INTERIM REPORT. Q (unaudited)

Transcription

1 INTERIM REPORT Q (unaudited)

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3 Key figures FIGURES IN NOK 000s INCOME STATEMENT Profit/loss after taxation Net interest margin 1,53 % 1,81 % 1,64 % Profit/loss after tax as a % of average total assets 1,12 % 1,41 % 1,19 % KEY BALANCE SHEET FIGURES Gross loans to customers Loan impairment Equity Total assets Average total assets OTHER KEY FIGURES Cost-to-income ratio 5,47 % 4,66 % 4,59 % Impairment charge as a % of gross loans 0,03 % 0,07 % 0,05 % Impairment provisions as a % of gross loans 0,07 % 0,11 % 0,10 % Return on equity after tax*) 14,95 % 19,16 % 15,07 % Capital adequacy ratio 16,31 % 19,67 % 16,75 % YEAR-ON-YEAR BALANCE SHEET GROWTH Growth in total assets 19,50 % 4,91 % 13,20 % Growth in customer lending 16,14 % 6,16 % 11,33 % Information about the loan portfolio Surplus value of cover pool (NOK millions) Surplus value of cover pool (%) 29,0 % 32,0 % 24,9 % Committed surplus (%) 11,0 % 11,0 % 11,0 % Loan-to-value ratio, indexed 50,6 % 56,0 % 55,7 % Loan-to-value ratio, not indexed 57,2 % 57,9 % 58,0 % Face value of covered bonds issued (NOK millions) Substitute assets other than loans (NOK millions) 858,0 479,0 755,3 Weighted average time since issue of loans (years) 3,1 3,0 3,1 Weighted average remaining term of loans (years) 16,0 15,8 16,3 Proportion of variable-rate loans 100 % 100 % 100 % Proportion of flexible mortgages 27,0 % 29,7 % 27,3 % Average loan value (NOK millions) 1,12 1,11 1,17 Number of loans Proportion of loans secured by an overseas property 0 % 0 % 0 % *) Calculated using the opening equity balance adjusted for capital increases. Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q

4 Interim report HIGHLIGHTS Bustadkreditt Sogn og Fjordane AS is a wholly-owned subsidiary of Sparebanken Sogn og Fjordane, with its head office in Førde. Bustadkreditt Sogn og Fjordane AS has given the Sparebanken Sogn og Fjordane group access to long-term funding on competitive terms. It finances itself by issuing covered bonds. Services such as customer care, loan servicing, management and administrative services are supplied by Sparebanken Sogn og Fjordane. At the end of March 2015, the Company had 8,826 mortgages with a total face value of NOK 9,899 million. The loans in the cover pool were issued by Sparebanken Sogn og Fjordane, and subsequently bought by Bustadkreditt Sogn og Fjordane. All of the Company s loans were subject to a variable interest rate. 27.0% of the loan book was made up of flexible mortgages. The weighted average loan-to-value ratio was 50.6 percent, the weighted average loan term was 16.0 years and the weighted average time since the loans were granted was 3.1 years. The average loan per customer was NOK 1.12 million. The Company s total loan portfolio grew by NOK 1,375 million over the past year. The volume of covered bonds issued by the Company was NOK 8.3 billion. RATING OF COVERED BONDS In the third quarter of 2011, Bustadkreditt Sogn og Fjordane AS s covered bond programme was given a long term rating of Aaa by the ratings agency Moody s. That rating remains unchanged. CHANGE IN CALCULATION OF LOAN-TO-VALUE RATIOS All Norwegian credit institutions use Eiendomsverdi to provide valuations of the collateral in their cover pools. Eiendomsverdi provides two estimates: one unbiased estimate, and one adjusted estimate that downwardly adjusts the unbiased estimate for the riskiest assets. Some Norwegian covered bond companies have used the unbiased estimate and others the adjusted estimate to calculate loan-to-value ratios. Bustadkreditt Sogn og Fjordane has in the past used the adjusted estimate. As of first quarter 2015, the company will follow the advice from the Norwegian committee on covered bonds, which recommends that Norwegian covered bond companies use the unbiased estimate to calculate loan-to-value ratios. The reported loan-to-value ratio in Bustadkreditt Sogn og Fjordane falls from 55.7 % at the end of 2014 to 50.6 % at 31 March Change of methodology for loan-to-value ratios combined with use of a new and improved estimation model from Eiendomsverdi are the most important factors explaining this reduction. But also rising house prices and repayments on loans in the cover pool contribute to the reduction. KEY FIGURES (Figures in brackets are for the year-earlier period.) Profit after taxation of NOK 29.4 million (32.1 million) Net interest income of NOK 39.6 million (40.6 million) Operating expenses of NOK 2.2 million (1.9 million) Net change in the value of financial instruments of NOK -0.4 million ( 0.7 million) Impairment charge of NOK -2.9 million ( 5.6 million) Annualised return on equity of 14.9% (19.2%) after tax Core capital adequacy ratio of 16.31% (19.67%) FINANCIAL RESULTS In the first quarter of 2015, the Company made a pre-tax profit of NOK 40.3 million. Profit after tax was NOK 29.4 million, giving an annualised return on equity of 14.9%. The equivalent figures for the previous year were NOK 43.9 million in pre-tax profit, NOK 32.1 million in profit after tax and return on equity of 19.2%. Profit after tax was equivalent to 1.12% of average total assets, compared with 1.41% the previous year. NET INTEREST INCOME Net interest income totalled NOK 39.6 million. The net interest margin for the first quarter of 2015 was 1.53%. The equivalent figures for the year-earlier period were NOK 40.6 million and 1.81%. The reduction was due to margins on loans to customers falling as a result of fierce competition in the banking market. OPERATING EXPENSES Operating expenses were NOK 2.2 million, compared with NOK 1.9 million last year. The chief items were the purchase of services from Sparebanken Sogn og Fjordane, costs associated with issuing bonds and credit rating costs. The cost/income ratio rose to 5.5% in the first quarter of 2015, from 4.7% in the year-earlier period. This was related to a slight increase in the cost of services bought from the parent company, combined with somewhat lower interest income than last year. LOAN IMPAIRMENT CHARGE The Company follows Sparebanken Sogn og Fjordane s guidelines for assessing loan impairment. At 31 March 2015, one loan was more than 90 days in arrears, but no losses had been realised. Credit risk is low, and no individually assessed impairment provisions have been made. 4 Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q1 2015

