Dividend yield, anyone? Source: Fondsfinans research, Savings Banks

Transcription

1 Savings Banks Sector Report 13 April 2015 Target Upside / Ticker Rec. Price Downside AURG SELL % HELG BUY % HSPG SELL % ISSG BUY % JAEREN BUY % MELG BUY % MING BUY % MORG BUY % NONG BUY % NTSG BUY % RING BUY % SADG BUY % SBVG BUY % SKUE BUY % SOAG BUY % SPOG BUY % SRBANK BUY 64 7 % SVEG BUY % SOR NEUTRAL % TOTG BUY % OSEEX vs OBX Index past 2 years OSEEX Index Equity analyst: Geir Kristiansen Fondsfinans AS TEL: gk@fondsfinans.no Ulrik Årdal Zürcher Fondsfinans AS TEL: uaz@fondsfinans.no OBX Index (Rebased) Dividend yield, anyone? Savings banks Equity Capital Certificates (ECCs) is the ultimate dividend yield instrument. We expect that average yields will increase from about 6% for 2015 to about 9% for 2017, as banks increase payout ratios when targeted CET 1 levels are reached. This will, together with the low interest rate environment, continue to trigger increased valuations of ECCs. We have Buy recommendations on 16 out of 19 ECCs and on SR-Bank s ordinary shares. Among the regional banks, we see about equal upside for SpareBank 1 SMN, SpareBank 1 Nord-Norge and Sparebanken Vest. Vest generates the highest dividend yield among the regional banks, but the ECC is also less liquid. SpareBank 1 SMN and SpareBank 1 Nord Norge, on the other side, have lower oil price exposure than banks operating in the south-west. Among the large local banks we continue to prefer SpareBank 1 Østfold-Akershus. We have cut the target price for SR-Bank from NOK 69 to NOK 64 due to lower estimates in 2015 and The main risk for the bank is a collapse in the commercial real estate market in the Stavanger region. We have increased target prices by 7% in this report, despite the fact that all banks except SR-Bank are ex dividend. Higher target prices are mainly based on expectations of higher profitability in 2017 due to lower loan losses, which we expect to peak in Note that our target prices are based on risk premiums in the % range, which may be considered high. The main reasons for high risk premiums are more upside than downside risk on the risk free rate, risk for increased unemployment due to the low oil price and relatively low liquidity in the ECCs. 1% lower discount rate would increase valuations by 16-19%. Higher oil prices will trigger lower risk premiums and higher valuations also for Norwegian savings banks. Share Dividend Dividend Dividend Banks price P/E-15E P/E-16E P/E-17E P/B-15E ROE-15E ROE-16E ROE-17E Yield-15E Yield-16E Yield-17E Aurskog Sparebank % 8.8 % 10.2 % 4.7 % 4.1 % 5.0 % Helgeland Sparebank % 7.4 % 9.0 % 4.9 % 5.7 % 8.0 % Høland og Setskog Sparebank % 7.6 % 9.7 % 8.4 % 7.5 % 9.6 % Indre Sogn Sparebank % 5.5 % 6.6 % 5.1 % 5.0 % 5.5 % Jæren Sparebank % 6.5 % 7.8 % 5.6 % 5.0 % 6.3 % Melhus Banken % 9.8 % 9.1 % 11.3 % 11.0 % 10.7 % Sparebank 1 SMN % 11.9 % 11.3 % 5.5 % 6.7 % 8.2 % Sparebank Møre % 10.3 % 10.3 % 7.1 % 6.9 % 7.2 % Sparebank 1 Nord-Norge % 10.8 % 11.9 % 4.9 % 6.3 % 7.4 % Sparebank 1 Nøtterøy Tønsberg % 9.0 % 10.2 % 4.9 % 5.6 % 8.8 % Sparebank 1 Ringerike Hadeland % 7.8 % 9.8 % 4.9 % 5.3 % 7.0 % Sandnes Sparebank % 7.6 % 9.9 % 4.5 % 5.7 % 9.8 % Sparebank 1 BV % 10.7 % 11.6 % 6.7 % 8.6 % 10.3 % Skue Sparebank % 6.9 % 8.6 % 5.7 % 6.4 % 9.3 % Sparebank 1 Østfold Akershus % 11.9 % 12.2 % 3.8 % 6.4 % 8.6 % Sparebanken Øst % 10.1 % 10.1 % 7.5 % 8.6 % 9.5 % Sparebank 1 SR-Bank % 9.4 % 10.5 % 4.6 % 5.6 % 8.4 % Sparebanken Vest % 10.7 % 11.7 % 7.0 % 7.5 % 9.3 % Sparebanken Sør % 8.1 % 8.7 % 5.4 % 6.6 % 7.4 % Totens Sparebank % 8.5 % 10.3 % 5.0 % 5.8 % 9.0 % Median % 8.9 % 10.1 % 5.3 % 6.3 % 8.5 % Mean % 9.0 % 10.0 % 5.9 % 6.5 % 8.3 % Source: Fondsfinans research, Savings Banks FONDSFINANS AS, HAAKON VII S GATE 2, P.O.BOX 1782 VIKA, NO-0122 OSLO, TEL: , FAX: , mail@fondsfinans.no This report was prepared by an analyst employed by Fondsfinans AS, the Norwegian affiliate of Fondsfinans Inc., who is not registered as a research analyst with FINRA or subject to FINRA rules governing research. See page of this report for Important Disclosure Information.

2 Savings Banks - Sector Report Contents Page Introduction 3 Regional Banks SpareBank 1 SMN MING 11 Sparebank Møre MORG 17 SpareBank 1 Nord-Norge NONG 23 SpareBank 1 SR-Bank SRBANK 29 Sparebanken Vest SVEG 35 Large Local Banks Helgeland Sparebank HELG 41 SpareBank 1 Ringerike Hadeland RING 47 Sandnes Sparebank SADG 53 SpareBank 1 Buskerud Vestfold SBVG 59 SpareBank 1 Østfold Akershus SOAG 65 Sparebanken Sør SOR 71 Sparebanken Øst SPOG 77 Totens Sparebank TOTG 83 Small Local Banks Aurskog Sparebank AURG 89 Høland og Setskog Sparebank HSPG 95 Indre Sogn Sparebank ISSG 101 Jæren Sparebank JAEREN 107 Melhus Banken MELG 113 SpareBank 1 Nøtterøy Tønsberg NTSG 119 Skue Sparebank SKUE 125 Page 2 13 April 2015 Fondsfinans Research

