The Spar Nord Bank Group Quarterly Report, 1st 3rd quarter 2003

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1 To the Copenhagen Stock Exchange Stock Exchange Announcement No. 14, October 2003 Contact: Keld Gammelgaard, Phone The Spar Nord Bank Group Quarterly Report, 1st 3rd quarter 2003 DKK 190.8m profit before tax and upward revision Annualized 12.7% return on equity before tax Core earnings amounted to DKK 155.7m versus DKK 87.5m in the first three quarters of 2002 Earnings from investment portfolios reached DKK 42.9m versus DKK 22.1m 10.0% growth in loans and advances and deposits up 7.3% The expectations for the year s core earnings have been revised upwards by DKK 20m to DKK m In the January-to-September period of 2003, Spar Nord Bank recorded a pre-tax profit of DKK 190.8m versus last year s DKK 109.5m, a performance Management considers satisfactory. Spar Nord Bank A/S, CVR nr , Aalborg The DKK 190.8m profit corresponds to an annualized 12.7% return on equity. The improved profit is attributable to the generally higher activity level as well as a decline in losses and provisions and higher earnings from investment portfolios. Net interest income grew by 6.1% to DKK 646.4m. The background to this is the 10.0% increase in loans and advances and the 7.3% hike in deposits. Spar Nord Bank A/S Skelagervej 15 P. O. Box 162 DK-9100 Aalborg Reg. No Phone Telefax Telex spano dk Swift spno dk 22 sparnord@sparnord.dk Page 1 of 10

2 The rise in loans and advances is particularly attributable to the expanded leasing activities, partly resulting from the acquisition of DanFinans in the 4th quarter 2002, and a slight advance in other lending. Net fees and charges bounced to DKK 213.2m, up 20.1% on the same tri-quarterly period last year. This increase is notably attributable to the highly positive trend in arranging mortgage loans and the high investment activity level among customers. However, the refinancing activity in the mortgage credit area dipped in the 3rd quarter, a factor which coupled with the holiday season led the income from fees and charges to decline in the third quarter compared with the first two quarters of the year. Market-value adjustments, which primarily relate to activities carried on by Trading, Financial Markets & International Banking, were maintained at an unchanged high level, viz. DKK 63.3m versus DKK 69.0m in the tri-quarterly period However, rising short interest rates in the July-to-September quarter impacted negatively on market-value adjustments. Other ordinary income is developing largely as forecast, with the DKK 19.2m decline due primarily to the profit of DKK 16m from the sale of shares in Vendsyssel Bank in the first three-month period of Market-value adjustment of participating interests is down at DKK -11.4m versus the DKK 1.0m income in the same period last year. This downturn results from an expected loss recorded by SDC, the data-processing centre, and a writedown of a shareholding acquired in connection with winding up a particular customer commitment. Costs are up 4.9% to DKK 625.7m. This increase is due exclusively to the opening of three new local banks in Herning, Vejle and Odense plus the acquisition of DanFinans, the leasing company, at the end of The bank still expects to keep the total rise in costs within 4% for the full year. In the first nine months of 2003, losses and provisions were slashed to DKK 173.3m, down DKK 60.6m on the same period last year. In 2003, the Bank has implemented a new credit analysis tool, which helps identify danger signals from commitments at a much earlier stage. Based on the impact on operating performance as at 30 September 2003, losses and provisions for the year are expected to amount to 1.1% of loans, advances and guarantees. At end-2002, total provisions amounted to DKK 646.2m, while non-performing loans aggregated DKK 279.6m. At end-september, total provisions stood at DKK 690.4m, while non-performing loans added up to DKK 295.4m. Spar Nord Bank A/S, CVR nr , Aalborg Customers and shareholders In the nine-month period under review the number of shareholders increased by 924 to 82,100. Since 30 September 2002, the number of customers comprised by the Bank s loyalty scheme the Star Concept has grown by 10,700 to 33,000. Page 2 of 10

