ANNUAL REPORT BANK 1 OSLO AKERSHUS AS

Transcription

1 2015 ANNUAL REPORT BANK 1 OSLO AKERSHUS AS

2 2 CONTENTS Side 3 Key figures and ratios 4 Chief Executive s Report 5 Organisation chart 6 Business concept, vision and strategy 8 Our local branches in Oslo and Akershus 9 Corporate social responsibility 14 Director s report for Income statement 23 Balance sheet 24 Statement of change in equity 25 Cash flow statement 26 Auditor s report 28 The SpareBank 1-alliance 29 SpareBank 1 Banksamarbeidet DA

3 3 key figures and ratios for Bank 1 Oslo Akershus group Income statement summary (as a % of average assets) MNOK in % MNOK in % Net interest income Net commission and other income Net return on financial investments Total income Total operating expenses before losses Profit before losses Losses on loans and guarantees Profit before tax Tax expense Profit after tax Profitability Return on equity after tax (%) 1) 8.4% 16.2% Return on average assets 2) 0.7% 1.4% Net interest margin (%) 3) 1.27% 1.39% Cost/Income ratio (%) 4) 70.1% 57.9% From the balance sheet (MNOK) Outstanding loans (gross) Outstanding loans including transf. SpareBank 1 Boligkreditt (gross) Deposits Deposit coverage 5) 73.9% 79.1% Annual growth in lending (%) 15.2% 11.4% Annual growth in lending including transf. SpareBank 1 Boligkreditt (%) 13.3% 5.1% Annual growth in deposits (%) 7.7% 14.8% Average assets Total assets Total assets including transf. SpareBank 1 Boligkreditt Losses and defaults Loss ratio (Loan losses as a % of gross loans) -0.06% -0.06% Non-performing loans as a % of gross loans 0.24% 0.45% Other impaired loans as a % of gross loans 0.03% 0.13% Solvency and liquidity Capital adequacy ratio 6) 17.8% 16.5% Core capital ratio 7) 15.9% 15.0% Common equity Tier 1 capital ratio 15.3% 14.6% Core capital Net capital Leverage Ratio 7.2% 7.2% LCR 8) 108.3% 118.8% Offices and Staffing No. of bank branches No. of real estate agents Total no. of person-years worked ) Profit after tax in relation to average equity 2) Profit after tax in relation to average assets 3) Total net interest income as a % of average total assets 4) Total costs relative to total net income 5) Deposits from customers as a % of gross loans (excluding SB1 Boligkreditt) 6) Net capital as a % of calculated risk-weighted assets 7) The core capital as a % of calculated risk-weighted assets 8) Liquidity Coverage Ratio: Size of the banks liquid assets which can be easily converted into cash in order to meet a 30 day liquidity stress scenario

4 4 Chief Executive s Report The Group s profit after tax for 2015 was NOK 254 million and its return on equity 8.4%. The Group s total growth in lending to retail and corporate customers was 13.3% in 2015 (inclusive of home mortgages transferred to Spare- Bank 1 Boligkreditt). The growth in deposits was 7.7%. EiendomsMegler 1 Oslo Akershus s market share dropped slightly in 2015 and ended the year at 9.1%. The Group continues to aim for a rate of growth above market growth in the retail market. Both banks and estate agents are fiercely competing for customers. Achieving our ambition going forward will therefore require us to continually adapt our costs structure. The Bank has strengthened its capitalisation in recent years, both nominally and relatively in relation to the authorities stricter requirements, and today has a comfortable capital adequacy ratio in terms of the current buffer requirements. The introduction of new, stricter capital requirements and the phasing out of the transitional rules will, however, make great demands with respect to earnings or capital inflow in order to maintain good regulatory capital adequacy in the coming years. The Bank has a robust funding structure and could withstand significant instability in the financial markets. A change in customer behaviour towards more self-service solutions and the increasing automation of work processes are creating a need for new means of distributing the Bank s products and services. These will be crucial in maintaining our competitiveness and market position. The participants in the SpareBank 1-alliance invest heavily in the development of future-oriented system solutions for self-service and efficient customer advice. The Bank has also redefined its distribution model. This involves the Bank improving its remote advice and digital solutions in order to satisfy the customers wishes in relation to accessibility. The Group wants to ensure our customers have a good experience when they use the Bank and estate agent, irrespective of the channel they use to contact us. In December, Sparebanken Hedmark signed an agreement to purchase the Norwegian Confederation of Trade Unions (LO) and the other SpareBank 1 banks shares in Bank 1 Oslo Akershus AS. Once the agreement is implemen- ted, Bank 1 Oslo Akershus will become a wholly owned subsidiary of Sparebanken Hedmark. The agreement and its implementation are contingent on the approval of the authorities. Assuming the authorities approve Sparebanken Hedmark s purchase of the shares of the Bank s other owners, an integration project involving the two banks will start in Sparebanken Hedmark has applied for permission to operate Bank 1 Oslo Akershus as a wholly owned subsidiary for up to three years. Gradual integration will improve the capital situation and preserve expertise and effectiveness for the benefit of the customers, the employees and the market. A solid customer portfolio built up over time means the loss situation is expected to be satisfactory. A competent organisation, large customer base, good products and broad distribution through branches and digital channels provide good opportunities for further developing the Bank s market position in Oslo and Akershus.

