INTERIM REPORT Q1 2015

Transcription

1 INTERIM REPORT Q1 2015

2 First quarter 2015 Improved pre-tax profit: NOK 407 million, NOK 370 million excl. basis swaps (NOK 360 million excl. Nets) Good return on equity of 13.6%, 12.4% excl. basis swaps (11.9% excl. Nets) Net interest 1.63% (1.67%) Profit improvement in Eiendomsmegler Vest, 6,3 MNOK before tax (-1,5 MNOK) Reduced costs: NOK 356 million (NOK 364 million), cost ratio excl. basis swaps 46.5% (47.2% excl. Nets) Moderate write-downs on loans and guarantees, NOK 39 million (NOK 47 million) Profit per equity certificate: NOK 1.88, NOK 1.72 excl. basis swaps (NOK 1.59 excl. Nets) Book equity per equity certificate: NOK 56.5 (NOK 54.4) Capital accumulation according to plan, Core Tier 1 capital 12.3% (11.5%)* Main figures 1Q Q Pre-tax profit 407 MNOK 526 MNOK MNOK Profit per equitiy certificate 1,88 kr 2,66 kr 356 Net interest (annualised) 1,63 % 1,67 % 1,68 % Cost ratio 44,4 % 38,8 % 45,5 % Return on equity (annualised) 13,6 % 19,8 % 13,7 % Core Tier 1 12,3 % 11,5 % 12,2 % Core Tier 1 (IRB) 12,8 % 14,0 % 14,0 % The capital adequacy figure for the first quarter includes 80% of the profit for the period. First quarter 2014 was positively affected by re-evaluation of shares in Nets Holding AS of NOK 166 million. At commentary excl. Nets this one-off effect is excluded from the comparative figures. 2

3 Report for the first quarter 2014 Table 1: Key accounting figures NOKm Q Q Net interest income and credit commissions Commissions receivable and income from banking services Commissions payable and cost of banking services Net banking services Income from owner interests in group companies Net gain/(loss) on financial instruments Other operating income Net operating income Net operating income Salaries and general administration expenses Depreciation Other operating expenses Total operating expenses Profit before write-downs and tax Net gain on fixed assets Write-downs and losses on loans and guarantees Profit before tax Taxes Profit for the period First quarter 2015 Sparebanken Vest achieved a pre-tax profit of NOK 407 million (NOK 526 million) in the first quarter, and a return on equity of 13.6% and 12.4% excl. the effect of basis swaps (11.7% excl. Nets). The profit performance was positively affected by stable nominal net interest, lower costs, overall growth in line with targets and moderate losses. The Group s cost control is good and in line with targets. The total expenses amount to NOK 356 million in the first quarter 2015 compared with NOK 364 million in the first quarter Combined, associated companies and subsidiary Eiendomsmegler Vest contribute a share of profit of NOK 20.3 million (NOK 16.5 million) for the first quarter The Core Tier 1 capital ratio is 12.3% (11.5%) and Sparebanken Vest is on schedule with its capital plan for the period up until Net interest income in the first quarter amounted to NOK 586 million (NOK 566 million). The increase of NOK 20 million is the result of the falling NIBOR, implemented repricing of the deposit portfolios for both the retail and corporate markets, and higher volume. Reduced lending margins pull in the opposite direction. Net interest as a percentage of average assets under management was 1.63% (1.67%) for the first quarter seen in isolation. That is a reduction of 5 basis points compared with the fourth quarter The lending margins in the retail and corporate markets measured against the average 3-month NIBOR are 2.36 (2.54) and 3.09 (3.27), respectively, in the first quarter, a reduction of 18 basis points for both the retail and corporate markets compared with the corresponding period in Compared with the fourth quarter 2014, the lending margins in the retail and corporate markets have decreased by 4 and 9 basis points, respectively. This is due to a reduction of 23 basis points in the average NIBOR for the quarter, and because the customer interest rate in the retail and corporate markets is down by 27 and 32 basis points, respectively. This is due to the effect of repricing and because there is strong competition in the market. The deposit margins in the retail and corporate markets measured against the average 3-month NIBOR in the first quarter were (-0.76) and (-0.50) percentage points, respectively. That is an improvement of 29 and 44 basis points, respectively, compared with the corresponding period last year. Compared with the fourth quarter 2014, the deposit margins in the retail and corporate markets improved by 3