3 Third quarter compared with the second As anticipated, activity in the lending area and in mortgage credit financing declined marginally in the third quarter. Core earnings in the third quarter ended at DKK 41.5m, versus DKK 59.9m in the second quarter. Solvency ratio At 30 September 2003, the solvency ratio stood at 10.7% compared with 11.2% at the same date last year. If the profit at 30 September 2003 is included, the solvency ratio goes up to 11,3%. The Board of Directors Poul Lauritsen, aged 67, has informed the Board of Directors that he after 9 years on the post will resign as Chairman of the Board of Directors at the Annual General Meeting in April 2004, one reason being that a number of major strategic changes in Spar Nord Bank have been completed, and another that in 2004 he will reach the age limit set in the previous Articles of Association. Spar Nord Vejle and Spar Nord Odense Two new local bank branches opened in September. The one in Vejle opened on 4th September, and the Odense branch opened for business on 25th September. Another one or two banks a year will open outside North Jutland as part of the Bank s local presence strategy. Management incentive scheme After the close of the 2003 semi-annual financial statements, the majority of the members of Spar Nord s management team exercised their options under the incentive scheme adopted by the Board of Directors in The scheme is based on options that entitle members of the management team to buy 348,000 shares in Spar Nord Bank at prices fixed to give shareholders an advance return of 11% p.a. compared with the market price at the time of issuance. Options totalling 326,500 shares have been exercised, with options on 21,500 shares remaining unexercised. The exercise of the options under the scheme will not impact Spar Nord Bank s cost or earnings forecasts, as the scheme has been hedged via the Bank s portfolio of own shares. Outlook for 2003 The semi-annual financial statements forecast full-year core earnings to hover at the upper end of the DKK m range. Based on the sustained satisfactory Page 3 of 10

4 growth in the Bank s profit, the estimate is raised to DKK m. To this should be added earnings from investment portfolios and the profit recorded by Erhvervsinvest Nord, a subsidiary. The projection does not take into account the profit that the Bank s sale of Totalkredit shares to Nykredit will generate. The deal is expected to go through on 10 November According to Nykredit s offer the Bank has accepted to sell 72,552 shares in Totalkredit A/S as of 1 October In addition, Nykredit has been granted an option to buy 32,518 shares at 1 October 2004, and an option to buy the remaining 137,881 shares at 2 October The compensation for sale of shares is composed of cash payment and a 9-year conditional current disbursement. Assuming that Nykredit exercises the options, the current value of Spar Nord s total profit, incl. the Bank s proportional share of Nørresundby Bank s profit, can be calculated at DKK m after tax. No clarification has yet been reached as to when the profit is to be included in the Bank s financial statements, pending a decision by the Danish Financial Supervisory Authority. Please direct any queries you may have to Lasse Nyby, Chief Executive Officer, who can be reached on tel Yours truly, Spar Nord Bank Poul Lauritsen Chairman of the Board of Directors Lasse Nyby CEO Page 4 of 10

5 Financial Highlights the Spar Nord Bank A/S Group Excerpts from the Profit and Loss Account DKK million Net interest income... Net income from fees, charges and commissions Dividends on shares, etc.... Market-value adjustments *... Other ordinary income... Revaluation of participating interests... Core income Q 1-3 Q Increase in per cent Operating costs* and depreciation... Core earnings before losses and provisions Losses and provisions... Core earnings Erhvervsinvest Nord... Earnings from investment portfolios... Profit before tax Estimated tax... Net profit for the year Balance sheet total DKK million Total assets... Deposits... Loans and advances... Guarantees etc.... Shareholders equity... Subordinated capital investments... 32,006 29, ,407 16, ,273 15, ,661 3, ,063 1, , Key ratios Return on equity before tax... Return on equity after tax... Cost share of core income... Cost share of core income, incl. losses and provisions... Losses and loan loss provisions, pct.... Solvency ratio, pct.... Core capital, pct The Spar Nord Bank share Earnings before tax per share... Official price, year-end... Net asset value, incl. profit/loss for the period Price/net asset value * An adjustment has been made for capital gains on own shares bought to cover the Bank s Management Incentive Scheme. Payroll costs have also been adjusted. Page 5 of 10