5 5 Bank 1 Oslo Akershus Group Torbjørn Vik CEO Risk Management and Compliance Business Support CFO Gudrun Michelsen Director Risk Management and Compliance Geir-Egil Bolstad Deputy CEO Financial Director CFO Legal Affairs EiendomsMegler 1 Marianne Uppman Director Legal Affairs Odd Nymark Director Retail Banking Kent Staahle (Succeeded Kåre Johan Osen 1 February 2016) Director Retail Banking Corporate Banking Monica Mathisen Director Corporate Banking Trade Unions and Organisations Espen Mejlænder-Larsen Director Trade Unions and Organisations

6 6 Business concept, vision and strategy Business concept Bank 1 Oslo Akershus AS operates under the brand name SpareBank 1 Oslo Akershus and offers products within the areas of financing, savings and investment, payment services, insurance and financial advice. The Bank also offers estate agency services through its subsidiary Eiendoms- Megler 1. Its product sales should be based on high quality, expert advice. Vision «The customer experiences security, closeness and a simpler every day». The focus is on the customer s wishes and needs. The customer should trust the Bank and be able to perform their banking using the channels they want. The Bank must facilitate simple processes and offer products of value to the customer. Values «Close, capable and fast». The Bank must be accessible to the customer and offer good quality products and services in a proper and efficient manner. Organisation From an organisational perspective, SpareBank 1 Oslo Akershus is divided into the retail, corporate and organisations markets, as well as support and control functions. Retail Market Division The Retail Market Division refined its distribution model in 2016 to take account of changed customer behaviour. Reinforcing remote advice and digital solutions will enable us to improve our accessibility on the customers terms. The goal of the new distribution model is to satisfy the customer s needs in the channel the customer chooses. Work on the Distribution Project took place throughout The new distribution model was officially launched in January The retail market is the Bank s largest business area. It employs 163 of the Bank s full-time equivalents, following its reorganisation at the start of The retail market now comprises two regions. One covers Asker, Bærum and Oslo City Centre, and the other covers Romerike, Oslo East and Follo. The Bank s sixteen branches are organised under these. The distribution network is divided into branches that either focus on new sales and advice or on portfolio follow-up. The customer service centre has been replaced by the Direct Bank, a full service channel with the expertise to handle all types of customer enquiries. Direct Bank offers customers proper meetings with consultants via telephone, chat and video. The Bank also has a department for high net worth customers (Private Banking). In 2015, the product and back office tasks were amalgamated into a single production environment with the establishment of Sales and Distribution Support. The main purpose of Sales and Distribution Support (SDS) is to free up more of our advisers capacity for sales and customer follow-up. The department consists of one team with primary responsibility for credit and another for day-to-day banking and savings. SDS is intended to improve the customer experience and productivity. Corporate Market Division The Corporate Market Division employs 41 full-time equivalents. They cover all disciplines and ensure that we have the required expertise and are a one-stop provider of financial services. We assign customers a dedicated team with expertise in all of the areas in which the customer needs advice and a good discussion partner. Our Company Service Centre is available for all types of enquiries and our customer service is open 07:00-24:00 every day. The Corporate Market Division is located in the centre of the city, but we have meeting premises throughout our market area of Oslo and Akershus. This is why our customers find the Corporate Market Division accessible and a good partner in their region. We help customers with their everyday banking chores so they can focus on their business, which is what ensures their company s earnings and growth. Trade Union Division The trade union movement is the Bank s most important customer group in terms of the significant deposits they have placed with the Bank. The Trade Union Division is organised as a dedicated business area in the Bank that takes care of and develops customer relationships with the various customer groups in the trade union movement, and functions as a resource for the Retail Market Division in relation to individual members. Each year, the Trade Union Division arranges and holds around courses/meetings for individual union shops and unions. Any potential new customers it meets in these arenas are forwarded to the Retail Market Division for advice. EiendomsMegler 1 EiendomsMegler 1 Oslo Akershus is a wholly owned subsidiary of the Bank. Its twenty-three branches mean the company has good coverage in its local market. It facilitated 3,570 housing sales in In June, the company opened a new branch in Fornebu in partnership with the Bank. The level of customer satisfaction with the estate agency services improved well in EiendomsMegler 1 Oslo Akershus s estate agents scored no less than 93% for the year. The company is a strong driving force in the SpareBank 1-alliance with respect to establishing inno-

7 7 Population growth per year 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% n Akershus n Oslo n Norway vative solutions that help strength its position as an attractive actor in the industry. Today s users are digital and Eiendoms- Megler 1 was the first to launch digital advertising packages for its estate agents in May. This product has had positive effects both externally and internally in the company. The population of Oslo and Akershus According to the City of Oslo s annual statistics for 2014 (latest edition) the population of Oslo has grown steadily since From 1991 to 2014, Oslo s population grew by no less than 37% and Akershus saw similar growth. By way of comparison, Norway s population as a whole grew by 20% in the same period. At the last census (2015), Oslo had 647,676 inhabitants and Akershus 585,000. The City of Oslo expects annual growth of around 1.7% in the coming years with the population reaching around 806,000 in Akershus County Council is expecting around 761,000 inhabitants by According to Akershus County Council, Ås (3%), Ullensaker (2.7%) and Eidsvoll (2.4%) saw the highest growth in Akershus. Migration accounts for around three quarters of this population growth. Most of those who move to Akershus move from Oslo. At the start of 2014, 12.4% of the country s population lived in Oslo. If one includes Akershus, a quarter of the population of Norway lives in the Bank s market area. Given that the populations of Oslo and Akershus are growing faster than in the rest of the country, an increasing proportion of the country s inhabitants will live in our area. A steadily increasing number of people in Oslo have immigrant backgrounds. In 2014, 30% had an immigrant background, while in 1970 the same figure was 3.4%. Meanwhile, the proportion of those with immigrant backgrounds varies strongly depending on the district in Oslo, from around half in Søndre Nordstrand to around 15% in the districts of Ullern, Vestre Aker, Nordre Aker and Nordstrand. According to the City of Oslo s annual statistics from 2014, 52% of households in Oslo are single households. Business in Oslo and Akershus According to Akershus County Council the public, social and private service industries constitute the largest segment in Akershus, while the wholesale and retail trade and the hotel and restaurant industry are the next largest. Health and social services are the largest in Oslo, while the wholesale and retail trade and motor vehicle repairs are number two. An increasing proportion of the new jobs in the capital city s region are based in Akershus because of the steadily increasing price of space in Oslo. 40% of employed people living in Akershus worked in Oslo in 2015, while 13% of employed people living in Oslo commuted to Akershus (2013 figures).