4 7 and 17 basis points, respectively. While NIBOR has fallen by 23 basis points, the customer interest rate in the retail market has improved by 30 basis points, which is the effect of repricing. In the corporate market, customer interest rates have improved by 40 basis points in relation to the fourth quarter Operating expenses in the first quarter 2015 amounted to NOK 356 million (NOK 364 million). The reduction of NOK 8 million is primarily due to payroll expenses being NOK 5 million lower than in the corresponding period last year. The number of full-time equivalents in the Group is 805 (830). That is 25 fewer full-time equivalents than in the corresponding period the year before. As announced in the third quarter 2014, the bank is in the process of reducing the number of branch offices to 44 and downsizing staff. Table 2: Number of full-time equivalents Quarterly Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Full-time equivalents Net commission income amounted to NOK 100 million (NOK 93 million) in the first quarter. The increase of NOK 7 million is mainly due to growth in commission income from the sale of insurance products, profit commission on insurance and card sales. Net commission income from savings and investments and charges from payment transfers is stable. Net income from financial instruments amounted to NOK 50 million (NOK 55 million excl. Nets). The stock market was strong in the first quarter, with a broad upturn in the Norwegian and European stock markets. The bank s shareholdings showed a positive increase in value of NOK 28 million in the quarter seen in isolation. The prices for basis swaps the bank uses to hedge the financing of covered bonds in foreign currency have increased, and the bank has recognised a gain of NOK 37 million in the first quarter. The gain must be expensed against the maturing of the covered bonds. Losses on certificates and bonds are ascribed to the widening of spreads for bonds and covered bonds. Table 3: Financial instruments NOKm Q Q Dividends Gain/loss(-) on commercial papers and bonds Gain/loss(-) on shares and securities Net gain/loss(-) on other financial instruments Net gain on financial instruments The contribution to profit from associated companies amounted to NOK 14 million (NOK 18 million), which breaks down as follows: Table 4: Associated companies NOKm Q Q Frende Forsikring Norne Securities Brage Finans Verd Boligkreditt Net profit from associated companies Total write-downs on loans and guarantees amounted to NOK 39 million (NOK 47 million) in the first quarter. See the chapter on risk and capital factors and Notes 6 and 7, which describe the write-downs and the development in default of payment. Developments in lending and deposits Gross lending increased by NOK 7.7 billion (NOK 5 billion) to NOK billion (NOK 114 billion) from the first quarter 2014, corresponding to year-on-year growth of 6.8%. Table 5: Growth in lending Growth last 12 months Growth last quarter Lending total 6,8 % 1,9 % Lending retail market 7,6 % 1,4 % Lending corporate market 4,3 % 3,5 % Of gross lending, loans to the retail market amounted to NOK 92.3 billion (NOK 85.8 billion), NOK 50.1 billion of which were loans transferred to Sparebanken Vest Boligkreditt. Gross lending to the corporate market amounted to NOK 29.4 billion (NOK 28.2 billion). The growth in lending in the corporate market is within the SME segment, which is in line with the bank s strategy. Customer deposits increased by NOK 2.9 billion (NOK 3.2 billion) to NOK 64.9 billion (NOK 62 billion), corresponding to year-on-year growth of 4.7%. 4

5 Table 6: Growth in deposits Figure 2 Write-downs Growth last 12 months Growth last quarter 1, Deposits total 4,7 % -2,4 % Deposits retail market 7,6 % 0,6 % Deposits corporate market 0,4 % -6,7 % Deposits break down as follows: NOK 39.8 billion (NOK 36.9 billion) from retail customers and NOK 25.1 billion (NOK 25 billion) from corporate customers. Write-downs as % of gross lendings 1,0 0,8 0,6 0,4 0,79 % 418 0,87 % 383 1,02 % 359 0,70 % 338 0,70 % Capitalised write-downs (MNOK) 400 The breakdown between deposits and lending is specified in Notes 8 and 9. 0, Risk and capital factors Credit risk The risk in the bank s retail market portfolio is stable and low. A total of 95% of the portfolio is secured by mortgages with a low loan-to-asset value ratio. The riskadjusted return on the portfolio is good. In 2014, the bank completed the restructuring of a number of commitments in default and potential bad debt commitments in the corporate market portfolio. The risk in the corporate market portfolio is deemed to be moderate, and the risk-adjusted return has continued to improve in Defaults and other potential bad debt amounted to NOK 1,080 million (NOK 1,548 million) for the corporate market and NOK 237 million (NOK 233 million) for the retail market. Figure 1 Defaults and potential bad debt ,34 % ,32 % ,64 % ,98 % Q Q Q Q Q Retail Corporate % of total ,94 % The total losses on lending and guarantees amounted to NOK 39 million in the first quarter. NOK 36 million of this amount is related to group write-downs, where the increase reflects a somewhat more uncertain macroeconomic situation. The total percentage provided for in the portfolio remains stable at 0.7%. The loss costs are specified in Note % 4 % 3 % 2 % 1 % 0 % 0,0 Q Q Q Q Q Individual write-downs Group write-downs Write-downs as % of gross lendings Market risk and operational risk The bank s interest rate and currency risk is managed within limits adopted by the Board of Directors and is considered to be low. The bank is exposed to credit spread risk, primarily through the management of interestbearing securities in the bank s liquidity portfolio, and to a lesser extent through proprietary trading. The portfolio mainly consists of securities issued by Norwegian banks, residential mortgage companies, municipalities, county authorities, the Norwegian state and non-financial enterprises. The bank s credit spread risk is at roughly the same level as at the end of the first quarter The bank s stock market exposure (excluding subsidiaries and associated companies) at the end of the first quarter amounted to NOK 549 million (NOK 872 million). In its management, the bank focuses on the total exposure and the concentration in companies and industries. The bank has stock market exposure both through companies listed on Oslo Børs and through unlisted companies. The identification, analysis and followup of operational risk is addressed at a general level through management confirmations, continuous assessments and the registration of events. No matters have been uncovered during the quarter that are critical to the bank s operations. Liquidity and financing The Group s liquidity situation is satisfactory. In the first quarter 2015, it has been managed at the overall level using liquidity indicators, stress tests (similar to LCR) and the deposits/loans ratio. The bank expects the Financial Supervisory Authority of Norway to propose a date for the introduction of LCR in The bank will adjust its liquidity management in light of this. 0 5

