Sparebanken Sør Boligkreditt AS. Investor Presentation March 2016

Transcription

1 Sparebanken Sør Boligkreditt AS Investor Presentation March 2016

2 Executive summary Sparebanken Sør Sparebanken Sør Boligkreditt Norwegian economy Southern region economy The fifth largest savings bank in Norway with a strong market position in Southern Norway High capitalization; Capital ratio of 15.5 % - Core Tier 1 ratio of 12.7 % at December 31 th 2015 Rated A1 (stable outlook) by Moody s Strong asset quality 65 per cent of loan book to retail customers New rights issue of NOK 600 million in progress will strengthen capital ratio even further 100 % owned and dedicated covered bond subsidiary of Sparebanken Sør Cover pool consisting of 100 % prime Norwegian residential mortgages High quality cover pool reflected by the weighted average LTV of 55.3 % Covered bonds rated Aaa by Moody s with 5 notches of leeway Strong legal framework for covered bonds in Norway with LTV limit of 75 % for residential mortgages Low interest rates, weak NOK and fiscal stimulus are counterbalancing economic slowdown stemming from the lower oil investments Unemployment is expected to increase gradually but from a very low level and the unemployment rate remains well below the European levels The Norwegian government has a strong financial position with large budget surplus. The government pension fund, which accounts over 200% of the GDP, provides the government with substantial economic leeway The Southern region is clearly less exposed to oil production than Western Norway Registered unemployment in the Southern region remains below 4 % and has moved up only slightly, at a similar pace than the national average House price development over the past years has been more moderate than average in Norway 2

3 Table of content I II III IV V Sparebanken Sør Financial key figures Sparebanken Sør Boligkreditt Norwegian economy Contact details 3

4 Historical milestones 190 years of development and renewal Arendal Sparebank was founded in 1825 as one of the first savings banks in Norway The bank merged with 4 other savings banks in Aust-Agder, and formed Aust-Agder Sparebank. Sparebanken Sør was established in 1984 after a merger between Aust- Agder Sparebank, 2 other savings banks in Aust- Agder and 9 from Vest- Agder The bank entered for the first time Telemark, through a merger with Nissedal Sparebank and totals today 7 branches in the county, where the latest was the opening of an office in Skien in the fall of Merger between Sparebanken Pluss and Sparebanken Sør and the new bank is named Sparebanken Sør. The bank s history dates back to 1824 when Christianssand Sparebank was established as one of the first savings banks in Norway. The banks more recent history starts in 1984 when Sparebanken Agder was established through a merger between Christianssands Sparebank, Halse and Harkmark Sparebank, Iveland Sparebank, Oddernes Sparebank, Vennesla Sparebank and Øvrebø and Hægeland Sparebank. Four savings banks in Telemark and Sparebanken Agder joined forces in Through the merger the bank was named Sparebanken Agder and Telemark. In 1988 the name was changed to Sparebanken Pluss In January 1997 Sparebanken Pluss and Sparebanken NOR agreed that Sparebanken NOR was to take over Sparebanken Pluss branches in Telemark while Sparebanken Pluss was to take over Sparebanken Nor`s office in Kristiansand. Through this deal the banks business again was concentrated in the Agder counties. 4

5 Sparebanken Sør Proven operational platform Established customer base Stable outlook 1 Sparebanken Sør is an independent financial group with a history dating back to Sparebanken Sør is an independent savings bank offering its products and services to the retail banking market, corporate market and to the public sector. 3 Geographical presence mainly in Aust-Agder, Vest-Agder and Telemark 4 The 5th largest Norwegian-owned bank with assets above NOK 100 billions in Some 450 employees in 36 locations in the Southern part of Norway. 6 General banking services- and products, in addition to real-estate agency, life- and non-life insurance, security trade services and leasing through wholly- and partially owned subsidiaries and companies. 7 4,768,674 equity certificates listed on Oslo Stock Exchange with a market capitalization of NOK 711m * 8 With a strong and powerful ambition, Sparebanken Sør is committed to create further growth and development in its region. Note(*): based on the share price per