3 Savings Banks - Sector Report Introduction Total return performance last 6 months: DNB, Regional and Large local banks 28.7 % 21.1 % 21.0 % 20.7 % 18.1 % 16.9 % 16.5 % 16.1 % 15.8 % 14.0 % 12.7 % 9.4 % 4.3 % 2.0 % TOTG RING SVEG SOAG DNB SPOG NONG HELG MORG MING SBVG SOR SRBANK SADG Oil price in focus Below historical valuations Multiple expansion ahead There is no coincidence that the two worst performing banks the last 6 month period are located in the oil dependent Rogaland county. The stock market seems to discount that mainland Norway outside Rogaland county will do reasonably well, helped by a weak currency, low interest rates, and strong public finances. These factors will trigger growth in non-oil export industries, housing prices, and increase public spending. The table below shows Statistic Norway s prognosis of economic indicators. Statistic Norway now sees an even softer landing than the forecasts three months ago, with unemployment peaking at 4.1% in Housing prices will be supported by fundamental factors like low interest rates, low unemployment and insufficient supply. We do not believe that FSA s proposals to reduce credit demand and growth in housing prices will have a significant impact. A worst case scenario is, in our opinion, a significant increase in taxation for house owners, which may, together with moderate increase in lending rates, lead to the same kind of crash we saw after interest deductibility was reduced before the banking crisis hit Norway in the early 1990s. We do not believe, however, that Norwegian politicians will listen to bad advice from hawkish economists on this issue. Soft landing Selection of economic indicators F 2016F 2017F 2018F Consumption in households etc General government consumption Gross fixed investment Gross domestic product Mainland Norway Unemployment rate (level) Wages per standard man-year Consumer price index (CPI) Housing prices Household real income Household saving ratio (level) Money market rate (level) Lending rate, credit loans(level) Real after-tax lending rate, banks Current balance (per cent of GDP) Crude oil price NOK (level) Source: SSB (Statistics Norway), updated 13 March 2015 Fondsfinans Research 13 April 2015 Page 3

4 Savings Banks - Sector Report Current valuation Price / Earnings (2015E) Price / Book (2015E) AURG HSPG 1.10 RING AURG 1.10 HSPG SPOG 1.01 Regional banks price premiums have all but disappeared SOR JAEREN SRBANK MELG MING RING SVEG MORG AVG 8.59 SRBANK 0.88 MORG 8.46 NONG 0.88 SPOG 8.31 MELG 0.87 TOTG 8.20 SOR 0.86 HELG 8.18 AVG 0.80 NONG 8.10 SBVG 0.78 ISSG 8.09 TOTG 0.75 SVEG 7.85 SOAG 0.70 SADG 7.76 HELG 0.66 NTSG 7.34 NTSG 0.66 MING 7.25 JAEREN 0.63 SBVG 7.04 SADG 0.55 SOAG 6.51 SKUE 0.51 SKUE 6.09 ISSG 0.47 High multiples reflects high dividend pay-out ratios The large-cap premium has disappeared during the oil-price collapse, and the stock market is currently focusing on RoE and pay-out ratios (as it should). However, we see bargains among the large, regional savings banks (MING; NONG, SVEG). ROE (2015E) Dividend yield (2015E) MING 11.93% MELG 10.99% SOAG 11.90% SBVG 8.63% NONG 10.78% SPOG 8.58% SBVG 10.73% HSPG 7.52% SVEG 10.70% SVEG 7.49% MORG 10.26% MORG 6.87% SPOG 10.05% MING 6.74% MELG 9.84% SOR 6.55% SRBANK 9.41% AVG 6.53% Strong yields NTSG AVG 8.97% 8.96% SOAG SKUE 6.43% 6.40% AURG 8.76% NONG 6.30% TOTG 8.48% TOTG 5.83% SOR 8.07% HELG 5.72% RING 7.82% SADG 5.71% HSPG 7.63% NTSG 5.61% SADG 7.57% SRBANK 5.60% HELG 7.37% RING 5.33% SKUE 6.91% JAEREN 5.04% JAEREN 6.52% ISSG 5.04% ISSG 5.52% AURG 4.12% Page 4 13 April 2015 Fondsfinans Research

5 Savings Banks - Sector Report Historical Data Historical P/E Historical P/E Adjusted Regional Banks Large Local Banks Small Local Banks Regional Large Local Small Local There is a high quarterly volatility in P/E multiples among the smaller banks, while the largest banks are more stable. Regional banks have been trading in the range 5-8x EPEC the recent years. Discount to book equity Historical P/B Historical Equity Ratio 9.5 % 9.0 % 8.5 % 8.0 % 7.5 % 7.0 % 6.5 % Regional Large Local Small Local Regional Large Local Small Local Estimates Sector ROE peaking in 2014, but is expected to increase from levels Estimated ROE 19% 17% 15% 13% 11% 9% 7% 5% Estimated Cost / Income 60% 55% 50% 45% 40% 35% Regional Large Local Small Local Regional Large Local Small Local Loan losses peaked last year at the same time as net interest margins started to trend upwards. We expect a negative correlation between these measures over time. Loan losses are expected to peak in 2016 and lead to higher risk premiums in the form of higher net interest margins. Estimated Loan Loss Ratio 0.5 % Estimated Net Interest Margin 1.9 % Higher loan losses give increased NIM 0.4 % 0.3 % 0.2 % 0.1 % 1.8 % 1.7 % 1.6 % 0.0 % 1.5 % Regional Large Local Small Local Regional Large Local Small Local Fondsfinans Research 13 April 2015 Page 5

6 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Savings Banks - Sector Report Strong sector performance last 18 months All banks, share price 100) HIGH/LOW Average Shaking-off the oil price turmoil Regional banks, share price 100) HIGH/LOW Average Large local banks, share price 100) HIGH/LOW Average Large local banks continues to be performance winners Banks Price performance past year Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 Source: Fondsfinans Research/ Bloomberg Regional Banks Large Local Banks Small Local Banks Page 6 13 April 2015 Fondsfinans Research

