Länsförsäkringar Bank January March 2012

Transcription

1 23 APRIL Länsförsäkringar Bank January The period in brief, Group Operating profit increased 39% to SEK 131 M (94). Return on equity amounted to 6.2% (5.0). Net interest income increased 23% to SEK 482 M (391). Loan losses, net, remained low and amounted to SEK 26 M (9), corresponding to loan losses of 0.08% (0.03). Business volumes rose 9% to SEK 258 billion (237). Deposits rose 27% to SEK 53 billion (42). The Core Tier 1 ratio according to Basel II amounted to 11.5% (11.2). The Tier 1 ratio according to Basel II was 12.1% (11.8) and the capital adequacy ratio was 14.0% (13.5). The number of customers increased 8% to 904,000 (838,000) and the number of bank cards rose 7% to 296,000 (276,000). Rikard Josefson, President of Länsförsäkringar Bank: Länsförsäkringar is growing in all product areas and market shares in deposits in particular are strengthening. We are continuing to expand our off ering and a young person s bank card and an investment savings account were launched during the quarter. Profi t increased due to increased business volumes, improved margins and high credit quality. Figures in parentheses pertain to the same period in. CUSTOMER TREND BANK CARD TREND OPERATING PROFIT AND RETURN ON EQUITY Number of customers, 000s Number of bank cards, 000s %

2 Key figures Group Income statement, quarterly Group, Q 3 Q 2 Full-year Return on equity, % Return on total capital, % Investment margin, % Cost/income ratio before loan losses Cost/income ratio after loan losses Core Tier 1 ratio according to Basel II Tier 1 ratio according to Basel II, % Capital adequacy ratio according to Basel II, % Percentage of impaired loans, % Reserve ratio in relation to loans, % Loan losses, % Net interest income Net commission expense Net gains from financial items Other operating income Total operating income Staff costs Other expenses Total operating expenses Profit before loan losses Loan losses, net Operating profit Market commentary With its two three-year long-term refinancing operations, the European Central Bank provided a very large amount of liquidity to the European banking system, which had a significant effect on risk appetite in the first quarter. Global stock markets rose for most of the first quarter, while credit spreads generally declined and interest rates for Spanish and Italian government bonds fell. Activity in the European capital market was significantly higher than in the fourth quarter of when the market, periodically, was essentially closed. Large volumes of covered bonds and unsecured funding were issued during the quarter. Market sentiments weakened again slightly towards the end of the quarter when concern regarding Spain s government finances fuelled lower risk willingness and rising interest rates for Spanish and Italian government bonds. The Swedish market for covered bonds and unsecured funding was highly successful with gradually falling credit spreads. In February, the Riksbank cut the key interest rate by 0.25% to 1.50% due to the weaker economic outlook. Deposits from households increased 1% during the first two months of the year, according to data from Statistics Sweden. Net household savings in funds primarily took place through unit-linked insurance in the Swedish fund market, while direct savings were made through net withdrawals. The Swedish housing market experienced higher activity and more supply. Prices of tenant-owned apartments rose 4% and prices of single-family homes increased 1% in the first quarter compared with the prior quarter according to Real Estate Agency Statistics. The rate of increase in household and retail mortgages continued to slow and amounted to slightly less than 1% during the first two months of, according to data from Statistics Sweden. 2 Länsförsäkringar Bank Interim report january march