6 Complete provider of financial services Significant product range - still potential for increased product sales Subsidiaries Affiliates Vendors Sparebanken Sør Boligkreditt AS is a wholly owned subsidiary of Sparebanken Sør Sparebanken Sør Boligkreditt AS is licensed as a financial enterprise with the right to issue bonds where investors receive preferential coverage in home mortgages issued by the bank Covered bond financing allows Sparebanken Sør Group to offer mortgages with competitive terms to its customers Sparebanken Sør bought 10% of Frende Holding in 2008, and is one of 15 independent savings banks with stakes in the company Frende has customers and offers insurance, both life and non-life to corporates and private customers Brage Finans is a leasing company owned by 10 independent savings banks, Sør owns 14% Distribution of the company's products is done through own banks, via dealers of capital and through its own sales organization ABCenter and Plussmegleren have merged under the name Sørmegleren. Sparebanken Sør owns 91% of Sørmegleren Holding AS which is the parent to the real estate company Sørmegleren AS Sørmegleren is headquartered in Kristiansand as well as 9 branches in 9 other cities Conveys about 2,000 homes a year and is thereby the regions largest real estate agent Sør bought 18% of Norne Sec. in 2008 Norne a full service investment bank with corporate finance - services, analysis, and stock and bond brokerage 6

7 Company structure Subsidiaries Sparebanken Sør (parent bank) rated A1 Moody s Affiliates Sørmegleren (real estate broker) Ownership 91 % Sparebanken Sør Boligkreditt (covered bond company) rated Aaa Moody s Ownership 100 % Frende (insurance) Ownership 10 % Brage (leasing) Ownership 14 % Norne (brokerage) Ownership 18 % 7

8 A broad geographical footprint Important operator in the south: Aust-Agder, Vest-Agder and Telemark Local relationships and market proximity is essential for good savings bank operations Supporter of local business development TRANSPORTATION INDUSTRY TRAVEL COMMERCIAL REAL ESTATE RETAIL HEALTH AGRICULTURE PUBLIC SECTOR The market is totalling people and about 9 percent of all business in Norway. Sparebanken Sør is the only bank covering this area. FINANCIAL SERVICES EDUCATION 8

9 Table of content I II III IV V Sparebanken Sør Financial key figures Sparebanken Sør Boligkreditt Norwegian economy Contact Details 9

10 Financial key figures Solid foundation, both financially and operationally Net interest income (NOKm) Cost ratio* Impairment ratio Net income (NOKm) * 0.7% 6.9% -66.7% 1.6% ,2 % 46,2 % 0,33% ,11% Total assets (NOKm) Net lending (NOKm) Return on equity* CET 1 ratio 7.7% 9.2% -5.8% -3.2% ,9 % 8,4 % 13,1 % 12,7 % Note(*): 2014 is adjusted for gains from the sale of a stake in Nets with NOK 71m and recognition of negative goodwill of NOK 200m 10

11 Diversified loan portfolio(i) High retail share and a broad geographic presence contribute to a balanced portfolio Lending by region Distribution of retail banking - SME/corporate banking Gross loans Gross loans 27 % 27 % 46 % 65 % 35 % Vest-Agder Aust-Agder Telemark & Other SME/Corporate (CM) Retail market (RM) # 1 in Vest-Agder and Aust-Agder and # 3 in Telemark. Close and long-term cooperation with major stakeholders in the region. The agreement with KNIF* is a good example, which contributes to growth outside the region The lending portfolio is concentrated in the bank's market sectors, concentration risk is low, and is significantly diversified compared to other regions Large share of Retail lending which in itself contributes to lower risk, and combined with low average loan size (< NOK 2m) and a low average LTV, even in a case of a 30% house price drop, lead to a low overall risk level Note(*): KNIF = Kristen-Norges interessefellesskap -> consists of more than 70 national organizations 11