7 Savings Banks - Sector Report CET 1 Ratio Low lending growth and sufficient profitability to build capital make equity issues unlikely 16% 15% 15% 14% 14% 13% 13% 12% 12% 11% 3Q14 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E Regional Banks Large Local Banks Small Local Banks Regional banks are expected to build around 1.0 pp of CET 1 capital in 2015, 0.5% in % 14% 14% 13.0 % 12.9 % 12.9 % 12.9 % 13.6 % 13% 12.3 % 12.3 % 12.3 % 13% 11.7 % 12% 12.0 % 12% 11% 11% 10% 3Q14 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E HIGH/LOW AVG. Regional Banks Local banks are on average better capitalized than regional banks 19% 18% 17% 16% 13.7 % 14.5 % 14.9 % 15% 14.1 % 14.1 % 14.1 % 14.3 % 14.3 % 14.3 % 15.1 % 14% 13% 12% 11% 10% 3Q14 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E HIGH/LOW AVG. Large Local Banks 16% 15% 14% 13% 12.6 % 13.7 % 14.0 % 14.1 % 14.2 % 14.4 % 14.4 % 14.5 % 14.5 % 14.7 % 12% 11% 10% 3Q14 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E HIGH/LOW AVG. Small Local Banks Source: Fondsfinans Research / Savings Banks Fondsfinans Research 13 April 2015 Page 7

8 Savings Banks - Sector Report Regional Banks Increasing dividend yields Since the release of our last sector report 21 January, the regional banks have generated returns of 7%-18%. Our top pick at the time, SR-Bank, is up by 15%. Valuations are, however, still below book equity, and given expectations of double-digit RoE s and increasing payout ratios, we believe in strong performances also in the coming 12 month period. The economy in the Stavanger region, were SR-Bank is located, is heavily affected by lower activity in the oil industry. A combination of strong performance and cut in the target price make SR-Bank now our least preferred ECC among regional banks. We highlight instead SpareBank 1 SMN, SpareBank 1 Nord Norge and Sparebanken Vest. Sparebanken Vest is also our top dividend yield case. The regional banks are well capitalized and are on the way to reach target CET 1 ratios in Share issues are unlikely. On the contrary, dividend yields will increase going forward and make ECC s very attractive in the current low interest rate environment. Recommendations and estimates Regional Banks Share Div. Div. Div. Rec. price P/E-15E P/E-16E P/E-17E P/B-15E P/B-16E P/B-17E Yield-15E Yield-16E Yield-17E Sparebank 1 SMN BUY % 6.7 % 8.2 % Sparebank Møre BUY % 6.9 % 7.2 % Sparebank 1 Nord-Norge BUY % 6.3 % 7.4 % Sparebank 1 SR-Bank BUY % 5.6 % 8.4 % Sparebanken Vest BUY % 7.5 % 9.3 % Median % 6.7 % 8.2 % AVG % 6.6 % 8.1 % Source: Fondsfinans research Price / Earnings (2015E) Price / Book (2015E) SRBANK 8.75 MING 0.91 MORG 8.46 SVEG 0.90 NONG 8.10 MORG 0.90 AVG 8.08 AVG 0.89 SVEG 7.85 SRBANK 0.88 MING 7.25 NONG 0.88 ROE (2015E) Dividend yield (2015E) MING 13.2 % MORG 7.1 % AVG 11.5 % SVEG 7.0 % SVEG 11.5 % AVG 5.8 % NONG 11.2 % MING 5.5 % MORG 10.8 % NONG 4.9 % SRBANK 10.7 % SRBANK 4.6 % Page 8 13 April 2015 Fondsfinans Research

9 Savings Banks - Sector Report Large Local Banks Large local banks have continued to outperform both larger and smaller peers in 1Q15. However, as a group, large local banks continue to be attractively valued, with average/price book of 0.8x 2015E. Large local banks generates RoE on average around 9%, vs around 11% for regional banks and 8% for small local banks. Upgrades Value case There are larger differences in valuation and performance among the local banks than the regional banks. However, we find seven of the eight banks attractively valued, and upgrade Sparebank1 BV and Sparebanken Øst to Buy (Neutral). SpareBank 1 Østfold Akershus remains our top-pick among local banks, despite the 18% return since our last report about three months ago. The ECC is clearly undervalued at 0.7x book 2015E and P/E at 6.7x 2015E. Sandnes Sparebank is less expensive on P/B, but is in our view the only large local bank with a significant, although mostly indirect, exposure to the oil price. Recommendations and estimates Large Local Banks Share Div. Div. Div. Rec price P/E-15E P/E-16E P/E-17E P/B-15E P/B-16E P/B-17E Yield-15E Yield-15E Yield-17E Helgeland Sparebank BUY % 4.9 % 8.0 % Sparebank 1 Ringerike Hadeland BUY % 4.9 % 7.0 % Sandnes Sparebank BUY % 4.5 % 9.8 % Sparebank 1 BV BUY % 6.7 % 10.3 % Sparebank 1 Østfold Akershus BUY % 3.8 % 8.6 % Sparebanken Sør NEUTRAL % 5.4 % 7.4 % Sparebanken Øst BUY % 7.5 % 9.5 % Totens Sparebank BUY % 5.0 % 9.0 % Median % 4.9 % 8.8 % AVG % 5.3 % 8.7 % Source: Fondsfinance Research Price / Earnings (2015E) Price / Book (2015E) SOAG is our top pick RING SOR AVG SPOG TOTG HELG SADG SBVG SOAG SPOG RING SOR AVG SBVG TOTG SOAG HELG SADG ROE (2015E) Dividend yield (2015E) SOAG, SBVG and SPOG have ROEs at regional bank levels SPOG SOAG SBVG TOTG AVG SOR HELG RING SADG 11.2 % 10.9 % 10.6 % 9.4 % 9.3 % 9.2 % 8.2 % 7.6 % 7.2 % SPOG SBVG SOR AVG TOTG RING HELG SADG SOAG 5.4 % 5.3 % 5.0 % 4.9 % 4.9 % 4.5 % 3.8 % 6.7 % 7.5 % Fondsfinans Research 13 April 2015 Page 9

