annual report 2012 sg finans as

Transcription

1 headline annual report 2012 sg finans as

2 2 The board of directors in SG Finans AS From left: Jacques Bensen, Country Supervisor SGEF, Paris, Kaci Kullmann Five, Advisor public affairs, Bærum, Marie-Christine Ducholet, CEO, Société Générale Equipment Finance, Paris, Jean-Marc Mignerey, Independent Board Director and Carsten Thorne, CEO SG Finans AS.* * Tommy Pedersen, Independent Board Director, CEO Augustinus Fonden, Denmark and Kjell Vegard Opheim, Employee representative, were not present at the photo session.

3 3 contents SUMMARY 5 Stronger business 5 Key figures 6 REPORT OF THE BOARD OF DIRECTORS 7 The company 8 Activities 8 Company development 8 Market conditions 9 Financial result 9 Corporate governance 10 Risk management 11 Organisation 11 Future prospects 12 ORGANISAtion 13 Vision and values 13 Brands and image 13 SG Finans AS organisation and management 13 Societe Generale Equipment Finance SG Finans Norway 15 SG Finans Denmark 16 SG Finans Sweden 17 ANNUAL ACCOUNTS 19 Profit and loss account 19 Balance sheet/assets 20 Liability and equity 21 Cash flow statement 22 Statement of changes in equity 23 Notes 24 Auditor s report and statement from the control committee 57 EMPLOYEE REPRESENTATIVES AND MANAGEMENT 58 ADDRESSES 59

4 4 "Our financial performances make SG Finans still one of the three largest contributors to the consolidated result of Societe Generale Equipment Finance (SGEF), Europe's leader in equipment financing." Carsten Thorne CEO SG Finans AS

5 summary 5 STRONGER BUSINESS Coverage of liquidity and long-term capital level requirements and priority of customer relations SG Finans consolidated in 2012 its position as a leading finance company in Scandinavia. The total result for the overall operations of NOK 431,7 million, one of the best since 2005, is very satisfactory in light of a year of instability and unpredictability in the markets. We both increased our revenues in 2012, and also developed other revenue streams in addition to the net interest margin. In addition, we maintained good control of expenses and losses. For our Swedish operations, losses were higher than normal, but we observe a strong improvement in underlying earnings in the business in Sweden. The government s changes to the regulation of banking and finance in 2012 have led to stricter rules for the coverage of liquidity risk and increased capital levels. It has been of great importance for our business and has been a limiting factor for the development of the company s loan portfolio. Liquidity and capital becoming scarce, SG Finans, as other financial institutions, had to prioritise strongly the clients and partners the company wanted to continue financing. The company s core business however remains unchanged. We will continue to work, with our local presence and European network, to meet Nordic businesses requirements for capital intensive equipment, funding and administrative services by offering flexible financial solutions. key to the continued development of the company and will have a high priority in all countries. Total new sales in 2012 were slightly up compared to We have in 2012 maintained our position as the market leader in equipment and factoring in Norway, and we have made good progress in our Danish operations. For Sweden s part, 2012 was a year marked by a necessary reduction in the total lending portfolio. For Scandinavia, 2012 was all in all a very satisfactory year. I want to thank our customers and partners for the confidence they have placed in us and look forward with optimism to the future good relationship that can contribute to the good development for the Nordic industry. Carsten Thorne CEO SG Finans AS On this basis, it is gratifying that our customer satisfaction surveys conducted in 2012 have shown that we have strengthened our reputation as a predictable and reliable partner for our customers and supplier partners. Cooperation with major capital goods suppliers are also undoubtedly the

6 6 KEY FIGURES Amounts in NOK thousands Profit & Loss Net operating income Operating expenses Operating profit before losses Losses on loans Net profit before tax Loans outstanding NORWAY Equipment Transport Factoring Others Total Norway DENMARK / SWEDEN Equipment Denmark Equipment Sweden Total Denmark and Sweden Total loans Risk weighted assets Total regulatory capital Capital adequacy ratio 10,75 % 10,73 %