12 Diversified loan portfolio(ii) Detailed overview of the retail and commercial portfolio SME/corporate loans grouped by industry Retail loans grouped by size (NOK m) Share of loans in the Retail portfolio Gross loans Gross loans 54% 20% 7% 11% 50% 25% 56 % 44 % 12% 12% Rental real estate Property development Other (Trade, Manufacturing etc.) Social services Commercial services 4% 2% 2% < > 5 Sparebanken Sør Boligkreditt AS Sparebanken Sør Key points for SME/corporate LTV for Sparebanken Sør Boligkreditt Key points for Retail market Long term relationships and good quality in the SME-portfolio Clearly defined industry approach based on local expertise and balanced risk appetite Diversified across sectors The KNIF-agreement contributes significantly in the sector Social services Long contracts in the public sector Gross loans 12% 30% 5% 20% 20% 13% < 40 % % % % % > 75 % 44 % of the Retail portfolio is transferred to Sparebanken Sør Boligkreditt ** ~ 80 % of the Retail loans have a principal below NOK 2m 95 % of the mortgage portfolio in SBK has LTV below 75% Comfortable with the Retail portfolio, even in stormy weather Note(*): Other includes : construction of real estate(4%), wholesale and retail(4%), industry (3%), housing associations(3%), primary(2%), public sector(2%), transportation (2%), hotel and restaurants (1%) Note(**): 100% subsidiary= important funding instrument 12

13 Diversified loan portfolio(iii) Low exposure to oil & offshore stable exposure to real estate Norway's largest oil regions * Stavanger region Oslo/Akershus Bergens region Sunnhordaland Exposure to oil and the oil industry** Sparebank 1 SR 8,9 % DNB 7,0 % Sparebank 1 SMN 4,9 % Gross loans Overall real estate exposure in SME/corporate 23,5 % 1,4 % 3,7 % 0,9 % Sunnmøre Vestfold (expanded) region Arendal- og Kr.sand region Sparebanken More* Sparebank 1 Nord Norge* 3,1 % 1,9 % 17,5 % Trondheims region Molde/Kristiansund Sparebanken Vest 1,1 % Grenland Sandnes Sparebank* 0,9 % Overall real estate exposure Split Ytre Sogn Østfold SØR* 0,1 % Rental real estate Construction Property development Cooperative housing Sør has virtually no exposure to oil & offshore, due to a long-term strategic choice Although the Vest-Agder area is more exposed to oil than average, the bank as a whole is below average, due to the portfolio in Aust-Agder and Telemark The bank's overall property exposure constitutes ~ 68% of the corporate market portfolio -> The latter constitutes only 23.5% of total loans Large parts of the real estate exposures is related to commercial property (rental and condominium). Sør has considerable expertise in this area, along with its customers that operate very effectively with high level of occupancy Exposure towards traditional construction is low Note(*): Industribyggerne Rapport IRIS 2015/031 (direkte og indirekte sysselsatte knyttet til petroleumsindustrien) Note(**): Swedbank Research, EAD Oil and Oil service, except ** - in % of total lending 13

14 Credit risk(i) Manageable risks across the portfolio Deposits grouped by size Retail portfolio grouped by risk Key points 51,3 % 30,2 % 18,5 % < 2m 2-8m > 8m 94,5 % 4,2 % 1,3 % Low Medium High ~70% of the deposits is lower than NOK 8m ~95% of Retail portfolio is in the low risk category ~95% of SME/corporate deposits is below NOK 100m (few large individual commitments) ~90% of the SME/corporate portfolio is in the low or medium risk category Loans grouped by size* SME/corporate portfolio grouped by risk Risk categories 77,0 % 17,6 % 5,4 % < 10 mill mill > 100 mill 69,6 % 19,9 % 10,5 % Low Medium High Category Lower bound Upper bound A 0,00 0,10 B 0,10 0,25 C 0,25 0,50 D 0,50 0,75 E 0,75 1,25 F 1,25 2,00 G 2,00 3,00 H 3,00 5,00 I 5,00 8,00 J 8,00 99,99 K 100 Note(*): Individual commitments 14

