SpareBank 1 Nord-Norge

Transcription

1 SpareBank 1 Nord-Norge Interim report for Q Group (Figures in brackets are for the same period in 2011) Satisfactory result for Q Main features: Profit before tax NOK 392 million (NOK 573 million after write up of the stake in FrontX by NOK 189 million). Profit after tax NOK 298 million (NOK 487 million) Return on equity after tax was 9.2 % (16.3 %) Earnings per equity certificate of NOK 1.89 (NOK 2.85) Low loan losses Good lending growth: last 12 months 11.5% (6.3%) including intermediary loans Retail market 11.0% Corporate market 12.6% Growth in deposits over the last 12 months 0.2% (9.1%) Retail market 8.4% Corporate market 5.9% Public sector -26.2% Deposit-to-loan ratio: 78.4% (80.3%). Good financial strength: core capital adequacy Group 10.9% (11.3%). If 50% of the result was included, the core capital adequacy would be 11.2 % Continued satisfactory funding The Group is continuing its investment in accounting companies, with further acquisitions. Accounting principles The quarterly accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS), including IAS 34 relating to interim reporting. Earnings performance The accounts show a satisfactory result for the first half of 2012, with operating profit before tax of NOK 392 million. The accounts reflect the increased net interest income including commission on intermediary loans and a good growth in lending in both the retail and corporate markets. The results also reflect a further write down of the Group's stake in SpareBank 1 Nord-Norge Invest, including a write down of ownership of the oil company Front Exploration AS (FrontX) of NOK 41 million. Profit for the first half of 2011 was NOK 573 million, a result that was affected by the write up of the Group's stake in FrontX of NOK 189 million. The Group's customer-oriented operations show a profit before losses of NOK 289 million, NOK 9 million lower than for the equivalent period in The Group's return on equity after tax as at was 9.2% (16.3%). The earnings per equity certificate were NOK 1.89 (NOK 2.85). For the Parent Bank, the earnings per equity certificate were NOK 2.20 (NOK 2.45). 1/28

2 Net interest income The Group's net interest income for the first half of 2012 amounted to NOK 566 million. This is NOK 15 million higher than the first half of In relation to the average total assets, the net interest income was 1.58 %, which is 0.01 percentage points lower than the previous year. Income from the lending portfolio transferred to SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt is entered under commission income. For Q1 and Q2 2012, this commission income amounts to NOK 24 million and NOK 43 million respectively. The equivalent figures for 2011 were NOK 20 and 24 million. Net interest income including the above named commission income shows an increase of NOK 23 million from NOK 305 million for Q to NOK 328 million for Q Compared with Q1 2012, net interest income including commission income from the transferred lending portfolio has developed as follows: Amounts in NOK million Q Change Q Net interest income incl. comm. from Boligkreditt Lending and deposit volume Lending and deposit ma Interest day Other balance sheet items, net The lending and deposit margins are measured against the bank's average borrowing costs in the financial market. The reduced volume effect on net interest income is due to lower deposits from the public sector. Higher money market rates and borrowing costs (credit spreads) towards the end of 2011 meant that the bank took various measures involving pricing of parts of the banks lending and deposit products. In 2012, lower money market rates contributed to lower borrowing costs from the capital market. Seen against the funding costs, the lending margin has increased but the deposit margin has been reduced. In 2012 too, the bank is exempt from paying guarantee fund charges. At the end of the first half of 2012, home mortgages to the value of NOK 19 billion (NOK 13 billion) had been transferred to SpareBank1 Boligkreditt. As at , no loans had been transferred to SpareBank1 Næringskreditt. Net commissions and other income Net commissions and other income at the end of Q were NOK 282 million, an increase of NOK 28 million when compared with the same quarter last year. Amounts in NOK million as at Q Change as at Q Net commissions and other income Incr. comm. income from SpareBank 1 Boligkreditt +22 Incr. comm. income from SpareBank 1 Finans Nord-Norge + 3 Incr. comm. income EiendomsMegler 1 Nord-Norge + 3 Income from financial investments Total net income from financial investments as at Q amounts to NOK 151 million (NOK 300 million). This has developed as follows: Amounts in NOK million as at Q Change as at Q Net income from financial investments Result from SpareBank 1 Gruppen Result SpareBank 1 Boligkreditt Result Bank 1 Oslo Result BN Bank Result SpareBank 1 Næringskreditt Share dividends /28