6 The introduction of NSFR in Norway will take place somewhat later. Under future regulatory liquidity and financing regimes (LCR and NSFR), stable deposits (deposits covered by the deposits guarantee scheme) and deposits from the retail market and SMEs will be treated favourably. A large proportion of Sparebanken Vest s deposits come from such sources; see the table below. The bank s Core Tier 1 capital ratio, taking into account the Basel I floor, is up 0.1 percentage points from the fourth quarter 2014, at 12.3%. This is due to accumulated profits and moderate growth in the calculation basis. The bank thus meets the current combined minimum and buffer requirement of at least 10% Core Tier 1 capital by a good margin. Figure 3 Capital adequacy, Basel I floor Table 7: Composition of deposits (figures in NOK mill.) 18 % Deposit Retail SME Larger enterprises Finance Total Over % 14 % 12 % 14,5 % 1,0 % 2,0 % 15,1 % 1,9 % 1,4 % 15,2 % 2,0 % 1,4 % 15,6 % 2,0 % 1,4 % 15,7 % 2,0 % 1,4 % Total % At the end of the first quarter 2015, the Group s liquidity indicator (6-month rolling average) was 104.5% (102.8%). The deposits/loans ratio is somewhat lower than at the same time last year at 53.7% (54.7%). At the end of the quarter, the group s holdings of bonds and certificates amounted to approximately NOK 16.5 billion. (NOK 16.7 billion). 8 % 6 % 4 % 2 % 0 % Total Capital 11,5 % 2014 Q1 14,3 % 11,8 % 2014 Q2 14,8 % 11,8 % 2014 Q3 14,8 % 12,2 % 2014 Q4 15,6 % 12,3 % 2015 Q1 15,7 % Tier Capital 1,0 % 1,9 % 2,0 % 2,0 % 2,0 % The total capital market financing amounts to NOK 64.4 billion (NOK 60.9 billion). The bank s relative proportion of covered bonds at the end of the first quarter is approximately 67% (68%) of the bank s capital market financing. The proportion of financing with a remaining term to maturity of more than three years was approximately 41% (49%) at the end of the quarter. Add. Tier 1 Cap. Core Tier 1 Capital 2,0 % 11,3 % 1,4 % 11,5 % 1,4 % 11,4 % 1,4 % 12,2 % 1,4 % 12,3 % Pursuant to IRB, the Core Tier 1 capital adequacy rate has fallen from 14.0% to 12.8%. This is due to upward calibration of the housing loan portfolio in line with regulatory requirements. Figure 4 Capital adequacy, IRB Rating Sparebanken Vest is rated by Moody s and Fitch Ratings. As a result of new rating methods, Moody s has changed Sparebanken Vest s rating from A2 Negative Outlook to A2 Review for Upgrade. 20 % 18 % 16 % 14 % 17,6 % 1,3 % 2,3 % 19,1 % 2,4 % 1,7 % 18,9 % 2,5 % 1,7 % 17,9 % 2,3 % 1,6 % 16,3 % 2,1 % 1,4 % Fitch confirmed all the bank s ratings on 19 November 2014, including the bank s rating for long-term unsecured borrowings: A- with a stable outlook. 12 % 10 % 8 % 14,0 % 15,0 % 14,7 % 14,0 % 12,8 % Bonds issued by Sparebanken Vest Boligkreditt AS are rated by Moody s and have an AAA rating, with a stable outlook. 6 % 4 % 2 % Capital adequacy With effect from the first quarter 2015, 80% of accumulated profits after tax are included when communicating Core Tier 1 capital. This is in order to improve the coherence between capital adequacy reporting and the level of the bank s distribution of dividend and donations. 0 % Total Capital Tier 2 Capital Add. Tier 1 Cap. Core Tier 1 Capital 2014 Q1 16,9 % 1,2 % 2,3 % 13,4 % 2014 Q2 18,7 % 2,4 % 1,7 % 14,6 % 2014 Q3 18,4 % 2,5 % 1,7 % 14,2 % 2014 Q4 17,9 % 2,3 % 1,6 % 14,0 % 2015 Q1 16,3 % 2,1 % 1,4 % 12,8 % In the first quarter, the Financial Supervisory Authority of Norway issued its annual advice concerning which 6