8 8 our local branches in Oslo and Akershus Eidsvoll Oslo Sentrum Youngstorget 5, 0181 Oslo. Asker Bankveien Asker Bekkestua Signaturgården Gamle Ringeriks vei 45A 1357 Bekkestua Fornebu Martin Lingesvei 25 Technopolis-bygget 1330 Fornebu Lillestrøm Adolph Tidemands gate Lillestrøm Lørenskog Metrosenteret 1473 Lørenskog Majorstuen Majorstuveien 38 inngang Kirkeveien 0367 Oslo Eidsvoll Gladbakkveien 1 Råholt Senter 2070 Råholt Storo Vitaminveien 7-9 Storosenteret 0485 Oslo Tveita Tvetenveien 150 Tveitasenteret 0671 Oslo Vika Olav Vs gate Oslo Skøyen (lclosed down in 2016) Sjølyst plass Oslo Jessheim Grorud Bergensveien 2-8 Grorud Nærsenter 0963 Oslo Jessheim Storgata Jessheim Lambertseter Langbølgen Oslo Kolbotn Kolbotnveien Kolbotn Sandvika Claude Monets allé 18 vis à vis Sandvika Storsenter 1338 Sandvika Ski Jernbaneveien 10 Ski Storsenter 1400 Ski Majorstuen Storo Strømmen (closed down in 2016) Stasjonsveien Strømmen Grorud Strømmen Lillestrøm Bekkestua Skøyen Vika Oslo Sentrum Tveita Lørenskog Sandvika Lambertseter Asker Fornebu Kolbotn SpareBank 1 Oslo Akershus EiendomsMegler 1 Ski

9 9 Corporate social responsibility The financial crisis has shown the importance of stable banks to the economy has seen Bank 1 Oslo Akershus deliver a good result and it will use the solidity of its future operations to help our customers realise their ambitions, whether they are individuals, families or corporations. All of the Bank s stakeholders should be able to trust that the bank meets their needs, and is a credible and competent partner for the long term. This is an important part of the bank s corporate responsibility. Ever since its foundation in 1898, further development of the community that the bank is part of has figured prominently in our choices and decisions. With our local knowledge and proximity to customers, the bank makes assessments, that in addition to finance and risk, are based on a social perspective, and how the Bank works closely with customers and communities to develop good businesses and good living. Vision, Values and Strategy Bank 1 Oslo Akershus AS vision: «The customer experiences security, proximity and an easier daily life» The Bank will create value for customers, shareholders, employees and society. Bank 1 Oslo Akershus AS values: «Close, skilled and fast» Our values reflect what should characterise Bank 1 Oslo Akershus. Skilled employees, providing customers with quick responses, who ensure that customers always experience relevant service and in all channels find meetings with the bank to be a good experience. The Bank s vision and values are about putting customers at the centre. Through satisfied customers, who find their needs for financial services met in a good way, the bank wants to be a hub offering a total range of financial products and services in Oslo and Akershus. StrategY The bank s solvency was strengthened in recent years, as well nominally as relative to government increased demands, and has today a comfortable capital adequacy in relation to current buffer requirements. The bank has a robust financing structure and will withstand considerable turbulence in financial markets. Uncertainty about future economic conditions and new requirements from regulatory agencies will, however, require considerable adaptability and facilitate the bank s strategic deliberations. Efficient capital growth, enhanced customer satisfaction and increased top line growth will be a high priority in the future.

10 10 The triple bottom line Solid banking creates the foundation for economic development. The bank tries to balance respect for society and the environment with financial objectives. The Bank has in each of these areas defined key areas to which special attention is devoted and for which it has developed specific measures for each area. Bank 1 Oslo Akershus has not formulated a specific policy for corporate responsibility as the work of corporate responsibility is integrated into the bank s ongoing planning. The following describes how the ongoing operations of the bank put various aspects of CSR on the agenda. Ethics The Group is dependent on being trusted. Customers, authorities, other financial institutions and society must always have confidence in the Group s professionalism and integrity. The Group s code of ethics must increase awareness of, and adherence to, the high ethical standards required of the employees of Bank 1 Oslo Akershus. The guidelines require the Group and its employees and officers to act with care, integrity and objectivity, including loyally following the rules and conditions set by the authorities. Bank 1 Oslo Akershus has prepared the following formalised and repeated review of the Bank s code of ethics for the bank s employees, in order for this combination to constitute the formal basis for the actual conduct of all the Group s employees: The Code of Ethics is part of the HR portal (Employee Manual), and hence a part of the employment contract. The Code of Ethics are reviewed, with accompanying examples for new employees. Ethics is a mandatory module in the bank s on-line educational facility and all employees must pass the test. The Code of Ethics is a key part of the Group s management development program. All financial advisors in the bank are certified under a national licensing system for the entire financial industry. The content of the code of ethics is followed up in the bank s annual management verification. Individual managers are responsible for ensuring that employees are familiar with the regulations and must, in their management verification, confirm that they are familiar with the code and provide feedback on whether ethical issues are discussed in such fora as, e.g. department meetings. The management verification for 2015 indicates that the code of ethics is well known among bank employees and that ethical issues are discussed regularly. Supplier follow-up All suppliers to the SpareBank 1-alliance must sign a document stating that they are not complicit in breach of human and labour rights, harm to the environment or corruption. Financial crime Financial services constitute one of the pillars of a functioning society. Banks make trading, saving and investing easier - the things that make the wheels go around in a modern economy. At the same time, banks can be exploited by criminal networks. Governments

11 11 around the world are currently investing considerable energy and resources in combating money laundering, and many of the new regulations in the banking sector deal with this. Bank 1 Oslo Akershus welcomes this. As a responsible bank, it supports all measures aimed at combating organised crime and terrorism. The concept of economic crime includes, among others, the following: Money laundering and terrorist financing Cybercrime Internal fraud and corruption Money laundering and terrorist financing Money laundering is about getting funds or assets obtained through criminal activity to appear as apparently legitimate funds. Financing of terrorism includes both channelling in, obtaining or receiving funds for financing terrorist acts. The Bank is subject to the government s money laundering legislation, which is aimed at helping combat money laundering and terrorist financing, and in collaboration with the other banks in SpareBank 1-alliance, has introduced a range of measures aimed at combating this type of crime. Training of bank staff in these topics takes place through in-classroom courses, on-line courses and reviews of the topic in meetings and the like. Cybercrime The SpareBank 1-alliance is, as are all major businesses/alliances, prone to virus attacks and hacker attacks from all over the world. The purpose is often financial crime. Bank 1 Oslo Akershus provides guidance to all of its customers about use of anti virus programs via its on-line bank service. The Bank has also participated in national security exercises (disaster exercises). Internal fraud and corruption Internal fraud encompasses actions where a staff member, temporary worker, employee representative or member of the governing bodies of Bank 1 Oslo Akershus in a deliberate and unauthorised manner, commits acts that result in gain or economic benefit to the employee himself or others. The Bank