3 Net change in share value Net change in bond value Net change in value of currency and financial derivatives Profit contribution from joint venture companies SpareBank 1 Gruppen SpareBank 1 Gruppen's preliminary profit after tax for the first half of 2012 totalled NOK 267 million (NOK 249 million). The SpareBank 1 Nord-Norge Group s 19.5% share of the result, amounting to NOK 52 million (NOK 48 million), has been incorporated in the accounts. In addition to this, in Q1 NOK 8 million has been incorporated as a result of the adjusted profit for the year for SpareBank 1 Livsforsikring and SpareBank 1 Skadeforsikring made the greatest contribution to profits. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt SpareBank 1 Boligkreditt was set up by the banks of the SpareBank 1 alliance to gain benefits from capital market borrowing through the use of covered bonds. The banks will transfer the best-secured home mortgages to this company. This reduces funding costs and increases the competitiveness of the SpareBank 1 banks. The bank's stake in SpareBank 1 Boligkreditt is 13.26%, and the share of the company's profits for the first half of 2012 is NOK 19 million (NOK 8 million). The SpareBank 1 banks established SpareBank 1 Næringskreditt in 2009 on the same model and with the same administration as SpareBank 1 Boligkreditt. SpareBank 1 Nord-Norge's stake in the company is 23.5%, and the share of the company's profits for the first half of 2012 is NOK 2 million (NOK 2 million). Bank 1 Oslo Akershus SpareBank 1 Nord-Norge has a 19.5% stake in Bank 1 Oslo Akershus. A share of the profits amounting to NOK 19 million (NOK 10 million) has been incorporated in the first half of BN Bank SpareBank 1 Nord-Norge has a 23.5% stake in BN Bank as at The share of profits for the first half of 2012 amounts to NOK 20 million (NOK 34 million) including the effect of amortisation from the date of purchase Other companies The alliance companies SpareBank 1 Verdipapirservice and SpareBank 1 Kundesenter were established at the end of Q SpareBank 1 Nord-Norge has a stake of 24.9% and 23.5% respectively in these two companies. As at Q there has been no profit share from these. The Group s share portfolio The bank's subsidiary SpareBank 1 Nord-Norge Invest owns a stake in the oil company Front Exploration (FrontX); in 2011, a net write down of NOK 24 million was made in this. The book value of the shareholding was NOK 55 million as at During the course of Q12012, there were merger negotiations between FrontX and the oil company North Energy, which did not come to a conclusion. There has been work on alternative solution models for the Group's stake in FrontX. At the end of June, it was decided to wind up the company, while an agreement was entered into with the Danish company Dong Energy to take over the employees and most of the assets of FrontX and to continue the activities of the company. In connection with this agreement, there have been further write downs of the company's shareholding in FrontX during Q2 amounting to NOK 41 million. After the write down, the book value as at was NOK 14 million. The remaining assets in the company will be realised in connection with the winding up of FrontX. The company's liabilities will be settled and surplus capital will be distributed to the company's shareholders. No further need for losses on the Group s commitment in the company is anticipated. 3/28