7 REPORT OF THE BOARD OF DIRECTORS 7 REPORT OF THE BOARD OF DIRECTORS Going into 2012, attention was particularly drawn to regulatory changes for banks and financial institutions. For SG Finans AS, mainly increased regulatory requirements for coverage of liquidity risk and increased capital ratio have had immediate impact. The changes in capital markets and the banks and investors risk appetite lead together with the strengthened regulatory requirements, to restricted access to liquidity and capital at the beginning of the year. Liquidity and capital thus became limitary factors for the development of the company s portfolio of funded assets. Liquidity and capital becoming scarce, SG Finans AS as other financial institutions, had to prioritise strongly the clients and partners the company wanted to continue financing. Given the prevailing circumstances at the start of 2012, the company adapted its strategy and risk appetite in some channels. Among others, we have in 2012 been more restrictive to financing of equipment through intermediaries. Concurrently, a tight and efficient management of the balance sheet has been necessary. An important element in the strategy was to lift off parts of existing funded assets, to ensure we could maintain our financing capacity for new business. This has been achieved among other through the sale of individual contracts and parts of the portfolio, thereby ensuring that SG Finans AS still maintains its strong position as an important and long-term partner for Scandinavian businesses. After two years with lower volumes, we saw in 2011 an increase in demand for new financing in Scandinavia. The level of demand for new financing is maintained largely at the same level through 2012, with growth in some segments. The total volume of new financing in Scandinavia grew by 0,6 %. Also in 2012, the growth was relatively speaking strongest in Denmark, with a growth of 14,4% compared to the year before, while the nominal amount of new lending to customers is still highest in Norway. Totally, the company established new financing for slightly above NOK 9,9 billion. Gross lending dropped by 4,7 % from the previous year, from NOK 30,8 billion to NOK 29,3 billion. This must be seen in connection with the measures implemented as part of the company s management of the balance-sheet; with the objective to maintain the company s capacity to finance existing and new clients and partners. The company thus maintains its position as market leader in Norway and it is a strong contributor to the financing of businesses in both Denmark and Sweden. SG Finans AS has maintained its strategy to develop and keep long-term relationships to customers and partners in the local market. In addition to a tight management of liquidity needs and capital consumption, control and management of operating expenses has been a central area. In this respect 2012 is marked by strong prioritisation on the income side and the cost side as well. During 2012, SG Finans has implemented several measures to increase efficiency and optimisation with the objective to adjust the cost side in line with the evolution in funded assets. This can be seen as a reduction in operating expenses, notably other operating expenses. During the year, the number of staff has been reduced with 15 staff. The reduction in number of staff comes as a result of increased efficiencies in operations and internal support processes. The Norwegian labour market has in 2012 been in a particular situation compared to the rest of Europe, and also Scandinavia. With very low unemployment

8 8 REPORT OF THE BOARD OF DIRECTORS and a tight labour market, the competition for highly skilled staff has still been strong. The organisation has managed the situation in an effective manner. A strong focus on sales and market activities characterises the organisation, and thanks to our skilled and motivated employees in addition to the good relations with our customers and partners, the company delivered in 2012 again very good financial results. (All the following figures are for SG Finans AS). The company s operating profit before tax came to MNOK 431,6. Total loans outstanding amounted at year-end to NOK 29,3 billion. This represents a drop in funded assets of 4,7% during the year. THE COMPANY SG Finans AS is a wholly owned company of the Société Générale Group. The company is part of the Société Générale Equipment Finance business line which is Europe s leading player for equipment leasing. Factoring is an important focus area. Société Générale is a leading financial group in the Euro zone. The head office is located in Paris. At year-end there were employees in the Société Générale Group. ACTIVITIES With a local presence and a European network, SG Finans AS aims to satisfy the requirements of Scandinavian trade and industry for capitalintensive equipment, liquidity and administrative services. The company is a Scandinavian finance company, and its business is carried out through a broad, Scandinavian distribution network with 16 regional and sales offices in Norway, 5 offices in Sweden and 2 in Denmark. The company s head office is located in Lysaker. At the end of the year the company had 358 employees. This represents a net reduction of 15 employees during the year. The activities of SG Finans do not pollute the external environment; however, some leasing objects may cause pollution when they are used. SG Finans is reporting a number of indicators for the company s environmental impact, which are part of Société Générale Group s sustainability reporting. The report is available on the Société Générale Group s web pages. COMPANY DEVELOPMENT 2012 has been another eventful year largely marked by the economic situation of the countries in southern Europe. This has also impacted the situation in Scandinavia. After several years of continuous growth in total loans as well as number of financed contracts, the development turned in After a growth in 2011, total loans outstanding in Scandinavia dropped by 4,7% during This is a result of management of funded assets, as the company has reduced some portfolios of financing, combined with a tightening of our credit and pricing policies. SG Finans AS established new financing for a total of NOK 9,9 billion in 2012, which is an increase of 0,6% compared to Credit margins on new financing have increased since 2009, and in 2012 the margins on new lending are slightly up compared to The overall level of margins in 2012 is somewhat below the levels in 2009 and 2010 though. Also in 2012, the volumes of new lending has grown relatively speaking most in Denmark, with a growth of 14,4% compared to At the same time, the company has decided to reduce the growth in new lending in Sweden, after several years of strong growth, and in 2012 the volume of new lending in Sweden dropped by 12% compared to At the end of 2012, the activities in Denmark and Sweden represent 22,6 % of total loans outstanding, while the branches in Denmark and Sweden establish more than one third of new financing in Scandinavia also in SG Finans maintains its position as the market leader in equipment finance in Norway, and maintains its market shares in both Sweden and Denmark at a satisfactory level. The company is also market leader in ordinary factoring in Norway. It is our objective to continually develop products and systems within the areas of factoring and equipment leasing. As an important part of the company s focus on relationship-strengthening activities, a number of market initiatives and events were carried out also in The primary objective of these activities has been to strengthen relations with the company s most important customers and partners. A goal for the future is to continue developing the company s Scandinavian corporate culture and further strengthen its brands, SG Equipment Finance and SG Factoring.