5 Collectively assessed provisions are estimated using a model that takes into the quality, size and composition of the loan portfolio. The model used is the same one as is used by Sparebanken Sogn og Fjordane. In the first quarter of 2015, the Company recognised a NOK 2.9 million gain in relation to collectively assessed impairment provisions. This gain was the result of adjustments to the scoring model used after the most recent validation. This adjustment pushed customers into lower risk classes, which in turn led to a reduction in collectively assessed impairment provisions. BALANCE SHEET The Company had total assets of NOK 10,759 million at 31 March This represented an increase of NOK 1,756 million over the past 12 months (+ 19.5%). The increase in total assets was primarily due to growth in loans to customers. CUSTOMER LOANS AND OTHER SUBSTITUTE ASSETS In addition to the NOK 9,899 million of mortgage loans, NOK 858 million of other substitute assets have been established. The total value of the (adjusted) cover pool is NOK 10,721 million, which is 29.0% higher than the volume of covered bonds issued. Around 63% of Bustadkreditt Sogn og Fjordane s loan portfolio has a loan-to-value ratio of less than 60%. The Company considers its loan portfolio to be lowrisk. The figure below shows the weighted loan-to-value ratio for the loans held by the Company. Weighted loan-to-value ratio 40% 5 biggest counties measured by loan volume County Share Sogn og Fjordane 51,4 % Hordaland 25,0 % Oslo 8,8 % Akershus 5,8 % Rogaland 2,6 % Rest of Norway 6,4 % Total 100,0 % 5 biggest municipalities measured by loan volume Municipality Share Bergen 21,5 % Førde 14,0 % Flora 11,8 % Oslo 8,8 % Sogndal 3,6 % Rest of Norway 40,4 % Total 100,0 % Other information about the loan portfolio Distribution by loan value Loan value Volume (NOK millions) 0 1 million million million over 3 million Total The combined volume of the five biggest loans was NOK 55.8 million. 35% 30% 25% 20% 15% 28% 15% 20% 34% SHAREHOLDERS EQUITY AND CORE TIER 1 CAPITAL RATIO At 31 March 2015, Bustadkreditt Sogn og Fjordane AS had NOK 706 million of equity. The Core Tier 1 capital ratio was 16.31%. The equivalent figures for the previous year were NOK 708 million of equity and a capital adequacy ratio of 19.67%.A dividend of NOK million was paid to the parent company during the reporting period. 10% 5% 3% Core Tier 1 capital ratio has been calculated by measuring credit risk using the standardised approach and operational risk using the basic indicator approach. 0% Under 40% 40-50% 50-60% 60-75% Over 75% The geographic distribution of our mortgage portfolio, based on where the main borrower lives, was as follows: Region Share Western Norway 80,4 % Eastern Norway 17,8 % Central Norway 0,9 % Southern Norway 0,5 % Northern Norway 0,4 % Overseas 0,0 % Total 100,0 % LIQUIDITY At the close of the first quarter, Bustadkreditt Sogn og Fjordane AS had NOK million of deposits held at Sparebanken Sogn og Fjordane, as well as a total of NOK million of substitute assets made up of short-term government bonds and covered bonds issued by other banks. In addition, the Company has good credit facilities with Sparebanken Sogn og Fjordane. These will allow the Company to make interest and principal payments to the owners of covered bonds, enable it to make advances to customers with flexible mortgages, provide bridge financing when loans are being transferred from the parent bank to it, and fund the necessary surplus in the cover pool. Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q