10 Savings Banks - Sector Report Small Local Banks Low liquidity Upgrades Local buying interest and high dividend payout ratios have led to premium pricing of small, local banks vs lager peers. Low liquidity in the ECCs does not seem to bother investors in these papers. Still, on absolute valuation, we find five of the seven banks attractive. SpareBank 1 Nøtterøy Tønsberg and Indre Sogn Sparebank are our preferred stocks in this sub-group, based on upside to target price. However, be aware of low liquidity. We upgrade Skue Sparebank and Jæren Sparebankto to Buy (Neutral), and downgrade Aurskog Sparebak and Høland og Setskog Sparebank to Sell (Neutral). Recommendations and estimates Small Local Banks Share Div. Div. Div. Rec price P/E-15E P/E-16E P/E-17E P/B-15E P/B-16E P/B-17E Yield-15E Yield-16E Yield-17E Aurskog Sparebank SELL % 4.1 % 5.0 % Høland og Setskog Sparebank SELL % 7.5 % 9.6 % Indre Sogn Sparebank BUY % 5.0 % 5.5 % Jæren Sparebank BUY % 5.0 % 6.3 % Melhus Banken BUY % 11.0 % 10.7 % Sparebank 1 Nøtterøy Tønsberg BUY % 5.6 % 8.8 % Skue Sparebank BUY % 6.4 % 9.3 % Median % 5.6 % 8.8 % AVG % 6.4 % 7.9 % Source: Fondsfinans Research Price / Earnings (2015E) Price / Book (2015E) AURG 13.1 HSPG 1.10 HSPG 11.8 AURG 1.10 AVG 9.1 MELG 0.87 JAEREN 8.8 AVG 0.76 MELG 8.7 NTSG 0.66 ISSG NTSG SKUE JAEREN SKUE ISSG ROE (2015E) Dividend yield (2015E) MELG 10.3 % MELG 11.3 % NTSG 9.3 % HSPG 8.4 % HSPG AURG SKUE AVG JAEREN ISSG 9.1 % 8.7 % 8.5 % 8.4 % 7.2 % 5.6 % AVG SKUE JAEREN ISSG NTSG AURG 6.5 % 5.7 % 5.6 % 5.1 % 4.9 % 4.7 % Page April 2015 Fondsfinans Research

11 SpareBank 1 SMN BUY Sector Report Share Price: NOK April 2015 Target Price: NOK 77 (70) Low risk, strong RoE Share data Sector Banks Bloomberg MING NO Risk rating Low Outst. shares (m) Market cap (NOKb) 8.0 Total assets (NOKb) Net lending (NOKb) 91.3 Free float 90 % Aver. vol. (t) High/low 52w 62.8/ 48.6 Weight PCC index % Rel. Perf 3/6/12 3/ 2/ 7 Abs. Perf. 3/6/12 14/ 17/ 24 Valuation Methods Dividend Discount Model 73 Book Equity Model 81 Target price (aver) 77 Dividend Discount Model NOK gov. bond 10Y 1.5 % Market risk premium 6.5 % Beta (adjusted) 1.15 Cost of equity 9.0 % Perpetual growth 2.0 % Fair value per share 73 Book Equity Model Adjusted ROE 11.0 % Perpetual growth 2.5 % Cost of equity 9.0 % Fair P/B multiple 1.32 Fair value per share 81 We increase the target price to NOK 77 (70) based on higher estimates and lower cost of equity, and highlight SMN as one of our new top picks in the sector. We expect SMN to generate higher yield than the peer group average the coming years. The bank s main operations are in a region with low exposure to the oil industry and we expect moderate loan losses. We believe that cheaper funding will give resilience to lending margin pressure going forward. We have increased 2015 and 2016 estimates respectively 8% and 4% at pretax profit level, due to higher income. We have also reduced cost of equity by 0.5% due to the low risk in the loan book and the relatively liquid ECCs. SMN will report 1Q15 figures 8 May. We believe focus will mainly be on interest margins and loan loss guidance. We expect margins to show resilience also in this quarter and that NII will increase marginally from the previous quarter. We expect that non-interest income will be boosted by a stronger contribution from net financials, despite lower contributions from the SpareBank 1 Group. Loan losses are expected to remain at a low level. However, the expected increase in core pretax profit (ex. net financials) from NOK 344m in 4Q14 to NOK 369m is due to the absence of one-off costs (NOK 30m in restructuring charges in 4Q14), SMN is not classified as a SIFI bank, and the CET 1 requirement is thus 11% and not 13% (from 2H16) as it is for DNB and potentially for SR-Bank, if its market share grows above 5%. Still, SMN targets a CET 1 ratio of 13.5%, which will cap dividends in the near term. We expect pay-out ratios of 40% for 2015, 50% for 2016 and 60% for Key figures (NOKm) E 2016E 2017E 4Q14 1Q15E Net interest income (NII) 1,616 1,790 1,991 2,023 2, Other op.revenues 1,965 2,233 2,185 2,257 2, Total operating revenues 3,581 4,023 4,176 4,280 4, ,062 Operating costs -1,722-1,789-1,809-1,850-1, Pre-provision profit (PPP) 1,859 2,234 2,366 2,431 2, Loan losses Pre-tax profit (PTP) 1,758 2,145 2,173 2,125 2, Taxes Net profit 1,370 1,782 1,717 1,679 1, Prepared by analyst: Geir Kristiansen Fondsfinans AS TEL: gk@fondsfinans.no EPEC BPS DPS Net interest income 1.45 % 1.48 % 1.53 % 1.47 % 1.41 % 1.58 % 1.55 % Loan losses (%) 0.13 % 0.10 % 0.20 % 0.30 % 0.28 % 0.15 % 0.17 % Core equity capital ratio (CET 1) 10.7 % 11.2 % 12.7 % 13.6 % 14.8 % 11.2 % 12.0 % Yield 3.8 % 4.2 % 5.5 % 6.7 % 8.2 % P/E P/B ROE 13.1 % 15.0 % 13.2 % 11.9 % 11.3 % 12.2 % Source: Fondsfinans research, Sparebank 1 SMN 14.4 % FONDSFINANS AS, HAAKON VII S GATE 2, P.O.BOX 1782 VIKA, NO-0122 OSLO, TEL: , FAX: , mail@fondsfinans.no This report was prepared by an analyst employed by Fondsfinans AS, the Norwegian affiliate of Fondsfinans Inc., who is not registered as a research analyst with FINRA or subject to FINRA rules governing research. See page of this report for Important Disclosure Information.