12 12 does not tolerate such actions and has made this known through its code of ethics, see the chapter concerning ethics. This code also includes a clear procedure for notification and handling of any indication of fraud and corruption. Human Rights The Group supports the recognised human rights principles. Contribution to society Bank 1 Oslo Akershus supports sporting, cultural and charitable organisations and other charitable causes. The bank sees it as an important social task to conduct training activities in financial topics. The topics have included the new pension reform, property trends, product training, financial advice, pensions, payment systems and macroeconomics. The training activities help to keep our various customer groups updated on what is happening in the market, and about new products and solutions that provide increased security for their own finances. Customers How its customers, and the market in general, experience Bank 1 Oslo Akershus affects the Group s operations and results. Both reputation and customer satisfaction are key focus areas for the Group. The Bank conducts annual position surveys that map the banks market position in the population, based on a comprehensive questionnaire with many different topics, including market description, reputation and customer relationships. TNS Gallup conducts the surveys. Every second year, TNS Gallup also conducts a TRIM Index survey that measures customer satisfaction. Surveys of customers perception of, and satisfaction with, the bank show that both retail customers and corporate customers relative satisfaction increased from 2012 to In addition, the SpareBank 1-alliance conducts monthly surveys of customer satisfaction associated with the Alliance s call centres. The Bank 1 Oslo Akershus customer centre s score remains the highest in the surveys. On the basis of these surveys, the bank directs its focus on relevant initiatives for increasing customer satisfaction, such as good consultancy processes, opening hours at customer centres and the functionality of on-line banking and mobile solutions. The bank broad-based sales and consultancy processes are based on Best customer practice. This is the key to good preparation for all consultancy meetings, which are systematised by the PM consultancy school. Good survey systems have been established that highlight and reward good consultancy experiences at local branches, and customer experience is monitored regularly by using Mystery Shoppers. Employees/working conditions At year-end 2015 (2014), the Group had 423 (411) full-time equivalent positions, 293 (282) of which were employed by the parent bank and 130 (129) were employed by EiendomsMegler 1. The Bank is committed to providing women and men the same opportunities for professional and personal development, pay and promotion. Of the parent bank s total number of employees, 48.5% are women and 51.5% are men. The company has used various measures to encourage female representation in its senior management and this now stands at 40.4%. 3 of the 7 members of the parent bank s senior management group are women. The bank s Board has a total of 9 members, 2 of whom are women.

13 The current average age of the bank s employees is 44.3 years old, while the average age of new employees in 2015 was 35.9 years old. 55% of EiendomsMegler 1 s total number of employees are women and 45% are men. 2 of the 7 members of the company s senior management group are women. The Board of EiendomsMegler 1 has a total of 6 members, 1 of whom is female. The recruitment group considers the candidates on the background of their formal qualifications and experience. In addition, the bank attaches considerable significance to their personal skills and attitudes. In this way, the Group ensures a neutral assessment and complies with the intentions of antidiscrimination and accessibility legislation. The Group bases its policy on its HR work supporting its commercial strategy. The Group has developed its own HR strategy. The overriding goal of the HR work is to ensure that the Group: Attracts the right employees by focusing on the Group s core values. Retains the best employees by offering them challenging tasks, constructive communication and reward for good performance Develops its employees by creating commercial understanding through involvement, giving responsibility in relation to clear goals. Implement restructuring and liquidation of employees in accordance with legislation and agreements. Annual working environment surveys are carried out throughout the Group, with subsequent systematic activities to meet organisational challenges and potential areas of improvement. It is a goal that all employees should have an individual development plan. Group conducted for the first time a joint management training for the bank, real estate company and Hedmark. Annual performance reviews aim at each employee, along with their manager, being able to discuss their development potential in order to create further commitment and satisfaction, through which they can improve their performance. The Group has established a joint management development programme for the bank and the real estate brokerage, and has initiated a business development programme for key resources. The bank has an active life phase policy. The life phase policy contains measures to ensure adaptation of the employees working conditions throughout their entire career. The bank and EiendomsMegler 1 have their own working environment committees that work with the safety service as needed. A Workplace Anti-Alcoholism and Drug Addiction Dependency Committee has been established in association with the bank s working environment committee. The collaboration with the employees organisations is regarded as being constructive. A works committee has been established consisting of representatives of management and the employee organisations. The committee has held five meetings in 2015 where current issues of importance to the Bank s commercial situation were discussed. The bank and EiendomsMegler 1 work systematically on interaction in order to enhance business outcomes through better use of common customer streams. This resulted in stronger results than for The bank has renewed its agreement concerning an Inclusive Workplace. Average absence due to illness in 2015 was 3.5%, 0.2% higher than the bank s goals of 3.3%. No industrial accidents or occupational injuries were reported during the year. The bank has drawn up a remuneration policy that has been approved by the Board in line with the remuneration regulations that came into force on 1 January 2011, and which was revised January The bonus schemes for the management and profit-sharing schemes for employees where terminated on 1 January Environment The Group s direct climatic and environmental impact is mainly related to waste from office operations. The group initiates regular measures to help reduce the consumption of electricity, paper and other resources, and to ensure that resource-intensive travel activity is limited. Close focus is also directed on the management of technological waste and procurement of environmentally friendly solutions. The Bank works constantly to ensure proper procurement of technological equipment, in which we put energy and environmental requirements as specific assessment criteria. All technological devices are treated as hazardous waste, ensuring environmentally sound handling of the equipment. The Bank has a dedicated travel policy for employees to limit the amount of business travel. Alternative options, such as the use of video conferencing, audio conferencing and digital tools for collaboration and knowledge sharing are used if they provide a satisfactory alternative. The Group offers an increasing number of paperless services that reduce environmental impact. The bank focuses on digital solutions, which means as many paperless processes as possible for customers and employees. There is a determined effort to increase the use of our self-service solutions in both local branches and the customer centre. Electronic signatures using BankID for mortgage applications with security in property were offered to customers from Q All contracts that are signed electronically will be offered to the customer in an easy and safe way, and they will be easier to retrieve from the customers electronic records. The company does not conduct any research and/or development activities over and above normal business development to promote growth and competitiveness. 13

