Presentation of 1st Quarter Report Tromsø/Oslo, 29. april 2009

Transcription

1 Presentation of 1st Quarter Report 2009 Tromsø/Oslo, 29. april

2 SpareBank 1 Nord-Norge Group Headoffice: Organization: Regional branches: Tromsø 6 regions Hammerfest Tromsø* Harstad Bodø Mo i Rana Local branches: 81 Number of man-years, Group: 811 *Including Representation office in Northwest Russia. 2

3 3 Organisation of the financial services group

4 Financial targets Financial strength targeted capital adequacy ratio (agreed in June 2008): SpareBank 1 Nord-Norge s confidence level has been fixed at 99.9 per cent. The Group s ambition is to increase the confidence level to per cent by One of the strategic targets is that SpareBank 1 Nord-Norge shall be an incontestably strong bank financially. The Group s agreed target ratio for capital adequacy shall be based on the Group s internal process for the calculation of capital requirements (ICAAP) and shall be reviewed annually. The capital adequacy target is expressed in accordance with currently valid laws relating to capital adequacy. SpareBank 1 Nord-Norge s capital coverage target ratios are as follows: Core capital coverage: 9 per cent or higher Total capital coverage (capital adequacy) 12 per cent or higher 4

5 Capital adequacy ratio - Group (Amounts in NOK million) Core capital Supplementary capital Equity and related capital resources Total risk-weighted assets base - IRB Basel I risk-weighted assets base Adjusted risk-weighted assets base Core capital adequacy ratio % 9.54 % 9.06 % Supplementary capital adequacy ratio 1.60 % 2.16 % 1.50 % Capital adequacy ratio % % % 5

6 Financial targets Capital adequacy ratio Core-capital coverage: 9 % or higher Total capital coverage: 12 % or higher Profitability ROE shall be comparable to the performance of competing banks in Norway. The targeted after-tax return is minimum 6 percentage points above the yield on long-term government bonds Effectiveness The targeted cost ratio is maximum 50% of income and shall be comparable to the level of competing banks in Norway Top-line growth The growth in interest contribution and provisions is targeted to be 2 percentage points above the growth in operating costs 6

7 Preliminary annual report and accounts 1st quarter Satisfactory result for the first quarter. The underlying banking operations remain good. The Bank s financial strength is good and its liquidity satisfactory. Main features (2008): Pre-tax operating result totalled NOK 189 million (NOK 66 million). After-tax return on equity capital: 13.5 per cent (3.6 per cent). Earnings per Primary Capital Certificate (PCC) (Parent Bank): NOK 2.68 (NOK 2.69). The underlying banking operations remain very good; the result from core operations before credit losses amounted to NOK 174 million (NOK 157million). The net result from financial investments amounted to NOK 68 million; (losses NOK 88 million) Overall cost development under control a 4.3 per cent increase in costs compared to Overall cost ratio 50.1 % (78.6 %). Low losses on loans, taking into consideration the general macro-economic situation : Net losses of NOK 53 million (NOK 3 million). Lending growth during the last 12 months (including loans transferred to SpareBank 1 Boligkreditt): 7.4% (11.2%). Retail banking market: 8.6 per cent (including SpareBank 1 Boligkreditt). Corporate market: 5.40per cent. The accounts show lending growth during the last 12 months of 2.2 per cent (4.5 per cent). Deposit growth during the last 12 months: 9.6 per cent (7.3%). Overall deposit coverage ratio: 67.0 per cent (62.4 %). The Bank has good financial strength with a core capital ratio at 10.1 % (9.5 %) Liquidity remains satisfactory 7

8 Profit and loss account - Group (Amounts in NOK million) Net interest income Net fee-, commision and other operating income Net income from financial investments Total net income Total costs Result before losses and writedowns Net losses and write-downs 53 3 Result before tax Tax Minority interests 0 0 Profit for the period

9 Quarterly Summary Profit and loss account figures (Amounts in NOK million) 1Q09 4Q08 3Q08 2Q08 1Q08 Net interest income Net fee-, commision and other operating income Net income from financial investments Total net income Total costs Result before losses and write-downs Net losses and write-downs Profit before tax Return on equity capital % 9.18 % 5.98 % % 3.62 % Cost/income % % % % % 9

10 Quarterly Summary Profit and loss account figures (Amounts in NOK million) The reduction in net interest 1Q09 4Q08 3Q08 2Q08 1Q08 income is due to Net interest income reduced funding effect Net fee-, commision and from the bank's equity other operating income due to decreased interest rates Net income from financial reduced deposit-margin investments which partly is compensated 33by -88 Total net income increased lending Total costs margin Result before losses and write-downs Net losses and write-downs Profit before tax Return on equity capital % 9.18 % 5.98 % % 3.62 % Cost/income % % % % % 10