6 RISK Under its licence as a credit institution, Bustadkreditt Sogn og Fjordane is subject to laws, regulations and rules that limit the level of risk to which it can be exposed. The Board of Directors and CEO are responsible for establishing risk management procedures, and for ensuring that they are adequate and in compliance with laws and regulations. Bustadkreditt Sogn og Fjordane is exposed to credit risk, operational risk, liquidity risk and interest rate risk. The Board considers it a priority for the Company to maintain a low risk exposure. Limits have been set on exposure to the various classes of risk, and a system has been established for measuring, managing and monitoring each of them. Credit risk Credit risk is the risk of losing money as a result of customers or counterparties being unable or unwilling to fulfil their obligations to BSF. The Company has its own rules on which loans it can buy from its parent company. The rules are strict, which means that in principle the credit risk is low. The rules specify requirements relating to the type of loan, loan-to-value ratio, risk class and type of collateral. At the end of the first quarter of 2014, the Company s average loan-to-value ratio was 56%, measured using the approved valuation of the collateral by Eiendomsverdi AS. The Board of Directors considers the loan portfolio to be of high quality, and to be associated with a low credit risk. Market risk Market risk is the risk arising from the Bank s open positions relating to loans and financial instruments whose values fluctuate over time in response to changes in market prices. Bustadkreditt Sogn og Fjordane AS does not have any investments in shares of foreign currencies, so all of its market risk is related to interest rate risk. Bustadkreditt Sogn og Fjordane s risk management policies set limits on its exposure to market risk. The Board considers it a priority for the Company to maintain a low exposure to market risk. Liquidity risk Liquidity risk is the risk that the Company will be unable to fulfil its obligations and/or finance an increase in assets without significant additional cost, either because it has to realise losses on the sale of assets or because it has to make use of unusually expensive financing. The Board has decided that the Company should maintain a low exposure to liquidity risk. This is, amongst other things, reflected in the size of the required liquidity buffer. The credit agreements with the parent company also play an important role in reducing the Company s liquidity risk. Operational risk Operational risk is defined as the risk of losses due to human error, external actions or failures and defects in the Company s systems, procedures and processes. Bustadkreditt Sogn og Fjordane AS has signed an agreement with Sparebanken Sogn og Fjordane on the provision of services in areas such as customer service, administration, IT, finance and risk management. In these areas, the parent company is responsible for resolving any mistakes and for handling the operational risk. The Board believes that it handles this area well. OUTLOOK The Company has started 2015 well, but it is still strongly affected by the fact that margins on loans to customers are under pressure due to competition in the banking market. At the end of March 2015, house prices had risen for 15 months in a row, reaching record levels. For Bustadkreditt Sogn og Fjordane, this reduces the average loan-to-value ratio of the loans in its portfolio. Funding obtained through the market for covered bonds will continue to play a vital role in helping the Sparebanken Sogn og Fjordane banking group to remain competitive. We are therefore working to ensure that Bustadkreditt Sogn og Fjordane can buy a larger proportion of Sparebanken Sogn og Fjordane s mortgage portfolio in the coming years. Førde, 22 April 2015 The Board of Directors of Bustadkreditt Sogn og Fjordane AS Frode Vasseth Chair Hallvard Klakegg Peter Midthun Ingeborg Aase Fransson Harald Slettvoll CEO 6 Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q1 2015

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8 Income statement Note Interest income Interest expenses Net interest income Commission income Net commission income Net gains/losses on financial instruments Total other operating income Net other operating income Total operating income Wages, salaries, etc Administration expenses Other operating expenses Total operating expenses Operating profit/loss before loan impairment charge Loan impairment 3, 4, Operating profit/loss Tax expense Profit/loss for the reporting period COMPREHENSIVE INCOME Profit/loss for the reporting period Other comprehensive income Comprehensive income Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q1 2015