14 14 Director s report for 2015 (Consolidated figures. Figures in (brackets) are for 2014 unless otherwise stated). Net profit for the year: NOK 254 million (NOK 452 million) Return on equity: 8.4% (16.2%) Net interest income: NOK 472 million (NOK 459 million) Net commissions and other operating income: NOK 572 million (NOK 617 million) Net income from financial investments: NOK 7 million (NOK 166 million) Operating costs: NOK 737 million (NOK 719 million) Losses on loans and guarantees: net recoveries on losses of NOK 18 million (net recoveries on losses of NOK 18 million) Lending growth over last 12 months, incl. SpareBank 1 Boligkreditt: 13.3% (5.1%) Growth in deposits over last 12 months: 7.7% (14.8%) Common equity tier 1 capital ratio: 15.3% (14.6%) The Board proposes a dividend rate of 20% of the profit for the year, which amounts to NOK 9.32 per share. In December, Sparebanken Hedmark agreed to purchase the Norwegian Confederation of Trade Unions (LO) (29.9%) and the other SpareBank 1 banks stakes (29.6% in total) such that Bank 1 Oslo Akershus will become a wholly owned subsidiary of Sparebanken Hedmark. The agreement is contingent on the approval of the authorities. THE GROUP S BUSINESS AREAS The consolidated financial statements cover the EiendomsMegler 1 Oslo Akershus Group and Invest 6, as well as the Bank s stakes in SpareBank 1 Boligkreditt AS, SpareBank 1 Gruppen AS and SpareBank 1 Kredittkort AS. Bank 1 Oslo Akershus AS s head office is in Oslo and it has a total of nineteen local branches, nine of which are in Oslo and ten in Akershus. Eiendoms- Megler 1 Oslo Akershus AS s head office is in Oslo and it has a total of twenty-four branches, fourteen of which are in Oslo and ten in Akershus. The Group aims to be a one-stop provider of financial products and services in Oslo and Akershus. Besides loans, deposits and payment services, these include most savings products, as well as life and general insurance. The Group also offers estate agency services. The overall range of products and services are delivered by the Bank, its subsidiaries and the product companies in SpareBank 1 Gruppen. The Group employs a multi-channel strategy for the distribution of its products and services: face-to-face via local branches, Direct Bank via telephone, chat and video, and via mobile solutions. GROUP S PERFORMANCE The Group s total growth in lending to retail and corporate customers was 13.3% in This is inclusive of home mortgages transferred to SpareBank 1 Boligkreditt AS. The growth in the retail market was 11.0%, while the corporate market saw growth of 23.8%. According to Statistics Norway, general household credit grew by 6.2% in The growth in lending in the corporate market must be viewed in the context of the corporate market experiencing negative growth in 2014 due to a number of major redemptions towards the end of the year. EiendomsMegler 1 Oslo Akershus s market share was 9.1%, compared with 10.1% at year-end The Group s most important customer groups are the retail market, small and medium-sized enterprises, and the organisations market, primarily the trade union movement. The Group s current strategy involves a visible physical presence in the Bank s market area, with a special focus on wide-ranging advice. The focus on, and importance of, self-service is increasing. The focus on greater profitability continued throughout In January 2016, the Retail Market Division (RM) implemented its new distribution strategy in which the scope and content of the branch network, customer service centre and self-service solutions have been tailored to changes in customer behaviour and preferences. The Corporate Market Division (CM) continues

15 to focus on credit quality and capital efficiency, as well as repricing credit and increasing sales of other financial products to new and existing customers. The estate agency company is focusing on improved operations and streamling. A change in customer behaviour towards more self-service solutions and the increasing automation of work processes are creating a need for new means of distributing the Bank s products and services. These will be crucial in maintaining competitiveness and market position. The Bank invests heavily, through the SpareBank 1- alliance, in the development of futureoriented system solutions for selfservice and efficient customer advice. financial performance MNOK Operating profit before losses Operating profit before tax The Group s profit after tax for 2015 was NOK 254 million (NOK 452 million). The decrease was primarily attributable to the fact that the figures for 2014 include income of NOK 138 million linked to the Bank s shares in Nets Holding. In addition to this, commissions from SpareBank 1 Boligkreditt fell, the liquidity portfolio experienced a significant loss and costs increased. The Group s return on equity for 2015 amounted to 8.4%, compared with 16.2% for Net interest income MNOK Net interest income in MNOK SB1 Boligkreditt Net interest income as % of average total assets 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Net interest income for 2015 amounted to NOK 472 million (NOK 459 million). Net interest income must be viewed in the context of the commissions from SpareBank 1 Boligkreditt. The commissions amounted to NOK 170 million for 2015 (NOK 210 million). Interest rates for loans to retail customers were lowered across the board on five occasions in 2014 and 2015 (the last general interest rate reduction was on 29 September 2015). The Bank has therefore adjusted rates in line with the competition situation. During the same period, deposit rates for retail and corporate customers were reduced due to falling market rates. Net interest income as a percentage of average total assets amounted to 1.27% (1.39%). Net commissions and other operating income Net commissions and other operating income totalled NOK 572 million in 2015 (NOK 617 million). The decrease was primarily attributable to lower commissions from SpareBank 1 Boligkreditt due to lower interest rates for loans to customers compared with The reduction in guarantee provisions/other operating income was primarily due to a decrease in income from the subsidiaries Invest 3 and Invest 4, which were sold in the fourth quarter of Net income from financial investments Net income from financial investments amounted to NOK 7 million in 2015 (NOK 166 million). The decrease was primarily attributable to the fact that the figures for the year before include income of NOK 138 million linked to the Bank s shares in Nets Holding AS. Credit spreads expanded strongly in Norway in the latter half of the year due to a demanding Norwegian liquidity market. This resulted in a significant capital loss in the Bank s liquidity portfolio. The Bank s liquidity portfolio primarily consists of covered bonds and bonds with low risk. Income from ownership interests increased by NOK 24 million. The increase was largely due to an increase in the profit contribution from Spare- Bank 1 Boligkreditt, which was due in turn to the very positive effects on the company s result of currency effects on its own borrowing (basis swap effects). Operating costs MNOK Costs 2.6% 2.5% 2.4% 2.3% 2.2% 2.1% 2.0% 1.9% 1.8% Expenses as % of average total assets Operating costs amounted to NOK 737 million for 2015 (NOK 719 million). This represents an increase of NOK 19 million or 2.6%. The increase in costs was primarily attributable to higher personnel costs and higher depreciation costs. Person- 15

