, the strong competition prevails, and further interest rate cuts in the retail market can weaken the bank s lending margins in the time ahead. The bank is on schedule with measures to ensure a flat cost development in 2016 and Sparebanken Vest has started work on evaluating the bank s pension schemes, including the possible conversion of the bank s defined benefit scheme into a defined contribution scheme. Endeavours will be made to implement any changes in the coming year. The bank s growth in the first quarter is within the stipulated limits (5% in the retail market and 2.5% in the corporate market). The growth is expected to be within these limits for the year as a whole. Sparebanken Vest had low losses in the first quarter. However, group write-downs have been increased to allow for increased individual losses in the time ahead. The bank s previous expectation of write-downs somewhere in the region of NOK million in 2016 still applies, but with a pre-ponderance of probability that the figure will be in the lower part of the interval. In accordance with the bank s capital accumulation plan, a fifty per cent dividend was paid out for Sparebanken Vest s dividend policy prescribes a 50 80% cash dividend of the equity certificate holders share of profits. The bank s capital accumulation plan assumes that dividend for 2016 will in the lower part of the interval. 9

10 Bergen, 27 April 2016 The Board of Directors of Sparebanken Vest Trygve Bruvik Marit Solberg Birthe Kåfjord Lange Chair of the Board Deputy Chair of the Board Arild Bødal Richard Rettedal Øyvind A. Langedal Anne Marit Hope Sivert Sørnes Kristin Axelsen Jan Erik Kjerpeseth Managing Director 10

11 Income statement, group Notes 01/ / / / Interest income and similar income Interest expenses and similar expenses Net interest and credit commission income Commission income and income from banking services Commission expenses and expenses relating to banking services Income from ownership interests in associated companies Net gain/(loss) on financial instruments Other operating income Net other operating income Net operating income Payroll and general administration expenses Depreciation Other operating expenses Total operating expenses Profit before write-downs and tax Net gain on fixed assets Write-downs on loans and guarantees Pre-tax profit Tax Profit for the period Majority share of the profit for the period Minority share of the profit for the period Profit/Diluted profit per equity certificate 0,99 1,88 6,32 Statement of comprehensive income 01/ / / / Profit/loss for the period Estimate variance, pensions Tax effect of estimate variance, pensions Effect of change in tax rules Other profit/loss elements that will not be reclassified to profit or loss after tax Other profit/loss elements that will be reclassified to profit or loss after tax Total other profit/loss elements in the period Total profit for the period Majority share of the total profit for the period Minority share of the total profit for the period

12 Balance sheet, group Notes 31/ / /12-15 Assets Cash to and receivables from central banks Loans to and receivables from credit institutions Net lendings 7, Shares at fair value through profit or loss Commercial papers and bonds Financial derivatives Shareholdings in associated companies Other intangible assets Tangible fixed assets Prepaid expenses Other assets Total assets Liabilities and equity Liabilities to credit institutions Deposits Securitised liabilities Financial derivatives Accrued expenses and pre-paid income Pension commitments Deferred tax Other provision for commitments Tax payable Subordinated loan capital Other liabilities Total liabilities Equity certificates Own equity certificates Premium reserve Equalisation reserve Total equity certificate capital Primary capital Gift fund Compensation fund Total primary capital Other equity Hybridcapital Minority interests Total equity Total liabilities and equity

13 Cash flow statement, group 01/ / / / Cash flows from operations Interest, commission and customer fees received Interest, commission and customer fees paid Interest received on other assets Interest payments on other funding Payments to other suppliers for goods and services Payment to employees, pension schemes, National Insurance contributions, tax withholdings etc Payment of taxes Dividends received on securities for trading purposes Net receipts/payments on sales/purchases of securities for trading purposes Net cash flow from operations Cash flows from investment activities Payments received/made relating to customers' loans Net receipts/payments on loans to credit institutions Dividends received on securities not for trading purposes Net receipts/payments on sales/purchases of securities not for trading purposes Net receipts/payments on sales/purchases of other financial instruments Payment received from sale of associated companies Payments related to associated companies Payments received from the sale of operating assets etc Payments made on purchases of operating assets etc Net cash flows from investment activities Cash flows from financing activities Payments received/made relating to customer deposits Payments received/made on deposits from Norges Bank and other financial institutions Receipts related to issues of subordinated loan capital Payments related to redemptions of subordinated loan capital Receipts related to issues of bonds and commercial papers Payments related to redemptions of bonds and commercial papers New equity certificates Dividends paid / Gifts for the public benefit Net cash flow from financing activities Net cash flow for the period Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