3 First quarter of compared with first quarter of Growth and customer trend Business volumes increased 9%, or SEK 21 billion, to SEK 258 billion (237). The number of customers rose 8%, or 66,000, to 904,000 (838,000).The number of customers with Länsförsäkringar as their primary bank increased 14%, or 33,000, to 265,000 (232,000) and the number of products per customer rose to 4.8 (4.7). Some 93% (93) of those customers who have the bank as their primary bank are also existing Länsförsäkringar insurance customers. The number of cards increased 7%, or from 20,000 to 296,000 (276,000). Earnings and profitability Profit before loan losses rose 52% to SEK 157 M (103) and operating profit increased 39% to SEK 131 M (94), due to higher net interest income. Return on equity strengthened to 6.2% (5.0). Income Operating income rose a total of 30% to SEK 440 M (339), due to higher net interest income. Higher business volumes, improved lending margins and increased return on equity boosted net interest income by 23% to SEK 482 M (391). The investment margin strengthened to 1.09% (1.04). Net interest income was charged with SEK 14 M (12) for fees to the stability fund. Commission income increased 2% to SEK 236 M (231) attributable to higher business volumes. Commission expense amounted to SEK 331 M (330). Commission expense largely comprises compensation to the regional insurance companies. The remuneration model has been further developed since the start of the year with enhanced precision and business orientation. The new model is being successively introduced and, given no other changes, the first quarter remuneration was slightly lower than if the new model had been fully implemented. The underlying increase in remuneration is attributable to volume growth. NET INTEREST INCOME Expenses Operating expenses rose 20% to SEK 283 M (236) due to higher IT and staff costs. The year-earlier period had significantly lower costs than other quarters in. The cost/income ratio strengthened to 0.64 (0.70) before loan losses and 0.70 (0.72) after loan losses EXPENSES Q1 COST/INCOME RATIO Q Q Q4 Q1 Loan losses Loan losses remain low and amounted to SEK 26 M (9), net, corresponding to loan losses of 0.08% (0.03). Reserves amounted to SEK 299 M (301), corresponding to a provision ratio of 0.22% (0.25). Impaired loans increased to SEK 240 M (228) and the percentage of impaired loans was 0.17% (0.19). For more information regarding loan losses, reserves and impaired loans, see notes 8 and 9. Business volumes Business volumes rose 9%, or SEK 21 billion, to SEK 258 billion (237), and the increase excluding fund volumes was 15%. Loans to the public rose 11%, or SEK 13 billion, to SEK 135 billion (122). Retail mortgages in Länsförsäkringar Hypotek increased 11%, or SEK 9 billion, to SEK 91 billion (82). Deposits from the public increased 27%, or SEK 11 billion, to SEK 53 billion (42). The volume of managed funds declined 5% or SEK 4 billion to SEK 69 billion (73). Bank services for small businesses is an offering that has been launched gradually and growth is progressing favourably according to plan, primarily in deposits which totalled SEK 5.9 billion on 31,. Loans amounted to SEK 3.3 billion. BUSINESS VOLUMES SEK billion Business volumes, total Mutual funds Agricultural loans Retail mortgages 2010 Other loans, bank and Wasa Kredit Customer deposits Savings Deposits from the public rose 27%, or SEK 11 billion, to SEK 53 billion (42), with all types of deposit accounts showing an increase. The market share strengthened to 3.9% (3.5) on February 29, and the bank s share of market growth was high, according to data from Statistics Sweden. Fund volumes fell 5%, or SEK 4 billion, to SEK 69 billion (73), mainly due to the negative value trend in 3 Länsförsäkringar Bank Interim report january march

4 the equities market during the preceding year. Monthly savings in funds performed well, as did fund transfers. The IPS offering, Individual Pension Savings, showed a stable trend. Loans Loans to the public rose 11%, or SEK 13 billion, to SEK 135 billion (122). Retail mortgages in Länsförsäkringar Hypotek increased 11%, or SEK 9 billion, to SEK 91 billion (82). All loans are granted in Sweden and in SEK. On February 29,, the market share for household deposits and retail mortgages increased to 4.7% (4.4), according to data from Statistics Sweden. The loan portfolio, totalling SEK 135 billion (122), has a favourable geographic distribution and maintains a high level of quality. A total of 80% (81) of the portfolio comprises household credits. Most of the total portfolio, 73% (74), pertained to retail mortgages, of which 80% (81) comprised collateral in single-family homes and 20% (19) tenant-owned apartments. First-lien mortgages for agricultural properties rose 21% to SEK 14.2 billion (11.7) and agricultural lending increased 17% to a total of SEK 17.2 billion (14.7). First-lien mortgages, mainly to family-owned agricultural operations, accounted for 83% (80) of agricultural loans. Loan portfolio Lending segment, % Mar. 31, Mar. 31, Retail mortgages Agricultural loans Unsecured loans 4 4 Leasing 4 4 Hire purchase 3 3 Multi-family homes 2 2 Other 1 1 Total Borrowing Debt securities in issue rose 10%, or SEK 9 billion, to SEK 103 billion (94), of which covered bonds increased to SEK 83 billion (82). The Bank Group has low refinancing risk and long-term financing in the capital market primarily takes place through Länsförsäkringar Hypotek s covered bonds. Issued covered bonds during the quarter totalled a nominal amount of SEK 10.2 billion (8.6) and repurchased covered bonds a nominal amount of SEK 7.2 billion (4.6). Matured covered bonds during the first quarter totalled a nominal amount of SEK 5.6 billion (1.0). Financing is also conducted through Länsförsäkringar Bank s borrowing programmes. During the quarter, a nominal amount of SEK 4.8 billion (2.4) was issued under the MTN programme. The maturity structure of the Bank Group s borrowing is highly diversified. For more information about the borrowing programmes, see the Appendix page 21. Liquidity The liquidity reserve totalled a nominal amount of SEK 33.1 billion (22.5) at 31,. All liquidity is invested in Swedish securities with high credit quality. A total of 81% (81) of the liquidity reserve comprises Swedish covered bonds with the credit rating of AAA/Aaa and 19% (19) comprises Swedish government bonds. The liquidity of the investments is high and all securities included in the liquidity reserve are eligible for transactions with the Riksbank. By utilising the liquidity reserve, contracted undertakings for almost two years can be met without needing to secure new borrowing in the capital market. The Bank Group s Liquidity Coverage Ratio (LCR), as defined by the Swedish Financial Supervisory Authority, amounted to an average of 289% for the first quarter of. Rating The bank has a credit rating of A/stable from Standard & Poor s and A2/negative from Moody s. Länsförsäkringar Hypotek s covered bonds have the highest rating, Aaa/stable, from Moody s and the highest credit rating, AAA/stable, from Standard & Poor s. Company Agency Long-term rating Short-term rating Länsförsäkringar Standard & Bank Poor s A/stable A 1(K 1) Länsförsäkringar Moody s Bank A2/negative P 1 Länsförsäkringar Standard & Hypotek 1) Poor s AAA/stable A 1+ Länsförsäkringar Moody s Aaa/stable Hypotek 1) 1) Pertains to the company s covered bonds. Capital adequacy The Bank Group applies the Internal Ratings-based Approach (IRB Approach). The advanced IRB Approach provides the greatest opportunities to strategically and operationally manage credit risks and is used for all retail exposure. The basic IRB Approach is used for agricultural exposures. The Standardised Approach is applied to other exposures to calculate the capital requirement for credit risk. The bank is monitoring the development of the Capital Requirements Directive CRD IV and assesses that the Bank Group has a solid basis on which to meet currently known requirements. The capital base strengthened to SEK 6,792 M (6,140) and the capital adequacy ratio according to Basel II was 14.0% (13.5). Tier 1 capital strengthened to SEK 5,873 M (5,401) net, and the Tier 1 ratio according to Basel II totalled 12.1% (11.8). The target level for the Tier 1 ratio is 12% under Basel II. The capital target is permitted to vary +/- 0.5 percentage points. Core Tier 1 capital amounted to SEK 5,583 M (5,111) and the core Tier 1 ratio was 11.5% (11.2). For more information on the calculation of capital adequacy, see Note 12. Interest-rate risk On 31,, an increase in market interest rates of 1 percentage point would have resulted in a decrease in the value of interest-bearing assets and liabilities, including derivatives, of SEK 11 M (-56). Risks and uncertainties The Group and the Parent Company are exposed to a number of risks, primarily comprising credit risks and market risks. The macroeconomic situation in Sweden is critical for credit risk since all loans are granted in Sweden. Market risks primarily comprise interest-rate risks which are restricted through narrow limits. The operations are characterised by a low risk profile. Loan losses remain low and the refinancing of business activities was highly satisfactory during the first quarter. A detailed description of risks is available in the Annual Report. No significant changes in the allocation of risk have taken place compared with the description provided in the Annual Report. 4 Länsförsäkringar Bank Interim report january march