4 The overall change in value of the Group s share portfolio in the first half of 2012 is NOK -79 million, NOK 241 million weaker than the corresponding period in As mentioned in the introduction, during the first half of 2011 there was a write up of the Group s shareholding in FrontX of NOK 189 million. Combined with the NOK 41 million write down of the same shareholding in the first half of 2012, this represents the most important reason for the difference in net value between the first half of 2011 and the first half of Certificates and bonds As at , the Group s portfolio of certificates and bonds was NOK 12,141 million, compared with NOK 12,214 million at the same time the previous year. The portfolio of interest-bearing securities includes covered bonds issued under the authorities' swap scheme. On 1 July 2008, the bank completed a reclassification of large parts of the interest-bearing securities in the trading portfolio, from the category At fair market value through the profit and loss account to categories that are assessed at amortised cost. The effects of this reclassification appear in a note to the quarterly accounts. The reclassified portfolio is continuously assessed with regard to the need for permanent write down in value. As at , such write downs totalling NOK 75 million had been made. No further write-downs have been made in Currency and derivatives The net change in value from currency and financial derivatives as per Q amounts to NOK 63 million. This income includes part of the income from Markets, as well as changes in the value of the bank's own positions in currency and financial derivatives. Subsidiaries (Amounts in NOK 1 000) Result before tax Share of equity % SpareBank 1 Finans Nord-Norge AS SpareBank 1 Nord-Norge Invest AS EiendomsMegler 1 Nord-Norge AS SpareBank 1 Nord-Norge Forvaltning ASA SNN Økonomihus AS North-West 1 Alliance Bank The Group s subsidiaries have a combined result before tax for the first half of 2012 of NOK - 25 million (NOK 211 million), which has been fully consolidated in the Group s accounts. SpareBank 1 Finans Nord-Norge has a profit before tax in the first half of 2012 of NOK 33 million (NOK 35 million). The company has a good earnings base and total earnings year to date are NOK 53 million, against NOK 49 million last year. Losses on leasing and seller s chattel mortgage as per Q were NOK 3 million (NOK 1 million). At the end of the quarter, the company managed leasing and vendor's security agreements to a total value of NOK 3,017 million, of which leasing agreements represented NOK 1,604 million. North West 1-Alliance Bank in St. Petersburg, Russia (75% stake) had a profit before tax for the first half of 2012 of NOK 1 million (NOK -1 million). SpareBank 1 Nord-Norge Invest has a portfolio of unlisted shares and investments in funds. The company had a result before tax for the first half of 2012 of NOK -66 million (NOK 175 million). In addition to the previously mentioned write down of the stake in FrontX as at (see above), further write downs of NOK 17 million were made to the share portfolio. EiendomsMegler 1 Nord-Norge had a profit before tax for Q of NOK 7 million (NOK 2 million). The number of units sold so far in 2012 is 777 (657), with a total sales value of NOK 1,483 million, an increase of 17% compared with the corresponding period in SpareBank 1 Nord-Norge Forvaltning, which manages a portfolio of NOK 1,795 million, had a profit before tax of NOK million (NOK 1,030 million) for the first half of /28

5 SNN Økonomihus is a holding company that invested in two accounting companies at the end of 2011 and in The company's contribution to pre-tax profits in the first half of 2012 was NOK million (including the proportion of profit from accounting companies). The company owns 60% of the shares in Consis Alta AS and 100% of the shares in Merkantilservice AS in Tromsø. Operating costs Ordinary operating costs at the end of the first half of 2012 totalled NOK 559 million. Compared with the equivalent period in 2011, this represents an increase of NOK 52 million. The changes in costs are as follows: Amounts in NOK million as at Q change as at Q Operating costs Personnel costs Adm. costs Depreciation Other costs In relation to the average total assets, the costs amounted to 1.6 % in Q2 2012, an increase of 0.1 percentage points compared with the same quarter in The Group has a cost-to-income ratio of 56.0 % at the end of Q2 2012, compared with 45.9% at the end of Q NOK 30.5 million of the increase in personnel costs relates to increased costs in the parent bank. NOK 5 million of this is due to deferral of bonus in 2011 (i.e. lower costs in 2011), costs of NOK 2.5 million relate to the sale of equity certificates to employees at a discount and NOK 5 million is due to increased pension costs (new contractual retirement plan). Most of the remaining increase of NOK 18 million is due to general pay increases, including higher than average payroll costs for new employees. Increased personnel costs of NOK 9 million in the Group s subsidiaries are partly due to the consolidation of a new subsidiary (the accounting office Consis Alta). The increase is also due to increased activity and costs, particularly at SpareBank 1 Finans and Eiendomsmegler 1 Nord-Norge. Increased administrative costs relate to increased marketing costs, increased IT operational costs and the consolidation of a new subsidiary (Consis Alta). Compared with Q1 2012, costs were reduced by NOK 5 million in Q2. Personnel costs have increased by NOK 15 million, while other administrative costs were reduced by NOK 18 million. The increased personnel costs were due to payment of holiday pay, costs from the discounted sale of equity certificates to employees and increased costs relating to the transition to a new pension scheme. The reduction in other operating costs from Q1 to Q2 was partly due to wealth tax entered as a cost in Q Group employees totalled 867 full time equivalents (FTE) at the end of Q2 2012, of which the parent bank accounted for 667. The corresponding figures for the previous year were 786 and 665 respectively. The increase in the number of employees mainly relates to the Group s subsidiary in Russia (19 FTEs) and the acquisition of two accounting offices with a combined total of 60 FTEs. The last acquisition of an accounting office occurred at the end of the half year (42 FTEs) and therefore had no effect on profits for the first half of A programme of cost reduction measures has been started in This includes possible rationalisation measures within the areas of distribution and overall staffing levels. The effect of these measures is estimated to be approximately NOK 70 million, which is expected to come from the year end onward. Net losses and commitments in default The Group s losses on lending as at Q amount to NOK 48 million (NOK 25 million). Net losses in Q2 were NOK 6 million. The net losses in the first half are made up of NOK 50 million from the corporate market and NOK -2 million from the retail market. NOK 36 million of the losses in the corporate market were due to one commitment during the first half of Net commitments in default and doubtful commitments totalled NOK 514 million (NOK 649 million) as at , which represents 0.71 % of gross lending, including intermediary loans. This represents a reduction from 1.00 % as at /28