9 Balance sheet ASSETS Note Loans and advances to credit institutions Loans to customers 3, 4, Commercial paper and bonds Deferred tax assets Other receivables/accrued income Total assets SHAREHOLDERS EQUITY AND LIABILITIES Paid-up equity Share capital Total paid-up equity Retained earnings Other equity Allocated for dividends Total retained earnings Total equity Liabilities Debt to credit institutions Debt securities in issue Tax payable Accrued costs Total liabilities Total liabilities and equity Førde, 22 April 2015 The Board of Directors of Bustadkreditt Sogn og Fjordane AS Frode Vasseth Chair Hallvard Klakegg Peter Midthun Ingeborg Aase Fransson Harald Slettvoll CEO Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q

10 Cash flow statement Profit/loss before taxation Impairment provisions for loans and guarantees Tax paid Reduction/increase in loans and advances to customers Other non-cash transactions A) Net cash flow from operating activities Reduction/increase in investments in commercial paper and bonds B) Net cash flow from investment activities Increase/reduction in loans from credit institutions Increase/reduction in debt securities Increase/reduction in paid-up share capital Dividends C) Net cash flow from financing activities D) Net cash flow during the year (A+B+C) Opening balance of cash and cash equivalents Closing balance of cash and cash equivalents Breakdown of cash and cash equivalents Deposits at other financial institutions Total Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q1 2015

11 Equity statement PAID-UP EQUITY RETAINED EARNINGS Share Other Allocated for Total capital equity dividends equity Opening balance Dividends paid Profit/loss for the reporting period Equity transactions New paid-up equity Closing balance Opening balance Dividends paid Profit/loss for the reporting period Closing balance Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q

12 Notes to the accounts NOTE 1 WAGES, SALARIES, ETC. Bustadkreditt Sogn og Fjordane AS s financial statements have been prepared using the simplified application of IFRS. These interim financial statements have been presented in accordance with IAS 34 Interim Financial Reporting. The Company has used the same accounting policies and calculation methods as at 31 December The Ministry of Finance issued new regulations on the simplified application of IFRS on 3 March The new regulations came into force as of the 2014 financial year, but a transition arrangement allows the old regulations to be used for the 2014 and 2015 financial years. The Company has chosen to make use of the transition arrangement, and has therefore prepared the financial statements for Q using the old regulations. For more detailed information about accounting policies and critical accounting estimates, please see Bustadkreditt Sogn og Fjordane s 2014 annual report. See: All figures are stated in thousands of NOK, unless otherwise specified. NOTE 2 SEGMENTS The Company has one segment. This segment consists of loans to retail customers and a small volume of loans to private businesses. All of the loans have been bought from Sparebanken Sogn og Fjordane. The Company does not have any operations outside Norway. Customers with overseas addresses are classified as part of the Norwegian operations. NOTE 3 LOAN IMPAIRMENT CHARGE Increase/reduction in individually assessed impairment provisions Increase/reduction in collectively assessed impairment provisions Losses realised during the period for which impairment provisions had previously been made Losses realised during the period for which impairment provisions had not previously been made Recoveries against previous years realised losses = Loan impairment charge for the period NOTE 4 IMPAIRMENT PROVISIONS Individually assessed impairment provisions at the start of the period New ind. ass. provisions against previously impaired loans Writebacks of individually assessed provisions from past periods Loan loss provisions against previously unimpaired loans Losses realised for which individually assessed provisions had been made Individually assessed impairment provisions at the end of the period Collectively assessed impairment provisions at start of period Change in collectively assessed provisions for the period Collectively assessed impairment provisions at end of period Total impairment provisions at end of period Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q1 2015

13 NOTE 5 LOANS IN DEFAULT AND AT RISK OF DEFAULT Loans in default Loans more than 90 days in arrears individually assessed impairment provisions Net loans in default Coverage ratio 0 % 0 % 0 % Other loans at risk of default Loans at risk of default (not in default) Individually assessed impairment provisions Net other loans at risk of default Coverage ratio 0 % 0 % 0 % NOTE 6 DEBT SECURITIES IN ISSUE Commercial paper and other short-term borrowings Bonds in issue Own commercial paper/bonds, not amortised Total debt securities in issue Term to maturity Remaining term to maturity (face value) Total New borrowings in Repaid during the reporting period 0 MATURITY BOOK VALUE ISIN NUMBER FACE VALUE INTEREST RATE SPREAD DATE *) NO MND. NIBOR 0,55 % NO MND. NIBOR 0,70 % NO MND. NIBOR 0,58 % NO MND. NIBOR 0,55 % NO MND. NIBOR 0,72 % NO MND. NIBOR 0,55 % NO MND. NIBOR 0,48 % NO MND. NIBOR 0,58 % NO MND. NIBOR 0,36 % Amortisation Total debt securities in issue The table shows the agreed maturity date. *) The terms of the loan allow for the maturity date to be extended by one year. All loans are denominated in NOK. All loan agreements are subject to standard loan terms. Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q