5 First quarter of compared with fourth quarter of Operating profit rose 8% to SEK 131 M (121) as a result of higher net interest income. The return on equity strengthened to 6.2% (5.7). Operating income increased a total of 4%, or SEK 17 M, to SEK 440 M (423), as a result of higher net interest income. Net interest income amounted to SEK 482 M (484). The investment margin amounted to 1.09% (1.14). Commission income amounted to SEK 236 M (237). Commission expense declined 3%, or SEK 10 M, to SEK 331 M (341). Commission expense largely comprises compensation to the regional insurance companies. The remuneration model has been further developed since the start of the year with enhanced precision and business orientation. The new model is being successively introduced and, given no other changes, the first quarter remuneration was slightly lower than if the new model had been fully implemented. The underlying increase in remuneration is attributable to volume growth. Operating expenses declined 3%, or SEK 9 M, to SEK 283 M (292). Loan losses, net, remained low at SEK 26 M (10). Events after the end of the period No significant events took place after the end of the period. Parent Company First quarter of compared with first quarter of Deposits and some lending are conducted by the Parent Company. Most of the lending and borrowing operations are conducted through the subsidiary Länsförsäkringar Hypotek. Loans to the public rose 14%, or SEK 4 billion, to SEK 33 billion (29). Deposits from the public increased 27%, or SEK 11 billion, to SEK 53 billion (42). Debt securities in issue rose 83%, or SEK 10 billion, to SEK 21 billion (11) due to increased senior borro- wing. Operating loss amounted to SEK 14 M (11). Operating income increased a total of 47% to SEK 145 M (99) due to higher net interest income. Net interest income rose 23% to SEK 191 M (155) boosted by higher business volumes. Net interest income was charged with SEK 5 M (5) for fees to the stability fund. Commission income rose 17% to SEK 51 M (44). Commission expense declined 5% to SEK 145 M (153). The remuneration model has been further developed since the start of the year with enhanced precision and business orientation. The new model is being successively introduced and, given no other changes, the first quarter remuneration was slightly lower than if the new model had been fully implemented. The underlying increase in remuneration is attributable to volume growth. Operating expenses increased 34% to SEK 148 M (110) due to the continued rate of development of the business operations. Recoveries exceeded loan losses and amounted to SEK 11 M (0), net. Subsidiaries Länsförsäkringar Hypotek First quarter of compared with first quarter of Retail mortgages in the bank s mortgage institution increased 11%, or SEK 9 billion, to SEK 91 billion (82). Retail mortgages up to 75% of the market value of the collateral are granted by Länsförsäkringar Hypotek and the remainder by the Parent Company. Higher net interest income expalins the higher operating profit of SEK 81 M (45). Loan losses, net, amounted to SEK 2 M (-2), corresponding to loan losses of 0.01% (-0.01). The number of retail mortgage customers rose to 165,000 (152,000). Mar. 31, Mar. 31, Total assets 115, ,551 Lending volume 90,798 82,426 Net interest income Operating profit Wasa Kredit First quarter of compared with first quarter of Lending volumes rose 9% to SEK 12.0 billion (11.0) as a result of high sales in a climate of intensified competition. Operating profit rose 3% to SEK 38 M (37). Net interest income increased 7% to SEK 119 M (110). Expenses rose 10% to SEK 95 M (86) and loan losses amounted to SEK 13 M (11). Mar. 31, Mar. 31, Total assets 12,422 11,385 Lending volume 12,015 11,001 Net interest income Operating profit Länsförsäkringar Fondförvaltning First quarter of compared with first quarter of Länsförsäkringar is Sweden s fifth largest fund company. The volume of managed funds fell 5%, or SEK 4 billion, to SEK 69 billion (73), mainly due to the negative trend in asset values in the equities market during the year. The company manages 33 (32) mutual funds with various investment orientations. The funds are available as direct fund savings, IPS and unit-linked insurance and through the PPM system. All fund managers are continuously evaluated to ensure that they meet return targets. Operating profit amounted to SEK 25 M (23). Mar. 31, Mar. 31, Total assets Assets under management 69,363 73,209 Net flow -1,878 1,707 Net commission expense Operating profit Länsförsäkringar Bank Interim report january march