11 Group companies Profit before tax SpareBank 1 Finans Nord-Norge AS Sparebanken Factoring SpareBank 1 Nord-Norge Invest AS Eiendomsdrift AS EiendomsMegler 1 Nord-Norge AS BBL Eiendomsmegling AS 0 0 SpareBank 1 Nord-Norge Securities ASA Total

12 Results the Group In relation to the 1th quarter of 2008, the reasons for the change in the pre-tax result are as follows: Reduction in net interest income - NOK 6 mill. Reduction in net commission income - NOK 3 mill. Increase in income from financial investments Increase in other (non-interest) income Reduction in costs + NOK 156 mill. + NOK 15 mill. + NOK 11 mill. Increase in net losses - NOK 50 mill. Total + NOK 123 mill. 12

13 Very good underlying banking operations - (excl. SpareBank 1 Gruppen and financial investments) Group (Amounts in NOK million) 1Q09 4Q08 3Q08 2Q08 1Q08 4Q07 3Q07 Net interest income Net fee- and commission income Other operating income Total costs Income, core banking Net losses and write-downs Income, core banking after losses and write-downs

14 Top line growth Net interest income Net fee-, commision and other operating income Gross lending including Boligkreditt Income growth -1.9% 11.8% 1.5% Costs growth -4.3% 14

15 Net interest- and credit commission income - Group Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 NOK Million Perc.of aver.tot.ass % 3.00 % 2.00 % 1.00 % 0.00 % 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 NOK Million Perc.of aver.tot.ass % 2.03 % 2.08 % 2.15 % 2.06 % 2.10 % 2.31 % 2.21 % 1.88 % 15

16 Lending, Parent bank corporate market Loan volum corporate Loan contribution corporate NOK Interest contribution The interest margin is defined as the difference between the customer lending (deposit) interest rate and the Bank's average capital markets funding rate dec.06 mar.07 jun.07 sep.07 dec.07 mar.08 jun.08 sep.08 dec.08 mar.09 16

17 Lending, Parent bank retail market Loan volum retail banking Loan contribution retail banking NOK Interest contribution The interest margin is defined as the difference between the customer lending (deposit) interest rate and the Bank's average capital markets funding rate dec.06 mar.07 jun.07 sep.07 dec.07 mar.08 jun.08 sep.08 dec.08 mar.09 17

18 Customer deposits, Parent bank corporate market Deposit volum c orporate Deposit contribution corporate NOK Interest contribution The interest margin is defined as the difference between the customer lending (deposit) interest rate and the Bank's average capital markets funding rate dec.06 mar.07 jun.07 sep.07 dec.07 mar.08 jun.08 sep.08 dec.08 mar.09 18

19 Customer deposits, Parent bank retail market Deposit volum retail banking Deposit contribution retail banking NOK Interest contribution The interest margin is defined as the difference between the customer lending (deposit) interest rate and the Bank's average capital markets funding rate. dec.06 mar.07 jun.07 sep.07 dec.07 mar.08 jun.08 sep.08 dec.08 mar.09 19

20 Financial targets Capital adequacy ratio Core-capital coverage: 9 % or higher Total capital coverage: 12 % or higher Profitability ROE shall be comparable to the performance of competing banks in Norway. The targeted after-tax return is minimum 6 percentage points above the yield on long-term government bonds Effectiveness The targeted cost ratio is maximum 50% of income and shall be comparable to the level of competing banks in Norway Top-line growth The growth in interest contribution and provisions is targeted to be 2 percentage points above the growth in operating costs 20

21 Group operating costs NOK mill % 3.00 % 2.50 % 2.00 % 1.50 % 1.00 % 0.50 % 0.00 % 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 NOK Million Perc.of aver.tot.ass. 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 NOK Million Perc.of aver.tot.ass 1.65 % 1.68 % 1.67 % 1.66 % 1.70 % 1.64 % 1.60 % 1.58 % 1.51 % 21

22 Group operating costs (NOK Million) Change Wages and salaries Pension costs Social costs Total personnel costs Administration costs Total personnel- and general administration costs Depreciation and write-downs of fixed assets Operating costs buildings Other operating costs Total operating costs Total costs

23 Measures aimed at further improving profitability The Bank will now focus on the following main areas: Quality in all credit work to remain high Deposits the Bank s most important source of funding Additional sales focus on professional advisory services and the handling of customers Improved average interest margin for loans, especially within the corporate market Increased effectiveness Continuation/further development of cost-reducing measures Making specialist- and support functions more effective Changes in the Bank s distribution network, including reduced cash-related function 23