14 Changes in equity, group Equity certificates Own equity certificates Premium reserve Equalisation Primary reserve capital Gift fund Comp. fund Other equity Hybrid capital Minority interests Total Equity at 31 Dec Profit/loss Other comprehensive income Purchase/sale of own equity certificates Distributed dividend and donations Equity at 31 Mars Equity at 31 Dec Profit/loss Other comprehensive income Issue of new equity certificates Correction of prior year errors from Associated Companies 6 6 Purchase/sale of own equity certificates Fusjon Sparebanken Vest Eiendom AS Distributed dividend and donations Reclassification of hybrid capital at 31 Dec Equity at 31. Dec Profit/loss first quarter Other comprehensive income 0 Purchase/sale of own equity certificates Distributed dividend and donations Interest paid on hybrid capital -8-8 Tax on interest on hybrid capital, directly against equity Donations from gift fund Equity at 31 Mars Notes Note 1 Accounting principles The consolidated accounts for the first quarter 2016 have been prepared in accordance with IAS 34. The accounts have been prepared on the basis of the same principles and with the same estimate methods as the annual accounts for The accounting principles are described in the 2015 annual report. Subordinated bonds that do not meet the definition of financial commitment pursuant to IAS 32 are reclassified as equity at 31 Dec All amounts are stated in NOK million and apply to the Group unless otherwise specified. 14

15 Note 2 Segment information The management has evaluated the segments that it is appropriate to report in relation to corporate governance. The segments are: Corporate Banking, Retail, Treasury and Real Estate Markets. Operating expenses are allocated, with the exception of IT costs, staff costs and depreciation. Net interest income is allocated based on internally calculated interest based on 3-month NIBOR. Banking operations Corporate market Retail market Treasury Estate agency business Not allocated by segment Total 01/01-31/ Income statement Net interest income Operating income Operating expenses Losses Pre-tax profit Tax -80 Profit for the period / Balance sheet Net lendings Deposits /01-31/ Income statement Net interest income Operating income Operating expenses Losses Pre-tax profit Tax -100 Profit for the period /03-15 Balance sheet Net lendings Deposits Income statement Net interest income Operating income Operating expenses Net gain on fixed assets Losses Pre-tax profit Tax -349 Profit for the period /12-15 Balance sheet Net lendings Deposits

16 Note 3 Net interest and credit commission income Change 01/ / / / Q1-16 vs Q1-15 Q1-16 vs Q4-15 Interest and similar income from loans to and receivables from credit institutions Interest and similar income from loans to and receivables from customers Interest and similar income from commercial papers, bonds and other interest-bearing securities Interest income and similar income Interest and similar expenses on debt to credit institutions Interest and similar expenses on deposits from and debt to customers Interest and similar expenses on issued securities Interest and similar expenses on subordinated loan capital Other interest expenses etc. 1) Fee Norwegian Banks' Guarantee Fund Interest expenses and similar expenses Net interest and credit commission income ) Interest from derivatives entered into to manage the interest rate risk attached to the bank s ordinary portfolios is classified as interest income and recognised as an adjustment of the bank s other interest income/ interest expenses. Note 4 Net other operating income 01/ / / / Change Q1-16 vs Q1-15 Q1-16 vs Q4-15 Guarantee commissions Fees from payment transfers /interbank fee credit Other commissions and fees Commission income and income from banking services Fees payment transfers Fees payment transfers/interbank debit Other commissions and fees Commission expenses and expenses relating to banking services Net banking services 1) Income from ownership interests in associated companies Dividend Gain/(loss) on commercial papers and bonds Gain/(loss) on shares Gain/(loss) on financial derivatives Gain/(loss) on financial instruments, recognised at fair value Gain/(loss) on currency Net gain/(loss) on financial instruments designated for hedge accounting Of which gain/loss related to basisswaps Other Net gain/(loss) on financial instruments Brokerage commission Other operating income Other operating income Net other operating income ) Specification of income and expenses relating to banking services Guarantee commissions Payment transfers Insurance Funds and other placement products Other income Net banking services

17 Note 5 Operating expenses Change 01/ / / / Q1-16 vs Q1-15 Q1-16 vs Q4-15 Salaries Pensions Other personnel expences Fees ICT expenses Marketing and public relations Payroll and general administration expenses Depreciation Operating expenses, premises Wealth tax Other operating expenses Total other operating expenses Total operating expenses

18 Note 6 Losses and defaults on loans and guarantees Change 01/ / / / Q1-16 vs Q1-15 Q1-16 vs Q4-15 Change in individual write-downs during period Confirmed losses on loans for which provisions have been made Confirmed losses on loans for which no provision has been made Recoveries of previously recognised losses Net effect of individual write-downs Change in group write-downs in period The period`s net losses on loans Confirmed losses on guarantees Change in provision for bad debt The period`s net losses on guarantees Write-downs on loans and guarantees Defaults and other problem loans The table shows booked value of total loans in default based on Basel II definitions. 31/ Retail market Corporate market Total Gross loans in defaults of payment exceeding 90 days Gross other defaults and other problem loans Gross default and other problem loans Individual write-downs Net default and other problem loans / Retail market Corporate market Gross loans in defaults of payment exceeding 90 days Gross other defaults and other problem loans Gross default and other problem loans Individual write-downs Net default and other problem loans Total Age distribution of commitments in default The table shows defaults of payment exceeding 30 days where the amount in default is more than NOK 1,000 in one of the commitment s accounts not caused by payment service delays. 31/ Retail market Corporate market Up to 30 days days days More than 90 days Gross loans in default of payment Total 31/ Retail market Corporate market Up to 30 days days days More than 90 days Gross loans in default of payment Total 18