6 Income statement Group Note Change Change Full year Interest income 3 2, , % 2, % 9,529.8 Interest expense 4 2, , % 2, % 7,801.5 Net interest income % % 1,728.3 Dividends received Commission income % % Commission expense % % 1,363.9 Net gains from financial items Other operating income % % Total operating income % % 1,519.6 Staff costs % % Other administration expenses % % Total administration expenses % % 1,003.1 Depreciation / amortisation and impairment of property and equipment / intangible assets % % 82.9 Total operating expenses % % 1,086.0 Profit before loan losses % % Loan losses, net % % 48.2 Operating profit % % Tax % % 87.6 Profit for the period % % Statement of comprehensive income Group Change Change Full-year Profit for the period % % Other comprehensive income Available-for-sale financial assets Change in fair value % % Reclassification realised securities % 26.5 Tax % % 43.9 Other comprehensive income for the period, net after tax % % Total comprehensive income for the period % % Länsförsäkringar Bank interim report january

7 Balance sheet Group Note 31, Dec 31, 31, Assets Cash and balances with central banks Treasury bills and other eligible bills 4, , ,870.1 Loans to credit institutions 3, , Loans to the public 9 135, , ,552.6 Bonds and other interest-bearing securities 27, , ,954.7 Shares and participations Derivatives 10 1, , ,190.9 Fair value changes of interest-rate-risk hedged items in the portfolio hedge Intangible assets Property and equipment Deferred tax assets Other assets Prepaid expenses and accrued income 2, , ,660.4 Total assets 175, , ,576.3 Liabilities and equity Liabilities to credit institutions 2, , ,006.1 Deposits and borrowing from the public 53, , ,906.7 Debt securities in issue 103, , ,721.8 Derivatives 10 1, , ,690.7 Fair value changes of interest-rate-risk hedged items in the portfolio hedge 1, , ,281.8 Deferred tax liabilities Other liabilities Accrued expenses and deferred income 3, , ,957.0 Provisions Subordinated liabilities 1, , ,250.0 Total liabilities 168, , ,690.5 Equity Share capital, 9,548,708 shares Other capital contributed 5, , ,453.5 Reserves Retained earnings Profit for the period Total equity 6, , ,885.8 Total liabilities and equity 175, , ,576.3 Pledged assets, contingent liabilities and commitments 11 Other notes Accounting policies 1 Segment reporting 2 Capital-adequacy analysis 12 Disclosures on related parties 13 7 Länsförsäkringar Bank interim report january