12 SpareBank 1 SMN - Sector Report INCOME STATEMENT (Y) E 2016E 2017E Net interest income Net commission income Other income Total core income Personnel expenses Administrative expenses Deprectiation Other expenses Total expenses Pre-provision profit (core items) Loan loss provision Pre-tax profit (core items) Dividends Income from associated companies Capital gains Total financial income Pre-tax profit Taxes Net profit (recurring) One-offs Net profit (reported) Adjustments Adjusted net profit EPEC (rep.) EPEC (adj.) BALANCE SHEET (Y) E 2016E 2017E Assets Cash Lending to credit institutions Gross lending to customers Individual writedowns Collective writedowns Net lending to customers Equity Bonds Derivatives Inv. in associated companies Intangible assets Fixed assets Other assets Total assets Liabilities Deposits from credit institutions Deposits from customers Issued bonds Issued sub. Bonds Other liabilities Total liabilities Equity Equity certificat capital Primary capital Other equity Total equity Page April 2015 Fondsfinans Research

13 SpareBank 1 SMN - Sector Report INCOME STATEMENT (Q) 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E Net interest income Net commission income Other income Total core income Personnel expenses Administrative expenses Deprectiation Other expenses Total expenses Pre-provision profit (core items) Loan loss provision Pre-tax profit (core items) Dividends Income from associated companies Capital gains Total financial income Pre-tax profit Taxes Net profit (recurring) One-offs Net profit (reported) Adjustments Adjusted net profit EPEC (rep.) EPEC (adj.) BALANCE SHEET (Q) 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E Assets Cash Lending to credit institutions Gross lending to customers Individual writedowns Collective writedowns Net lending to customers Equity Bonds Derivatives Inv. in associated companies Intangible assets Fixed assets Other assets Total assets Liabilities Deposits from credit institutions Deposits from customers Issued bonds Issued sub. Bonds Other liabilities Total liabilities Equity Equity certificat capital Primary capital Other equity Total equity Fondsfinans Research 13 April 2015 Page 13

14 SpareBank 1 SMN - Sector Report KEY FIGURES (Y) E 2016E 2017E Dividend NOK Dividend yield 6.8 % 4.4 % 4.1 % 3.8 % 4.2 % 5.5 % 6.7 % 8.2 % ECC ratio 60 % 64 % 65 % 65 % 65 % 64 % 64 % Book equity per EC Book equity per EC (excl intangible assets) P/B P/B (excl intangible assets) ROE % % % % % % % % ROE (core banking) 9.1 % 6.8 % 6.8 % 8.4 % 8.8 % 8.1 % 7.0 % 6.5 % ROA 1.12 % 1.03 % 1.03 % 1.24 % 1.45 % 1.32 % 1.22 % 1.20 % RORWA 1.53 % 1.36 % 1.30 % 1.58 % 1.84 % 1.80 % 1.71 % 1.70 % RORWA (core banking) 1.12 % 0.79 % 0.84 % 1.12 % 1.14 % 1.29 % 1.28 % 1.24 % C/I 44.6 % 53.2 % 53.9 % 48.1 % 44.5 % 43.3 % 43.2 % 43.6 % C/I adj % 64.1 % 63.2 % 55.9 % 54.2 % 51.5 % 51.5 % 52.3 % Costs in % of total assets 1.25 % 1.49 % 1.58 % 1.54 % 1.48 % 1.39 % 1.35 % 1.33 % Loan loss ratio (gross loans) 0.19 % 0.04 % 0.08 % 0.13 % 0.10 % 0.20 % 0.30 % 0.28 % Net interest margin (normalised) 1.44 % 1.40 % 1.41 % 1.45 % 1.48 % 1.53 % 1.47 % 1.41 % Deposit-to-loan ratio Net Loans/Equity Equity ratio 8.2 % 9.3 % 9.6 % 9.8 % 10.1 % 10.4 % 10.8 % CET 1 ratio (transition rule) 9.3 % 8.9 % 10.0 % 10.7 % 11.2 % 12.7 % 13.6 % 14.8 % Tier 1 ratio (transition rule) 10.9 % 10.4 % 11.3 % 12.6 % 13.0 % 14.5 % 15.4 % 16.5 % Tier 2 ratio (transition rule) 13.0 % 12.0 % 13.3 % 14.2 % 15.2 % 17.3 % 18.0 % 19.1 % KEY FIGURES (Q) 4Q14 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E Book equity per EC Book equity per EC (excl intangible assets) P/B P/B (excl intangible assets) ROE % % % % % % % % ROE (core banking) 14.0 % 12.6 % 12.8 % 12.1 % 12.5 % 11.6 % 11.3 % 10.3 % ROA 1.23 % 1.28 % 1.27 % 1.25 % 1.34 % 1.22 % 1.18 % 1.12 % RORWA 1.57 % 1.79 % 1.77 % 1.76 % 1.88 % 1.74 % 1.67 % 1.60 % RORWA (core banking) 1.85 % 1.67 % 1.68 % 1.66 % 1.77 % 1.61 % 1.57 % 1.49 % C/I 50.5 % 43.9 % 43.0 % 43.7 % 42.1 % 43.3 % 43.1 % 44.4 % C/I adj % 45.1 % 44.3 % 44.9 % 43.2 % 44.6 % 44.4 % 45.7 % Costs in % of total assets 1.58 % 1.37 % 1.34 % 1.37 % 1.36 % 1.34 % 1.31 % 1.34 % Loan loss ratio (gross loans) 0.15 % 0.19 % 0.21 % 0.23 % 0.26 % 0.29 % 0.32 % 0.35 % Net interest margin (normalised) 1.58 % 1.50 % 1.49 % 1.49 % 1.51 % 1.48 % 1.45 % 1.42 % Deposit-to-loan ratio Net Loans/Equity CET 1 ratio (transition rule) 11.2 % 11.7 % 11.4 % 12.7 % 12.7 % 12.7 % 12.7 % 13.6 % Tier 1 ratio (transition rule) 13.0 % 13.5 % 13.2 % 14.5 % 14.5 % 14.5 % 14.4 % 15.4 % Tier 2 ratio (transition rule) 15.2 % 16.3 % 15.9 % 17.3 % 17.2 % 17.2 % 17.1 % 18.0 % Page April 2015 Fondsfinans Research

