SNS REAAL posts third quarter net profit of 34 million

Transcription

1 Utrecht, 6 November 2012 Press Release Trading update third quarter 2012 SNS REAAL posts third quarter net profit of 34 million KEY POINTS Higher net profit at core activities of 133 million Net loss at Property Finance of 99 million; higher loan impairments due to further weakening of Dutch real estate markets Lower net profit at SNS Bank; higher net profit at SNS Retail Bank but lower result at SNS SME due to higher loan impairments Higher net profit at Insurance activities, positively impacted by realised gains on investment portfolio; higher underlying profit at Life insurance, small net profit at Non-life insurance Total operating costs down 6% Core Tier 1 ratio SNS Bank NV decreases to 8.8% (end of June: 9.6%) due to an increase in risk-weighted assets and the loss at Property Finance1 Regulatory solvency of Insurance activities virtually stable at 198% (end of June 2012: 199%) Repositioning of SNS SME: commercial real estate-based loan portfolio to be combined with Property Finance and put in run-off Earlier announced review for strategic restructuring and capital enhancement and simplification measures is ongoing We are making progress with the exploration of a broad range of scenarios for both strategic restructuring and the enhancement and simplification of our capital base, which we announced earlier this year. Our aim is to find a comprehensive solution for the Property Finance portfolio and the capital position of SNS REAAL. The outcome will likely consist of a combination of several measures. No decisions have been taken yet. It is our intention to provide a further update later this year or early next year. The net profit at SNS REAAL s core activities of 133 million held up well in the third quarter, in an ongoing difficult economic and capital markets environment. At the same time, customer service levels remained strong, 1 Core Tier 1 ratio based on Basel II, taking into account the higher of risk-weighted assets under Basel II or Basel I with an 80% floor. SNS REAAL Press Release 6 November

2 while we reduced operating costs by 6%. The ongoing efforts and commitment of our employees have again been important in the performance of our core activities. However, loan impairments at Property Finance increased and the run-off of the commercial real estate-based loan portfolio slowed down, reflecting the limited refinancing capacity in the market and the increasing pressure on prices in the commercial real estate sector. Going forward, SNS Bank will focus primarily on retail clients. As a consequence, the commercial real estatebased lending operations of SNS SME will be combined with those of Property Finance. While macro-economic trends and financial markets remain very challenging, we remain committed to executing our strategic priorities, said Ronald Latenstein, Chairman of the Executive Board. UPDATE ON STRATEGIC RESTRUCTURING SCENARIOS On 13 July 2012, and later on 16 August 2012, SNS REAAL stated it is exploring a broad range of scenarios with the aim to find a comprehensive solution for the State core Tier 1 securities and the capital position. In consultation with external advisors, SNS REAAL is currently researching a broad range of measures in the field of strategic restructuring (e.g. sale of parts of the business, limitation of credit risks at Property Finance) and the enhancement and simplification of the capital base (e.g. issuance of ordinary shares, conversion of core Tier 1 securities, a reduction in the number of classes of shares, reduction of double leverage). In this process, the interests of our stakeholders are taken into consideration. The outcome is likely to consist of a combination of the above-mentioned elements and should provide a comprehensive solution, ensuring that all parts of SNS REAAL have a solid capital position. No decisions have been taken yet. SNS REAAL intends to provide a further update later this year or early next year. SNS REAAL does not expect to present the outcome on the SNS REAAL Investor Day held on 15 November. SNS BANK Total net interest income at SNS Retail Bank was up modestly compared to the third quarter of SNS Retail Bank s market share in new mortgages was limited at 2.3% (2011: 5.8%) but retention of existing mortgages remained high. In the third quarter, retail savings balances contracted marginally to 32.5 billion, compared to 32.6 billion at the end of June 2012, corresponding with a market share of 10.2%. Bank savings, included in the total savings balances, continued to grow significantly to 2,055 million. Commission income was sharply lower compared to the third quarter of 2011, mainly caused by the transfer of SNS Beleggingsfondsenbeheer to Group activities but also due to lower asset management transactions and fees. Other income was higher due to improved trading results and higher buy-back results on own funding paper. Operating costs showed a limited decline compared to the level in the third quarter of Impairments on retail mortgage loans were 23 basis points of loans (annualised), which was significantly higher than in the third quarter of 2011 but in line with previous quarters of The increase reflects the weakening housing market and the lack of transactions in the Netherlands. In all, net profit at SNS Retail Bank increased to 44 million, compared to 34 million in the third quarter of At SNS SME, net interest income was markedly lower than in the third quarter of 2011, driven by the reduction of the loan portfolio. Operating costs were flat. Impairments on loans were 141 basis points of loans (annualised), up sharply year-on-year and slightly up compared to earlier quarters of As a result, the third quarter net profit of SNS SME was limited to 1 million, compared to 16 million in the third quarter of In the third quarter, commitments at SNS SME were reduced by 150 million to 4.8 billion. SNS REAAL Press Release 6 November