8 Cash-flow statement in summary, indirect method Group Cash and cash equivalents, January 1 1, ,182.7 Cash flow from operating activities 1, Cash flow from investing activities Cash flow from financing activities Cash flow for the period Cash and cash equivalents, 31 2, Cash and cash equivalents are defined as cash and balances at central banks, lending and due to credit institutions payable on demand as well as overnight loans and deposits with the Riksbank maturing the following banking day. Changes to the cash flow from operating activities are largely attributable to bonds and other interestbearing securities SEK 7,228.5 M ( 910.6), deposits and borrowing from the public SEK 3,916.3 M (316.6) and debt securities in issue SEK 3,883.0 M (274.5). Changes to the cash flow from financing activities are attributable to shareholders contribution received SEK M (226.0), Group contribution paid SEK M ( 382.4). Statement of changes in shareholders equity Group Share capital Other capital contributed Reserves Retained earnings Profit for the period Opening balance, January 1, , ,528.9 Profit for the period Other comprehensive income for the period Comprehensive income for the period According to the Board s proposal Conditional shareholders contribution received Closing balance, 31, , ,885.8 Total Opening balance, April 1, , ,885.8 Profit for the period Other comprehensive income for the period Comprehensive income for the period Conditional shareholders s contribution received Group contribution paid Tax on Group contribution paid Closing balance, December 31, , ,332.4 Opening balance, January 31, , ,332.4 Profit for the period Other comprehensive income for the period Comprehensive income for the period According to the Board s proposal Conditional shareholders contribution received Closing balance, 31, , , Länsförsäkringar Bank interim report january

9 Notes Group NotE 1 ACCOUNTING POLICIES The consolidated accounts were prepared in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standard Board (IASB), and interpretations from the International Financial Reporting Interpretations Committee (IFRIC), as adopted by the EU. Furthermore, the Swedish Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL) (1995:1559), the Swedish Securities Market Act (2007:528), as well as the regulations and general guidelines of the Swedish Financial Supervisory Authority (FFFS 2008:25) were applied. The Group also applies the Swedish Financial Reporting Board s recommendation RFR 1 Supplementary Accounting Rules for Groups and statements (UFR). This interim report complies with the requirements of IAS 34, Interim Financial Reporting. The Interim report for the Group was prepared according to the same accounting policies and calculation methods as those applied in the Annual Report. NOTE 2 SEGMENT REPORTING Income statement, Banking operations Mortgage institution Finance company Mutual funds Eliminations / Adjustments Total Net interest income Net commission Net gains from financial items Intra-Group income Other income Total operating income Intra-Group expenses Other administration expenses Depreciation / amortisation and impairment Total operating expenses Profit / loss before loan losses Loan losses, net Operating profit / loss Balance sheet, 31, Total assets 84, , , , ,269.7 Liabilities 78, , , , ,629.4 Equity 6, , , ,640.3 Total liabilities and equity 84, , , , ,269.7 Income statement, Net interest income Net commission Net gains from financial items Intra-Group income Other income Total operating income Intra-Group expenses Other administration expenses Depreciation / amortisation and impairment Total operating expenses Profit / loss before loan losses Loan losses, net Operating profit / loss Balance sheet, 31, Total assets 70, , , , ,576.3 Liabilities 64, , , , ,690.5 Equity 5, , , ,885.8 Total liabilities and equity 70, , , , , Länsförsäkringar Bank interim report january

10 Note 3 INTEREST INCOME Change Change Full-year Loans to credit institutions % % 30.0 Loans to the public 1, , % 1, % 5,222.5 Interest-bearing securities % % Derivatives Hedge accounting % % 3,319.3 Non-hedge accounting Other interest income % % 0.0 Total interest income 2, , % 2, % 9,529.8 of which interest income on impaired loans % 11.6 of which interest income from financial items not measured at fair value 1, , % 1, % 5,252.4 Average interest rate on loans to the public during the period, including net leasing, % NOTE 4 INTEREST EXPENSE Change Change Full-year Liabilities to credit institutions % % 37.1 Deposits and borrowing from the public % % Interest-bearing securities % % 3,145.4 Subordinated liabilities % % 68.2 Derivatives Hedge accounting 1, % % 3,484.8 Non-hedge accounting % Other interest expense, including government deposit insurance % % 83.3 Total interest expense 2, , % 2, % 7,801.5 of which interest expense from financial items not measured at fair value 1, % 1, % 4,179.2 Average interest rate on deposits from the public during the period, % NOTE 5 COMMISSION INCOME Change Change Full-year Payment mediation % % 63.6 Loans % % 78.3 Deposits % % 7.1 Financial guarantees % % 0.3 Securities % % Bank cards % % Other commission % % 3.6 Total commission income % % of which commission income from financial items not measured at fair value % % NOTE 6 COMMISSION EXPENSE Change Change Full-year Payment mediation % % 95.7 Securities % % Bank cards % % 82.2 Remuneration to regional insurance companies % % Other commission % 3.5 1% 16.5 Total commission expense % % 1,363.9 of which commission expense from financial items not measured at fair value % % Länsförsäkringar Bank interim report january