15 SpareBank 1 SMN - Sector Report REGULATORY CAPITAL 2Q14 3Q14 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E CET1 ratio (FF est.) CET 1 ratio (transition rule) 11.1 % 11.5 % 11.2 % 12.0 % 11.7 % 11.4 % 12.7 % 12.7 % 12.7 % 12.7 % 13.6 % Tier 1 ratio (transition rule) 13.0 % 13.4 % 13.0 % 13.9 % 13.5 % 13.2 % 14.5 % 14.5 % 14.5 % 14.4 % 15.4 % Capital adequacy ratio (trans rule) 14.7 % 16.1 % 15.2 % 16.6 % 16.3 % 15.9 % 17.3 % 17.2 % 17.2 % 17.1 % 18.0 % Counter-cyclical buffer CET 1 ratio req. (1.0% cc-buffer) 0.0 % 0.0 % 0.0 % 0.0 % 1.0 % 1.0 % 1.0 % 0.0 % 1.0 % 1.0 % 1.0 % Total CET 1 ratio requirement (with 1.5% cc-buffer) 0.0 % 0.0 % 0.0 % 0.0 % 1.5 % 1.5 % 1.5 % 0.0 % 1.5 % 1.5 % 1.5 % Total CET 1 ratio requirement (with 2.0% cc-buffer) 0.0 % 0.0 % 0.0 % 0.0 % 2.0 % 2.0 % 2.0 % 0.0 % 2.0 % 2.0 % 2.0 % Total CET 1 ratio requirement (with 2.5% cc-buffer) 0.0 % 0.0 % 0.0 % 0.0 % 2.5 % 2.5 % 2.5 % 0.0 % 2.5 % 2.5 % 2.5 % CET 1 requirements (ex. cc-buffer) SIFI MAX Systemic risk buffer 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % Conservation buffer 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % Core equity capital 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % Total CET 1 requirements (ex. cc-buffer) 10.0 % 10.0 % 10.0 % 10.0 % 10.0 % 10.0 % 10.0 % 10.0 % 10.0 % 10.0 % 10.0 % Total CET 1 requirement Total CET 1 ratio requirement (with 1.0% cc-buffer) 10.0 % 10.0 % 10.0 % 10.0 % 11.0 % 11.0 % 11.0 % 10.0 % 11.0 % 11.0 % 11.0 % Total CET 1 ratio requirement (with 1.5% cc-buffer) 10.0 % 10.0 % 10.0 % 10.0 % 11.5 % 11.5 % 11.5 % 10.0 % 11.5 % 11.5 % 11.5 % Total CET 1 ratio requirement (with 2.0% cc-buffer) 10.0 % 10.0 % 10.0 % 10.0 % 12.0 % 12.0 % 12.0 % 10.0 % 12.0 % 12.0 % 12.0 % Total CET 1 ratio requirement (with 2.5% cc-buffer) 10.0 % 10.0 % 10.0 % 10.0 % 12.5 % 12.5 % 12.5 % 10.0 % 12.5 % 12.5 % 12.5 % Margin above total CET 1 req. Total CET 1 ratio requirement (with 1.0% cc-buffer) 1.1 % 1.5 % 1.2 % 2.0 % 0.7 % 0.4 % 1.7 % 2.7 % 1.7 % 1.7 % 2.6 % Total CET 1 ratio requirement (with 1.5% cc-buffer) 1.1 % 1.5 % 1.2 % 2.0 % 0.2 % -0.1 % 1.2 % 2.7 % 1.2 % 1.2 % 2.1 % Total CET 1 ratio requirement (with 2.0% cc-buffer) 1.1 % 1.5 % 1.2 % 2.0 % -0.3 % -0.6 % 0.7 % 2.7 % 0.7 % 0.7 % 1.6 % Total CET 1 ratio requirement (with 2.5% cc-buffer) 1.1 % 1.5 % 1.2 % 2.0 % -0.8 % -1.1 % 0.2 % 2.7 % 0.2 % 0.2 % 1.1 % Nominal difference (NOKm) Total CET 1 ratio requirement (with 1.0% cc-buffer) Total CET 1 ratio requirement (with 1.5% cc-buffer) Total CET 1 ratio requirement (with 2.0% cc-buffer) Total CET 1 ratio requirement (with 2.5% cc-buffer) Fondsfinans Research 13 April 2015 Page 15

16 SpareBank 1 SMN - Sector Report SpareBank 1 SMN Analyst: Geir Kristiansen tel Sector: Banks Price 62.0 EC outstanding (mill.) Date: 09.apr.15 Book equity per PCC: 61.5 Market capitalisation (NOKb): 8.05 Next result: 08.mai.15 Price/Book: 1.01 Total assets (NOKb): Target 77 Net Lending: 85 Deposit/loan ratio (%): 68.9 % Recommendation: BUY 12 month high/low: 62.8/ 48.6 CET1 ratio (excl. profit): 11.2 % INCOME STATEMENT (NOK million) E 2016E 2017E 4Q14 1Q15E 2Q15E 3Q15E 4Q15E Net interest income 1,616 1,790 1,991 2,023 2, Non-interest income 1,965 2,233 2,185 2,257 2, Net Commission income 1,136 1,168 1,202 1,253 1, Dividends Income from ass. companies Gains/losses on fin. assets Other operating income Total operating income 3,581 4,023 4,176 4,280 4, ,062 1,030 1,033 1,050 Total operating expense -1,722-1,789-1,809-1,850-1, Personnel expense ,002-1,003-1,043-1, Administrative expense Depreciation/amortisation Other expense Pre-provision profit (PPP) 1,859 2,234 2,366 2,431 2, Loan loss provision Pre tax profit (PTP) 1,758 2,145 2,173 2,125 2, Tax Net profit 1,370 1,782 1,717 1,679 1, BALANCE SHEET (NOK billion) Gross loans to customers Specified provisions Group provisions Net Loans to customers Interest bearing assets Total assets Deposits from customers Interest bearing debt Equity KEY FIGURES Net interest income (norm.) 1.45 % 1.48 % 1.53 % 1.47 % 1.41 % 1.58 % 1.55 % 1.50 % 1.49 % 1.49 % Commission income in % of ATA 1.02 % 0.97 % 0.92 % 0.91 % 0.91 % 0.95 % 0.93 % 0.91 % 0.91 % 0.91 % Cost/income 48.1 % 44.5 % 43.3 % 43.2 % 43.6 % 50.5 % 42.8 % 43.9 % 43.0 % 43.7 % Cost/income adj. for fin. items 55.9 % 54.2 % 51.5 % 51.5 % 52.3 % 47.6 % 44.3 % 45.1 % 44.3 % 44.9 % LLP in % of gross aver. lending 0.13 % 0.10 % 0.20 % 0.30 % 0.28 % 0.15 % 0.17 % 0.19 % 0.21 % 0.23 % EPS EPS adj Dividend Dividend yield 3.8 % 4.2 % 5.5 % 6.7 % 8.2 % Major shareholders as of P/E Odin Forvaltning As 6.2 % 8,097 P/E adj Nordea Bank AB 4.2 % 5,430 DNB Asset Management 4.1 % 5,322 ROE 13.1 % 15.0 % 13.2 % 11.9 % 11.3 % Sparebankstiftelsen 3.1 % 3,965 Vind LV AS 2.1 % 2,736 P/B State Street Corp 2.1 % 2,715 Book value Danske Capital Norge 2.1 % 2,668 Wimoh Invest 1.8 % 2,359 CET 1 ratio (transition rule) 10.7 % 11.2 % 12.7 % 13.6 % 14.8 % MP Pension 1.6 % 2,058 Tier 1 ratio (transition rule) 12.6 % 13.0 % 14.5 % 15.4 % 16.5 % Danske Invest Norske 1.6 % 2,026 Capital adequacy ratio (trans rule) 14.2 % 15.2 % 17.3 % 18.0 % 19.1 % Total number of EC shares 30.3 % 129,836 Page April 2015 Fondsfinans Research