16 16 nel costs increased by NOK 12 million or 3.2%. The number of full-time equivalents increased by twelve in The increase was due to the opening of a new local branch, including estate agency services, in Fornebu. The estate agency business also has a new department for customer acquisition. Depreciation increased by NOK 7 million due to the refurbishment of the head office and a number of local branches during 2014 and The Group is focusing on the development and level of costs. In January 2016, the Group implemented its new distribution strategy in which the scope and content of the branch network, customer service centre and self-service solutions have been tailored to changes in customer behaviour and preferences. Because of these changes, staffing in the retail market will be reduced by just over twenty full-time equivalents, equivalent to around 12%. This is expected to be completed in the first half of Projects that improved the Group s purchasing and supplier agreements and streamline key administrative processes were also implemented in Non-performance and losses on loans Losses on loans saw net recoveries on losses of NOK 18 million in 2015 (net recoveries on losses of NOK 18 million). The loss ratio (losses as a percentage of gross loans) was -0.06% (-0.06%). MNOK Corporate Market Retail Market Gross non-performing and impaired loans amounted to NOK 87 million at year-end 2015 (NOK 162 million). 84 Measured in terms of gross loans this amounts to 0.3% (0.6%). Individual impairments amounted to NOK 18 million in 2015 (NOK 44 million). Collective impairments amounted to NOK 99 million in 2015 (NOK 85 million). The increase in collective impairments reflects the poorer economic situation and is in line with signals in the Financial Supervisory Authority of Norway s letter to Norwegian banks concerning assessing levels of loss provisions. Of the total non-performance over 90 days amounting to NOK 77 million (NOK 125 million) loss provisions of NOK 11 million had been made at yearend 2015 (NOK 28 million), equivalent to 14.0% (22.3%). The reduction in the degree of non-performance and provisions was due to the establishment of a loss linked to one major commitment. Other non-performing and impaired loans amounted to NOK 10 million (NOK 37 million), of which loss provisions of NOK 7 million had been made (NOK 16 million), which is equivalent to 69.7% (43.0%). BALANce sheet MNOK Total assets SpareBank 1 Boligkreditt Growth as a % (incl. SpareBank 1 Boligkreditt) 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Total assets at year-end 2015 amounted to NOK 39.0 billion (NOK 35.6 billion), an increase of NOK 3.4 billion or 9.6%. The increase was primarily attributable to growth in loans to customers. Business capital (total assets inclusive loans transferred to SpareBank 1 Boligkreditt AS) amounted to NOK 55.3 billion (NOK 50.4 billion) after growth of NOK 4.8 billion or 9.6%. Loans Lending to customers increased by NOK 5.6 billion in 2015, or 13.3%, to NOK 48.1 billion. This is inclusive of home mortgages transferred to Spare- Bank 1 Boligkreditt, which amounted to NOK 16.3 billion at year-end. MNOK Retail Market (incl. transferred til SpareBank 1 Boligkreditt) Corporate Market (incl. Trade Union movement) The growth in the retail market was NOK 3.8 billion or 11.0%, while the growth in the corporate market was NOK 1.8 billion or 23.8%. The growth in lending in the corporate market must be viewed in the context of the corporate market experiencing negative growth in 2014 due to a number of major redemptions towards the end of the year. The basis for calculation was reduced by 0.7% in 2015 for the Bank as a whole. The ratio between the retail and corporate market at year-end 2015 was 81/19 (82/18), inclusive of home mortgages transferred to SpareBank 1 Boligkreditt AS. Exclusive of these transferred loans, the ratio was 71/29 (73/27). The credit risk portfolio improved in general in 2015.