9 REPORT OF THE BOARD OF DIRECTORS 9 MARKET CONDITIONS For several years the Norwegian finance companies have enjoyed favourable growth as a result of the strong development in the Norwegian economy, but the development has since 2008 turned further to the change in the business cycle. This has also impacted SG Finans. Scarcity of capital and increasing prices on liquidity has led to changes in the pricing of credit. At the start of 2013 the economic prospects are generally better for Scandinavian business compared to southern Europe, but the development is still uncertain and dependent on a positive development for the southern part of Europe. SG Finans enjoys a very strong market position for its products in the Norwegian market. Based on figures provided by the Association of Norwegian Finance Houses as of , the company s market shares are as follows: Equipment leasing 27,5 % Factoring (ordinary) 39,2 % SG Finans thereby retains its position as a market leader in Norway within both product areas. The company has also maintained its position in Sweden and Denmark at a satisfactory level, and SG Finans is thus one of Scandinavia s leading finance companies. FINANCIAL RESULTS For 2012 the operating profit before taxes for SG Finans AS was MNOK 431,6 compared to MNOK 412,8 in The company s net banking income was in 2012 MNOK 1.131,3 compared to MNOK 1.128,4 in The increase in income is mainly linked to higher other income, in particular sales gains on terminated contracts and sale of financed equipment. The net interest margin is somewhat lower in 2012 compared to the year before. This is due to increased funding costs and adaptation of maturities on funding compared to lending. The operating expenses amounted to MNOK 530,7 compared to MNOK 541,2 the previous year. Staff expenses represent approximately 61 % of the total expenses in 2012, which is slightly above the level of previous year. This must be seen in connection with the measures implemented to increase efficiency and to adapt the cost side with the development of the outstanding loans. This has lead to a reduction of other operating expenses of 12,6%. Staff expenses increase by 6,5% as a result of increase in pension liabilities and an increase in projectrelated bonuses to staff. Also in 2012 the number of bankruptcies has been relatively high. In particular we have observed a negative development in number of bankruptcies and credit losses in Sweden in the second half of This has lead to a total cost of risk above long term average, and total cost of risk is in 2012 approximately at the same level as in At the end of 2012, total cost of risk amounted to MNOK 169,0. This is a reduction of MNOK 5,5 or 3,2% from 2011, when cost or risk amounted to MNOK 174,5. Measured against average funded assets the cost of risk was at 0,63% compared to 0,65% in This is a slight improvement in the cost of risk, but still remains at a higher level compared to historic cost of risk and the company s targets for the risk profile of the portfolios. Total write-downs for credit risk was at year end MNOK 199,2, corresponding to 0,76 % of total loans outstanding. This is a reduction of MNOK 37,5 during the year. In comparison, at the end of 2011, total write-downs for credit risk represented MNOK 236,7, or 0,77 % of total loans outstanding. Gross doubtful loans were MNOK 630,6 compared to MNOK 751,9 the previous year. This represents 2,4 % of total loans outstanding, which is the same level as in Because of the continued high number of bankruptcies, the uncertainty in relation to future losses must still be assessed as larger than normal. Write-downs for credit losses are done based on individual engagements, and the company has not made write-downs for groups of assets. This is in line with the business line Société Générale Equipment Finance s principles and guidelines. The Board assesses that the writedowns for credit losses represent a satisfactory estimate of expected losses in the portfolio by year end In the second half of 2012, the development of loan losses has been high, but under control, in Sweden. At the start of 2013 we see signs of improvement. We therefore expect lower cost of risk in 2013 than the previous three years, but still at a higher level than our long-term targets for average cost of risk over a 5 years period. Assets that are repossessed as a result of defaulted leasing and loan contracts amounted at year end to MNOK 67,8 from total 268 contracts. This is a reduction of MNOK 40,9 during the year compared