6 The Group's total individual loss write downs as at were NOK 171 million (NOK 259 million). Provisions have been reduced by a net NOK 46 million in the last quarter after losses have been confirmed on a number of commitments that had previously been written down. Group write downs as at were NOK 221 million (NOK 201 million) and have also been reduced compared with the previous quarter. The Group uses a conservative calculation model in arriving at Group write downs. Group write downs totalled 0.42% of the Group s combined gross lending as at (0.30 % of gross lending including intermediary loans). In the opinion of the Main Board of Directors, the quality of the bank's loan portfolio is good and the bank is still doing hight quality work in connection with commitments in default and doubtful commitments in the Group. The general level of losses is expected to remain low, even though losses might arise due to events connected with individual commitments. Tax The Group s tax cost was estimated at NOK 93 million at the end of Q In the parent bank's accounts, the taxable profit has been reduced by permanent differences coupled with the effects of the exemption model. Total assets The Group s total assets were NOK 74,036 million as at This represents an increase of NOK 3,003 million, or 4.2 %, over the last 12 months. Lending As at , lending totalling NOK 19 billion (NOK 13 billion) has been transferred to SpareBank-1 Boligkreditt. These loans do not appear as lending on the bank's balance sheet. Comments regarding increases in lending include lending transferred to SpareBank 1 Boligkreditt. The Group's gross lending to customers including intermediary loans totalled NOK 72,331 million as at Compared with , this represents an increase of 11.5%. Retail banking loans showed growth of 11.0%, while corporate and public sector loans showed growth of 12.6%. 69 % of the bank's total lending was to the retail market as at , a slightly lower proportion than as at the end of Q1. Lending growth has increased during the course of 2012, especially in the corporate market. Lending growth in Q2 in isolation was 13.4% (annualised) and can be broken down as follows: Retail market 12.7 % Corporate and public sector market 14.8 % The Main Board of Directors sustains its ambitions for lending growth and increased market shares. In the case of new loans, particular emphasis is placed on customers ability to service and repay their outstanding loans, and on a satisfactory level of collateral and other security to ensure that credit risk is maintained at an acceptable level. Saving and investments The Group s deposits from customers totalled NOK 41,377 million as at The increase over the past 12 months was NOK 93 million, or 0.2 %. Deposits increased 8.4 % in the retail market and 5.9 % in the corporate market. Deposits from the public sector show a reduction of 26.2%, which is due to a strategic decision by the bank with regard to the pricing of deposits in this sector. A focus on a broader range of financial advice through the completion of authorisation ofr the bank's advisers is expected to give a growth in production of future sales in the savings and investment area. Liquidity Deposits from customers represent the bank s main source of funding. At the end of Q2 2012, the deposit-to-loan ratio (excluding intermediary loans) was 78.4%, 1.9 percentage points lower than at the same time last year. The bank s remaining funding, apart from equity and subordinated capital and deposits from customers, is mainly from long-term funding from the capital markets. The bank's liquidity situation and access to liquidity is still satisfactory. The bank's strategic aim is to maintain the overall liquidity risk at a low level. Rating 6/28