17 Sparebanken Møre BUY Sector Report Share Price: NOK April 2015 Target Price: NOK 260 (253) Strong to the core Sector Bloomberg MORG NO Equity Risk rating Low Outst. shares (m) 9.9 Market cap (NOKb) 2.3 Total assets (NOKb) 57.0 Net lending (NOKb) 48.8 Average volume (1000s last 12m) High/low 52w 231.6/ Weight PCC index % Rel. Perf 3/6/12 1/ 3/ 8 Abs. Perf. 3/6/12 1/ 3/ 8 Valuation Methods Dividend Discount Model 257 Book Equity Model 262 Target price 260 We expect Sparebanken Møre to generate strong results also in the current economic climate. We have increased sustainable ROE in our valuation model to 10.3% (10%), and have also increased dividends to reflect strong dividend capacity. Our NOK 260 (253) target price values the ECC at 1.1x book equity per 1Q15E. Møre will release the 1Q15 report on 30 April. We forecast a core pretax profit of NOK 181m in the quarter, NOK 6m lower than 4Q14 due to higher costs. Margin pressure is not expected to hit yet. We expect low loan losses of only 0.08% of lending (annualized) in the quarter. Reported pretax profit will increase from the previous quarter due to stronger net financials. Core pretax profit estimates for 2015 and 2016 are cut by 1% and 6%, respectively, mainly due to higher loan loss provisions. Dividend Discount Model NOK gov. bond 10Y 1.5 % Market risk premium 6.5 % Beta (adjusted) 1.23 Cost of equity 9.5 % Perpetual growth 2.5 % Fair value per share 257 Book Equity Model Adjusted ROE 10.3 % Perpetual growth 2.5 % Cost of equity 9.5 % Fair P/B multiple 1.11 Fair value per share 262 Key figures (NOKm) E 2016E 2017E 4Q14 1Q15E Net interest income (NII) 1,042 1,093 1,147 1,192 1, Other op.revenues Total operating revenues 1,244 1,408 1,365 1,416 1, Operating costs Pre-provision profit (PPP) Loan losses Pre-tax profit (PTP) Taxes Net profit Prepared by analyst: Geir Kristiansen Fondsfinans AS TEL: gk@fondsfinans.no EPEC BPS DPS Net interest income 1.96 % 1.97 % 2.02 % 2.03 % 2.03 % 2.00 % 2.07 % Loan losses (%) 0.12 % 0.05 % 0.12 % 0.24 % 0.21 % 0.06 % 0.08 % Core equity capital ratio (CET 1) 12.5 % 12.0 % 12.5 % 12.8 % 13.0 % 12.0 % 11.7 % Yield 4.3 % 6.9 % 7.1 % 6.9 % 7.2 % P/E P/B ROE 10.9 % 13.0 % 10.8 % 10.3 % 10.3 % 10.3 % 11.5 % Source: Sparebanken Møre, Fondsfinans research FONDSFINANS AS, HAAKON VII S GATE 2, P.O.BOX 1782 VIKA, NO-0122 OSLO, TEL: , FAX: , mail@fondsfinans.no This report was prepared by an analyst employed by Fondsfinans AS, the Norwegian affiliate of Fondsfinans Inc., who is not registered as a research analyst with FINRA or subject to FINRA rules governing research. See page of this report for Important Disclosure Information.

18 Sparebanken Møre - Sector Report INCOME STATEMENT (Y) E 2016E 2017E Net interest income ,042 1,093 1,147 1,192 1,224 Net commission income Other income Total core income 1,032 1,080 1,116 1,216 1,273 1,330 1,379 1,415 Personnel expenses Administrative expenses Deprectiation Other expenses Total expenses Pre-provision profit (core items) Loan loss provision Pre-tax profit (core items) Dividends Income from associated companies Capital gains Total financial income Pre-tax profit Taxes Net profit (reported) One-offs Net profit (recurring) Adjustments Adjusted net profit EPEC (rep.) EPEC (adj.) BALANCE SHEET (Y) E 2016E 2017E Assets Cash , Lending to credit institutions , Gross lending to customers 38,084 40,701 43,741 46,428 49,071 50,177 51,682 53,232 Individual writedowns Collective writedowns Net lending to customers 37,676 40,305 43,435 46,122 48,884 49,985 51,485 53,030 Equity Bonds 4,496 5,226 5,542 5,073 4,771 4,879 5,025 5,176 Derivatives Inv. in associated companies 4 Intangible assets Fixed assets Other assets Total assets 44,441 48,406 51,590 54,627 56,305 57,574 59,301 61,080 Liabilities Deposits from credit institutions 4,976 4,741 2,532 1, Deposits from customers 24,551 25,325 27,080 28,056 28,389 29,034 29,905 30,802 Issued bonds 9,697 12,799 15,607 18,334 19,872 20,320 20,929 21,557 Issued sub. Bonds ,302 1,498 1,379 1,410 1,452 1,496 Other liabilities 1,003 1,152 1,306 1,141 1,272 1,259 1,202 1,163 Total liabilities 41,188 44,989 47,827 50,136 51,460 52,583 54,066 55,613 Equity Equity certificat capital 1,332 1,450 1,554 2,022 2,130 2,399 2,501 2,579 Primary capital 1,560 1,698 1,835 2,060 2,173 2,320 2,462 2,612 Other equity Total equity 3,253 3,417 3,763 4,491 5,066 4,991 5,235 5,467 Page April 2015 Fondsfinans Research