11 NOTE 7 NET GAINS FROM FINANCIAL ITEMS Change Change Full-year Change in fair value Interest-related instruments Currency-related instruments % % 18.0 Change in fair value of hedged items Capital gain / loss Interest-related instruments % 6.4 Interest compensation % % 28.6 Total net gains from financial items NOTE 8 LOAN LOSSES, NET Change Change Full-year Specific reserve for individually assessed loan receivables Write-off of confirmed loan losses during the period % 92.7 Reversed earlier impairment of loan losses recognised as confirmed losses % 92.5 Impairment of loan losses during the period % % Payment received for prior confirmed loan losses % % 41.5 Reversed impairment of loan losses no longer required % % 62.2 Loss coverage from related company Net expense for the period for individually assessed loan receivables % % 97.2 Collective reserves for individually assessed receivables Collectively assessed homogenous groups of loan receivables with limited value and similar credit risk Provision / reversal of impairment for loan losses Net expense for the period for collectively assessed homogenous loan receivables Net expense for the period for fulfilment of guarantees % % 0.3 Net expense of loan losses for the period % % Länsförsäkringar Bank interim report january

12 NOTE 9 LOANS TO THE PUBLIC Loan receivables are geographically attributable in their entirety to Sweden. 31, Dec 31, 31, Loan receivables, gross Public sector , Corporate sector 9, , ,929.9 Retail sector 125, , ,629.9 Other Total loan receivables, gross 135, , ,853.9 Impairment of individually assessed loan receivables Corporate sector Retail sector Total individual reserves Impairment of collectively reserved loan receivables Corporate sector Retail sector Other Total collective reserves Total reserves Loan receivables, net Public sector , Corporate sector 9, , ,859.0 Retail sector 124, , ,399.5 Other Total loans to the public, net 135, , ,552.6 Impaired loans Corporate sector Retail sector Total impaired loans Definition A loan receivable is considered impaired if a payment is more than 60 days past due or if there are other reasons to expect that the counterparty cannot meet its undertaking. The loan receivable is considered impaired to the extent that it is not covered by collateral in an adequate amount. 12 Länsförsäkringar Bank interim report january

13 NOTE 10 DERIVATIVES 31, Dec 31, 31, Nominal value Fair value Nominal value Fair value Nominal value Fair value Derivatives with positive values Derivatives in hedge accounting Interest 72, , , , Currency 10, , , Collateral received, CSA Other derivatives Interest , Currency Total derivatives with positive values 82, , , , , ,190.9 Derivatives with negative values Derivatives in hedge accounting Interest 68, , , , , ,568.0 Currency 11, , , ,121.5 Other derivatives Interest 4, Currency 1, Total derivatives with negative values 82, , , , , ,690.7 NOTE 11 PLEDGED ASSETS, CONTINGENT LIABILITIES AND COMMITMENTS 31, Dec 31, 31, For own liabilities, pledged assets Pledged securities in the Riksbank 1, , ,900.0 Pledged securities in Euroclear ,150.0 Collateral provided for derivatives Loan receivables, covered bonds 86, , ,350.2 Commitments resulting from repurchase transactions 2, , ,347.2 Other collateral for securities Total for own liabilities, pledged assets 91, , ,762.4 Other pledged assets None None None Contingent liabilities Guarantees Conditional shareholders contribution 3, , ,301.0 Early retirement at age 62 in accordance with pension agreement, 80% Total contingent liabilities 3, , ,389.5 Other commitments Loans approved but not disbursed 5, , ,779.0 Unutilised portion of overdraft facilities 1, , ,080.4 Unutilised portion of credit card facilities Total other commitments 8, , , Länsförsäkringar Bank interim report january

14 NOTE 12 CAPITAL-ADEQUACY ANALYSIS 31, Dec 31, 31, Capital base Tier 1 capital before deductions 6, , ,999.6 Less intangible assets Less deferred tax assets Less / plus IRB deficit / surplus Tier 1 capital 5, , ,401.0 Subordinated debt, perpetual Total Core Tier 1 capital 5, , ,111.0 Tier 2 capital 1, , Deductions for Tier 2 capital Total capital base 6, , ,140.1 Risk-weighted assets according to Basel II 48, , ,628.8 Risk-weighted assets according to transition rules 73, , ,199.3 Capital requirement Capital requirement for credit risk according to Standardised Approach Capital requirement for credit risk according to IRB Approach 2, , ,698.4 Capital requirement for operational risk Capital requirement according to Basel II 3, , ,650.3 Adjustment according to transition rules 2, , ,663.3 Total capital requirement 5, , ,313.6 Capital ratio Tier 1 ratio according to Basel II, % Core Tier 1 ratio according to Basel ll, % Capital-adequacy ratio according to Basel II, % Capital ratio according to Basel II * Tier 1 ratio according to transition rules, % Core Tier 1 ratio according to transition rules, % Capital-adequacy ratio according to transition rules, % Capital ratio according to transition rules* Special disclosures IRB Provisions surplus (+) / deficit ( ) Total provisions (+) Anticipated loss ( ) Capital requirement Credit risk according to Standardised Approach Exposures to institutions Exposures to corporates Retail exposures Exposures secured on residential property Past due items Covered bonds Other items Total capital requirement for credit risk according to Standardised Approach Länsförsäkringar Bank interim report january