17 17 Deposits Customer deposits at year-end 2015 amounted to NOK 23.5 billion (NOK 21.8 billion). This represents an increase of NOK 1.7 billion or 7.7%. The retail market increased by NOK 1.7 billion or 17.1%. Deposits in the corporate market (inclusive of the organisations market) increased by NOK 11 billion or 0.1%. The deposit coverage ratio (deposits/loans) at year-end 2015 was 73.9% (79.1%). Liquidity The Bank s liquidity situation is regarded as satisfactory. In the next twelve months, securitised loans worth a total of NOK 1.5 billion will mature (NOK 1.1 billion if holdings of own papers are taken into account). At year-end 2015, the Bank had sold loans equivalent to NOK 16.3 billion to SpareBank 1 Boligkreditt. Around NOK 6.3 billion worth of home mortgages are ready for transfer to SpareBank 1 Boligkreditt. This constitutes part of the Bank s liquidity reserves, together with the portfolio of liquid fixed income securities and access to loans in Norges Bank. At year-end, the Bank s securities portfolio was worth NOK 4.2 billion, inclusive of holdings of own papers, a reduction of NOK 0.4 billion in The Bank wants to use deposits and the bond market to ensure that the liquidity indicators and degree of deposits are in line with the Bank s targets. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt will also be used as sources of funding. Since the end of the year, the Bank has borrowed NOK 200 million in the securities market. The holding of liquid assets, defined as cash, deposits in Norges Bank and receivables from financial institutions, at year-end 2015 amounted to NOK 1.0 billion (NOK 1.4 billion). At year-end, the Bank had sufficient liquidity reserves to cover more than the expected refinancing needs and planned lending growth for the next eighteen months without using the securities market. Capital adequacy and capital requirements The Group s capital adequacy and tier 1 capital ratio at year-end 2015 were 17.8% and 15.9%, respectively. Common equity tier 1 capital ratio was 15.3%. The Group s primary capital amounted to NOK 3.0 billion. Please see note % 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2.4% 9.7% 1.9% 9.9% 10.9% 10.9% Tier 1 capital Tier 2 capital CET 1 capital 0.9% 13.1% 14.0% 1.5% 14.6% 15.0% 1.9% 15.3% 15.9% The Board of Bank 1 Oslo Akershus continually assesses the capital situation and future capital requirements. The Board stresses that it is important that the Group is adequately capitalised so that it can at all times fulfil all of the regulatory requirements, including buffers, and maintain a buffer in excess of this (management buffer). In February, the Bank received the Financial Supervisory Authority of Norway s permission to use Advanced IRB to calculate regulatory capital requirements for credit risk for the corporate market. As a transitional arrangement, a lower limit of 80% of the Basel I regulations has been set for the basis for calculation. This limit applies to Bank 1 Oslo Akershus from the fourth quarter of Bank 1 Oslo Akershus AS The Bank s profit before losses for 2015 was NOK 272 million (NOK 505 million). Net recoveries on losses on loans of NOK 18 million were recognised (net recoveries on losses on loans of NOK 5 million), such that the profit after losses amounted to NOK 290 million (NOK 510 million). Calculated tax amounted to NOK 77 million (NOK 88 million) and the profit after tax for the year was thus NOK 213 million (NOK 422 million). The Bank s capital adequacy and tier 1 capital ratio at year-end % and 15.6%, respectively, compared with 16.5% and 15.0% at year-end The common equity tier 1 capital ratio for 2015 was 15.0%, while the Bank s primary capital was NOK 3.0 billion. Subsidiaries and joint ventures The EiendomsMegler 1 Group achieved a profit before tax of NOK 4.1 million in 2015 (NOK 2.5 million). The improvement in the result was due to increased commissions. Its market share at yearend 2015 was 9.1% (10.1%). The company underwent a consolidation phase in 2015 with a focus on improving efficiency. The project resulted in a non-recurring cost for external consultants of NOK 2.9 million. Invest 6 was established in 2011 and was an empty company until the Bank took over properties in the second quarter of 2015 in connection with a non-performing commitment. The purpose of the company is to prepare the properties for sale. The Group s book value of the properties at year-end 2015 was NOK 14 million and reflected market value. The Group is in the process of disposing of the properties/company. The company posted a profit before tax of NOK 0.4 million for SpareBank 1 Boligkreditt AS was established by the banks in the SpareBank 1- alliance for the issuing of covered bonds. The banks transfer well-secured home mortgages with low risk to the company. The Bank s stake was 9.36% up to 29 December 2015 and 9.68% after this. This amounted to a profit contribution of NOK 42.4 million for 2015, compared with NOK 19.7 million for the same period the year before. The result was heavily affects by positive basis swap effects on the company s own borrowing because of the strong expansion in the EUR/NOK swap.

18 18 SpareBank 1 Gruppen AS is the Spare- Bank 1 banks jointly owned holding company for product deliveries that the banks do not produce themselves. The Bank s stake in SpareBank 1 Gruppen was 1.4% at year-end This produced a profit contribution of NOK 18 million for 2015 (NOK 25.9 million). The lower profit compared with 2014 was primarily attributable to higher compensation payouts for disasters and lower profit prior years in the general insurance business, as well as lower financial income. SpareBank 1 Kredittkort AS started ordinary operations on 1 July The company is owned by the banks in the SpareBank 1-alliance and Bank 1 Oslo Akershus s stake was 9.6% at year-end This produced a profit contribution of NOK 10.8 million for 2015, compared with NOK 1.1 million for Allocation of the profit The Board proposes that 20% of the net profit for the year be paid out as dividends. This amounts to NOK 42.6 million or NOK 9.32 per share. The Board proposes that the rest of the profit for 2015, NOK million, be transferred to other equity. CORPORATE governance The Bank has the following ownership structure: Sparebanken Hedmark (40.5%), the Norwegian Confederation of Trade Unions (LO)/unions affiliated with LO (29.9%), Samarbeidende Sparebanker AS (15.2%), SpareBank 1 Nord- Norge (4.8%), SpareBank 1 SMN (4.8%) and SpareBank 1 SR-Bank (4.8%). Shares in Bank 1 Oslo Akershus AS are not publicly traded, but as at December the company did have a bond issue listed on Oslo ABM. The company has a concentrated ownership structure and all shareholder groups either directly or indirectly represented on the Board. The Board also includes a shareholder-elected, independent board member. The Board of Bank 1 Oslo Akershus AS complies with the Norwegian Code of Practice for Corporate Governance wherever the guidelines apply and are relevant for a company whose shares are not listed on the stock exchange. Operations are managed in accordance with Norwegian law and the company s articles of association, as well as strategic goals and internal guidelines drawn up by the Board. The Board has established both an audit committee and a risk committee. The committees consist of three members of the Bank s Board with the members being appointed to the committees for a period of two years. The same members sat on both committees in The audit committee s duties in 2015 included reviewing drafts of the interim and annual financial statements before they are considered by the Board. The committees have also considered matters related to the Group s risk, capital management and internal control. In addition to this, the committees have reviewed reports and letters from the Group s internal and external auditors and have assisted the Board with ensuring that both audit processes are functioning satisfactorily. The Bank has its own remuneration committee, which consists of three members of the Bank s Board. The members are appointed to the committee for a period of two years. The committee normally meets twice a year. In 2015, the committee was involved in drawing up guidelines and the remuneration packages of the Group s executive employees, and assisted the Board with preparing the chief executive s remuneration package. RISK MANAGEMENT AND RISK situatiion The Group manages risk on an overarching level through its own boardapproved policy for risk and capital management. This contains target figures and guidelines for factors such as the Group s risk tolerance, describes processes for risk management and responsibilities and roles in risk management. The Group s activities are primarily associated with four areas of risk: credit risk, market risk, liquidity risk and operational risk. The Group believes it is very important to identify and follow up key risks in a manner that ensures the Group can achieve its strategic goals and maintain adequate primary capital at any given time. The Group expresses and quantifies risk through two performance indicators: financial capital requirement, which expresses the Bank s risk measured using internal risk models, and a socalled risk-adjusted capital requirement, which expresses the authorities capital requirements (Pillar I) plus the Bank s self-calculated Pillar II requirement. Risk-adjusted capital requirement compared to the Group s CET 1 capital (MNOK) as at ( ) Internal capital requirement Difference between internal and regulatory capital requirement Regulatory capital requirement Pilar II Risik-adjusted capital requirement Buffer in relation to riskadjusted capital requirement CET 1 capital 1396 (1070) (1725) 2143 (1948) (2510) The figure above shows that the Bank s internal capital requirement increased by NOK 326 million in 2015 from NOK 1,070 million to NOK 1,396 million. This increase in the capital requirement is primarily attributable to growth in the Bank s credit portfolio. The figure also shows an increase in the Bank s total risk-adjusted capital requirement (Pillar I + Pillar II) of NOK 195 million, from NOK 1,948 million to NOK 2,143 million. This increase is due to a combination of credit growth and rules changes in the area of capital adequacy. The Bank s total net common equity tier 1 capital at year-end 2015 of NOK 2,623 million indicates a satisfactory buffer in relation to both risk measurements. Credit risk Credit risk represents the single greatest risk in the Group and is defined as the risk of losses as a result of customers being unable or unwilling to fulfil their obligations to the Bank. The Bank s credit strategy is anchored in the Bank s business strategy and is designed to achieve a low to moderate risk profile. The credit strategy is reviewed by the Board at least annually. The Bank s credit risk, measured using internal models, increased by NOK 290 million in 2015, primarily due to growth.