10 10 REPORT OF THE BOARD OF DIRECTORS to MNOK 108,7 from total 376 contracts at the end of Turnover during the year from the sale of repossessed assets amounts to MNOK 353,5 which is a reduction from 2011 when the turnover was MNOK 409,7. The company has achieved acceptable prices on sale of repossessed assets in 2012, and the market for second-hand equipment has generally improved compared to the previous year. Total loans outstanding has decreased from NOK 30,8 billion to NOK 29,3 billion. This is a reduction of 4,7 % during the year. The branches in Sweden and Denmark represented 22,6 % of total loans at the end of the year. This is a small decrease of their relative share since the end of 2011, when Denmark and Sweden represented 24 % of total loans outstanding. The company s equity was MNOK 3.453,1 including the net result of the year at end Regulatory capital for the calculation of the capital coverage amounted to MNOK 2.776,9 as of The net result of the year and expected dividend are deducted in the calculation of regulatory capital. The capital coverage by the year end 2012 was 10,75 %, which is at the same level as at the end of The capital base consists of core capital only. The company presented in 2009 its application to the regulator to use internal models for the calculation of the regulatory capital requirement for credit risk for a number of portfolios as well as the advanced method for the calculation of the regulatory capital requirement for operational risk. The application was extended to further portfolios in 2010 and it is not yet finally assessed by the regulator. SG Finans will in 2013 present updated models for the assessment of collateral and financed objects ( LGD models) based on recommendations from the regulatory authorities in France and Norway. The capital requirement and capital coverage for 2012 is calculated based on the Basel II capital directive s standard method for credit risk and the basic indicator approach for operational risk. Total risk-weighted assets were MNOK ,4 at the end of 2012, and the regulatory capital requirement for credit risk was MNOK 1.894,1. The regulatory capital requirement for operational risk was MNOK 173,2. The company does not take market risk and the regulatory capital requirement for market risk was zero. The total capital requirement was therefore MNOK 2.067,3. The capital coverage is satisfactory compared to regulatory minimum requirements and the company s internal requirements and guidelines for solidity and capital adequacy. As part of the company s capital management procedures, stress testing of all relevant risks is performed and the change in the capital requirement under various stress scenarios is evaluated. The capital adequacy is considered satisfactory also considering the results of the performed stress tests. The capital buffer after performed stress tests and additional capital requirement (pillar 2 requirements) is MNOK 461,3 before allocation of the net result of the year, compared to MNOK 496,9 at the end of The net income after tax is MNOK 255,0 for the company. The Board proposes to pay a dividend of TNOK 420 based on the 2012 financial statements. The Board considers that the financial statements give a true and fair view of the company s financial position. Other than what is stated in the accounts there have not been any events after balance-sheet date that may have any significant impact on the financial statements. Based on the results of the year, the Board concludes that there are grounds for continuing operations, and this forms the basis for the preparation of the financial statements for CORPORATE GOVERNANCE SG Finans is a wholly owned subsidiary of Société Générale Group, and is subject to comprehensive reporting to and controls from the parent company. Furthermore, the company has established a number of functions to ensure good monitoring and control of the company development, use of resources and risk taking. The company takes credit risk through lending and financing of equipment, while other types of risk are hedged to the extent this is possible and practicable. The company s principles and guidelines for internal governance and internal control are based on a.o. CEBS guidelines and recommendations. It is established formal committees and procedures for monitoring and control, including control of credit risk, financial risks, operational risks as well as for internal control, compliance, antimoney laundering and audit. SG Finans thus complies with the internal requirements defined by the parent company, and the company also participates in relevant external forums to contribute to the development of rules and regulations for financing companies.