15 NOTE 12 CAPITAL-ADEQUACY ANALYSIS, CONTINUed 31, Dec 31, 31, Credit risk according to IRB Approach Retail exposures Exposures secured by real estate collateral 1, , ,230.4 Other retail exposures Total retail exposures 2, , ,885.1 Exposures to corporates Non credit-obligation assets Total capital requirement for credit risk according to IRB Approach 2, , ,698.4 Operational risk Standardised Approach Total capital requirement for operational risk * Capital ratio = total capital base / total capital requirement In addition to the Parent Company Länsförsäkringar Bank AB (publ) ( ), the financial corporate group includes the wholly owned and fully consolidated subsidiaries Länsförsäkringar Hypotek AB (publ) ( ), Wasa Kredit AB ( ) and Länsförsäkringar Fondförvaltning AB (publ) ( ). NOTE 13 DISCLOSURES ON RELATED PARTIES Related legal entities include the Länsförsäkringar AB Group s and the Länsförsäkringar Liv Group s companies, all associated companies, Länsförsäkringar Mäklarservice AB, Länsförsäkringar Fastighetsförmedling AB, the 23 regional insurance companies with subsidiaries and the local insurance companies that hold shares in Länsförsäkringar AB. Normal business transactions between the related parties took place during first quarter. No other significant changes have occured in the company s agreements with these related legal entities since December 31,. The Bank Group s compensation to the regional insurance companies in accordance with prevailing outsourcing agreements is presented in Note 6 Commission expense. Related key persons are Board members, senior executives and close family members to these individuals. Since December 31,, no significant changes have occurred in the company s agreements with these persons. 15 Länsförsäkringar Bank interim report january

16 Income statement Parent Company Change Change Full-year Interest income % % 2,642.2 Interest expense % % 1,916.2 Net interest income % % Dividends received Group contributions received Commission income % % Commission expense % % Net gains from financial items Other operating income % % Total operating income % % Staff costs % % Other administration expenses % % Total administration expenses % % Depreciation / amortisation and impairment of property and equipment / intangible assets % % 61.0 Total operating expenses % % Profit/loss before loan losses % % 17.0 Loan losses, net Operating profit/loss % Tax % Profit/loss for the period % Statement of comprehensive income Parent Company Change Change Full-year Profit/loss for the period Other comprehensive income Available-for-sale financial assets Change in fair value % Reclassification realised securities % 22.8 Tax % Other comprehensive income for the period, net after tax % Total comprehensive income for the period % % Länsförsäkringar Bank interim report january

17 Balance sheet Parent Company 31, Dec 31, 31, Assets Cash and balances with central banks Treasury bills and other eligible bills ,096.4 Loans to credit institutions 34, , ,721.7 Loans to the public 32, , ,517.6 Bonds and other interest-bearing securities 11, , ,633.1 Shares and participations Shares and participations in Group companies 5, , ,744.0 Derivatives Fair value changes of interest-rate-risk hedged items in the portfolio hedge Intangible assets Property and equipment Deferred tax assets Other assets Prepaid expenses and accrued income Total assets 84, , ,639.0 Liabilities, provisions and equity Liabilities to credit institutions 1, , ,282.1 Deposits and borrowing from the public 53, , ,029.1 Debt securities in issue 20, , ,296.2 Derivatives Fair value changes of interest-rate-risk hedged items in the portfolio hedge Deferred tax liabilities Other liabilities Accrued expenses and deferred income Provisions Subordinated liabilities 1, , ,250.0 Total liabilities and provisions 78, , ,856.4 Equity Share capital, 9,548,708 shares Statutory reserve Fair value reserve Retained earnings 5, , ,790.4 Loss for the period Total equity 6, , ,782.6 Total liabilities, provisions and equity 84, , ,639.0 Memorandum items For own liabilities, pledged assets 2, , ,412.2 Other pledged assets None None None Contingent liabilities 3, , ,340.7 Other commitments 10, , ,741.0 Other notes Accounting policies 1 Capital-adequacy analysis 2 Disclosures on related parties 3 17 Länsförsäkringar Bank interim report january