7 financial institutions should be regarded as systemically important. There are still three institutions that are regarded as systemically important in Norway: DNB, Nordea and Kommunalbanken. None of the regional savings banks are regarded as systemically important at the present time. For market reasons, Sparebanken Vest wishes to be capitalised on a par with the systemically important institutions. The goal of meeting the requirements by a satisfactory margin through operations still applies. Business in subsidiaries and associated companies Subsidiaries Eiendomsmegler Vest (holding 100%) sold 841 houses in the first quarter 2015, compared with 654 in the same period last year, an increase of 28.5%. It recorded a pre-tax profit of NOK 6.3 million, compared with a loss of NOK 1.5 million in the first quarter As a result of improved cooperation between the bank and estate agents, the company has greater access to sales assignments in a highly competitive market. The company expects the next quarter to be positive. The second quarter is usually the most active of the year. The property market is still driven by low interest rates, low unemployment and good purchasing power. Combined with imbalance in the supply of housing properties, this is leading to a continued increase in house prices and rapid turnover. Sparebanken Vest Boligkreditt AS (holding 100%) manages housing loans in the amount of NOK 50.1 billion (NOK 48.2 billion), and, at the end of the first quarter 2014, the company had issued covered bonds in the amount of NOK 42.2 billion (NOK 43.6 billion). Associated companies The share of profit/loss from associated companies shows progress, and a total of NOK 14 million was included in the accounts in accordance with the equity method in the first quarter. Frende Holding (holding 39.7%) recorded a profit after tax in the first quarter of NOK 16.3 million, compared with NOK 27.9 million in the first quarter This is primarily due to a negative contribution from Frende Liv. Sparebanken Vest s share of profits is NOK 8 million for the first quarter, compared with NOK 12 million for the corresponding period last year. Frende Skade s annualised return on equity (ROE) is 8.2%. Vegar Styve took over as the new managing director in the first quarter. At the end of the first quarter 2015, Frende Skade had a total of NOK 1,303 million (NOK 1,163 million) in premiums, divided between 112,000 customers, an increase of 10,000 customers compared with the corresponding period last year. Frende Skade s market share continues to grow, and it is estimated to be 3.2% for Norway as a whole and 20% in Hordaland county. The loss ratio at the end of the first quarter was 82.4%, compared with 74% last year. The company s combined ratio was 99% in the first quarter, compared with 92.2% in the same period last year. Frende Skade expects continued strong and profitable growth in Frende Skade s annualised return on equity (ROE) is 12.4%. Frende Liv recorded a loss of NOK 2.6 million in the first quarter, compared with a profit of NOK 6.7 million in the corresponding period last year. The return on financial assets amounted to NOK 7.6 million in the first quarter, compared with NOK 4.3 million in the first quarter 2014, while the administrative result was minus NOK 11.7 million. Premiums in Frende Liv increased by NOK 87 million in the first quarter compared with the corresponding period in 2014 and amounted to NOK 695 million at the end of the first quarter (NOK 608 million). Frende Liv achieved an annualised return on equity (ROE) of minus 1.3%. Norne Securities AS (holding 47.6%) delivered a positive contribution to profits in the first quarter. Sparebanken Vest s share of the profit in Norne Securities is NOK 0.8 million, compared with NOK 1.2 million in the same period last year. Sales are evenly spread between the business areas, with good growth in equity and bond trading driven by a strong market. Norne expects a turnover of NOK 75 million in 2015 and a profit for the year of NOK 5 million. Verd Boligkreditt AS (holding 40%) is a housing credit company that is owned by Sparebanken Vest and eight independent savings banks. The company, which is run by Sparebanken Vest Boligkreditt AS, manages housing loans in the amount of NOK 4.7 billion. The share of profit/loss from Verd Boligkreditt in the first quarter amounted to NOK 2.1 million (NOK 2.5 million). Brage Finans AS (holding 49.9%) is a financing company that offers leasing and loans secured by the 7