3 REPOSITIONING OF SNS SME Going forward, SNS Bank will focus its activities primarily 0n retail clients. Following up on the reduction of the SME loan portfolio since 2010, SNS Bank has decided to withdraw from the market for commercial real estatebased lending for the SME market. This should over time lead to an improved funding profile, a more conservative risk profile and a further reduction of risk-weighted assets. Consequently, as of 2013 the SME commercial real estate based loan portfolio will be combined with the Property Finance organisation and run off. Operations such as insurance, payments and savings for SME will be continued and will be transferred to the SNS Retail Bank organisation. Furthermore, in order to realign its operations with current market trends, SNS Retail Bank has developed plans to improve the efficiency of its operations, including a more centralised use of office facilities. The implementation of the repositioning and efficiency plans is scheduled for 2013 and is expected to result in a decline in the number of staff by approximately 300 FTE by the end of More details on the repositioning of SNS SME will be provided at the SNS REAAL Investor Day on 15 November. REAAL Regular premiums of REAAL Life showed a limited decline compared to the third quarter of The market share of individual new regular premiums decreased somewhat but remained high at 18.8% (full year 2011: 21.9%) due to REAAL Life s strong position in mortality coverage insurance. Single premiums showed a considerable drop, due to continued pricing discipline. Investment income for own account rose significantly, due in particular to higher realised gains on both equities and fixed-income securities. Excluding these gains, investment income decreased slightly, due to lower yields on reinvestments. Operating costs at REAAL Life showed a modest decline compared to the third quarter of In all, REAAL Life posted a net profit of 77 million, considerably lower than the 113 million net profit in the third quarter of The impact of interest rate hedges was slightly negative in the third quarter due to decreased volatility and divergent movements in the swap rate curve compared to the ECB AAA interest rate curve. Adjusted for the impact of the investment portfolio and hedges, the underlying result showed a considerable increase. This was primarily due to higher results on participations (Ducatus), lower operating costs and higher technical results more than compensating an impairment on real estate for own use. At REAAL Non-Life, premium income showed a limited decline and investment income was markedly lower compared to the third quarter of 2011, the latter driven by lower realised gains on fixed-income securities. Operating costs showed a small decrease. On a quarterly basis, results at REAAL Non-Life are volatile. Net profit decreased to 1 million compared to 2 million in the third quarter of 2011, mostly due to lower realised gains and with both quarters being impacted by relatively high claims ratios at Motor and Fire. ZWITSERLEVEN Zwitserleven s pension premium income showed a significant decline compared to the third quarter of 2011, due to lower single premiums driven by continued pricing discipline. Regular premiums showed a limited increase. Investment income for own account was up sharply, driven by higher realised gains on equities and fixedincome securities. Operating costs were flat compared to the third quarter of SNS REAAL Press Release 6 November

4 In all, Zwitserleven posted a net profit of 34 million compared to a net loss of 12 million in the third quarter of The impact of interest rate hedges was slightly negative in the third quarter. Adjusted for the impact of the investment portfolio and hedges, the underlying profit was up year-on-year, due to higher technical results. GROUP ACTIVITIES The third quarter result of Group activities of - 20 million was adversely impacted by lower interest income and an impairment on the shareholding in Van Lanschot of 7 million. PROPERTY FINANCE Interest income at Property Finance was virtually flat compared to the third quarter of 2011 and down compared to previous quarters of Discounts on the sale of performing loans and negative results on property projects were very limited. Total commitments declined from 4.9 billion at the end of June 2012 to 4.8 billion. Total outstanding loans, net of provisions, declined from 4.2 billion at the end of June 2012 to 4.1 billion, of which 1.4 billion are international loans. The slowdown of the run-off reflects the low level of transactions in the Dutch and international real estate markets and the limited refinancing capacity in the market. Property projects (real estate projects where Property Finance has taken control) and assets held for sale combined were slightly lower compared to the level at the end of June The level of non-performing loans was up slightly at 2.0 billion compared to 1.9 billion at the end of June Total non-performing loans as a percentage of gross loans outstanding increased slightly to 41% compared to 40% at the end of June The coverage ratio (loan provisions as a percentage of nonperforming loans) improved by almost 3%-points to 37% (domestic loans: 34%, international loans: 45%). Operating costs were lower compared to the third quarter of Impairments on loans and property projects amounted to 118 million (8.8% annualised of average gross outstandings), compared to 67 million in the third quarter of This sharp increase was mainly driven by the impact of higher loan-to-value ratios on provisioning for non-performing loans. The net loss at Property Finance amounted to 99 million compared to a loss of 69 million for the third quarter of 2011, with the decline more than wholly attributable to higher loan impairments. CAPITAL RATIOS AND FUNDING SNS Bank publishes its solvency ratios using the higher of risk-weighted assets as calculated under Basel II and 80% of the Basel I calculation. In the third quarter of 2012 the partial implementation of more stringent risk assessment models for loans in combination with a deteriorating credit risk environment has led to an increase in the level of risk-weighted assets under Basel II, which now surpasses the level of Basel I with an 80% floor. As a consequence, third quarter solvency ratios are calculated using Basel II risk-weighted assets, whereas for previous periods Basel I with an 80% floor was used. Risk-weighted assets were also impacted by the redemption of debt securities issued under a securitisation programme in the third quarter of Due to this increase in risk-weighted assets and taking into account the net loss at SNS Bank NV, the core Tier 1 ratio dropped from 9.6% at the end of June to 8.8% at the end of September. The Tier 1 ratio of SNS Bank NV declined to 11.2% (end of June 2012: 12.2%). Regulatory solvency of the Insurance activities was 198% at the end of September, virtually stable compared to the end of June 2011 (199%). The positive impact of a downward movement of the ECB AAA curve and retained earnings was offset by credit spread movements and other items. Shareholders equity of the Group remained stable compared to the end of June 2012 at 4.8 billion. The fall in interest rates in the third quarter led to an increase in the fair value reserves of the Insurance activities which was offset by an additional shortfall in the IFRS liability adequacy test (LAT). SNS REAAL Press Release 6 November