24 Key figures balance sheet (Amounts in NOK million) BALANCE SHEET Change Change % Total assets % Gross lending % Loans and advances to customers including % SpareBank 1 Boligkreditt Deposits from customers % 24

25 Good development of customer deposits throughout the global financial crisis Deposits from customers Volume according to markets Corp. 32 % Retail 52 % Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 Public 16 % Overall deposit coverage ratio as at : 67.0 % Growth (last 12 months); 9.6%, Corporate 2.8%, Retail 9.0 %, Public sector 28.9 % 25

26 Deposit growth households 12 % Househol ds 12 months gr owth 9 % 6 % 3 % 0 % Jan 06 Apr 06 Jul 06 Okt 06 Jan 07 Apr 07 Jul 07 Okt 07 Jan 08 Apr 08 juli 08 okt 08 jan.09 Norway, households SNN, retail clients Source: Statistisk Sentralbyrå, Pengemengden M2, 1.april 2009 og SNN Bare, 1.april

27 Deposit growth corporates 34 % Cor por ates 12 months gr owth 24 % 14 % 4 % -6 % Jan 06 Apr 06 Jul06 Okt 06 Jan 07 Apr 07 Jul07 Okt 07 Jan 08 Apr 08 juli08 okt 08 jan.09 Nor way, cor por at es SNN, cor por at e clien t s Source: Statistisk Sentralbyrå, Pengemengden M2, 1.april 2009 og SNN Bare, 1.april

28 Group lending portfolio according to markets Loans and advances to customers including SpareBank 1 Boligkreditt AS Volume according to markets Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 Corp/ Pub 33 % Retail incl. Boligkreditt 67 % Growth (last 12 months); 7.4 %, Corporate/Public 5.0%, Retail 8.6 % 28

29 Credit growth households 18 % Households 12 months grow th 15 % 12 % 9 % 6 % Jan 06 Apr 06 Jul 06 Okt 06 Jan 07 Apr 07 Jul 07 Okt 07 Jan 08 Apr 08 juli 08 okt 08 jan.09 Norway, households SNN, ret ail client s Source: Statistisk Sentralbyrå, Kredittindikatoren K2, 1.april 2009 og SNN Bare, 1.april

30 Credit growth corporates Cor por at es 12 mon t hs gr owt h 25 % 20 % 15 % 10 % 5 % 0 % Jan 06 Apr 06 Jul06 Okt 06 Jan 07 Apr 07 Jul07 Okt 07 Jan 08 Apr 08 juli08 Okt 08 jan.09 Nor way, cor por ates SNN, cor por ate cl i ents Source: Statistisk Sentralbyrå, Kredittindikatoren K2, 1.april 2009 og SNN Bare, 1.april

31 Credit area Quality Portfolio Migration, commitments in default and losses Measures 31

32 Portfolio The Group s corporate portfolio is well diversified. Exposure to certain sectors with historically large losses for the Bank was reduced last year. Fish farming Fishing industry Renting out of property An estimated 45 % of the portfolio is related to commercial rental, not renting out involving own property. The level of defaulted payments remains low. Increasing probability of default, but the level remains very low. 32

33 33 Group lending by sector

34 34 Portfolio exposure as of

35 Risk change The reduced volume within high- and mediumrisk corporate commitments is largely related to repayments of project finance loans, coupled with amended classification of housing co-operatives. 35

36 36 Risk change

37 Loan to value Retail market Lending portfolio retail market The retail portfolio consists mainly of mortgages NOK 6.3 bill is transferred to Boligkreditt 37

38 Losses and commitments in default During the last 3 years, the Bank has experienced low credit losses, against a background of a favorable economic situation. Exposure to certain sectors with historically large losses for the Bank has been significantly reduced last year. Fish farming Fishing industry The level of credit losses is expected to be affected in line with lower general economic growth. Commitments in default and commitments in certain sectors are monitored very closely. Property projects Property rentals Fishing vessels (whitefish) Housing co-operatives Extended review of the portfolio generally and of high-risk commitments in the 4th quarter of 2008 and first half of

39 Portfolio measures Review of lending portfolio Monitoring of certain selected sectors Property projects Property rentals Fishing vessels (whitefish) Housing co-operatives Further enhancement of competence for advisory officers Special further training days in the credit area Changed focus on quality; from the granting of credit to quality in the follow-up of commitments Dedicated regional officers for portfolio monitoring 39