19 19 The risk in the retail market is considered to be low and the risk in the corporate market low to moderate. Market risk Market risk is the risk associated with changes in the value of interest, currency positions, securities and property. Market risk is managed by setting detailed limits for activities such as investing in certificates, bonds, and currency positions. The limits are reviewed at least once a year and adopted by the Bank s Board. The Bank s exposure in relation to the adopted limits is reported to the Board every quarter. The Group s market risk at year-end 2015 was about the same as at year-end The market risk is considered to be low. Liquidity and funding risk Liquidity risk is the risk of the Bank being unable to refinance its liabilities when they mature. At the same time, liquidity and funding risk entail a price element, which is defined as the risk of the Bank being unable to fund its operations without extraordinary costs during periods of market instability. The Group enjoyed a satisfactory liquidity situation throughout 2015, despite the significant spread widening in the last six months of All of the performance indicators were within the limits set by the Board at year-end The liquidity risk is considered to be low. Operational risk Operational risk includes the risk of financial losses due to human or system errors, either internally or inflicted externally on the Bank. The risk of loss of reputation, legal risk, and risk due to lack of expertise, ethics and appropriate attitudes among the personnel are all elements of operational risk. The Bank continued to work on registering and following up operational losses and other adverse incidents in The Bank maintains a continuous focus on the development of efficient internal control systems. The guidelines specify how employees should report events related to operational risk. The Bank s IT systems also experienced periods of downtime in 2015, which affected customers access to self-service channels. In recent years, the Bank has worked hard to identify underlying causes and implement measures aimed at contributing to stable operations. This resulted in greater operational stability in 2015 than in previous years. The risk-adjusted capital requirement for operational risk was somewhat higher at year-end 2015 than it was at the same time the year before. This was due to an increase in the volume of business in 2015 and the fact that the risk-adjusted capital requirement is calculated on the basis of a template formulated by the authorities. In the opinion of the Board, the Group generally has good control of operational risk as a result of both preventive and identifying control measures.

20 20 Ownership risk In addition to the four risk categories described above, the Group must also maintain a high proportion of primary capital in order to satisfy the regulatory capital requirements associated with strategic ownership positions. The largest item in relation to this is the Bank s stake in SpareBank 1 Boligkreditt. For more information about the Bank s risk and capital management, please see notes 5 and 6, as well as the Bank s Pillar III document (available from: oslo-akershus/om-oss/investor.html ). CORPORATE SOCIAL RESPONSIBILITY The Group s corporate social responsibility work is described in a separate chapter of the annual report. This also provides information about the working environment, equal opportunities and measures in relation to the external environment. Going concern The annual financial statements have been prepared on the assumption that the Group is a going concern. Future prospects The economic situation at the start of 2016 is characterised by an uncertain macro picture and the outlook for growth in the Norwegian economy is also uncertain. Low oil prices and challenging market conditions for oil-dependent industries are causing rising unemployment and falling housing prices, especially in regions that are heavily exposed to oil-related activities. This development has so far not had any particular effect in our market area where housing prices continue to rise and the employment rate is stable. Depending on the macro trend, the negative outlook could also have consequences in the Bank s market area. The Bank has strengthened its capitalisation in recent years, both nominally and relatively in relation to the authorities stricter requirements, and today has a comfortable capital adequacy ratio in terms of the current buffer requirements. The Bank has a robust funding structure and could withstand significant instability in the financial markets. The Group continues to aim for a rate of growth above market growth in the retail market. Both banks and estate agents are fiercely competing for customers. Achieving our ambition going forward will therefore require us to continually adapt our costs structure. Assuming the authorities approve Sparebanken Hedmark s purchase of the shares of the Bank s other owners, an integration project involving the two banks will start in Sparebanken Hedmark has applied for permission to operate Bank 1 Oslo Akershus as a wholly owned subsidiary for up to three years. Gradual integration will improve the capital situation and preserve expertise and effectiveness for the benefit of the customers, the employees and the market. A solid customer portfolio built up over time means the loss situation is expected to be satisfactory. A competent organisation, large customer base, good products and broad distribution through branches and digital channels provide good opportunities for further developing the Bank s market position in Oslo and Akershus. The Board of Directors would like to thank the Group s employees for their efforts in the past year. Oslo, 16 March 2016 Richard Heiberg Roar Flåthen Tore Anstein Dobloug Jan-Egil Pedersen Arve Bakke Chair Deputy Chair Tone Bjørnov Finn Haugan Knut Oscar Fleten Dordi Formoe Thorbjørn Vik Employees representative CEO