7 SpareBank 1 Nord-Norge has long-term ratings from Moody s and Fitch Rating of A1 (negative outlook) and A (stable outlook) respectively. Like many other financial institutions, the bank received a notice in March about possible downgrading by up to one mark by Moody's. The Bank s equity certificate holders As at , the parent bank's equity certificate capital was NOK 1,655 million. The number of equity certificates as at was 66,208,987 each with a nominal value of NOK 25 and fully paid-up. The ownership fraction as at 1 January 2012 was calculated at 42.07%. The number of equity certificate holders was 8,123 as at at , a reduction of 86 over the last 12 months. The number of Norwegian equity certificate holders was 2,445. A summary of the Bank's 20 largest equity certificate holders is provided in the notes to the interim financial statements. Book value per equity certificate on was NOK and profit per equity certificate was NOK As at , the price was NOK 26 and in 2012 a dividend for 2011 of NOK 1.50 per equity certificate was paid. Price/Earnings was 6.9 and Price/Book 0.6 as at 30/06/2012. Financial strength and capital adequacy SpareBank 1 Nord-Norge uses an Internal Rating Based Approach for credit risk. The statutory minimum capital adequacy requirement for credit risk is based on the bank s internal risk assessment. The rules and regulations render the statutory minimum requirement for capital adequacy more risk-sensitive, so that the capital requirement to a larger extent corresponds to the risk in the underlying portfolios. The use of internal measurement measures places great demands on the bank s organisation, competence, risk models and risk management systems. As a result of the transitional rules in the new regulations, the IRB banks were to benefit in full from the reduced regulatory capital adequacy requirements as of This has been postponed, and the transitional rules also apply in The Group has been granted a permit by the Financial Supervisory Authority of Norway to use proportional consolidation for its capital adequacy reporting for SpareBank 1 Boligkreditt, SpareBank 1 Næringskreditt and BN Bank. As at , Group core capital adequacy amounted to 10.88% (11.30%) of the weighted asset calculation basis. The total capital adequacy ratio was 11.59% (12.26%). If 50% of the result was included, the core capital ratio would be 11.15%. If the full impact of the IRB approach is included (without a "floor"), the core capital adequacy ratio was 12.99%. Reference is made otherwise to the relevant note in the quarterly accounts. Given that the European Banking Authority (EBA) has decided in the latest Capital Requirements Directive (CRD IV) that the level of pure core capital in the largest banks must be a minimum of 9% by no later than 30 June 2012, the Norwegian authorities have also imposed this requirement on Norwegian banks. SpareBank 1 Nord-Norge's core capital adequacy as at satisfied this requirement by a good margin. The bank s financial position is deemed to be very good. Concluding remarks and outlook The results for the first half year are regarded as satisfactory, even though profits for Q2 were weaker than for Q1. The bank's core operations continue to be very good. Fluctuations in profits are primarily due to value changes connected with the share portfolio of SpareBank 1 Nord-Norge Invest. The business and industry in the region remains optimistic, which is resulting in greater demand for loans. Lending growth is expected to continue to be relatively strong in both retail and corporate markets. The growth in deposits from the retail and corporate markets is expected to continue, but growth in deposits in the public sector is not expected to be as strong. Both deposit and lending margins are expected to be affected by continued strong competition, with deposit margins weakening and lending margins strengthening. Continued strong lending growth could lead to a need for increased equity. In this context, Sparebankstiftelsen SpareBank 1 Nord- Norge represents unexploited potential for increased equity. Even so, it should be mentioned that continued international economic uncertainty may lead to reduced consumption and the postponement of investments, including in North Norway. 7/28

8 The bank attaches importance to balance sheet growth, in terms of deposits and loans alike. Importance is also attached to increasing other income through sales of various products and services. All lending growth shall continue to involve good quality. The bank has a clear focus on cost-reducing measures and work continues on measures to improve efficiency in distribution and staffing. Tromsø, 08 August 2012 The Main Board of Directors of SpareBank 1 Nord-Norge Kjell Olav Pettersen Pål Andreas Pedersen Sonja Djønne Roar Dons (Chairman of the Board) (Deputy Chairman) Greger Mannsverk Ann-Christine Nybacka Anita Persen Vivi-Ann Pedersen (employee-elected) Hans Olav Karde Chief Executive Officer 8/28