8 purchased object to the corporate and retail markets. At the end of the first quarter 2015, the company had a gross portfolio of NOK 2,654 million (NOK 2,031 million). The company has delivered its strongest quarterly profit so far as a result of growth in the lending portfolio, improved margins and efficient operations. Sparebanken Vest s share of the profit/loss in Brage Finans in the first quarter amounted to NOK 3.2 million, compared with NOK 2 million in the same period last year. Post balance sheet events No significant events have taken place since the balance sheet date, 31 March 2015, that affect the quarterly accounts. Outlook Macroeconomic developments The global economy is growing at a moderate pace, but there are big differences between countries and regions. Growth has taken hold in the USA, and households consumption is increasing. In China, growth is slowing down as a result of a continued fall in property investments. Activity has picked up in the Eurozone, but growth is still very low. Households and enterprises show signs of increasing their consumption and investments, but the activity level will continue to be affected by high unemployment and the need to reduce debt in the private and public sectors. In Norway, mainland GDP increased by 2.3% in Norges Bank s regional network shows falling output growth in business and industry, particularly in connection with activity in the oil service industry. Growth has slowed in the housing market so far in 2015 and unemployment has increased somewhat. The low oil price and a fall in oil investments will reduce the growth in activity in mainland Norway overall. Sparebanken Vest expects growth of around one per cent in mainland GDP this year. Western Norway Sparebanken Vest s own index for Western Norway, Vestlandsindeks, shows that the negative trend from the fourth quarter was reinforced in the first quarter. Enterprises in Western Norway report poorer results in the past three months, and the performance index is falling. The expectation index shows a marginal increase, which reflects the continued optimism among enterprises whose turnover is not related to the oil industry. Oilrelated companies belief in the future, on the other hand, continues to fall. This is underpinned be the weaker outlook for oil investments, where Western Norway is more exposed than the rest of the country, and by the reports from Norges Bank s Regional Network, where the oil service industry expects a further decrease in production. Sparebanken Vest The bank s goal of meeting the new regulatory requirements by a satisfactory margin through operations still applies, and the bank aims to have a Core Tier 1 capital ratio of 13.5% at the end of Developments in the first quarter 2015 are in line with this plan. The current margin situation, positive development in other income, good cost control and moderate losses are all important preconditions for accumulating equity through operations. Cost development is good, and the bank is well on track to achieve an average cost growth of 2% in the parent bank from 2012 to In a market with strong competition and prolonged pressure on margins going forward, Sparebanken Vest will continue to focus strongly on efficient operations and a healthy cost development. Digitalisation and changed customer behaviour mean that the bank must continuously adapt its staffing and branch structure to new framework conditions. The bank has four strategic focus areas in the period up until 2016, which are meant to further the Group s two overriding goals: the Customer Promise, in which trust, simplicity and local commitment are key, and a financial target of ROE > 11%. The focus on these four strategic areas is intended to ensure that Sparebanken Vest adapts and becomes a modern retail market bank, further professionalises its corporate market operations, rationalises the bank s operations and wins the competition to be the most attractive bank for housing loan customers. Developments in macroeconomic framework conditions could lead to higher losses in exposed industries. Sparebanken Vest has therefore increased its group write-downs. The total loss picture in 2015 is expected to be in line with the provisions made in the first quarter. 8

9 Bergen 28 April 2015 The Board of Directors of Sparebanken Vest Trygve Bruvik Marit Solberg Birthe Kåfjord Lange Chair of the Board Deputy Chair of the Board Arild Bødal Richard Rettedal Øyvind A. Langedal Anne Marit Hope Sivert Sørnes Kristin Axelsen Jan Erik Kjerpeseth Managing Director 9

10 Income statement, group Notes 01/ / / / Interest income and similar income Interest expenses and similar expenses Net interest and credit commission income Commission income and income from banking services Commission expenses and expenses relating to banking services Income from ownership interests in associated companies Net gain/(loss) on financial instruments Other operating income Net other operating income Net operating income Payroll and general administration expenses Depreciation Other operating expenses Total operating expenses Profit before write-downs and tax Net gain on fixed assets Write-downs on loans and guarantees Pre-tax profit Tax Profit for the period Majority share of the profit for the period Minority share of the profit for the period Equity certificates' share of profits divided by the number for equity certificates 1,88 2,66 7,66 Diluted profit per equity certificate 1,88 2,66 7,66 Statement of comprehensive income 01/ / / / Profit/loss for the period Estimate variance, pensions 1) Tax effect of estimate variance, pensions Other profit/loss elements that will not be reclassified to profit or loss after tax Other profit/loss elements that will be reclassified to profit or loss after tax Total other profit/loss elements in the period Total profit for the period Majority share of the total profit for the period Minority share of the total profit for the period ) In the third and fourth quarter 2014, the bank recalculated the pension commitment based on updated assumptions. This is due to a reduction in long-term covered bond yields, which form the basis for the calculation. The recalculation has resulted in an estimate variance of NOK 133 million that, pursuant to IAS 19R, must be recognised in the statement of comprehensive income. The assumptions that have been used are in accordance with the advisory assumptions i Norwegian Accounting Standards (NRS) per January

11 Balance sheet, group Notes 31/ / /12-14 Assets Cash to and receivables from central banks Loans to and receivables from credit institutions Net lendings 7, Shares at fair value through profit or loss Commercial papers and bonds Financial derivatives Shareholdings in associated companies Other intangible assets Tangible fixed assets Prepaid expenses Other assets Total assets Liabilities and equity Liabilities to credit institutions Deposits Securitised liabilities Financial derivatives Accrued expenses and pre-paid income Pension commitments Deferred tax Other provision for commitments Tax payable Subordinated loan capital Other liabilities Total liabilities Equity certificates Own equity certificates Premium reserve Equalisation reserve Total equity certificate capital Primary capital Gift fund Compensation fund Total primary capital Other equity Minority interests Total equity Total liabilities and equity

12 Cash flow statement, group Cash flows from operations 01/ / / / Interest, commission and customer fees received Interest, commission and customer fees paid Interest received on other assets Interest payments on other funding Payments to other suppliers for goods and services Payment to employees, pension schemes, National Insurance contributions, tax withholdings etc Payment of taxes Dividends received on securities for trading purposes Net receipts/payments on sales/purchases of securities for trading purposes Net cash flow from operations Cash flows from investment activities Payments received/made relating to customers' loans Net receipts/payments on loans to credit institutions Dividends received on securities not for trading purposes Net receipts/payments on sales/purchases of securities not for trading purposes Net receipts/payments on sales/purchases of other financial instruments Payment received from sale of associated companies Payments related to associated companies Payments received from the sale of operating assets etc Payments made on purchases of operating assets etc Net cash flows from investment activities Cash flows from financing activities Payments received/made relating to customer deposits Payments received/made on deposits from Norges Bank and other financial institutions Receipts related to issues of subordinated loan capital Payments related to redemptions of subordinated loan capital Receipts related to issues of bonds and commercial papers Payments related to redemptions of bonds and commercial papers New equity certificates Dividends paid / Gifts for the public benefit Net cash flow from financing activities Net cash flow for the period Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