11 REPORT OF THE BOARD OF DIRECTORS 11 RISK MANAGEMENT The company s principles for risk management have been presented in more detail in note 17 Risk management. Since the second half of 2007 capital markets have been marked by financial crisis, lack of confidence and a sharp reduction in liquidity in the interbank market followed by an increase in funding costs and general increase in credit spreads. In 2012 interbank markets have been marked by uncertainty linked to the economic development of some EU countries. SG Finans AS gets its funding from the parent company and we have in the entire period maintained a close contact with our parent. In total we can conclude that the company has had access to satisfactory levels of funding and liquidity. As part of the group s measures to adapt to new capital regulation, SG Finans has adjusted the total volume of financed objects. This has lead to a reduction in outstanding loans during Another central element in the company s management of the financial crisis has been the possibility to incorporate increased cost of funding in the pricing of financing to clients. Furthermore, the company has in 2012 continuously adapted the maturity profile of funding to match maturities of lending in order to ensure stable long term funding and long term coverage of liquidity requirements. The company is subject to internal and external capital adequacy requirements. The internal guidelines compel the company always to comply with internal requirements which are stricter than the regulatory minimum requirements. As part of the company s policy and procedures for capital management the company regularly performs assessment of the capital situation and capital adequacy in given stress tests for various scenarios and relevant types of risk. This has been carried out in accordance with the regulatory requirements for internal processes for the assessment of capital adequacy (Internal Capital Adequacy Assessment Process or ICAAP). The analysis demonstrates that the company s capital adequacy and solidity is satisfactory in respect of expected future growth and also following the stress tests that have been performed. In 2007 and 2008 the company has implemented the central elements in Société Générale group s methods and procedures for operational risk management. As a part of this, the company has implemented monitoring and reporting of key risk indicators for operational risk and scenario analysis of different stress scenarios, in addition to the existing event and loss reporting and the group s framework for self-assessment of risks and controls. On an overall level, the Board assesses the level of operational risk losses in the company in 2012 as satisfactory. SG Finans has implemented the Société Générale group s requirements for the use of the advanced measurement approach (AMA according to the Basel II capital directive) for the calculation of the capital requirement for operational risk. The company has applied for the approval from regulatory authorities to use the AMA method in the calculation of capital adequacy and reporting to regulatory authorities and the public. The application is under assessment by Finanstilsynet. As part of Société Générale group, the company has worked in line with the group s principles and framework for internal control and corporate governance. Assessments are made of relevant risks and the efficiency of internal controls. The results of these assessments are considered satisfactory. ORGANISATION At the end of the year the company had 358 employees, whereof 285 in the Norwegian operations, 43 in Sweden and 30 in Denmark. The number of staff is thus reduced with 15 during the year. The reduction in number of staff comes from in-creased efficiency in operations and internal support processes. In 2012, the company has recruited 16 new employees. The Board welcomes all new employees joining SG Finans in SG Finans focuses on ensuring that its employees experience equal opportunities, and work designed to achieve this has been incorporated into the company s strategy plan. Furthermore, the company has established functions and procedures to prevent any form of discrimination. This includes the Remuneration and Recruitment Committee and the Work Environment Committee, whose members are equally staff representatives and company management, anonymous whistle-blower protection procedures for employees, periodic staff appraisal reviews as well as staff satisfaction surveys where any potential discrimination shall be identified and avoided. As an IA-company ( Including working environment ) SG Finans AS has in the plans for the company s IA-activities defined measures to avoid discrimination of employees with disabilities in new recruitments. The company facilities are adapted