18 Cash-flow statement in summary, indirect method Parent Company Cash and cash equivalents, January 1 1, ,159.8 Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Cash flow for the period Cash and cash equivalents, 31 2, Cash and cash equivalents are defined as cash and balances at central banks, lending and due to credit institutions payable on demand as well as overnight loans and deposits with the Riksbank maturing the following banking day. Changes to the cash flow from operating activities are mainly attributable to liabilities to bonds and other interest-bearing securities SEK 5,208.8 M (23.8), debt securities in issue SEK 4,781.3 M (1,745.6) and deposits and borrowings from the public SEK 3,883.0 M (306.5). Changes to the cash flow from investing activities are mainly attributable to shares in subsidiaries SEK M (150.0) and from financing activities to shareholders contribution received SEK 52.8 M (37.7). Statement of changes in shareholders equity Parent Company Share capital Other capital contributed Reserves Retained earnings Profit for the period Opening balance, January 1, , ,553.4 Profit for the period Other comprehensive income for the period Comprehensive income for the period According to the Board s proposal Conditional shareholders contribution received Closing balance, 31, , ,782.6 Total Opening balance, April 1, , ,782.6 Profit for the period Other comprehensive income for the period Comprehensive income for the period Conditional shareholders s contribution received Group contribution paid Tax on Group contribution paid Closing balance, December 31, , ,352.0 Opening balance, January 31, , ,352.0 Profit for the period Other comprehensive income for the period Comprehensive income for the period According to the Board s proposal Conditional shareholders contribution received Closing balance, 31, , , Länsförsäkringar Bank interim report january

19 Notes Parent Company NotE 1 ACCOUNTING POLICIES Länsförsäkringar Bank AB prepares the accounts in accordance with the Swedish Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL) (1995:1559), the Swedish Securities Market Act (2007:528) and the regulations and general guidelines of the Swedish Financial Supervisory Authority (FFFS 2008:25). The company also applies the Swedish Financial Reporting Board s recommendation RFR 2 Accounting for Legal Entities and statements regarding listed companies by the Swedish Financial Reporting Board. The regulations in RFR 2 stipulate that the company, in the annual accounts for the legal entity, shall apply all IFRS adopted by EU and statements to the extent that this is possible within the framework of the Swedish Annual Accounts Act and the Pension Obligations Vesting Act and with consideration to the link between accounting and taxation. The recommendation stipulates the permissible exceptions from and supplements to IFRS. The interim report for the company was prepared according to the same accounting policies and calculation methods as those applied in the Annual Report NOTE 2 CAPITAL ADEQUACY ANALYSIS 31, Dec 31, 31, Capital base Tier 1 capital before deductions 6, , ,045.5 Less intangible assets Avgår uppskjutna skattefordringar Less / plus IRB deficit / surplus Tier 1 capital 6, , ,686.0 Subordinated debt perpetual Total Core Tier capital 5, , ,139.5 Tier 2 capital 1, , Deductions for Tier 2 capital Total capital base 7, , ,575.3 Risk-weighted assets according to Basel II 19, , ,082.3 Risk-weighted assets according to transition rules 21, , ,202.4 Capital requirement Capital requirement for credit risk according to Standardised Approach Capital requirement for credit risk according to IRB Approach 1, , ,149.3 Capital requirement for operational risk Capital requirement according to Basel II 1, , ,446.6 Adjustment according to transition rules Total capital requirement 1, , ,559.9 Capital ratio Tier 1 ratio according to Basel II, % Core Tier ratio according to Basel ll, % Capital-adequacy ratio according to Basel II, % Capital ratio according to Basel II * Tier 1 ratio according to transition rules, % Core Tier ratio according to transition rules, % Capital-adequacy ratio according to transition rules, % Capital ratio according to transition rules* Special disclosures IRB Provisions surplus (+) / deficit ( ) Total reserves (+) Anticipated loss ( ) Capital requirement Credit risk according to Standardised Approach Exposures to institutions Exposures to corporates Retail exposures Exposures secured on residential property Past due items Covered bonds Other items Total capital requirement according to the Standardised Approach Länsförsäkringar Bank interim report january

20 NOTE 2 CAPITAL-ADEQUACY ANALYSIS, CONTINUED 31, Dec 31, 31, Credit risk according to IRB Approach Retail exposures Exposures secured by real estate collateral Other retail exposures Total retail exposures Exposures to corporates Non credit-obligation assets Total capital requirement for credit risk according to IRB Approach 1, , ,149.3 Operational risk Standardised Approach Total capital requirement for operational risk * Capital ratio = total capital base / total capital requirement Note 3 DISCLOSURES ON RELATED PARTIES Related legal entities include the Länsförsäkringar AB Group s and the Länsförsäkringar Liv Group s companies, all associated companies, Länsförsäkringar Mäklarservice AB, Länsförsäkringar Fastighetsförmedling AB, the 23 regional insurance companies with subsidiaries and the local insurance companies that hold shares in Länsförsäkringar AB. Normal business transactions between the related parties took place during Janaury -. Since December 31,, no significant changes have occured in the company s agreements with these related legal entities. Related key persons are Board members, senior executives and close family members to these individuals. Since December 31,, no significant changes have occurred in the company s agreements with these persons. This interim report has not been reviewed by the company s auditors. Stockholm, April 23, Rikard Josefson President 20 Länsförsäkringar Bank interim report january