19 Sparebanken Møre - Sector Report INCOME STATEMENT (Q) 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E Net interest income Net commission income Other income Total core income Personnel expenses Administrative expenses Deprectiation Other expenses Total expenses Pre-provision profit (core items) Loan loss provision Pre-tax profit (core items) Dividends Income from associated companies Capital gains Total financial income Pre-tax profit Taxes Net profit (reported) One-offs Net profit (recurring) Adjustments Adjusted net profit EPEC (rep.) EPEC (adj.) BALANCE SHEET (Q) 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E Assets Cash Lending to credit institutions 1, Gross lending to customers 49,071 49,665 48,991 49,246 50,177 50,811 50,790 50,724 Individual writedowns Collective writedowns Net lending to customers 48,884 49,475 48,804 49,059 49,985 50,617 50,596 50,530 Equity Bonds 4,771 4,829 4,763 4,788 4,879 4,940 4,938 4,932 Derivatives Inv. in associated companies Intangible assets Fixed assets Other assets Total assets 56,305 56,986 56,213 56,506 57,574 58,301 58,277 58,201 Liabilities Deposits from credit institutions Deposits from customers 28,389 29,698 30,374 29,084 29,034 30,383 31,489 29,956 Issued bonds 19,872 20,112 19,840 19,943 20,320 20,576 20,568 20,541 Issued sub. Bonds 1,379 1,396 1,377 1,384 1,410 1,428 1,427 1,425 Other liabilities 1, , Total liabilities 51,460 52,271 51,365 51,521 52,583 53,341 53,182 52,972 Equity Equity certificat capital Primary capital 2,173 2,173 2,173 2,173 2,320 2,320 2,320 2,320 Other equity Total equity 5,066 4,715 4,848 4,985 4,991 4,960 5,095 5,229 Fondsfinans Research 13 April 2015 Page 19

20 Sparebanken Møre - Sector Report KEY FIGURES (Y) E 2016E 2017E Dividend NOK Dividend yield 6.1 % 4.0 % 7.1 % 4.3 % 6.9 % 7.5 % 7.5 % 7.5 % ECC ratio 46 % 46 % 46 % 50 % 50 % 51 % 50 % 50 % Book equity per EC Book equity per EC (excl intangible assets) P/B P/B (excl intangible assets) ROE 14.8 % 11.4 % 10.9 % 10.9 % 13.0 % 10.8 % 10.3 % 10.3 % ROE (core banking) 10.5 % 10.1 % 7.8 % 10.2 % 10.2 % 10.1 % 9.5 % 9.6 % ROA 1.07 % 0.82 % 0.78 % 0.85 % 1.12 % 0.95 % 0.90 % 0.92 % RORWA 1.60 % 1.23 % 1.21 % 1.35 % 1.63 % 1.38 % 1.29 % 1.32 % RORWA (core banking) 1.28 % 1.22 % 1.19 % 1.39 % 1.34 % 1.41 % 1.43 % 1.43 % C/I 33.1 % 42.1 % 41.8 % 41.1 % 39.9 % 41.5 % 41.9 % 39.6 % C/I adj % 51.8 % 52.0 % 46.8 % 44.3 % 42.2 % 41.6 % 41.4 % Costs in % of total assets 1.22 % 1.20 % 1.16 % 1.07 % 1.02 % 0.99 % 0.98 % 0.97 % Loan loss ratio (gross loans) 0.08 % 0.10 % 0.11 % 0.12 % 0.05 % 0.12 % 0.24 % 0.21 % Net interest margin (normalised) 2.01 % 1.96 % 1.87 % 1.96 % 1.97 % 2.02 % 2.03 % 2.03 % Deposit-to-loan ratio Net Loans/Equity Equity ratio 7.3 % 7.1 % 7.3 % 8.2 % 9.0 % 8.7 % 8.8 % 9.0 % CET 1 ratio 10.3 % 10.4 % 10.6 % 12.5 % 12.0 % 12.5 % 12.8 % 13.0 % Tier 1 ratio 12.0 % 12.0 % 13.7 % 15.5 % 14.3 % 14.7 % 14.9 % 15.0 % Tier 2 ratio 13.7 % 13.6 % 14.6 % 17.0 % 15.6 % 16.0 % 16.2 % 16.3 % KEY FIGURES (Q) 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q16E 2Q16E 3Q16E Book equity per EC Book equity per EC (excl intangible assets) P/B P/B (excl intangible assets) ROE 10.3 % 11.5 % 11.2 % 11.1 % 10.6 % 10.5 % 10.7 % 10.4 % ROE (core banking) 10.8 % 10.9 % 10.5 % 10.5 % 10.1 % 10.0 % 10.1 % 9.8 % ROA 0.90 % 1.00 % 0.94 % 0.96 % 0.92 % 0.91 % 0.92 % 0.92 % RORWA 1.32 % 1.48 % 1.39 % 1.40 % 1.34 % 1.32 % 1.35 % 1.34 % RORWA (core banking) 1.47 % 1.39 % 1.31 % 1.35 % 1.29 % 1.25 % 1.28 % 1.28 % C/I 42.1 % 41.8 % 41.1 % 39.9 % 41.5 % 41.9 % 39.6 % 39.0 % C/I adj % 42.7 % 42.0 % 40.8 % 42.4 % 42.8 % 40.5 % 39.9 % Costs in % of total assets 0.97 % 1.02 % 0.97 % 0.96 % 1.01 % 1.02 % 0.96 % 0.95 % Loan loss ratio (gross loans) 0.06 % 0.08 % 0.11 % 0.14 % 0.17 % 0.20 % 0.23 % 0.26 % Net interest margin (normalised) 2.00 % 2.07 % 1.98 % 2.01 % 2.04 % 2.04 % 2.05 % 2.04 % Deposit-to-loan ratio Net Loans/Equity CET 1 ratio 12.0 % 11.7 % 11.8 % 11.7 % 12.5 % 12.0 % 12.0 % 12.0 % Tier 1 ratio 14.3 % 13.9 % 14.0 % 13.9 % 14.7 % 14.1 % 14.1 % 14.1 % Tier 2 ratio 15.6 % 15.3 % 15.3 % 15.2 % 16.0 % 15.4 % 15.4 % 15.4 % Page April 2015 Fondsfinans Research