15 SOR DNB SVEG MORG NONG SB1HE SRBANK MING Credit risk(ii) Solid buffer in place no surprises expected due to strong risk management Gross arrears > 90 days NOKm ,77% 0,71% 0,72% 0,61% 0,57% 0,57% 0,57% 0,48% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Gross loans in arrears > 90 days Arrears in % of loans Non-performing and doubtful loans** NOKm ,42% 2,04% 1,90% 1,98% 1,74% 1,60% 1,68% 1,51% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Non-performing and doubtful loans As % of gross loans Key points Total non-performing and doubtful loans amounted to 1.5% of the gross loan portfolio for Q4-15 Loan loss provisions, both collective and individual, represented more than 50% of the total non-performing and doubtful loans in Q Sør is well prepared for the future through a solid loan loss provision level vs. similar banks in Norway Loan loss expenses Loan loss provisions (collective and individual) Total provisions compared to other banks *** NOKm NOKm 44,6 % 46,0 % ,1 % ,7 % 41,5 % 44,8 % 48,0 % 52,4 % % of loans 0,82% 0,77% 0,72% 0,62% 0,57% 0,45% 0,45% 0,37% 1 3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Loss provisions Unexpected losses Reversals Total deposits Collective % of defaulted and doubtful loans Note(*): Annualised Note(**): Consists of: arrear >31 60 days, arrear > days, arrear >90 days and remaining doubtful loans, Note(***): Sparebank 1 Markets, ukerapport

16 Operational effectiveness Low interest margin offset by good cost and loss rate Net interest margin* Cost ratio Impairment ratio* Net interest income / average assets Operating expenses before loss / net income Losses on loans and guarantees / average net loans to customers 1,64% 1,60% 1,58% 1,59% 1,57% 1,57% 1,55% 1,53% 46,8 % 44,2 % 36,3 % 45,8 % 42,6 % 43,9 % 54,2 % 45,7 % 0,97% As a result of increased provisions for future losses after an extensive review of the bank's loan portfolio to CM 0,22% 0,14% 0,14% 0,09% 0,07% 0,09% 0,08% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Q1 ** Q2 Q3 Q4 Q1 Q2 Q3 Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Slightly decreasing net interest income in 2015, but strengthened nominal income growth due to volume growth Among the most cost-effective banks in Norway -> Influenced by a general spread widening in the bond market affecting the bond portfolio in 2015 Impairment ratio significantly reduced in 2015, after a thorough review of the corporate market portfolio in 2014 with the associated strengthening of loss provisions Note(*): Annualised (Figures from the income statement x4) Note(**): Adjusted for gains from the sale of a stake in Nets with NOK 71m and recognition of negative goodwill of NOK 200m 16

17 Capital requirements Core capital of 12,7% in 2015 expected core capital in 2016 of 14,5% Sparebanken Sør - Actual coverage, requirements and objectives Leverage ratio Requirements Today Expected 7,0 % Unweighted core capital ratio 2,0 % 1,5 % 11,0 % Requirements from the FSA (Pilar I) 2,0 % 1,5 % 11,5 % Requirements from the FSA (Pilar I) 1,9 % 0,8 % 12,7 % Capital ratio CET1 Additional tier 1 Additional Tier 2 2,0 % 1,5 % 14,5 % Expected capital requirements from the FSA (Pilar II) Key points Sør has implemented ICAAP for 2015 and the Financial Supervisory Authority will conclude on individual Pillar II requirements later in 2016 Through dialogue with the Financial Supervisory Authority ("FSA"), there has been an expectation to bank on CET 1 at the end of 2016 of 14.5% (including Pillar II) To reach the expectation from the FSA, Sør will continue to strengthen profitability, making adjustments in the balance sheet and restricting growth in lending In addition, Sør will implement rights issue of NOK 600m during H1-16 The rights issue will strengthen core capital per from 12.7% to 13.7% Further measures are expected to ensure that Sør will have CET1 of 14.5% at the end of

