sparebanken SØR Growth Net interest Commission income Reduced costs RESULTS losses and doubtful Q3 and 9M 2013

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1 sparebanken RESULTS Q3 and 9M 2013 % Growth Net interest Commission income Reduced costs losses and doubtful

2 Sparebanken SØR 1825 Sparebanken Sør has its origin from 1825, when Arendal Sparebank was set up as one of the first six banks in Norway 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. Aust Agder inhabitants square km 12 branches 2013 Sparebanken Sør is an independent savings bank with total assets BNOK 46.8 and man-years as at 30. September In 1973 the bank merged with 4 other saving s banks in Aust- Agder, and formed Aust-Agder Sparebank. Vest Agder inhabitants square km 11 branches Going forward -> We have supported businesses and people in the region to realize their dreams for more than 180 years, and have thus influenced the local history Telemark inhabitants square km 7 branches 2007 In 2007 we opened a branch in Bø and 8. October 2008 our first branch in Grenland. In autumn 2012, the bank opened its branch in Skien. As an independent savings bank close to customers and with local decisionmaking, we will continue to be the most important and best bank for the counties of Agder and Telemark. Where you are 2

3 Highlights Continued growth on loans and deposits Further strengthened net interest and improved lending margins Growth in commission income from cards, mutual funds- and insurance sales Cost efficiency gives results, nominal reduction in costs 3

4 Status The merger with Sparebanken Pluss On plan A hectic spring has passed with progression as planned. Resolution Unanimous decisions on both banks Board of Trustees before summer. The Competition Authority FSA The merger is approved by The Competition Authority. Approval from FSA in September/October. Merger Awaiting MoF approval and confirmed that we can expect response in due time for implementation on 1. January

5 Key figures - Group Profit and loss Q Q M M Net interest and credit commission income Net commission income Other income Operating costs Losses on loans, guarantees Result ordinary operations Valuation of debt Pre-tax profit Balance Sheet 9M M Net loans Deposits Total assets

6 Stable profit from underlying operations Pre-tax profit Adjusted for valuation of debt Q Q Q Q Q Q Q Q Q Q Valuation of debt limited effect in Q3, and increase in underlying operations. Result adjusted for valuation of debt constitutes 140 MNOK in Q

7 Key figures Deposit growth Lending growth 9,9 11,9 10,4 9,0 8,4 9,7 10,1 7, Q Q Losses as % of net loans Q Q Cost ratio 0,21 0,17 0,03 0,04 1,23 1,19 1,14 1, Q Q Q Q * Costs annualized as % of average total assets 7

8 Profit and loss Interest income Interest costs M M 2013 Q Q Operating costs 9M M 2013 Q Q Pre-tax profit M M 2013 Q Q M M 2013 Q Q

9 Development deposits - loans Deposit coverage above target of 56 percent ,5 % 56,7 % 55,6 % 57,3 % 55,5 % 57,0 % 53,9 % 57,4 % 56,3 % Q Q Q Q Q Q Q Q Q * Deposit coverage as % of net loans Loans Deposits Deposit coverage 9

10 Lending and deposit margins Increased lending margins, but still lower deposit margins 2,11 % 2,23 % 2,80 % 2,69 % 2,51 % 2,52 % 2,40 % 1,51 % 1,50 % 1,18 % 1,13 % 1,33 % 1,34 % 1,55 % 1,43 % 1,43 % 1,44 % 1,50 % 1,55 % 0,57 % 0,48 % -0,05 % -0,22 % -0,32 % -0,45 % -0,57 % -0,59 % -0,68 % Q Q Q Q Q Q Q Q Q * Margin relative to 3 months NIBOR Lending margins Deposit margins Weighted average 10

11 Net interest Effects of interest rate adjustments in May 1,73 % 1,78 % 1,68 % 1,82 % 1,64 % 1,65 % 1,56 % 1,48 % 1,46 % Q Q Q Q Q Q Q Q Q Nominal Net interest * Quarterly net interest annualized as % of average total assets 11

12 Costs Efforts to reduce costs continues and effects beginning to show 0,98 % 1,16 % 1,34 % 1,13 % 1,17 % 1,10 % 1,35 % 1,12 % 1,08 % Q Q Q Q Q Q Q Q Q Nominal Cost ratio * Quarterly costs annualized as % of average total assets 12

13 Income Q Q Commission income 7,5 % Other income 140,9 % Total 183 MNOK Total 275 MNOK Net interest + 14,4 % Net interest Comm.income Other income Net interest Comm.income Other income 13

14 Lending Distribution RBM/CM Distribution Corporate Market 6 % 4 % 4 % 2 % 0 % 29,5 % 6 % 7 % 48 % 8 % 70,5 % 15 % Comm.properties Constructions Wholesale and retail trade Financial services Industry Sundry/Other industries CM RBM Primary industries Hotel and restaurant Transport Public sector Well-diversified portfolio that reflects the business activity in the region. 14