13 Changes in equity, group Equity certificates Own equity certificates Premium reserve Equalisation Primary reserve capital Gift fund Comp. fund Other Minority equity interests Equity at 31 Dec Profit/loss first quarter Other comprehensive income 0 Distributed dividend and donations Equity at 31 Mar Total Equity at 31 Dec Profit/loss Comprehensive income Purchase/sale of own equity certificates Distributed dividend and donations Equity at 31 Dec Profit/loss first quarter Other comprehensive income 0 Purchase/sale of own equity certificates Distributed dividend and donations Equity at 31 Mar Notes Note 1 Accounting principles The consolidated accounts for the first quarter 2015 have been prepared in accordance with the requirements of the Securities Trading Act, the Financial Supervisory Authority of Norway s Regulations relating to annual reports and accounts and IAS 34. The accounts have been prepared on the basis of the same principles and with the same estimate methods as the annual accounts for The accounting principles are described in the 2014 annual report. All amounts are stated in NOK million and apply to the Group unless otherwise specified. 13

14 Note 2 Segment information The management has evaluated the segments that it is appropriate to report in relation to corporate governance. The segments are: Corporate Banking, Retail, Treasury and Real Estate Markets. Operating expenses are allocated, with the exception of IT costs, staff costs and depreciation. Net interest income is allocated based on internally calculated interest based on 3-month NIBOR. Banking operations Corporate market Retail market Treasury Estate agency business Not allocated by segment Total 01/01-31/ Income statement Net interest income Operating income Operating expenses Losses Pre-tax profit Tax 100 Profit for the period /03-15 Balance sheet Net lendings Deposits /01-31/ Income statement Net interest income Operating income Operating expenses Losses Pre-tax profit Tax 114 Profit for the period /03-14 Balance sheet Net lendings Deposits Income statement Net interest income Operating income Operating expenses Net gain on fixed assets Losses Pre-tax profit Tax 305 Profit for the year /12-14 Balance sheet Net lendings Deposits

15 Note 3 Net interest and credit commission income Change 01/ / / / Q1-15 vs Q1-14 Q1-15 vs Q4-14 Interest and similar income from loans to and receivables from credit institutions Interest and similar income from loans to and receivables from customers Interest and similar income from commercial papers, bonds and other interest-bearing securities Interest income and similar income Interest and similar expenses on debt to credit institutions Interest and similar expenses on deposits from and debt to customers Interest and similar expenses on issued securities Interest and similar expenses on subordinated loan capital Other interest expenses etc. 1) Fee Norwegian Banks' Guarantee Fund Interest expenses and similar expenses Net interest and credit commission income ) Interest from derivatives entered into to manage the interest rate risk attached to the bank s ordinary portfolios is classified as interest income and recognised as an adjustment of the bank s other interest income/ interest expenses. Note 4 Net other operating income 01/ / / / Change Q1-15 vs Q1-14 Q1-15 vs Q4-14 Guarantee commissions Fees from payment transfers /interbank fee credit Other commissions and fees Commission income and income from banking services Fees payment transfers Fees payment transfers/interbank debit Other commissions and fees Commission expenses and expenses relating to banking services Net banking services 1) Income from ownership interests in associated companies Dividend Gain/(loss) on commercial papers and bonds Gain/(loss) on shares Gain/(loss) on financial derivatives Gain/(loss) on financial instruments, recognised at fair value Gain/(loss) on currency Net gain/(loss) on financial instruments designated for hedge accounting Of which gain/loss related to basisswaps Other Net gain/(loss) on financial instruments Brokerage commission Other operating income Other operating income Net other operating income ) Specification of income and expenses relating to banking services Guarantee commissions Payment transfers Insurance Funds and other placement products Other income Net banking services

16 Note 5 Operating expenses Change 01/ / / / Q1-15 vs Q1-14 Q1-15 vs Q4-14 Salaries Pensions Other personnel expences Fees ICT expenses Marketing and public relations Payroll and general administration expenses Depreciation Operating expenses, premises Wealth tax Other operating expenses Total other operating expenses Total operating expenses