18 Table of content I II III IV V Sparebanken Sør Financial key figures Sparebanken Sør Boligkreditt Norwegian economy Contact Details 18

19 Sparebanken Sør Boligkreditt Executive summary Dedicated covered bond company of Sparebanken Sør The covered bonds have full recourse to the issuer (Sparebanken Sør Boligkreditt), which is a whollyowned subsidiary of Sparebanken Sør Sparebanken Sør Boligkreditt has established a revolving credit facility with Sparebanken Sør which secures the refinancing risk The cover pool consists 100 % of prime Norwegian residential assets Low LTV of 55.3 % (indexed) There are no non-performing assets in the cover pool Current OC of 16.8 %, of which 2.0 % is provided on committed basis Main cover pool exposure is towards Southern Norway, where price developments have been relatively stable Aaa rating assigned by Moody s with 5 notches of leeway, pointing to significant buffer against potential downgrades Collateral score of 5.0 % (4.3 % excluding systemic risk) 19

20 Sparebanken Sør Boligkreditt Breakdown of portfolio Sparebanken Sør total loan portfolio LTV breakdown of Sparebanken Sør Boligkreditt (cover pool) 35 % 36 % 29 % 12% 30% 5% 20% 20% 13% Cov.bond Other retail SME/corporate < 40 % % % % % > 75 % 100% 75% 50% 25% 0% Stress test of the cover pool 76,8 % 67,2 % 55,3 % 59,7 % 16,8 % 14,5 % 10,3 % 2,9 % Status Q4 15 House price decline 10 % House price decline 20 % House price decline 30 % Weighted average LTV Nominal OC 20

21 The Cover Pool(I) Cover pool composition Indexed LTV distribution Category Type of Collateral 100 % residential Total loan balance NOK 25,673,390,250 Average loan balance NOK 1,017,614 No. of loans 25,229 WA seasoning (in months): 36 WA remaining term (in months): 206 NO. of borrowers 22,752 NO. of properties 24,755 WA Indexed LTV % WA LTV % Percentage of variable mortgages (S.Def.): % Loans in arrears > 90 days (e.g. 1% or 0.01): 0.00 % 35% 30% 25% 20% 15% 10% 5% 0% 0-40% >40%- 50% >50%- 60% >60%- 70% >70%- 80% >80% Committed over collateralisation: 2.00 % Over Collateralisation: % Total Cover Pool 25,673,390, % prime Norwegian residential mortgages No non-performing mortgages in the cover pool Current OC level of 16.8 % and commitment to maintain level above 2.0 % The weighted-average LTV is 55 % on an indexed basis. This is well below the legislative maximum of 75 % for residential mortgages 21

22 The Cover Pool(II) Cover pool geographic split Moody s collateral scores Avg. c-score assigned by jurisdiction and to Sparebanken Sør BK 25% 20% Oslo (9%) 15% 10% 5% 0% CA FR FI NL SE UK Sør NO IE PT BE IT DE AT DK ES Vest-Agder (44%) Aust-Agder (29%) Telemark (8%) The cover pool is primarily exposed towards Vest-Agder and Aust-Agder, as well as Oslo and Telemark to some extent Property price development in Vest-Agder and Aust-Agder has been more modest than in the rest of the country A low c-score points to strong credit quality of the cover pool Sparebanken Sør Boligkreditt covered bond program has been assigned a c-score of 5.0% (4.3% excluding systemic risk) This is stronger than the national average and also compares well with international peers Sparebanken Sør Boligkreditt covered bond program has been assigned a TPI of high and has Aaa rating with 5 notches of leeway. This indicates strong resilience against potential issuer rating downgrades Source: Moody s deal-by-deal overview Q and Sparebanken Sør Boligkreditt performance overview Sep