12 12 REPORT OF THE BOARD OF DIRECTORS to employees with disabilities. Based on the above functions and measures the company procedures related to the law against discrimination and availability are considered satisfactory. ( diskriminerings- og tilgjengelighetsloven ) high degree of competence and experience and the organisation has both the capacity and will for adjustment and change. After a period of tight labour market and strong demand for employees with expertise in the finance sector, the turnover in 2012 is at a satisfactory level. The rate of absence due to illness is also slightly up compared to 2011, and is at an acceptable level with in total absence days. This represents 4,17 % absence. The Board is not aware of any personal injuries occurred at work during The working environment at SG Finans is considered to be good. This was also confirmed in the company s staff satisfaction survey. The company has a Work Environment Committee and a Cooperation Committee. Legally required meetings have been held. Various cultural and expertise-building measures have been conducted in 2012, both at local (regional and branch) and central level. Emphasis has also been placed on continuing to build up a common Scandinavian culture while simultaneously promoting the advantages of being a part of one of Europe s largest banking groups to the company s employees. Being part of Société Générale group is also actively marketed in recruitment of new staff. Marie-Christine Ducholet Chairman Karin Cecile Kullmann Five Lysaker 7 March 2013 Tommy Pedersen Jacques Bensen FUTURE PROSPECTS The situation for the countries in southern Europe show signs of improvement at the end of 2012, but the uncertainty is still large. At the start of 2013 the economic outlook for Scandinavia is better than for the countries in southern Europe. Still we must expect high number of bankruptcies and thus credit losses above long-term average in For SG Finans AS the development in 2013 will largely follow the same development as the rest of the business. In particular the development of interest rates and funding costs for banks will be important to stimulate business investments and demand for financing of equipment. It is important for SG Finans that our clients and partners experience that the company has demonstrated willingness and ability to be a long-term partner for financing of capital goods and equipment. Our focus will continue to be to maintain and develop the good relations to our existing clients and partners and to develop new long-term relations. The organisation is well prepared to meet the challenges. The company has employees with a Jean-Marc Mignerey Kjell Vegard Opheim Carsten Thorne CEO

13 organisation 13 organisation SG Finans is a wholly owned company at the Société Générale Group. The company operates through fifteen regional offices in Norway, five in Sweden and two in Denmark. The companys head office is in Lysaker (near Oslo) and the total number of employees end 2012 is 358. SG Finans is a part of Société Générale Equipment Finance, a leading player in equipment leasing in Europe. Société Général has employees and is represented in 77 countries. Vision and Values of SG Finans SG Finans wants to be seen as a leading Scandinavian player who creates values through teamwork and knowledge. The vision is based on the following core values: This vision is based on the following core values: Sales and relationshipfocus Knowledge Enthusiasm and team spirit Brands and image The core activities are equipment finance (leasing) and factoring. Brands are SG Equipment Finance and SG Factoring. At the company level the brand is SG Equipment Finance. SG Finans Organisation and management The business activities of SG Finans are organized into regions and branch officies with regions in Sweden and Denmark. Key corporate functions are: Credit, Finance, IT and HR together with the Departments and Sales- & Business Development Equipment (SOFE) and Factoring (SOFF). CEO Carsten Thorne Group coordinator Kjell Brevik Deputy to the CEO Hans Einar Herzog Credit Armand Taillandier HR/Personal Maria Ulla Credit Adviser Odd Sørensen Internal audit Carl Gunnar Lunde Finance Hans Einar Herzog IT Sverre Edin Region Oslo/Akershus Finn Mathisen/Jan Juliussen SOFE Finn Mathisen SOFF Jan Juliussen Sweden Anders Holmgren Region South Arne Hodnefjell Denmark Lars Rasmussen Region East Finn Kristiansen Region West Espen Brochmann Region North Stig-Are Eriksen