9 Key figures group Amounts in NOK million and in % of average assets % % % From the profit and loss account Net interest income % % % Net fee-, commision and other operating income % % % Net income from financial investments % % % Total income % % % Total costs % % % Result before losses % % % Losses % % % Result before tax % % % Tax % % % Minority interests % % % Result after tax % % % Profitability Return on equity capital % 16.3 % 8.5 % Interest margin % 1.59 % 1.61 % Cost/income % 45.9 % 57.0 % Balance sheet figures Loans and advances to customers Loans and advances to customers including agency loans Growth in loans and advances to customers past 12 months 2.6 % 6.4 % 5.3 % Growth in loans and advances to cust. incl. agency loans past 12 months 11.5 % 6.3 % 7.4 % Deposits from customers Growth in deposits from customers past 12 months 0.2 % 9.1 % 6.0 % Deposits as a percentage of gross lending % 80.3 % 80.9 % Deposits as a percentage of gross lending including agency loans 57.2 % 63.6 % 61.4 % Average assets Total assets Losses on loans and commitments in default *) Losses on loans to customers as a percentage of gross loans incl.agency loans 0.13 % 0.08 % 0.15 % Commitments in default as a percentage of gross loans incl.agency loans 0.72 % 0.85 % 0.69 % Commitments at risk of loss as a percentage of gross loans incl.agency loans 0.24 % 0.55 % 0.50 % Net comm. in default and at risk of loss as a per. of gross loans incl. agency loans 0.71 % 1.00 % 0.88 % Solidity Capital adequacy ratio % % % Core capital adequacy ratio % % % Core capital Equity and related capital resources Adjusted risk-weighted assets base Branches and full-time employees Branches Manyear Equity Certificates **) Equity Certificate ratio overall % % % % % % Quoted/market price NONG as at Quotation value Equity capital per Equity Certificate - Group (NOK) Result per Equity Certificate (Group) Cash dividend per Equity Certificate to be paid P/E (Price/Earnings) - Group P/V (Price/Book Value) - Group *) Agency loans includes loans transferred to SpareBank 1 Boligkreditt AS and SpareBank 1 Næringskreditt AS **) All key figures are recalculated due to new total of EC's 1 Profit for the period as a percentage of average total equity, calculated as average amount of quarterly equity and per and Total interest margin as a percentage of average total assets 3 Total costs as a percentage of total net income 4 Deposits from customers as a percentage of gross lending 5 Average assets are calculated as average assets each quarter and at and Net subordinated capital as a percentage of calculated risk-weighted balance 7 Core capital as a percentage of calculated risk-weighted balance 8 EC holders share of equity capital as at Quoted price on Oslo Stock Exchange multiplied by numbers of EC's outstanding 10 EC-capital + Premium Fund + Dividend Equalisation Fund + Equity Certificates holders' share of the equity capital as at * (other equity capital + Result for the period, divided by number of EC's outstanding 11 Profit for the period (group) multiplied by Equity Certificates holders' share of the equity capital as at , in relation to total number of EC's 12 Cash dividend per EC for the accounting year. Resolution made by Main Board of Directors 13 Market price on Oslo Stock Exchange at end of period, divided by result for the period per EC 14 Market price on Oslo Stock Exchange at end of period, divided by book value of equity capital per EC 9/28

10 Statement of comprehensive income Parent Bank Group Q11 2Q Q12 2Q Interest income Interest costs Net interest income Fee- and commission income Fee- and commission costs Other operating income Net fee-, commision and other operating income Dividend Income from investments Net gain from investments in securities Net income from financial investments Total income Personnel costs Administration costs Ordinary depreciation Other operating costs Total costs Result before losses Losses Result before tax Tax Result after tax Majority interest Minority interests Result per Equity Certificate Result per Equity Certificate Diluted result per Equity Certificate Comprehensive income Result after tax Recalculation differences Effective part of change in fair market value in cash flow hedging Net change in fair market value of investment in joint ventures Net change in fair market value of financial assets available for sale Tax on other comprehensive income Other comprehensive income for the period Total comprehensive income for the period Majority interest Minority interests Totalresult per Equity Certificate Total result per Equity Certificate Diluted total result per Equity Certificate Tax on other comprehensive income: Effective part of change in fair market value in cash flow hedging Net change in fair market value of financial assets available for sale Tax on other comprehensive income /28