17 Note 6 Losses and defaults on loans and guarantees Change 01/ / / / Q1-15 vs Q1-14 Q1-15 vs Q4-14 Change in individual write-downs during period Confirmed losses on loans for which provisions have been made Confirmed losses on loans for which no provision has been made Recoveries of previously recognised losses Net effect of individual write-downs Change in group write-downs in period The period`s net losses on loans Confirmed losses on guarantees Change in provision for bad debt The period`s net losses on guarantees Write-downs on loans and guarantees Defaults and other problem loans The table shows booked value of total loans in default based on Basel II definitions. 31/ Retail market Corporate market Total Gross loans in defaults of payment exceeding 90 days Gross other defaults and other problem loans Gross default and other problem loans Individual write-downs Net default and other problem loans / Retail market Corporate market Gross loans in defaults of payment exceeding 90 days Gross other defaults and other problem loans Gross default and other problem loans Individual write-downs Net default and other problem loans Total Age distribution of commitments in default The table shows defaults of payment exceeding 30 days where the amount in default is more than NOK 1,000 in one of the commitment s accounts not caused by payment service delays. 31/ Retail market Corporate market Up to 30 days days days More than 90 days Gross loans in default of payment Total 31/ Retail market Corporate market Up to 30 days days days More than 90 days Gross loans in default of payment Total 17

18 Note 7 Capitalised write-downs on loans and guarantees 31/ / /12-14 Individual write-downs Individual write-downs of loans at 1 January (nominal values) Realised losses on loans covered by previous write-downs Increase in write-downs of loans written down previously Write-downs of loans not written down previously Reduction in previous years' write-downs on individually assessed loans Changes due to exchange rate movement Individual write-downs Group write-downs Group write-downs at 1 January (nominal values) Change in group write-downs for the period Group write-downs Total write-downs on loans Provision for bad debt for guarantees Provision for bad debt to cover losses on guarantees at 1 January Change in write-downs Total write-downs on guarantees Note 8 Loans by sector and industry 31/ / /12-14 Gross loans Primary industries Manufacturing and mining Power and water supply Building and construction Commerce International shipping and pipeline transport Hotel and restaurants Property management Services Municipal/public sector Other financial corporations Total corporate sector Retail customers Gross loans to customers Write-downs Primary industries Manufacturing and mining Power and water supply Building and construction Commerce International shipping and pipeline transport Hotel and restaurants Property management Services Municipal/public sector Other financial corporations Individual write-downs corporate sector Individual write-downs retail customers Group write-downs Total write-downs on loans Net loans to customers

19 Note 9 Deposits by sector and industry 31/ / /12-14 Primary industries Manufacturing and mining Power and water supply Building and construction Commerce International shipping and pipeline transport Hotel and restaurants Property management Services Municipal/public sector Other financial corporations Total corporate sector Retail customers Total deposits to customers Note 10 Valuation hierarchy for financial instruments at fair value Valuation of fair value Level 1 Financial instruments traded in active markets are classified as level 1. A market is deemed to be active if the market prices are easily and regularly available from a stock exchange, broker, industry group, pricing service or regulatory authority, and these prices represent actual and regularly occurring market transactions at arm s length. The market price used for financial assets is the applicable purchase price, while the applicable sales price is used for financial commitments. Instruments included in level 1 comprise listed shares, investments in unit trusts and treasury certificates. Level 2 The fair value of financial instruments that are not traded in an active market is determined by using valuation methods. These valuation methods maximise the use of observable data where available and, as far as possible, are not based on the group s own estimates. If all the material data required to determine the fair value of an instrument are observable data, the instrument is included in level 2. Instruments included in level 2 comprise loans to customers, equity instruments on the OTC list, other certificates and bonds, financial derivatives and all financial commitments valued at fair value. Level 3 If one or more data items are not based on observable market information, the instrument is included in level 3. Non-listed equity instruments, certain equity instruments on the OTC list and loans to customers valued at fair value are classified at level 3. 31/ Level 1 Level 2 Level 3 Total Assets Loans to customers Shares valued at fair value through profit or loss Certificates and bonds Financial derivatives Financial derivatives designated for hedge accounting Total Liabilities Debt to credit institutions Deposits from and debt to customers Securitised debt Financial derivatives Subordinated loan capital Total Loan to customers Shares Financial Instruments valued pursuant to level 3 at 1 Jan Additions/acquisitions Sales / redemption / repayment This years value adjustment 53 3 Reclassification between levels 2 and Financial instruments valued pursuant to level 3 at 31 Mar

20 Note 10 Valuation hierarchy for financial instruments at fair value (cont.) 31/ Level 1 Level 2 Level 3 Total Assets Loans to customers Shares valued at fair value through profit or loss Certificates and bonds Financial derivatives Financial derivatives designated for hedge accounting Total Liabilities Debt to credit institutions Deposits from and debt to customers Securitised debt Financial derivatives Financial derivatives designated for hedge accounting Subordinated loan capital Total Financial instruments valued pursuant to level 3 at 1 Jan Additions/acquisitions Sales / redemption / repayment This years value adjustment Reclassification between levels 2 and Financial instruments valued pursuant to level 3 at 31 Mar