6 Financial Highlights the Spar Nord Bank A/S Group Excerpts from the Profit and Loss Account DKK million Net interest income... Net income from fees, charges and commissions Dividends on shares, etc... Market-value adjustments *... Other ordinary income... Revaluation of participating interests... Core income... 3 Q 4 Q 1 Q 2 Q 3 Q Operating costs* and depreciation... Core earnings before losses and provisions Losses and provisions... Core earnings Erhvervsinvest Nord... Earnings from investment portfolios... Profit before tax Estimated tax... Net profit for the year Balance sheet total DKK million Total assets... Deposits... Loans and advances... Guarantees etc.... Shareholders equity... Subordinated capital investments... 29,403 31,951 32,710 34,332 32,006 16,219 16,229 16,573 17,319 17,407 15,701 16,848 17,095 17,441 17,273 3,477 3,694 3,585 3,568 3,661 1,932 1,927 1,975 2,031 2, ,056 1,058 Key ratios Return on equity before tax... Return on equity after tax... Cost share of core income... Cost share of core income, incl. losses and provisions... Losses and loan loss provisions, pct.... Solvency ratio, pct.... Core capital, pct The Spar Nord Bank share Earnings before tax per share... Official price, year-end... Net asset value, incl. profit/loss for the period Price/net asset value * An adjustment has been made for capital gains on own shares bought to cover the Bank s Management Incentive Scheme. Payroll costs have also been adjusted. Page 6 of 10

7 Other comments on the interim report Holdings of Spar Nord Bank shares by the Board of Directors and the Board of Management 4 June 17 October Niels Ole Arndt Henrik Hougaard 1,810 1,810 Erling Kjær 1,193 1,193 Poul Lauritsen 4,764 4,764 Per Søndergaard 2,646 2,746 Torben Fristrup Michael Budolfsen Ole Skov Birthe Kiel Jensen Lasse Nyby 742 3,489 John Lundsgaard 1,060 3,807 Lars Møller 979 3,726 Note: The holdings include all shares held by the entire household. Accounting policies As announced in Stock Exchange Announcement no. 2 in 2003, the Recommended Accounting Procedures for Financial Institutions were amended, effective 1 January This means that the Bank has amended its accounting policies for the valuation of unlisted shares and adapted the principle for including shares in profits recorded by associated companies. This change improves the pre- and post-tax profit for the three-month period by DKK 21.1m (1st quarter 2002: DKK -10.7m), while the equity capital and the balance-sheet total at 30 September 2003 swelled by DKK 182.5m (30 September 2002: DKK 155.8m). The comparative figures have been adjusted accordingly. The subsidiaries Spar Nord Finanslån A/S, Aalborg, Aars Invest I A/S, Aars, Aars Invest II A/S, Aars, Ejendomsselskabet af ApS, Aars were previously consolidated but are now excluded. In future, they will be recorded according to the equity method in the Consolidated Financial Statements. Collectively and individually, the companies are considered insignificant compared with the entire Group. The combined equity capital of the companies amounts to DKK 5.9m at 30 September 2003, while the combined profits of the three companies amount to DKK 0.3m for the period January to September The change was effective as of 1 January 2003, and comparative figures have not been adjusted. Otherwise, the accounting and consolidation policies are the same as those applied in the 2002 Financial Statements. Unlisted shares are recorded at fair value in contrast to the former principle of using the lower of cost and market value. Shares in profits of associated companies are valued at an estimated value measured under the equity method as of the last day of the relevant accounting period, whereas the market-value adjustment was previously made once a year in the initial quarter based on the financial statements most recently published. Page 7 of 10