23 Funding Well diversified maturity profile giving great confidence during turmoil Remaining maturity of outstanding wholesale funding Key points 11% 12% 20% 19% 27% 7% 1% 1% 3% Total funding amounted to NOK 42bn, of which NOK 22 billion is issued as covered bonds International turmoil has been affecting liquidity and price volatility in Norwegian bonds The bank has a diversified maturity profile and few expiring bonds in 2016 and > 2024 Funding > 12 months totalled 89% Liquidity indicator 1 is 106% LCR is 108% on a group level The average maturity is 3.4 years corresponding with the average among similar Norwegian banks Sparebanken Sør Sparebanken Sør Boligkreditt 23

24 Covered Bond programme 24

25 Table of content I II III IV V Sparebanken Sør Financial key figures Sparebanken Sør Boligkreditt Norwegian economy Contact Details 25

26 Key indicators for the Norwegian economy Temporary slowdown in growth In % E 2017E 2018E GDP growth, mainland Core inflation Unemployment rate registered Key policy rate Current account surplus / GDP Sovereign wealth fund / GDP N.A N.A N.A Economic growth in Norway has edged down due to lower oil investments Low interest rates, historically weak NOK and fiscal stimulus are sustaining growth in rest of the economy Unemployment is expected to increase gradually but from a very low level and remains well contained in the European context Excellent financial position of the Norwegian government with large budget surplus and the government pension fund accounting over 200% of GDP Source: Estimates from Norges Bank s December Monetary Policy report and Statistics Norway (Current account) 26

27 Mainland growth Weaker growth due to lower oil investments 27

28 NOK, oil price and competitiveness Weak NOK has reduced cost level significantly 28

29 Mainland exports Export sector benefits from weak NOK and is boosting growth 29

30 Breakdown of Norwegian exports Norwegian exports is more than oil Exports Export of traditional goods Other 12 % Fish 20 % Services 29 % Traditional goods 32 % Machines 28 % Chemicals 15 % Food 2 % Raw materials 4 % Oil and Gas 39 % Metals 19 % REGION SHARE OF GOODS EXPORT EU ex Nordic Asia North America Nordics South America Europe ex EU Oceania Africa 30 % 20 % 16 % 14 % 6 % 5 % 3 % 3 % Source: Statistics Norway 30

31 Public finances Strong fiscal power to support the economy The Government Pension Fund currently amounts to NOK 7,000bn (approx. EUR 737bn) which is more than twice the size of the Mainland GDP and equals to five annual national budgets This gives the Norwegian government substantial economic leeway The fiscal rule: 4% of the fund s value can be used in the national budget (expected real return on the fund) The rule is to ensure that the fund itself would not be tapped. Thus the fiscal break even oil price is zero In response to lower oil price public spending has increased. The fiscal policy stimulus is estimated to be 0.7% of the Mainland GDP in

32 Western Norway is the oil region Sparebanken Sør s operating regions is less exposed to oil Direct and indirect employment in the oil sector Employed in oil sector in absolute numbers and % of employment Indirect employment Supply industry export Supply industry home market Employed onshore Employed offshore Indirect employment Supply industry export Supply industry home market Employed onshore Employed offshore Source: IRIS 32

33 Bank specific exposure to oil related industries Norway s largest petroleum regions* Banks exposure towards oil- and oil service** Stavanger region Oslo/Akershus Bergens region Sunnhordaland Sunnmøre Vestfold region +,+ Arendal- og Kr.sand region Trondheims region Molde/Kristiansund Grenland Ytre Sogn Østfold 8,9 % 7,0 % 4,9 % 3,1 % 1,9 % 0,1 % 0,9 % 1,1 % SØR* SADG* SVEG NONG* MORG* MING DNB SRBANK Sparebanken Sør has practically no exposure to oil or oil service industry * Source: Industribyggerne 2015 Rapport IRIS 2015/031 (direct and indirect employment petroleum) ** Source: Swedbank Research, EAD Oil and Oil service, except * - in % of total lending 33