40 Identification of problem commitments The retail banking market Assessment of 1,010 commitments in the retail banking sector Criteria: Indications of problems (repeated cases of default) Mortgages in housing co-operatives with large communal debt (mortgages in housing co-operatives established after 2000) Large retail banking customers (over NOK 5 million) (bridging finance, property projects etc.) Customers with new external collection remarks Customers in class I > NOK 200,000 in commitments Review of and action plan for vulnerable commitments 40

41 Identification of problem commitments The corporate market Assessment of 1,162 commitments Comprises 28 % of all customers 39 % of volume To be done in 3 sessions during the first half of the year Criteria 1st priority Indications of problems (e.g. repeated cases of default of short duration) Building loans/ project financing Commercial property for rental (value assessment in relation to rental income) High utilisation of overdraft facility High risk > NOK 200,000 < NOK 3 million Not many new commitments are identified as challenging today. Decided on strategy; action plan for settlement/payment/winding up, turnaround or monitoring. 41

42 Collective write-downs The basis for collective write-downs in the Group is as follows: 1. Loans to customers high risk 2. Loans to customers - negative migration 3. Loans to customers in sectors involving particular challenges, where it is deemed probable that loss events have occurred at sector level For Group 3, an assessment is done with regard to sectors in relation to historical losses, observations in the Group s portfolio, macrovariables and knowledge of the sector involved. Increase in collective write-downs in 2008 NOK 34 mill. Increase in collective write-downs in Q1/2009 NOK 15 mill. Conservative methodology Collective write-downs total 0,43 % of gross loans as at ( 0,40 % as at ). 42

43 Losses on loans and guarantees - Group Q % 1.20 % 1.00 % 0.80 % 0.60 % 0.40 % 0.20 % 0.00 % % Net losses Net losses, % of gross lending Q09 Individual write-downs for impaired value Collective write-downs imp. value Recoveries, previously confirmed losses Net losses Net losses, % of gross lending 0.86 % 0.45 % 0.16 % % 0.03 % 0.36 % 0.10 % 43

44 44 Securities

45 Income from financial investments (Amount s in NOK million) Dividends 0 8 Income from joint ventures 7 19 Gains/losses and net value changes on certificates and bonds 7-69 Gains/losses and net value changes on shares Gains/losses and net value changes on foreign exchange and fin. derivatives 17 9 Income from financial investments 68-88

46 Shares 1.q-09 1.q-08 Total div./gains/losses + 37 mill - 47 mill Of which; Hurtigruten Group (HRG) + 45 mill - 30 mill Helgeland SPB + 2 mill + 8 mill Nordito + 7 mill 0 mill Other portfolio - 17 mill * - 25 mill Net shares + 37 mill - 47 mill * Of which foreign exchange loss Tavrichesky 11 mill Reduced limits for share-market exposure has been adopted by the Board of Directors Market value Total share portfolio as at : Of which; Hurtigruten Group (HRG) Helgeland Sparebank Tavrichesky Portefølje SNN Invest Other shares 575 mill 102 mill 46 mill 85 mill 144 mill 198 mill

47 Interest-bearing securities portfolio as at Of the NOK 4,981 million total interest-bearing portfolio, reclassification of NOK 3,807 million was completed in the third quarter Without this reclassification, further unrealised losses on this portfolio amounting to NOK 212 million would have been charged to the profit and loss account for the second half of This unrealised loss would have been reduced to NOK 192 million for the first quarter of Previous write-downs of the reclassified portfolio of NOK 112 million will be amortised over the remaining life. NOK 18 million was booked as income in the second half of 2008, NOK 7 million in 1st quarter 09. Average maturity for reclassified portfolio as at ; about 2.5 years. The value of the reclassified portfolio has been assessed with regard to the need for any adjustment for permanent impairment in value. As at , such write-down, amounting to NOK 46 million, had been made on two of the Bank s investments. No further write-down has been made on this part of the portfolio during the first quarter of 2009.

48 Interest-bearing portfolio Industry, Norway 4,8 % Subord. debt, Norway 2,6 % ABS 0,5 % CDO 2,3 % CPPI 1,2 % Certificates 12,0 % Fin. sector, abroad 25,0 % Fin. sector, Norway 21,2 % Covered bonds 30,4 % Total portfolio: NOK 7,654 million, of which NOK 2,326 million consist of covered bonds Increased portfolio compared with previous periods mainly certificates and and covered bonds. This represents a build-up of increased liquitity reserves, coupled with bonds which can be used in the authorities swap scheme. Reduced willingness to take on risk, within the area. Re-investment and new investment shall be subject to very low or low risk.