15 Lending distribution development 58,6 % 61,2 % 64,8 % 67,2 % 68,2 % 69,4 % 70,5 % 41,4 % 24,3 % 38,8 % 21,5 % 35,2 % 32,8 % 31,8 % 30,6 % 29,5 % 16,8 % 15,4 % 14,5 % 14,9 % 14,2 % Q RBM CM Comm.properties Altered ratio between RBM and CM have reduced the risk in the portfolio 15

16 Risk profile Portfolio according to risk groups RBM 90,9 % 91,7 % 70,5% of portfolio 6,4 % 5,6 % 2,8 % 2,7 % Lowest/Low Medium High/Highest Portfolio according to risk groups CM 63,3 % 65,5 % ,5 % of portfolio 18,5 % 19,7 % 18,1 % 14,8 % RBM Sør has a high proportion of loans with low risk RBM Sør has a low proportion of loans with high risk CM Sør has a moderate to high proportion of loans with low risk CM Sør has a moderate to low proportion of loans with high risk Lowest/Low Medium High/Highest

17 Risk profile Deposits by the amount 59,3 % 61,5 % 17,9 % 20,0 % 22,8 % 18,5 % < 2 MNOK 2-8 MNOK > 8 MNOK Lending by exposure size 82,8 % 81,0 % 16,4 % 14,2 % 2,6 % 3,0 % < 10 MNOK MNOK > 100 MNOK Proportion of deposits below 2 MNOK constitutes 61.5% Proportion of deposits between 2 and 8 MNOK constitutes 20.0 % Proportion of deposits over 8 MNOK constitutes 18.5 % Proportion of commitments under 10 MNOK at 82.8 % Proportion of commitments below 10 and 100 MNOK constitutes 14.2 % Proportion of commitments over 100 MNOK constitutes 3.0 % 17

18 Net non-performing and doubtful commitments One commitment (old) contribute negatively, improved underlying development 1,68 % 1,61 % 1,26 % 1,30 % 1,15 % 1,21 % 1,18 % 1,12 % 1,16 % 1,09 % Q Q Q Q Q Q Q Q Q Non-performing Doubtful Non-performing and doubtful as % Underlying development 18

19 Deposit coverage Group Group ex Sør Boligkreditt 73,9 77,9 55,5 56,3 Q Q Q Q * Deposit coverage as % of net loans Deposit coverage over target level at > 56 % High deposit coverage in Group ex Sør Boligkreditt at 77.9 % 19

20 Equity CT 1/Core capital adequacy ratio Return on equity 13,1 12,9 9,6 9,7 12,2 12,1 6,4 8,9 9M M 2013 * This years result not included 9M M 2013 * Return on Equity annualized Core Tier 1 12,1 % required > 9 % (12,6 % including part of this year result) Return on equity 9,7 % after 9M 2013 adjusted for valuation of debt 20

21 Certificates and bonds Assets Rating Finance 3 % Energy 2 % Ind IG 5 % Ind HY 7 % Sub.loans 2 % Gov. 19 % BB 4,3 % A 4,5 % BBB 6,4 % B 2,2 % Local gov. 18 % CB 44 % AAA/AA 82,6 % Total portfolio 6.7 BNOK Liquidity buffers 4.0 BNOK ~ 94 % investment grade Liquidity buffers 100 % AAA/AA 21

22 Maturity structure - debt Good access to new funding at reasonable market prices. Good maturity structure, provides greater security under volatile conditions. Funding > 12 months constitute 80.4 %. Increasing maturities on average funding Oct Nov Dec Sparebanken Sør Sør Boligkreditt Gov.repo > 2020 Sparebanken Sør Sør Boligkreditt Gov.repo 22

23 Stable access to long-term funding 9M 2013 BNOK Maturity Margin (bp) 3 months NIBOR Covered bonds 2,7 8,1 50 Senior bonds 1,2 5, Total 3,9 7,2 62 BNOK Maturity Margin (bp) 3 months NIBOR Covered bonds 3,4 4,4 49 Senior bonds 2,5 5,4 168 Total 5,9 4,

24 Summary Q Income Net interest income improved 14 % compared to same period last year, and good underlying growth in commission income. Costs Costs under control and reduced nominal development. Growth Continued strong growth in lending and deposits. Funding Group funding are made at long maturities. Total Improved underlying operations. 24

25 Future prospects Income Growth Costs Interest rate adjustments will continue to contribute positively. Expectations of continued lending growth, but slightly reduced development in deposits. Effects of cost reductions are balanced against necessary investments. Funding Good access to new funding. Macro Growth in the Norwegian economy is still good, but signs of somewhat more challenging macro conditions. 25

26 sparebanken SØR SØR INSURANCE MARKETS Norne We contribute to a better life in the region LOANS Brage Frende SAVINGS ABCenter