14 14 organisation Societe Generale Equipment Finance 2012 We, Societe Generale Equipment Finance, a European market leader, n 3 worldwide, have demonstrated that we can deliver high added value services, optimize use of scarce resources and achieve good business results in a complex environment. Leaseurope* has not yet released the European market figures for 2012 but, according to local European associations first impressions, the overall market trend shows a stabilisation or a slight decrease. The European leasing environment is complex, while some countries are performing well, others are facing difficulties. The situation of the equipment finance sector is also mixed outside Europe with good performance registered in the United States and Brazil, and a slow-down noticed in China. In this context, we, Societe Generale Equipment Finance, have been strengthening our leading position in our key markets thanks to the sound relationships built over the years with partners, while at the same time we ve been adapting our business mix and operating model and increasing external funding. In 2012, we generated a NBV of EUR 7,2bn, evenly spread across our main industry sectors, and the value of our end-managed assets reached more than EUR 22,3bn. We were recognised as the European Lessor of the Year and SME Champion of the Year at the Leasing Life Awards in November, in Barcelona, Spain. Our subsidiary, PEMA, which provides full-service truck and trailer rental in 9 European countries had a very successful year. With a fleet of more than 17,000 vehicles at the end of 2012, PEMA is one of Europe s leading commercial-vehicle rental companies. High demand in this sector resulted in a rise of about 10% in PEMA s number of vehicles rented at the end of the year. This corresponds to an all-time peak of 92% in the rental rate. In 2013, Societe Generale Equipment Finance, will continue to adapt its business activity to the new environment which will continue to be impacted by the reinforcement of regulations and financial constraints. We are a part of Societe Generale s Specialised Financial Services & Insurance division which brings together specialised businesses to meet the specific needs of corporate clients and individuals. The division s businesses offer life and non-life insurance products (Societe Generale Insurance), financing solutions for sales and professional equipment (Societe Generale Equipment Finance), a wide range of consumer credit solutions (Societe Generale Consumer Finance) and car fleet financing and management solutions (ALD Automotive). Present in 45 countries, the Specialized Financial Services & Insurance division is supported by the expertise of 27,000 employees. Societe Generale is the fifth largest European bank in terms of market capitalisation (EUR 22.1bn end 2012). The Group employs 160,000 people in 77 countries and reported in 2012 a Group Net Income of 774 MEUR. Societe Generale successfully continued with its transformation process in 2012, achieving all the objectives set at the beginning of the year. At the same time as carrying out a proactive portfolio disposal programme and business refocusing, the Group succeeded, in a turbulent economic environment, in maintaining a good level of activity in order to serve its customers and finance the economy. The Bank also significantly improved its financial solidity both in terms of capital and liquidity. On the strength of this momentum, the Group has secured its Basel 3 Core Tier 1 capital target of 9%-9.5% at end-2013 and is approaching this year of economic and regulatory transition with confidence. Societe Generale group is rated A2 by Moody s, A by S&P and A+ by Fitch New Business Volumes per geography (%) France ** 30% Germany 26% 7% Italy 7% 15% 15% BRUC s * Scandinavia 15% Others Benelux Spain 5% 10% Alps & 12% SEE 16% Poland UK 30% 27% Czech Rep. & Slovakia *Leaseurope: European Federation of Leasing Company Associations market *BRUC s : Brazil, Russia, United States, China

15 organisation 15 SG finans Norway The Norwegian business in SG Finans AS is the backbone of the company. The company holds the leading market position in Norway in the product area Equipment Leasing, and the same applies to the company s market position in Ordinary Factoring. The total result for the Norwegian business in 2012 was one of the best since Cooperation with Norwegian and International vendors is still an important pillar for the company s further development. Customer satisfaction and supplier satisfaction is measured regularly and the company achieved very high scores in both areas during Leasing On the leasing product we have had, throughout the year, a strong focus on the NBI and the development of other revenue items than just the margin. In addition to good control of expenses and losses, Finn Mathisen these measures have contributed to increased revenues for the business. We also noted growth in the number of contracts and customers. The company sales staff has been in charge of direct customer relationships. This, in addition to a focus on local presence, is a major cause of the company s solid market position in Norway. We have also in 2012 invested heavily in increasing the use of vendor financing facilities based on the latest technology. and transportation, while agriculture in the last three years has been stable. We also noted growth in the number of contracts and customers throughout the year. The company s market share of lease financing in Norway for 2012 is 27.5%. That means the company has maintained its leading market position. Factoring SG Finans has long been the leading factoring company in the Ordinary Factoring segment in Norway with market shares beyond 40%. The reason lies in several factors: a decentralized Jan Juliussen organization where both marketing and operations are located in five regions that gives us a special insight into market conditions, and the fact that we also have centralized specialists to support the regions and customers. In addition we have excellent IT systems with web solutions, E-print and E-invoice amongst the other wide range of products. Since all factoring companies in the Société Générale Group have introduced the same factoring system, we can take advantage of the combined experience gained in the various countries. The competence of the regional factoring environments is essential to being a leader in the Norwegian factoring market. We have therefore developed a training concept (SG Factoring Academy) which will help to maintain competence in relation to the needs and requirements for the product area. From left: Finn Kristiansen, Stig-Are Eriksen, Arne Hodnefjell and Espen Brochmann. The market for leasing in Norway has since 2011 continued to grow. This applies to both construction Factoring Operations in SG Finance have over time been of great importance for the company. The development of systems, in addition to the experience of the Norwegian operations, will provide a good basis to expand factoring activities to SG branches in Sweden and Denmark.