49 Liquidity

50 Good development of customer deposits throughout the global financial crisis Deposits from customers Volume according to markets Corp. 32 % Retail 52 % Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 Public 16 % Overall deposit coverage ratio as at : 67.0 % Growth (last 12 months); 9.6%, Corporate 2.8%, Retail 9.0 %, Public sector 28.9 %

51 Satisfactory liquidity situation Liquidity prognosis 2009 (NOK mill) des.08 jan.09 feb.09 mar.09 apr.09 mai.09 jun.09 jul.09 aug.09 sep.09 okt.09 nov.09 des Assumptions: 7 % growth in lending and deposits The green line shows 30-days forward average trend. The blue line shows actual figures on a daily basis.

52 Satisfactory liquidity Status medio April 2009 NOK mill Deposits in Norges Bank Loan access in Norges Bank Short term liquidity investements Covered bonds ready for the authorities' swap scheme 911 Mortgages ready for use in the authorities' swap scheme 834 Funding due within 3 months 682 Funding due within 12 months 5.193

53 Ownership policy

54 Dividend policy SpareBank 1 Nord-Norge aims to produce profits which will provide the basis for offering a competitive rate of return on the Bank's PCC's. The level of dividend paid to PCC-holders will depend upon the annual profit made. The sum of the dividend paid and transfer made to the Dividend Equalisation Fund should reflect the PCC-holders share of the Bank's equity capital. As far as the split between the total cash dividend payment and transfer to the Dividend Equalisation Fund is concerned, the Bank will seek to give priority to achieving a high cash dividend share. When considering the split between these two elements, however, the Board of Directors will also take into consideration the Bank s equity capital situation. The bank will make transfers to/and from the Dividend Equalisation Fund in accordance with the level of profit for the year and currently applicable laws, rules and regulations.

55 PCC holder structure % largest PCC Holders 20 largest PCC Holders Holders residing in North Norway Foreign Holders 55

56 The 20 largest PCC holders as at Number of Share of total PCC Holders of PCCs PCC Capital Pareto Aksjer Norge % Pareto Aktiv % Frank Mohn AS % MP Pensjon % Tonsenhagen Forretningssentrum A/S % JPMorgan Chase Bank - client account % Framo Development AS % Mellon Bank - client account % Sparebankstiftelsen DnB NOR % Forsvarets Personellservice % Karl Ditlefsen % SpareBank 1 SR-Bank Finans % Trond Mohn % Citibank N.A % Sparebanken Rogaland Pensjonskasse % Lærdal Finans A/S % Olsen & Co s pensjonskasse % Troms Kraft Invest A/S % Terra Utbytte Verdipapirfond % State Street Bank and Trust % SUM % 56

57 Summary 1st quarter 2009 key figures Group Amounts in NOK million Change Change % PROFIT AND LOSS ACCOUNT Result before tax % BALANCE SHEET Total assets % Gross lending % Deposits from customers % KEY FIGURES Change Change % Capital adequacy 11.7% 11.7% 0.0% After-tax return on equity capital 13.5% 3.6% 9.9% Cost/income 50.1% 78.6% -28.5% Manyear Parent bank Result per PCC (Parent Bank)

58 58 Development features

59 North-Norway 3 counties and 88 municipalities Nordland: inhabitants Troms: inhabitants Finnmark: inhabitants North-Norway totally: inhabitants Employment in North-Norway Public sector 43 % (34 %) Private sector 26 % (33 %) Tourism 10 % ( 9 %) Marine sector 5 % ( 1 %) Industry 5 % (13 %) Misc. 1 % (10 %) 59

60 Nord-Norge is less affected by the economic downturn than the rest of Norway. Norway Nord-Norge Increase in the number of bankruptcies in the period 1Q08 1Q09 +79% +21% Increase in number of jobless from March 08 to March % +44% Unemployment December 2009 (estimate) 4.7% 3.9% Reason: Breakdown by sector Public sector 29.4% 39.5% Industry 9.5% 5.3% Business services 10.1% 5.6% 60

61 Contact information SpareBank 1 Nord-Norge Po. Box 6800 N-9298 Tromsø Norway For further information Chief Excecutive Officer, Hans Olav Karde Phone , mob , hans.olav.karde@snn.no Deputy Chief Excecutive Officer, Oddmund Åsen Phone , mob , oddmund.asen@snn.no Chief Financial Officer, Rolf Eigil Bygdnes Phone , mob , rolf.eigil.bygdnes@snn.no Internet Homepage: Hugin-Online: On Primary Capital Certificates: