BANK NORWEGIAN AS. Company description prepared in connection with the listing of

Transcription

1 Approved by Nasdaq Stockholm AB on 8 December 2015 BANK NORWEGIAN AS Company description prepared in connection with the listing of a SEK 3,000,000,000 Medium Term Note Program on First North Bond Market

2 First North Disclaimer First North Bond Market is an alternative marketplace operated by an exchange within the NASDAQ OMX group. Issuers on First North Bond Market are not subject to the same rules as Issuers on the regulated main market. Instead they are subject to a less extensive set of rules and regulations. The risk in investing in an Issuer on First North Bond Market may therefore be higher than investing in an Issuer on the main market. At least during the application process Issuers except for Issuers whose securities are already admitted to trading on a regulated market or a First North market applying for admission to trading of fixed income instruments on First North Bond Market shall have a Certified Adviser who monitors that the rules are followed. The Exchange approves the application for admission to trading. Important information This company description (the Company Description ) has been prepared by Bank Norwegian AS (the Issuer, or the Company ), a limited liability company (No. aksjeselskap) incorporated in Norway, having its registered address at Oksenøyveien 3, 1366 Lysaker, Norway, with Norwegian Reg. No The Issuer has resolved to issue notes (the Notes ) under a Medium Term Note Program with a maximum program amount of SEK 3,000,000,000 (the Program ). The Notes will be issued under the terms and conditions for the Notes (the Terms and Conditions ), for each issue as specified in the final terms (Sw. slutliga villkor). The Company Description has been prepared in relation to the listing of the Program on the institutional segment of First North Bond Market at NASDAQ OMX Stockholm ( First North ). Swedbank AB (publ) is acting as arranger and dealer in connection with the Program. This Company Description does not constitute a prospectus as defined in the Directive 2003/71/EC, as amended, (the Prospectus Directive ) and no prospectus relating to the Notes or the listing on First North has been or will be registered under any law or regulation. This Company Description has not been prepared to comply with the Prospectus Directive or the EC Commission Regulation No. 809/2004, nor with any national rules and regulations relating to prospectuses, including but not limited to Chapter 2 of the Swedish Financial Instruments Trading Act (Sw. lag (1991:980) om handel med finansiella instrument). Each issue of Notes will be made and this Company Description has been prepared, on the basis that any offer of Notes in any member state of the European Economic Area which has implemented the Prospectus Directive, will be made pursuant to an exemption under the Prospectus Directive, as implemented in each relevant member state of the European Economic Area, from the requirement to publish a prospectus for offers of Notes. This Company Description does not contain and does not constitute an offer or a solicitation to purchase or sell Notes in any jurisdiction. The Notes have not been and will not be registered under the US Securities Act of 1933, as amended (the Securities Act ) or the securities laws of any state or other jurisdiction outside Sweden (and in Sweden only where permitted by an exemption to the Prospectus Directive). The Notes may not be offered, sold, pledge or otherwise transferred directly or indirectly within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Notes will be offered and sold outside the United States to purchasers who are not, or are not purchasing for the account of, U.S. persons in reliance upon Regulation S under the Securities Act. No person has been authorized to provide any information or make any statements other than those contained in this Company Description and, if given or made, such information or representation must not be relied upon as having been authorized by the Issuer and the Issuer assumes no responsibility for such information or statements. 1

3 Except where expressly stated otherwise, no information in this Company Description has been reviewed or audited by the Company s auditor. Certain financial and other numerical information set forth in this Company Description has been subject to rounding and, as a result, the numerical figures shown as totals in this Company Description may vary slightly from the exact arithmetic aggregation of the figures that precede them. In this Company Description, references to euro, and EUR refer to the single currency introduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treaty establishing the European Community, as amended, references to NOK refer to Norwegian krona, and references to SEK refer to Swedish krona. This Company Description may contain forward-looking statements and assumptions regarding future market conditions, operations and results. Such forward-looking statements and information are based on the beliefs of the Company s management or are assumptions based on information available to the Company. The words considers, intends, deems, expects, anticipates, plans and similar expressions indicate some of these forward-looking statements. Other such statements may be identified from the context. Any forward-looking statements in this Company Description involve known and unknown risks, uncertainties and other factors which may cause the actual results, performances or achievements of the Company to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Further, such forward-looking statements are based on assumptions regarding the Company s present and future business strategies and the environment in which the Company will operate in the future. Although the Company believes that the forecasts of, or indications of future results, performances and achievements are based on reasonable assumptions and expectations, they involve uncertainties and are subject to certain risks, the occurrence of which could cause actual results to differ materially from those predicted in the forward-looking statements and from past results, performances or achievements. Further, actual events and financial outcomes may differ significantly from what is described in such statements as a result of the materialization of risks and other factors affecting the Company s operations. Such factors of a significant nature are mentioned in the section Risk factors below. The Program has not been assigned and the Notes are not expected to be assigned any credit rating by a rating agency. The Company Description will be available at the Company s website ( 2

4 TABLE OF CONTENTS 1 RISK FACTORS LIABILITY STATEMENT OF THE BOARD OF DIRECTORS DESCRIPTION OF THE ISSUER BACKGROUND OF REQUEST TO ADMISSION TO TRADING DESCRIPTION OF THE NOTES FINANCIAL INFORMATION AND FINANCIAL CALENDAR BOARD OF DIRECTORS AND SENIOR MANAGEMENT ETC OWNERSHIP STRUCTURE LEGAL AND SUPPLEMENTARY INFORMATION ADDRESSES APPENDIX 1 TERMS AND CONDITIONS

5 1 RISK FACTORS Investments in corporate bonds always entail a certain degree of risk, including the risk of losing the value of the entire investments. A number of factors, both within the Issuer s control but also factors not controllable by the Issuer, affect and may come to affect the Issuer and its operations, result, financial position as well as the Notes. In this section a number of risk factors are described, both general risks attributable to the Issuer s operations and main risks linked to the Notes in their capacity of financial instruments. The intention is to describe risks that are linked to the Issuer s business and thus also its ability to fulfil its obligations in accordance with the Terms and Conditions. Before making a decision about acquisition of the Notes, any potential investors should carefully consider the risk factors outlined below, as well as any other information provided by the Issuer in relation to the Notes. In addition, an investor must, alone or together with its financial and other types of advisers, engage in a general evaluation of external facts, other information provided by the Issuer in relation to the Notes and general information about the banking business from its own perspective. An investor should have adequate knowledge to evaluate the risk factors as well as sufficient financial strength to bear these risks. The below summary of risk factors does not claim to be complete, nor are the risks ranked in order of importance. Additional risk factors which are currently unknown or which are currently not deemed to be material may also affect the Issuer s future operations, result and financial position and thus the Issuer s ability to fulfil its obligations in accordance with the Terms and Conditions. 1.1 Risks related to the Issuer Financial risks Credit risk The Issuer s object of business is primarily to receive deposits and to offer credits to the retail customer market. The Issuer only offers unsecured loans and credit risk constitutes the main element of the Issuer s total risk. Credit risk can be described as the risk of loss if customers lack ability or willingness to comply with their obligations towards the Issuer. The risk is accordingly that the Issuer will not receive repayment for its claims, such as interest amounts and deductions. The board of directors of the Issuer has defined guidelines that regulate credit risk. The guidelines are reviewed at least annually by the board of directors. All credit decisions in the business are made by means of automated decision support systems. Credit is granted based on a qualitative and quantitative analysis of the customer's willingness and ability to pay. The analysis of the willingness to pay 4

6 identifies the characteristics of the customer that predict future payment conduct, while the analysis of the customer s capacity to service loans is a quantitative evaluation of the customer s ability to repay his/her obligations, given the customer s current and anticipated future economic situation. Customer s application score is used in the bank s risk-based product pricing. Customers are regularly risk assessed based on behavioral score, if sufficient track records exists. For new customers and customers in new markets, application score is used in addition to any clear negative observations, such as default on loan agreement. The Issuer follows up credit quality through, for example, on-going reporting and credit committee meetings. The board of directors of the Issuer has set limits for the maximum exposure per customer based on the type of commitment. The Issuer is further exposed to credit risk in the investment portfolio. Credit risk can occur as a result of default or downgrading of a counterparty which in turn may lead to credit loss. The Issuer s investment portfolio is managed by Storebrand Kapitalforvaltning and the management is regulated by a mandate agreement. The counterparty risk is regulated in an investment policy and a counterparty policy, which also is reflected in the mandate agreement with Storebrand Kapitalforvaltning. Interest rate risk The board of directors of the Issuer has defined guidelines that set the limits for the maximum interest rate risk. The guidelines are reviewed at least annually by the board of directors. The Issuer s investment portfolio is invested with a short term to maturity. All products offered by the Issuer have interest rates set by the management of the Issuer and the interest rate commitment term for the Issuer s financial instruments coincides with the term for the products. Products with fixed interest terms are not offered. Any exposure exceeding the interest rate limits shall be mitigated by using hedging instruments. A scheme has been established for the on-going monitoring and reporting of the interest rate risk to the board of directors. Market risk Market risk is the potential loss caused by changes in market prices such as interest rates, fluctuations in the exchange rate of the Norwegian krona to foreign currencies and securities. The Issuer s exposure to market risk is connected to the investment portfolio and currency risk exposure in relation to cross border activities. The Issuer s exposure to market risk is regulated in the Issuer s interest rate risk policy, currency policy, derivatives policy, and investment policy, which inter alia include a defined maximum market risk that is intended to limit the risk for negative effects to the Issuer s equity. The market risk is quantified with the assistance of duration calculations. The benchmark duration for investment assets is set at The finance department follows up market risk on an on-going basis and the department reports on a monthly basis to the asset and liability management committee and the board of directors. 5

7 Exposure to foreign currency risk is hedged. The Issuer s board of directors has adopted guidelines for the Issuer s investments in certificates and bonds and for the management of foreign currency risk in connection with the Issuer s operations abroad. The guidelines are reviewed by the board of directors at least annually. Limits for the interest rate risk in the investment portfolio are set based on stress tests for negative fluctuations in the interest rate level. The guidelines also set out limits based on credit risk weights, and maximum exposure for each counterpart in accordance with their credit rating and maturity. The lowest acceptable credit rating is BBB-. Guidelines for continuous follow-ups and reporting have also been adopted. Counterparty risk is an element of credit risk and is the loss that follows from credit events with counterparties connected to the Issuer s investment management activities. Liquidity risk Liquidity risk is defined as the Issuer not being able to cover all financial obligations as they become due for payment without large consequences to the Issuer s results. The board of directors of the Issuer has adopted guidelines for management of the Issuer s liquidity position to ensure that the Issuer maintains a solid liquidity position. The guidelines are reviewed at least annually by the board of directors. The guidelines set risk limits for liquidity management and define a reporting scheme. The Issuer manages its liquidity position by means of summaries illustrating cash flows in the short term and by means of liquidity due date summaries. Regular liquidity stress tests are performed. A majority of the Issuer s assets consist of marketable securities, including substantial holdings of certificates issued by the Norwegian government. The Issuer further has a significant stock of deposits in the central bank of Norway, Norges Bank. The asset side is financed by core deposits from the retail market, bonds and subordinated capital. To reduce the liquidity risk, a maximum deposit limit per customer of NOK two million has been set to achieve the best deposit terms. Commercial risks Operational risk Operational risk is the loss caused by wrong-doing or errors in internal processes, actions taken by employees and technology or caused by external events as well as legal risk. The Issuer s board of directors has established operational risk guidelines, which are reviewed at least annually by the board of directors. The Issuer offers simple and 6

8 standardized products to the retail market, which contribute to limiting the operational risk. In order to ensure efficient, high quality operations, the Issuer is continuously seeking to automate critical processes. In addition to an annual review of significant operational risks and control measures, there is a continuous evaluation of the operational risk situation and risk-reducing measures are implemented as necessary. The Issuer s operating concept is based largely on purchasing services from external suppliers, such as services related to system operations, telecommunications, distribution, investment management, payment card issuance and debt collection. The agreements include quality standard provisions and are followed up on an ongoing basis by the Issuer in accordance with the outsourcing guidelines. Contingency plans have been established and insurance agreements have been entered into that safeguard the Issuer against major loss incidents. Strategic and business risk Strategic and business risk is the risk of insufficient profitability or fluctuations in results caused by lack in revenues and/or cost efficiency, and as a result of market or regulatory conditions and wrong choice of direction. Strategic and business risk further includes the risk of entering into new geographical markets and e.g. the implications of operating towards a new customer base and being subject to new regulatory frameworks. It cannot be excluded that expansion into new markets could lead to higher costs and in turn negatively affect the Issuer s result and financial position. Business risk is a significant risk for the Issuer. The Issuer bases its operations to a great extent on co-operation with and the trademark of the airline Norwegian. Norwegian s good reputation has contributed to strong customer growth, but, on the other hand, the Issuer may also be vulnerable in the event of a decline in Norwegian s good reputation and/or significant changes to the contractual relationship with the airline Norwegian (the contractual relationship is further described in the section Legal and supplementary information ). There will be factors of uncertainty associated with lower customer acquisition and volumes, reduced interest rate margins, inadequate cost-effectiveness and inappropriate technological choices. Business risk demands that the board of directors and the management have good planning processes and are able to adapt in order to reduce losses. 7

9 Macro-economic factors The Issuer is further subject to macro-economic changes such as GNP development, interest rate levels, and currency rate development. A decline in the economy may result in weaker growth, higher losses and weaker earnings, and it may make it difficult to raise capital at the same time. By way of example, an increase in the interest rate levels may increase the risk of credit losses and/or result in reduced willingness to take up new loans. Dependence on key personnel The Issuer bases much of its business development on challenging traditional banking solutions and creating new solutions, and the Issuer is accordingly dependent upon key individuals that holds this knowledge and have gathered the experience. If such key individuals should choose to end their employment with the Issuer, this could have adverse consequences for the Issuer s further development. Similarly the Issuer s future development is dependent on the Issuer s ability to attract and retain skilled personnel and to develop the level of expertise throughout its organization. Competition The Issuer meets strong competition and the competitors are primarily local and international financial institutions and banks. Even if the Issuer considers that it has a strong position on its markets, no guarantee can be made that increased competition will not adversely affect the Issuer s operations. Further, the banking market may be consolidated, which may adversely affect the Issuer s financial position. Legal risk The Issuer s operations are subject to comprehensive regulations and supervision. The legal framework is continuously changing and future changes of the legal framework, inter alia including changes in capital adequacy requirements and auditing standards, may have a negative effect and impact on the Issuer s pursuing of its operations and to the Issuer s financial results. The Issuer s business is further affected by new and amended legislation, regulations and other rules passed by authorities in Norway, Sweden, the European Union and by foreign governments and authorities in the countries where the Issuer operates. Legal actions The Issuer is currently not part in any civil actions or legal proceedings relating to its ordinary business or otherwise which significantly affect or may come to adversely affect the Issuer s financial strength. The Issuer can however not guarantee that there will be no claims or legal actions in the future (including regulations) against the Issuer which may affect or could significantly adversely affect the Issuer s financial position, earnings or market position. 8

10 1.2 Risks relating to the Notes Credit risks Investors in the Notes bear credit risk relating to the Issuer. An investor s ability to receive payment under the Terms and Conditions is dependent on the Issuer s ability to meet its payment obligations under the Terms and Conditions, which in turn is largely dependent on the Issuer s operations and its financial position. An increased credit risk for the Issuer, which has been described in further detail above, may result in that the market charges the Notes a higher risk premium which would affect the Notes value negatively. Refinancing risks The Issuer may be required to refinance certain or all of its outstanding debt, including the Notes. The Issuer s ability to successfully refinance is dependent on the conditions of the capital markets and its financial condition at such time. The Issuer s access to financing sources may not be available on favourable terms, or at all. The Issuers inability to refinance its debt obligations on favourable terms, or at all, could have a material adverse effect on the Issuer s business, financial condition and results of operations and on the noteholders recovery under the Notes. Market interest rate risks The market value of the Notes depends on several factors, including, but not limited to, the level of market interest rate. Investments in the Notes, particularly in Notes with a fixed interest rate and zero coupon notes, involve the risk that increases in market interest rates may adversely affect the value of the Notes. Liquidity risks Even if securities are admitted to trading, there is not always active trading in the securities and hence there are no guarantees that a liquid market for trading in the Notes will occur or be maintained. This may result in that the holders cannot sell their Notes when desired or at a price level which allows for a profit comparable to similar investments with an active and functioning secondary market. Lack of liquidity in the market may have a negative impact on the market value of the Notes. It should also be noted that during a given time period it may be difficult or impossible to sell the Notes (at all or at reasonable terms) due to, for example, severe price fluctuations, close down of the relevant market or trade restrictions imposed on the market. Volatility risks The market price of the Notes could be subject to significant fluctuations in response to actual or anticipated variations in the Issuer s operating results and those of its competitors, adverse business developments, changes to the regulatory environment 9

11 in which the Issuer operates, changes in financial estimates by securities analysts and the actual or expected sale of a large number of Notes, as well as other factors. In addition, in recent years the global financial markets have experienced significant price and volume fluctuations, which, if repeated in the future, could adversely affect the market price of the Notes without regard to the Issuer s operating results, financial condition or prospects. Noteholders representation and noteholders meetings In accordance with the Terms and Conditions, the relevant Issuing Agent (Sw. Administrerande Institut) represents the noteholders in matters relating to the Notes and the noteholders are not expected to take actions individually against the Issuer. This does not, however, rule out the possibility that noteholders, in certain situations, could bring their own action against the Issuer, which could negatively impact an acceleration of the Notes or other actions against the Issuer. To enable the Issuing Agent to represent the noteholders in court, each noteholder may have to submit a written power of attorney for legal proceedings. The failure of all noteholders to submit such powers of attorney may negatively impact the enforcement options available to the Issuing Agent and the legal proceedings. Pursuant to the Terms and Conditions in some cases the Issuing Agent is obliged - when so instructed by noteholders holding at least ten per cent of the nominal amount of a certain issue of Notes to take measures that bind all noteholders without first obtaining the prior consent of the noteholders. Consequently, actions pursuant to such instructions may impact the noteholders rights in a manner that would be undesirable for some of the noteholders. Further, under the Terms and Conditions, at noteholders meetings certain majorities of noteholders have the right to make decisions and take measures that bind all noteholders, including those who vote in a manner contrary to the majority. Consequently, the actions of the majority in such matters could impact the noteholders rights under the documentation relating to the Notes in a manner that would be undesirable for some of the noteholders. Settlement and clearing The Notes will be dematerialised and entered on the accounts of a central securities depository of notes, currently Euroclear Sweden s account-based system. Clearing and settlement relating to the Notes and, in the majority of cases, the payment of interest and repayment of principal amounts, will be performed within Euroclear Sweden s account-based system. The investors are therefore dependent on the functionality of Euroclear Sweden s account-based system. Restrictions on transferability of the Notes The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any U.S. state securities laws. Subject to certain exemptions, 10

12 a noteholder may not offer or sell the Notes in the United States. The Issuer has not undertaken to register the Notes under the U.S. Securities Act or any U.S. state securities laws or to effect any exchange offer for the Notes in the future. Furthermore, the Issuer has not registered the Notes under any other country s securities laws. It is the noteholder's obligation to ensure that the offers and sales of Notes comply with all applicable securities laws. Tax risk Investors in the Notes should be aware that the investment in the Notes may have unforeseen tax implications. Prospective investors should seek independent advice relating to tax risks prior to making a decision to invest in the Notes. The Issuer or Euroclear Sweden may be obliged to withhold tax and/or to report a noteholders holding of Notes or payments of interest to Swedish or foreign tax authorities. Change of law The Notes are subject to Swedish and applicable European laws and administrative practice in effect as at the date of this Company Description. There is a risk that any judicial decision, change to Swedish or European law or administrative practice after the date of this Company Description could adversely impact the ability of the Issuer to make payments under the Notes. Unsecured obligations and unsubordinated rights The Notes constitute direct, unconditional, unsecured and unsubordinated obligations of the Issuer. This means that in the event of bankrupcty or other insolvency of the Issuer, the noteholders will receive payment, if any, after any preferred creditors have been fully paid. Accordingly, every investor should be aware that by investing in the Notes, it risks losing all or part of its investment in the event of the Issuer s bankruptcy or other insolvency. 11

13 2 LIABILITY STATEMENT OF THE BOARD OF DIRECTORS We declare that, to the best of our knowledge, the information provided in the Company Description is accurate and that, to the best of our knowledge, the Company Description is not subject to any omissions that may serve to distort the picture the Company Description is to provide, and that all relevant information in the minutes of board meetings, auditors records and other internal documents is included in the Company Description. Bærum, 23 November 2015 Bank Norwegian AS The Board of Directors 12

14 3 DESCRIPTION OF THE ISSUER 3.1 General information The Issuer is an internet bank for the retail market and started its operations in Norway in November The bank offers high interest no-fee deposit accounts, and consumer loans, which are distributed through the Internet. The Issuer also offers Norwegian Reward a combined Visa credit card and reward card for the airline Norwegian Air Shuttle ASA ( Norwegian Air Shuttle ). Norwegian Reward enables the customer to earn so-called cash points on the Issuer s credit card transactions. The points can be used to purchase plane tickets with Norwegian Air Shuttle. The Company started its operations in Sweden in May 2013 and offers Norwegian Reward credit card, consumer loans and deposit accounts to customers on the Swedish market. The Company aims to commence operations in Denmark and Finland in the first quarter of 2016, as further described below in the section Significant markets and outlook. The Issuer is a wholly-owned subsidiary of Norwegian Finans Holding ASA ( NFH ). The Issuer has been granted authorization to conduct banking business in Norway by the Norwegian Financial Supervisory Authority (No. Finanstilsynet) and is registered with the Financial Supervisory Authorities in Sweden, Denmark and Finland for cross border banking activities. 3.2 Strategy and business model The strategy of the Company is based on leading e-commerce solutions, synergies with the airline Norwegian Air Shuttle, attractive terms for the Issuer s customers, cost-effective operations and effective risk selection. As illustrated by the scheme below, the different elements inter alia include a strong online marketing capability, a strong brand name and a large customer base (primarily due to the synergies with Norwegian Air Shuttle), attractive deposit pricing, strategy-focused and integrated systems development and a low-cost culture, and automated risk selection and advanced credit models. 13

15 Below follow examples of what the Issuer considers to be important components for its operations: Focused consumer lending operations; Cost-efficient operations; Stable credit quality; and An experienced management team. The loans offered by the Issuer are predominantly offered directly but also in cooperation with agents such as Axofinans, SGS Corporation AS and Millbert Event AB. The complete list of agents is disclosed on the Issuer s website. At the end of the third quarter of 2015, the Issuer had a customer base of 516,600 customers, which can be broken down into 66,800 loan customers, 76,000 deposit customers and 373,800 Norwegian Reward credit card customers. 14

16 3.3 Organization The Issuer s organization is led by CEO Erik Jensen and a management team as further set out in the organizational chart below. As at the end of the third quarter of 2015, the Company had 55 permanent employees, corresponding to 53.5 man-labor years. Contracted personnel accounted for 11.9 man-labor years at the end of the third quarter of The Company s board of directors and management aim to promote equal status between men and women. The Issuer has guidelines to ensure that there is no discrimination due to gender, ethnic background or religion in cases concerning salaries, promotions, recruitment, and others. Of the Company s 55 permanent employees, there are 34 men and 21 women. Of the managers with personnel responsibility, two are women. The Issuer has a bonus scheme for all permanent employees in accordance with current guidelines. The bonuses earned are based on the return on equity achieved. The Issuer has established good pension and personal insurance schemes, and offers a program for employees to counteract ergonomic injuries. 15

17 3.4 Significant markets and outlook The markets for the Issuer are Norway and Sweden. Pursuant to a market report published by the Norwegian Financial Supervisory Authority, the market for unsecured lending in Norway totals NOK 76 billion as of 30 June 2015 and has been growing at a rate of around 10 per cent since As regards the Swedish market for unsecured lending, statistics from Statistics Sweden (Sw. Statistiska Centralbyrån) shows that this market totals SEK 236 billion, with a growth rate of approximately four per cent since The Norwegian economy shows slower growth and slightly higher unemployment is expected, while the Swedish economy shows increased growth and stable employment. Increased unemployment may entail higher levels of loan losses. It is the expectation of the board of directors of the Issuer that the growth in earnings will continue, based on strong loan growth, stable margins, cost control and good credit quality. A high level of deposits to loans and good access to securities funding are expected to maintain the bank s strong liquidity position. The credit quality of the loan portfolio shows a stable development and the level of write-downs are, based on the current assessment of consensus macro economic forecasts, expected to remain stable going forward. The credit quality in the Swedish loan portfolio is in line with the board of director s expectations. The board of directors of the Issuer further considers that the Issuer has a sound capital situation. The current capital base and internal generation of capital are considered sufficient to ensure the Issuer's growth ambitions. The Issuer aims to commence operations in Denmark and Finland in the first quarter of The operations will be organized in accordance with the rules for crossborder operations, and will be ultimately managed by the current organization in Norway. The aim is that the operations in Denmark and Finland initially will be focused on deposits and unsecured loans in the retail market. Subsequently, the aim is to issue Norwegian Reward credit cards. It is the expectation of the board of directors that the establishment in Denmark and Finland will increase loan growth of the Issuer. 1 Finanstilsynet. Resultatrapport for finansinstitusjoner, 1. Halvår 2015, p. 26, and Statistiska centralbyrån. Finansmarknadsstatistik, September 2015, tables and 7.7.1, 16

18 3.5 Competitive situation The Issuer meets strong competition and the competitors are primarily domestic and international financial institutions and banks. In Norway, the main competitors of the Issuer are considered to be DNB, Santander Bank, Gjensidige Bank and Lendo. In Sweden, the competition is highly fragmented and in addition to the four largest banks, the bank faces stiff competition from institutions such as Santander Bank, Lendo, Nordax, Ikano Bank and Marginalen Bank. The different institutions pursue different competitive strategies regarding products, segments, pricing and distribution. 17

19 4 BACKGROUND OF REQUEST TO ADMISSION TO TRADING The Issuer considers First North Bond Market to be an attractive platform for the Issuer s strategy to further expand its operations and development on the Swedish market. The proceeds of the issues of Notes will be used for general corporate purposes, within and outside Sweden. The Issuer has previously issued debt securities on the Norwegian marketplace Nordic ABM, please see the section Legal and supplementary information for further details. The Issuer intends to continue issue debt securities on Nordic ABM and may issue debt securities or raise loans on other marketplaces or by private placements. 18

20 5 DESCRIPTION OF THE NOTES Notes may be issued as fixed rate Notes, floating rate Notes, (consumer price) index -linked Notes or zero-coupon Notes as more fully set out in the Terms and Conditions. The particular commercial terms for each issue of Notes will be set out in the relevant final terms (Sw. slutliga villkor). The Notes will constitute senior (i.e. unsubordinated) and unsecured obligations of the Issuer. The Program has not been and the Notes are not expected to be assigned any credit rating from any rating agency. Please refer to the full Terms and Conditions as set out in Appendix 1 (in Swedish). 19

21 6 FINANCIAL INFORMATION AND FINANCIAL CALENDAR 6.1 Annual reports The annual reports for 2014 and 2013 and general financial trends for the last two years, which include the audited financial statements for the years ending 2014 and 2013, respectively, have previously been published on the Issuer s website ( and shall by reference be incorporated in, and form part of this Company Description. The annual reports for 2014 and 2013 have been prepared in accordance with the Norwegian Financial Reporting Act (No. Lov om årsregnskap m.v.) and the Generally Accepted Accounting Principles in Norway (No. Norsk God Regnskapsskikk). The reports have been audited by PricewaterhouseCoopers AS. The audits have not resulted in any qualifications. Summary financials for the financial years 2014 and 2013 are set out below. Bank Norwegian AS MNOK Net interest income Net other operating income Total operating expenses Provision for loan losses Profit after tax MNOK Assets Liquid assets Loans to customers Other assets Total assets Liabilities and equity Deposits from customers Debt securities issued Other liabilities Subordinated debt Total liabilities Total equity Total liabilities and equity

22 6.2 Most recent quarterly report The Issuer s quarterly report of the third quarter of 2015 shall by reference be incorporated in, and form part of this Company Description. Below follows a summary of the profit and loss information presented in the quarterly report for the Issuer, which is found at the Company s website. Profit and loss for the third quarter of 2015 Profit after tax for the Issuer amounted to MNOK 128.2, compared with MNOK in the second quarter of Annual return on equity in the third quarter of 2015 was 35.6 per cent. Net interest income amounted to MNOK 372.7, an increase of MNOK 37.6 from the second quarter. The net interest margin increased from 9.6 per cent in the second quarter to 9.8 per cent. In the third quarter of 2015, net other operating income amounted to MNOK 8.9 compared with MNOK 21.8 in the second quarter. Net commission income increased MNOK 6.9 to MNOK Net loss on value of securities and currency amounted to MNOK 21.2, of which MNOK 19.5 were unrealized losses on securities due to increased credit spreads on bonds. The Issuer s total operating expenses amounted to MNOK compared with MNOK in the second quarter. Personnel expenses increased MNOK 4.0 due to accrual effects in the second quarter. Administrative expenses increased MNOK 12.2, mainly due to increased marketing expenses. Depreciation was unchanged, while other operating expenses increased MNOK 2.0. The Issuer s provisions for loan losses amounted to MNOK 53.9 in the third quarter of 2015, an increase of MNOK 7.9 from the second quarter. Provisions equaled 1.8 per cent of average gross loans, compared with 1.7 per cent in the second quarter. Delinquent loans accounted for 4.9 per cent of gross loans, compared with 4.8 per cent at the end of the previous quarter. Non-performing loans accounted for 3.8 per cent of gross loans, compared with 3.6 per cent as of Date of the next annual general meeting and half-yearly or quarterly report The date of the next annual general meeting is per the date of this Company Description not set. The publication date of the next quarterly report and the Issuer s financial calendar for 2016 will be set in late November

23 7 BOARD OF DIRECTORS AND SENIOR MANAGEMENT ETC. 7.1 Board of directors and senior management Pursuant to the Company s articles of association, the board of directors shall consist of no less than five and no more than seven members, with a maximum of three deputy members. The board of directors currently consists of six members, and one deputy member. Five of the members have been elected by the shareholders and one member and the deputy member have been elected among the employees of the Issuer. The business address for all members of the board of directors and the senior management of the Issuer is: Oksenøyveien 3, 1366 Lysaker, Norway. Further information on the members of the board of directors and the senior management is set forth below, including information on the members of the board of directors and senior management that are indirect shareholders in the Issuer. The details of shareholdings represent the shareholdings as at 9 November Board of directors Bjørn H. Kise Born Chairman of the board of directors since 2007 Principal education: Law degree, University of Oslo Other on-going principal assignments: Partner at law firm Simonsen Vogt Wiig, chairman of the board of directors of Norwegian Air Shuttle and chairman of the board of directors of NFH Indirect holding of shares (in NFH): Mr. Kise has ownership interests of: 100 per cent in Borak AS, a company which holds 8,580,454 shares in NFH, 51 per cent in Sneisungen AS, a company which holds 3,720,333 shares in NFH, and 34 per cent in Scan-Net AS, a company which holds 630,000 shares in NFH Kristin Farstad Born 1959 Member of the board of directors since 2007 Principal education: Law degree, University of Bergen Other on-going principal assignments: Partner at law firm Simonsen Vogt Wiig, member of the board of directors of NFH and Borea Asset Management AS, respectively Indirect holding of shares (in NFH): None 22

24 Frode Foss Born Member of the board of directors since 2007 Principal education: MBA, Masters in finance, University of Wyoming and European Certified Financial Analyst, Norwegian School of Economics Other on-going principal assignments: Chief financial officer in Norwegian Air Shuttle and chairman of the board of directors of Arctic Aviation Assets Ltd. Indirect holding of shares (in NFH): Mr. Foss has an ownership interest of 49 per cent in Active Deal International, a company which holds 1,024,000 shares in NFH John Høsteland Born Member of the board of directors since 2007 Principal education: Dr. Scient. in Economics, Norwegian University of Life Sciences Other on-going principal assignments: JH Consult, member of the board of directors of NFH and chairman of the board of directors of Agasti Holding ASA Indirect holding of shares (in NFH): None Lars Ola Kjos Born Member of the board of directors since 2013 Principal education: Bachelor of Science in business administration finance, University of Denver Other on-going principal assignments: Chairman of the board of directors of Laguan AS and Executive Vice President Commercial at Arctic Aviation Assets Ltd. Indirect holding of shares (in NFH): Mr. Kjos has an ownership interest of 33 per cent in Laguan AS, a company which holds 12,871,013 shares in NFH Esma Candic Born Employee representative and member of the board of directors since 2014 Principal education: Bachelor in business and management, Buskerud University College Other on-going principal assignments: None Indirect holding of shares (in NFH): 19,100 Henrik Hermansen Born Employee representative and deputy member of the board of directors since 2014 Principal education: Bachelor in computer science, Oslo and Akershus University College of Applied Sciences Other on-going principal assignments: None Indirect holding of shares (in NFH): 360,000 23

25 7.1.2 Senior management Erik Jensen Born Chief Executive Officer and employed since November Principal education: Bachelor in accounting and auditing, Sør-Trøndelag University College, Certified Public Accountant, Norwegian School of Economics Indirect holding of shares (in NFH): 1,406,686 Pål Svenkerud Born Chief Financial Officer and employed since November 2007 Principal education: Bachelor of arts in business administration, University of Oregon, MBA in finance, University of Denver, and European Certified Financial Analyst, Norwegian School of Economics Indirect holding of shares (in NFH): 1,105,381 Merete Gillund Born Chief Information Officer and employed since June 2008 Principal education: Master of science in information technology, University of Stavanger Indirect holding of shares (in NFH): 454,949 Tore Andresen Born Chief Operating Officer and employed since June 2009 Principal education: Associate degree in business administration, Norwegian School of Economics Indirect holding of shares (in NFH): 1,147,742 Tore Widding Born Chief Risk Officer and employed since November 2007 Principal education: Norwegian University of Science and Technology, applied physics and mathematics, specialization in numerical mathematics Indirect holding of shares (in NFH): 491,728 Michael Myran Born Chief Marketing Officer and employed since November 2007 Principal education: Bachelor in international marketing and management, Norwegian Business School Indirect holding of shares (in NFH): 739,000 2 Erik Jensen is also Chief Executive Officer in NFH. 24

26 7.2 Auditor PricewaterhouseCoopers AS has been the auditor of the Issuer since Principal partner, Geir Julsvoll, is a Norwegian state authorized public accountant (No. Statsutorisert revisor) and PricewaterhouseCoopers AS is a member of the Norwegian institute of public accountants (No. den norske Revisorforening og autorisert regnskapsførerselskap). 7.3 Supervisory board and control committee The Company has a supervisory board (No. representantskap) which supervises the Company s operations and ensures that the rules governing the Company s activities are observed. The supervisory board currently consists of 15 members and six deputy members of which eleven members and four deputy members have been elected by the general meeting and four members and two deputy members are employees of the Company. The Company has further established a control committee which, under Norwegian law, is a corporate body required in banks. The control committee shall oversee the activities of the Company and shall inter alia see to it that it complies with law, the articles of association and the instructions adopted by the supervisory board. The control committee of the Company currently consists of three members and one deputy member. For further information on the supervisory board and the control committee, see the articles of association of the Company, incorporated herein by reference and which are available at the Company s website. 7.4 Information on bankruptcy, liquidation, fraud and similar There have been no instances within the last five years of any conviction of economic crime, fraud related convictions, bankruptcies, enforced winding-up or similar insolvency proceedings where members of the Issuer s board of directors or senior management have been involved and no such instances or proceedings are ongoing. No member of the Issuer s board of directors or senior management have within the last five years been disqualified the right to act as a board member or member of the Issuer s senior management by a court of law. None of the members of the board of directors has any agreement with the Issuer giving the board member the right to compensation upon termination of his/her assignment. 25

27 8 OWNERSHIP STRUCTURE The Issuer is wholly-owned by NFH, which does not engage in any other operations than holding of the shares in the Issuer. The share capital of the Issuer is NOK 170,000,000 and the number of shares is 170,000,000. The ownership of NFH is divided between institutional and private investors in Norway and abroad, of which Norwegian Air Shuttle is the largest owner with an ownership stake of 20 per cent. The Issuer does not have any subsidiaries. The certified adviser does not have any shareholdings in the Issuer. 26

28 9 LEGAL AND SUPPLEMENTARY INFORMATION 9.1 Description of material contracts that are not entered into in the ordinary course of business Other than the contracts described below, there are no material contracts that are not entered into in the ordinary course of the Issuer s business. The Issuer and Norwegian Air Shuttle have since October 2007 had an agreement regarding the Issuer's use of the brand name Norwegian, IP-rights, and co-operation regarding credit cards, the loyalty program Norwegian Rewards and sales financing. In connection with the Issuer's establishment in Sweden, the original agreement was replaced by new agreements as of 1 January The agreements have a term of three years. All accrued rights remain. In addition to the co-operation agreement regarding use of brand name and IP-rights, agent agreements have been entered into with Norwegian Air Shuttle relating to distribution of financial services regarding credit cards and sales financing of airline tickets. At the date of this Company Description, the Issuer has no liabilities to NFH. 9.2 Debt securities issued The Issuer has issued the floating rate bonds and the certificate loan listed below: (i) FRN Bank Norwegian AS åpent obligasjonslån 2013/2016; (ii) FRN Bank Norwegian AS åpent obligasjonslån 2013/2018; (iii) FRN Bank Norwegian AS ansvarlig obligasjonslån 2013/2023; (iv) FRN Bank Norwegian AS evigvarende fondsobligasjon 2013; (v) FRN Bank Norwegian AS åpent obligasjonslån 2014/2017; (vi) Bank Norwegian AS sertifikatlån ; (vii) FRN Bank Norwegian AS åpent obligasjonslån 2014/2019; and (viii) FRN Bank Norwegian AS åpent obligasjonslån 2015/2018. The loans have been listed on Nordic ABM, which is an unregulated marketplace administered by Oslo Børs. In relation to the loans and their listing on the Nordic ABM, the Issuer has entered into agreements with the facilitators DNB Bank ASA, DNB Markets, Arctic Securities ASA, Danske Bank and Danske Markets, SEB, Nordic Trustee ASA and Oslo Børs. 27

29 The maturity dates and amounts of the loans vary and the complete terms and descriptions of the loans can be found on the Issuer s website ( 9.3 Lease agreement The Issuer is sharing premises with Norwegian Air Shuttle and there is a lease agreement for Oksenøyveien 3 at Lysaker. The agreement expires 31 March 2018, with an option to extend the lease agreement for two years. 9.4 Transactions with persons discharging managerial responsibilities The Issuer has not made any transactions outside the company s normal activities, beside the transactions described above in Section 9.1 with respect to the Issuer s agreement with Norwegian Air Shuttle. 9.5 Identity of any liquidity provider retained by the Issuer The Issuer does not currently retain any liquidity provider. 9.6 Certified Adviser The certified adviser for the Issuer is Swedbank AB (publ). The expected duration of the certified adviser is up to the first day of trading of the first issue of Notes under the Medium Term Note Program. 9.7 Other information Further on legal matters, it can be noted that two of the board directors, Bjørn H. Kise and Kristin Farstad, are partners with the law firm Simonsen Vogt Wiig, which is the law firm that provides legal services to the Issuer on a regular basis. 28

30 10 ADDRESSES Company and Issuer Bank Norwegian AS Oksenøyveien 3, Lysaker P.O. Box 338 Sentrum NO-0101 Oslo Norway Telephone: Arranger, Dealer and Certified Adviser Swedbank AB (publ) Large Corporates & Institutions, Legal SE Stockholm Sweden Telephone: Issuer s legal counsel in Norway Advokatfirmaet Simonsen Vogt Wiig P.O. Box 2043 Vika NO-0125 Oslo Norway Telephone: Issuer s legal counsel in Sweden Wistrand Advokatbyrå P.O. Box 7543 SE Stockholm Sweden Telephone: Central Securities Depository Euroclear Sweden AB P.O. Box 191 SE Stockholm Sweden Telephone: Auditors PricewaterhouseCoopers AS P.O. Box. 748 Sentrum NO-0106 Oslo Norway Telephone:

31 APPENDIX 1 TERMS AND CONDITIONS 30

32 31

33 32

34 33

35 34

36 35

37 36

38 37

39 38

40 39

41 40

42 41

43 42

44 43

45 44

46 45

47 46

48 47

49 48

50 49