14 NOTE 7 CAPITAL ADEQUACY Equity and subordinated debt Share capital and share premium account Other equity Share of interim profit/loss Equity Other core capital Deductions: Deferred tax assets Net core capital Core Tier 1 capital Net supplementary capital Net equity and subordinated loan capital BASIS FOR CALCULATION Credit risk Institutions Retail loans Residential mortgage loans Overdue advances Covered bonds Other advances Total calculation basis for credit risk Operational risk Total calculation basis Excess equity and subordinated debt CAPITAL ADEQUACY Capital adequacy ratio 16,31 % 19,67 % 16,75 % Core capital adequacy ratio 16,31 % 19,67 % 16,75 % Core Tier 1 capital adequacy ratio 16,31 % 19,67 % 16,75 % The capital adequacy ratio has been calculated using the new capital adequacy regulations (Basel II). The standardised approach has been used for credit risk and market risk, whilst the basic indicator approach has been used for operational risk. There are three pillars to the Basel II regulations. Pillar 1 relates to minimum capital adequacy requirements, and builds on the previous regulations in Basel I. Pillar 2 relates to the institution s internal assessment of total capital requirements (ICAAP), whilst Pillar 3 covers disclosure requirements for financial information. 14 Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q1 2015

15 NOTE 8 TRANSACTIONS WITH RELATED PARTIES Intra-group transactions Interest received from Sparebanken Sogn og Fjordane Interest paid to Sparebanken Sogn og Fjordane Interest paid to Sparebanken Sogn og Fjordane on covered bonds Services bought from Sparebanken Sogn og Fjordane Deposits at Sparebanken Sogn og Fjordane Liabilities to Sparebanken Sogn og Fjordane Covered bonds held by Sparebanken Sogn og Fjordane Bustadkreditt Sogn og Fjordane AS has no employees. An agreement has been signed with Sparebanken Sogn og Fjordane on the supply of loan servicing and administrative services. All of the Company s loans have been acquired from Sparebanken Sogn og Fjordane, and an agreement has been signed with the bank on the servicing of the portfolio. Bustadkreditt Sogn og Fjordane AS takes on all of the risk associated with the loans that it acquires from its parent. Bustadkreditt Sogn og Fjordane AS has been given access to good credit facilities with Sparebanken Sogn og Fjordane. These will allow the Company to make interest and principal payments to the owners of covered bonds, enable it to make advances to customers with flexible mortgages, provide bridge financing when loans are being transferred, and fund the necessary surplus in the cover pool. Further details of the credit facilities: Bustadkreditt Sogn og Fjordane AS has four credit facilities with Sparebanken Sogn og Fjordane (SSF): a) A 3-year credit that matures in June The credit facility is to be used for buying mortgage loans from SSF. It has a limit of NOK 750 million. b) A credit agreement to ensure that owners of covered bonds will be paid even if the mortgage finance subsidiary is unable to meet its obligations. At 31 March 2015, the agreement had a limit of NOK 1,654 million. Under the agreement, the obligations of the Bank relate to all payments due to the owners of the covered bonds over the coming year. c) A credit facility that can be used to finance advances to customers with available credit within their flexible mortgages. At 31 March 2015 the limit on the facility was NOK 1,072 million. d) A credit facility related to overcollateralisation. The facility shall be used to buy loans for inclusion in the cover pool, and to buy instruments that qualify as part of a liquidity buffer. At 31 March 2015 the limit on the facility was NOK 1,247 million, but this limit depends on the volume of covered bonds issued at any given time. All agreements adhere to arm s length principles. NOTE 9 OFF BALANCE SHEET ITEMS Unused credit facilities = Total contingent liabilities The unused credit facilities are available financing in flexible mortgages. The Company has no other off-balance-sheet obligations. NOTE 10 SUBSTITUTE ASSETS Deposits at the parent company Government-guaranteed commercial paper Other commercial paper and bonds Total substitute assets Bustadkreditt Sogn og Fjordane AS INTERIM REPORT Q

16 INFORMATION ABOUT THE COMPANY Address: Bustadkreditt Sogn og Fjordane AS Langebruvegen 12 N-6800 Førde, Norway Tel. no.: Organisation number: Management: Harald Slettvoll Board of Directors: Frode Vasseth Hallvard Klakegg Ingeborg Aase Fransson Peter Midthun Dagleg leiar Chair Board member Board member Board member Contact person: Harald Slettvoll, CEO, tel