16 16 organisation sg finans denmark 2012 was the best ever for our company in Denmark. Once again we showed positive development in the new issue of leases, increased further our market share and delivered strong growth in earnings. Growth rates in Denmark were modest in 2012, when the economy was still characterized by uncertainty and skepticism, which resulted in lower investment levels in businesses. The market for commercial leasing in SG Finans focus areas increased by approx. 2% compared to With growth in the new issue of leases of more than 10% in the same period, we increased our market share further in SG Finans Denmark has, during and after the crisis, maintained its focus on growth while establishing and developing strong relationships with suppliers. For 2012, the Group recorded sales growth that was the highest level in the branches history. The number of bankruptcies in Denmark remained in 2012 at the same high level as in 2011, when about. 5,000 companies had to close. Costs of losses and provisions for customers were reduced in 2012 and are at a satisfactory level. The increased business in SG Finans Denmark is based on our local presence and expertise, combined with a strong organizational and financial backing. Supplier, customer and employee satisfaction surveys in 2012 have been very positive and thus give a solid basis for further development. Lars Rasmussen SG Finans Denmark continues to be further strengthened and we will, by each employee living out our company core values - Sales and Relationship Focus, Enthusiasm and Team spirit, competence and knowledge - work to be perceived as the most attractive leasing company for customers suppliers and employees. On the basis of the increased business volume, good cost control and satisfactory loss development in Denmark, we are satisfied with our result, which is 65% higher than in 2011 and thus, again, the best ever result in SG Finans Denmark. Activities in Denmark have delivered a good return in line with the average result for SG Finans AS which is very satisfying. Our mission is to create value through collaboration and by offering a high level of service. We offer financing through dealers of fixed assets to businesses, where our financing solutions lead to increased sales from the supplier, but also to the wider business community s financing of machinery and fixed assets. It is therefore crucial that our partners and customers have a good experience when dealing with us and our services.

17 organisation 17 SG finans sweden In 2012, the total Swedish market grew by 21% and amounted to over SEK 51 billion. This is the highest figure in the last ten years with the exception of 2008 which was at the same level. Most of the increase came in Q4 (+38%) and mainly within the heavy trucks / trailers segment and production equipment segment and licenses. An increasing uncertainty and thus reduced investment appetite was noted at the end of the year. The number of bankruptcies increased by 7% compared with Due to the economic turmoil in the Euro countries and the introduction of new regulations such as Basel III, a decision was taken in the summer of 2012 to cut down on the rate of growth for 2013, and temporarily reduce the volume of business. Our total market share felt from 7% to 6% in An adaptation of business to these new conditions was carried out in the second half, which resulted in some cost savings, settlement where possible of any collaborations with low yields and a strong focus on increasing margins by including a higher portion of other income. Efforts to achieve a better credit quality in the loan portfolio have continued, and a number of older exposures with very uncertain values have been written down. Some major fraud suffered in the financial markets, also added to our losses. Loan losses, net of the write-downs of older commitment amounts were at a level slightly higher than 2011, which was in line with the increased number of bankruptcies in Sweden in Despite the special circumstances that have been in force since mid-2012, we have successfully managed to establish a number of new partnerships and develop existing ones. Staff turnover is a result of our conversion and was slightly higher this year than previously. Great emphasis is placed on continuing to develop our employees and leadership. Employee surveys, Supplier and Customer Surveys also show very good results in 2012, which can be explained by our local presence, talented employees and high activity levels. The work we have done in recent years, and especially towards the end of 2012, means that we are now strong and well-equipped to, despite financial turmoil in our world, deliver business value to our customers and suppliers and a good return to our shareholders. Anders Holmgren

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19 ANNUAL ACCOUNTS 19 PROFIT AND LOSS ACCOUNT Amounts in NOK thousands NOTES Total interest and similar income Total interest and similar expenses Net interest margin Total commission and fees income Total commission and fees expenses Net fees income Net gain on financial instruments at fair value Net change in value and gains on foreign currency Income on other activity Net banking income Payroll, fees and other staff costs 6, Other operating expenses Gross operating proft Net cost of risk Operating profit Taxes Profit for the year Other comprehensive income Exchange differences on translation of foreign operations Other comprehensive income for the year Attributable to: Equity holder of the parent Total comprehensive income of the year

20 20 ANNUAL ACCOUNTS Balance sheet Amounts in NOK thousands NOTES Assets Cash and deposits with central banks 7 6 Deposits with financial institutions 13,21, Loans to financial institutions 21,22, Financial derivatives 10, Loans to customers Repayment loans Factoring receivables Factoring loans Financial lease agreements 10, Total loans before allowances Allowances on doubtful loans 8, Net loans to customers 18,21,22, Repossessed assets Shares and primary capital certificates Deferred tax assset Other intangible assets Machinery, tools and equipment, means of transport Other assets Prepayments and accrued income Total assets