34 Unemployment Only moderate increase in unemployment in Sparebanken Sør s regions 34

35 Household economy Low interest rate burden and solid financial buffers Estimates from Norges Bank s December Monetary Policy report 35

36 Norwegian housing market(i) House prices have increased alongside income growth City Sum Oslo 1 % 8 % 10 % 10 % 5 % 1 % 10 % + 45 % Kr.sand 2 % 7 % 6 % 1 % - 2 % - 1 % 6 % + 19 % Stavanger 2 % 12 % 13 % 8 % 4 % - 2 % 1 % + 38 % Norway 2 % 8 % 9 % 7 % 5 % 2 % 7 % + 40 % 36

37 Norwegian housing market(ii) Key characteristics High home ownership Key features of residential mortgage loans in Norway Good tax incentives and supportive social security system Around 80 % of Norwegian households own their home which is among the highest home ownership ratios in the world. Hence, buy-to-let market is limited in Norway Residential mortgage loans are predominantly granted by banks and mortgage credit institutions (97 % as of January 2015) Lenders have access to wide range of information about borrowers before granting the mortgage (e.g. tax records for the last three years, any debt collection outstanding, any bankruptcies) Properties are registered in a central register to which banks have direct access Typical maturity of a new loan is 25 to 30 years The majority of residential mortgage loans have a floating interest rate meaning that banks are allowed to increase the interest rate with a six weeks notice Borrowers are personally liable for their debt also after foreclosure or forced sale Borrowing costs on mortgages are tax deductible (the tax rate applied is 25 %) Tax valuation of dwellings is favourably treated in the wealth tax system If a dwelling is occupied by the owner for a minimum of one year, capital gain is tax free when the dwelling is sold Unemployment benefit equals approximately 62 % of the previous calendar year s gross income and is paid for up to 104 weeks Source: Finance Norway, Norwegian Labour and Welfare Administration 37

38 Financial key figures for 2015 and expectations for 2016 Operational measures are implemented to ensure the bank's continued growth Return on equity Common equity (The group) Lending growth Satisfying level given the banks solid equity ratio 8,4 % 9,0 % Equity emission added 13.7% 1,0 % 12,7 % 14,5 % 9,2 % Potential buffer / Effect of initiatives 4.0% 2,0 % 2,0 % Cost development (The bank) Dividend ratio 2015 was impacted by the spread widening in the liquidity portfolio 46,2 % 42% 50% 50%

39 Contact details and website Marianne Lofthus Managing director/ceo Sparebanken Sør Boligkreditt AS Phone, direct line Phone, mobile E mail marianne.lofthus@sor.no Bjørn Erik Kittelsen Head of Treasury, Sparebanken Sør Phone, mobile E mail bjorn.kittelsen@sor.no 39

40 Disclaimer This presentation has been prepared solely for use at this presentation. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations. This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Sparebanken Sør Boligkreditt AS (the Company ), in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation has been prepared solely for use in connection with the presentation of the Company. The information contained in this document is strictly confidential and is being provided to you solely for your information and cannot be distributed to any other person or published, in whole or in part, for any purpose. It may not be reproduced, redistributed, passed on or published, in whole or in part, to any other person for any purpose. Failure to comply with this and the following restrictions may constitute a violation of applicable securities laws. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of their respective affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. This presentation is only for persons having professional experience in matters relating to investments and must not be acted or relied on by persons who are not Relevant Persons (as defined below). Solicitations resulting from this presentation will only be responded to if the person concerned is a Relevant Person. This presentation is not an offer of securities for sale in the United States. Neither the presentation nor any copy of it may be taken or transmitted into United States, its territories or possessions or distributed, directly or indirectly, in the United States, its territories or possessions, except to qualified institutional buyers as defined in Rule 144A under the U.S. Securities Act of 1933, as amended (the Securities Act ) or outside the United States in reliance on Regulation S under the Securities Act. Any failure to comply with this restriction may constitute a violation of the United States securities laws. 40

41