8 Spar Nord Spar Nord Spar Nord Spar Nord Bank A/S Bank A/S Bank A/S Bank A/S The Group The Group Parent Company Parent Company 1-3Q Q Q Q 2002 PROFIT AND LOSS ACCOUNT Interest income... Interest expenses... Net interest income... Dividends on capital holdings... Fees, charges and commission income... Fees, charges and commission expenses... Net income from interest, fees and charges... Market-value adjustments... Other ordinary income... Staff costs and administrative expenses... Depreciation and writedown of intangible and tangible assets... Other ordinary expenses... Losses and loan loss provisions... 1,129,284 1,189,728 1,054,430 1,144, , , , , , , , ,218 30,403 27,441 30,313 27, , , , ,846 39,394 35,020 38,908 34, , , , , ,754 80, ,264 76,864 19,591 38,227 15,400 33, , , , ,929 38,604 40,317 35,245 39,559 6,460 2,416 4,725 1, , , , ,663 Profit on capital holdings in associated and affiliated companies... Profit on ordinary operations before tax... Tax... Profit for the period... Attributable to minority shareholders ,260 1,297 4,440 22, , , , ,372 61,569 25,719 54,663 21, ,235 83, ,235 83, Page 8 of 10

9 Spar Nord Spar Nord Spar Nord Spar Nord Bank A/S Bank A/S Bank A/S Bank A/S The Group The Group Parent Company Parent Company ASSETS Cash in hand and claims at call on central banks... Claims on credit institutions and central banks... Loans and advances... Bonds... Shares, etc.... Capital holdings in associated companies, etc.... Capital holdings in affiliated companies... Intangible assets... Tangible assets... Own capital holdings... Other assets... Prepayments and accrued income... Total assets , , , ,427 2,463,552 1,840,772 2,463,230 1,840,709 17,273,017 15,700,789 16,783,700 15,283,638 7,903,449 7,690,547 7,903,449 7,690,547 1,200,362 1,060,889 1,127, , , , , ,442 5, , ,652 41,463 10,164 11,373 10, , , , , , , , ,739 1,379,561 1,244,892 1,398,199 1,278,384 21,574 39,215 21,295 38,386 32,006,105 29,402,939 31,695,608 29,201,339 LIABILITIES Debt to credit institutions and central banks... Deposits... Other liabilities... Accrued expenses and deferred income... Provisions for commitments... Subordinated loan capital... Minority interests... 9,236,496 8,384,081 9,236,174 8,384,081 17,407,411 16,219,423 17,446,936 16,280,122 2,062,175 1,755,072 1,875,626 1,603,869 70,745 56,363 4,369 7, ,355 76,240 10,580 14,747 1,058, ,416 1,058, , Shareholders equity: Share capital... Reserve for own shares... Other reserves... Brought forward from prior years... Profit after tax for the year to date... Total shareholders equity , , , , , , , ,739 79, , , ,075 1,208,604 1,106,385 1,060, , ,235 83, ,235 83,782 2,063,491 1,931,843 2,063,491 1,931,843 Total liabilities... 32,006,105 29,402,939 31,695,608 29,201,339 Page 9 of 10

10 Capital movements Shareholders equity, beginning of period... Adjustment of shareholders equity due to changed accounting policies for the valuation of unlisted shares and the adapted principle for including shares in profits recorded by associated companies.... Difference between purchase price and net asset value of investments in associated companies... Other capital movements in associated companies, booked at net asset value... Writedown of goodwill from acquisition of activity... Profit for the year to date (after tax)... Shareholders equity, incl. profit/loss for the period... Spar Nord Spar Nord Spar Nord Spar Nord Bank A/S Bank A/S Bank A/S Bank A/S The Group The Group Parent Company Parent Company ,927,866 1,692,214 1,927,866 1,692, , , , , , , , , ,235 83, ,235 83,782 2,063,491 1,931,843 2,063,491 1,931,843 The share capital consists of 5,188,480 shares in the denomination of DKK 100. Page 10 of 10