21 Note 11 Capital adequacy 31/ / Risk-weighted volume Basel II Corporate (ex SL) Specialised Lending (SL) Corporate - Other Mass market secured on property - SMB Mass market secured on property - Not SMB Mass market - Other SMB Mass market - Other not SMB Total credit risk IRB Debt risk Equity risk Currency risk Operational risk Commitments under the standard method Risk of impaired creditworthiness of the counterparty (CVA) Deductions Total risk-weighted volume before transitional rules Correction to the transitional arrangement Total risk-weighted volume Capital base Equity certificates Deductions for own equity certificates Premium reserve Saving bank`s reserve Share premium reserve Endowment fund Equalisation reserve Other equity Share of other equity in ownership interests Total booked equity Deductions Deferred taxes, goodwill and other intangible assets Including effects of regulatory scope of consolidation Fund for unrealized gains, available for sale Adj. for unrealised losses/(gains) on debt recorded at fair value Value adjustments due to the requirements for prudent valuation Investments in other financial institutions Adjusted expected losses IRB-portfolios Allocated dividends Common Equity Tier 1 capital Additional Tier 1 capital Total Tier 1 capital Tier 2 instruments % additions of unrealised gains on fixed assets Deduction for expected losses IRB/subord.capital in other fin.inst Total supplementary capital Own funds Common Equity Tier 1 capital 12,0 % 11,0 % 12,2 % Additional Tier 1 capital 1,4 % 2,0 % 1,4 % Supplementary capital 2,0 % 1,0 % 2,0 % Capital adequacy, transitional scheme 15,3 % 14,0 % 15,6 % Common Equity Tier 1 capital 12,4 % 13,0 % 14,0 % Additional Tier 1 capital 1,4 % 2,3 % 1,6 % Supplementary capital 2,1 % 1,2 % 2,3 % Capital adequacy, Basel II fully implemented 15,9 % 16,6 % 17,9 % 21

22 Note 12 Key information about equity certificate Sec. no (31/03-15) The twenty largest owners of ECs No of ECs Proportion of equity share capital % SPAREBANKSTIFTINGA HARDANGER ,09 SPAREBANKSTIFTINGA SAUDA ,30 PARETO AS ,50 MP PENSJON ,78 BERGEN KOMMUNALE PENSJONSKASSE ,94 VPF NORDEA NORGE VERDI C/O JPMORGAN EUROPE ,67 WIMOH INVEST AS ,42 FONDSFINANS SPAR ,42 SPAR SHIPPING AS ,26 VERDIPAPIRFONDET EIKA ,22 VPF NORDEA KAPITAL C/O JPMORGAN EUROPE ,04 VPF NORDEA AVKASTNING C/O JPMORGAN EUROPE ,78 AW CAPITAL INVEST AS ,76 VERDIPAPIRFONDET OMEGA INVEST ,75 FUSA KRAFTLAG ,73 TROVÅG AS ,72 HOLBERG NORGE VERDIPAPIRFONDET ,64 WENAASGRUPPEN AS ,63 HERFO FINANS AS ,63 HUSTADLITT AS ,56 Total ,84 Turnover statistics, the last 12 months Month Volume OSE (number) Market price ultimo April ,90 Mai ,50 Juni ,50 July ,50 August ,00 September ,50 October ,25 November ,80 December ,50 January ,25 February ,50 March ,25 Sparebanken Vest has paid a dividend of 4,00 NOK per equity certificate. The equity certificates was traded ex dividend as of

23 Note 13 Securitised debt and subordinated loan capital 31/ / /12-14 Securities debt Commercial papers, nominal value Bonds, nominal value Value adjustment Total securitised debt Change in securitised debt 31/12-14 Issued Fell due/ Change in redeemed exchange rate Other changes 31/03-15 Commercial papers, nominal value Bonds, nominal value Value adjustment Total securitised debt Subordinated loan capital and subordinated bond loans Ordinary subordinated loan capital, nominal value Subordinated bond loans, nominal value Value adjustment Total subordinated loans and subordinated bond loans Residual time to maturity 0-1 month 1-3 months 3-12 months 1-5 years Over 5 years Total Credit institutions, borrowings Securitised debt, nominal value Subordinated loans and subordinated bond loans, nominal value Total borrowings from capital market Note 14 Transactions with related parties Material transactions with related parties at 31 March 2015 are as follows: Frende Forsikring As of 31 March 2015, Sparebanken Vest has received commission totalling NOK 27 million from Frende for the distribution of life insurance and general insurance products. The transactions have been entered into on ordinary market terms as if they had been carried out by independent parties. Note 15 Significant transactions Sale of shares in Nets Holding AS First quarter 2014 and the fiscal year 2014: At the start of the year 2014, sparebanken Vest had a 1,76% holding in Nets Holding, which has been transferred to a consortium concisting of Advent International, ATP and Bain Capital. The shares were revalued to the agreed sales amount in the first quarter Since the sale was pending regulatory approval, the shares were not deducted from the balance sheet until third quarter This resulted in a gain of NOK 166 million in the accounts (including transactions to hedge against exchange rate fluctuations). The gain was recognised in the first quarter of Sale of bank premises The fiscal year 2014: Sparebanken Vest sold its properties at Nedre Korskirkealmenningen and Kaigaten 4 as of 30 June Four smaller bank buildings were also sold. This resulted in an overall gain of NOK 143 million that was recognised in the accounts for the second quarter