19 Note 7 Capitalised write-downs on loans and guarantees 31/ / /12-15 Individual write-downs Individual write-downs of loans at 1 January (nominal values) Realised losses on loans covered by previous write-downs Increase in write-downs of loans written down previously Write-downs of loans not written down previously Reduction in previous years' write-downs on individually assessed loans Changes due to exchange rate movement Individual write-downs Group write-downs Group write-downs at 1 January (nominal values) Change in group write-downs for the period Group write-downs Total write-downs on loans Provision for bad debt for guarantees Provision for bad debt to cover losses on guarantees at 1 January Change in write-downs Total write-downs on guarantees Note 8 Loans by sector and industry 31/ / /12-15 Gross loans Primary industries Manufacturing and mining Power and water supply Building and construction Commerce International shipping and pipeline transport Hotel and restaurants Property management Services Municipal/public sector Other financial corporations Total corporate sector Retail customers Gross loans to customers Write-downs Primary industries Manufacturing and mining Power and water supply Building and construction Commerce International shipping and pipeline transport Hotel and restaurants Property management Services Municipal/public sector Other financial corporations Individual write-downs corporate sector Individual write-downs retail customers Group write-downs Total write-downs on loans Net loans to customers

20 Note 9 Deposits by sector and industry 31/ / /12-15 Primary industries Manufacturing and mining Power and water supply Building and construction Commerce International shipping and pipeline transport Hotel and restaurants Property management Services Municipal/public sector Other financial corporations Total corporate sector Retail customers Total deposits to customers Note 10 Valuation hierarchy for financial instruments at fair value Level 1 Financial instruments traded in active markets are classified as level 1. A market is deemed to be active if the market prices are easily and regularly available from a stock exchange, broker, industry group, pricing service or regulatory authority, and these prices represent actual and regularly occurring market transactions at arm s length. The market price used for financial assets is the applicable purchase price, while the applicable sales price is used for financial commitments. Instruments included in level 1 comprise listed shares, investments in unit trusts and treasury certificates. Level 2 The fair value of financial instruments that are not traded in an active market is determined by using valuation methods. These valuation methods maximise the use of observable data where available and, as far as possible, are not based on the group s own estimates. If all the material data required to determine the fair value of an instrument are observable data, the instrument is included in level 2. Instruments included in level 2 comprise loans to customers, equity instruments on the OTC list, other certificates and bonds, financial derivatives and all financial commitments valued at fair value. Level 3 If one or more data items are not based on observable market information, the instrument is included in level 3. Non-listed equity instruments, certain equity instruments on the OTC list and loans to customers valued at fair value are classified at level 3. Financial instruments valued at fair value 31/ Level 1 Level 2 Level 3 Total Assets Loans to customers Shares valued at fair value through profit or loss Certificates and bonds Financial derivatives Financial derivatives designated for hedge accounting Total Liabilities Debt to credit institutions Deposits from and debt to customers Securitised debt Financial derivatives Subordinated loan capital Total Loans to customers Shares Financial Instruments valued pursuant to level 3 at 31 Dec Additions/acquisitions Sales / redemption / repayment This years value adjustment 80-3 Reclassification between levels 2 and Financial instruments valued pursuant to level 3 at 31 Mar

21 Note 10 Valuation hierarchy for financial instruments at fair value (cont.) 31/ Level 1 Level 2 Level 3 Total Assets Loans to customers Shares valued at fair value through profit or loss Certificates and bonds Financial derivatives Financial derivatives designated for hedge accounting Total Liabilities Debt to credit institutions Deposits from and debt to customers Securitised debt Financial derivatives Subordinated loan capital Total Financial instruments valued pursuant to level 3 at 31 Dec Additions/acquisitions Sales / redemption / repayment This years value adjustment Reclassification between levels 2 and Financial instruments valued pursuant to level 3 at 31 Mar

22 Note 11 Financial strength Capital adequacy 31/ / /12-15 Risk-weighted volume Corporate Specialised Lending (SL) Corporate - Other Mass market secured on property - SMB Mass market secured on property - Not SMB Mass market - Other SMB Mass market - Other not SMB Total credit risk IRB Debt risk Equity risk Operational risk Commitments under the standard method Risk of impaired creditworthiness of the counterparty (CVA) Total risk-weighted volume before transitional rules Correction to the transitional arrangement Total risk-weighted volume Capital base Equity certificates Deductions for own equity certificates Premium reserve Saving bank`s reserve Share premium reserve Endowment fund Equalisation reserve Other equity Share of other equity in ownership interests Total book equity excluding hybrid capital Deductions Deferred taxes, goodwill and other intangible assets Including effects of regulatory scope of consolidation Adj. for unrealised losses/(gains) on debt recorded at fair value Value adjustments due to the requirements for prudent valuation Adjusted expected losses IRB-portfolios Allocated dividends Year-to-date profit not included in Core Capital Common Equity Tier 1 capital Additional Tier 1 capital Total Tier 1 capital Tier 2 instruments Total supplementary capital Own funds