5 Double leverage at Group level increased to 118.4%, compared to 117.7% at the end of June At the end of the third quarter, exposure to sovereign debt of peripheral euro countries remained limited at 4% of the Group s total holdings of sovereign debt. With retail savings balances showing a slight decline in the third quarter, SNS Bank s main source of funding during this period was the placement of a 5-year covered bond of 1 billion and the placement of a securitisation of 900 million. Since the end of the third quarter, in October SNS REAAL issued approximately 67 million of unsecured debt though a private placement. Total liquidity, including cash, of the Banking activities remained high at 10.6 billion as at 30 September The loan-to-deposit ratio improved slightly to 146% (end of June 2012: 147%). OUTLOOK For the fourth quarter of 2012, loan impairments at SNS Bank (SNS Retail Bank and SNS SME combined) are not expected to improve. Furthermore, taking into account the ongoing pressure on commercial real estate markets, impairments at Property Finance are expected to remain high in the fourth quarter. SNS Bank expects to take a reorganisation charge related to the repositioning of SNS SME and the efficiency programmes at SNS Retail Bank in the fourth quarter of In accordance with legislation, the 2012 full year charge for the new banking tax, estimated at 10 million, will be accounted for in the fourth quarter of Macro-economic trends and developments on financial markets may have an impact on the outcome of impairment tests in the fourth quarter of Volatility on financial markets may continue to have a material impact on results. Due to the above-mentioned factors, SNS REAAL expects to report a net loss for the fourth quarter of Net result for the period In millions Q Q Q Q Q Net result for the period SNS Retail Bank SNS SME Net result for the period at SNS Bank REAAL Life REAAL Non-Life REAAL Other Net result for the period at REAAL Net result for the period at Zwitserleven Net result for the period at Group activities Net result for the period SNS REAAL Core activities Net result for the period at Property Finance Net result for the period SNS REAAL SNS REAAL Press Release 6 November

6 FOR MORE INFORMATION PLEASE CONTACT SNS REAAL Corporate Communications Roland Kroes Mobile phone: +31 (0) Jeroen de Graaf Mobile phone: +31 (0) SNS REAAL Investor Relations Jacob Bosscha Phone: +31 (0) Victor Zijlema Phone: +31 (0) ABOUT SNS REAAL SNS REAAL is an innovative service provider in the banking and insurance sector with a prime focus on the Dutch retail market and on small and medium-sized enterprises. Its activities cover three main product groups: savings and investments, mortgages and property finance, and insurance and pensions. From its historical background, SNS REAAL has always felt close to Dutch society. With a balance sheet total of 134 billion (end of June 2012), SNS REAAL is one of the major financial bancassurance companies in the Netherlands. The company has a staff of nearly 6,700 (FTE) and is headquartered in Utrecht, the Netherlands. DISCLAIMER This press release contains only factual information and should not be regarded as an opinion or recommendation concerning the purchase or sale of shares or other securities issued by SNS REAAL N.V. This press release does not contain any value judgement or predictions with respect to the financial performance of SNS REAAL N.V. If you don't want to receive press releases from SNS REAAL please send an to info@snsreaal.nl. RESERVATION CONCERNING FORWARD LOOKING STATEMENTS This trading update contains forward looking statements concerning future events. Those forward looking statements are based on the current information and assumptions of the SNS REAAL management concerning known and unknown risks and uncertainties. Forward looking statements do not relate to definite facts and are subject to risks and uncertainty. The actual results may differ considerably as a result of risks and uncertainties relating to SNS REAAL s expectations regarding such matters as the assessment of market risk or possible acquisitions, or business expansion and premium growth and investment income or cash flow predictions or, more generally, the economic climate and changes in the law and taxation. SNS REAAL cautions that expectations are only valid on the specific dates, and accepts no responsibility for the revision or updating of any information following changes in policy, developments, expectations or the like. This trading update has not been audited. SNS REAAL Press Release 6 November