11 Statement of financial position Parent Bank Group Assets Cash and balances with central banks Loans and advances to credit institutions Loans and advances to customers Individual write-downs for impaired value Collective write-downs for impaired value Net loans and advances to customers Shares Certificates and bonds Financial derivatives Investments in Group Companies Investments in assosiated companies and joint ventures Property, plant and equipment Intangible assets Other assets Total assets Liabilities Deposits from credit institutions Deposits from customers Debt securities in issue Financial derivatives Other liabilities Deferred tax liabilities Subordinated loan capital Total liabilities Equity Equity Certificate capital Equity Certificate premium reserve Dividend Equalisation Fund The Savings Bank's Fund Donations Fund for unrealised gains Other equity capital Result after tax Minority interests Total equity Total liabilities and equity /28

12 Result from the Group's quarterly accounts 2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 Interest income Interest costs Net interest income Fee- and commission income Fee- and commission costs Other operating income Net fee-, commision and other operating income Dividend Income from investments Net gain from investments in securities Net income from financial investments Total income Personnel costs Administration costs Ordinary depreciation Other operating costs Total costs Result before losses Losses Result before tax Tax Minority interests Result after tax Profitability Return on equity capital 6.40 % % % 8.92 % % % % % % Interest margin 1.58 % 1.59 % 1.57 % 1.65 % 1.59 % 1.61 % 1.66 % 1.74 % 1.73 % Cost/income % % % % % % % % % Balance sheet figures Loans and advances to customers Growth in loans and advances to cust. incl. agency loans past 12 months 11.5 % 10.1 % 7.4 % 6.4 % 6.3 % 6.1 % 7.2 % 7.3 % 6.2 % Deposits from customers Growth in deposits from customers past 12 months 0.2 % 0.7 % 6.0 % 12.5 % 9.1 % 11.0 % 12.9 % 8.9 % 4.8 % Deposits as a percentage of gross lending 78.4 % 77.9 % 80.9 % 80.0 % 80.3 % 79.4 % 80.3 % 73.9 % 78.3 % Deposits as a percentage of gross lending including agency loans 57.2 % 56.7 % 61.4 % 62.9 % 63.6 % 62.0 % 62.2 % 59.5 % 62.0 % Average assets Total assets Losses on loans and commitments in default Losses on loans to customers as a percentage of gross loans incl.agency loans 0.03 % 0.24 % 0.31 % 0.14 % 0.09 % 0.06 % 0.27 % 0.01 % 0.15 % Commitments in default as a percentage of gross loans incl.agency loans 0.72 % 0.62 % 0.69 % 0.86 % 0.85 % 0.75 % 0.78 % 0.34 % 0.51 % Commitments at risk of loss as a percentage of gross loans incl.agency loans 0.24 % 0.38 % 0.50 % 0.51 % 0.55 % 0.68 % 0.60 % 0.93 % 0.85 % Net comm. in default and at risk of loss as a per. of gross loans incl. agency loans 0.71 % 0.69 % 0.88 % 0.96 % 1.00 % 1.00 % 0.94 % 0.88 % 0.99 % Solidity Capital adequacy ratio % % % % % % % % % Core capital adequacy ratio % % % % % % % 9.78 % 9.86 % Core capital Equity and related capital resources Adjusted risk-weighted assets base /28

13 Quarterly Report - Changes in equity Group PCC capital Premium Fund Dividend Equalisation Fund Saving Bank's Fund Donations Fund Fair value reserve Other equity Period result Total Majority interests Minority interests Total equity Equity at Total comprehensive income for the Period result Other comprehensive income: Recalculation differences Effective part of change in fair market value in cash flow hedging Tax on other comprehensive income Total other comprehensive income Total comprehensive income for the period Transactions with owners Equity issue Set aside for dividend payments Reversal of dividend payments Dividend paid Andre føringer mot EK Endringer i minoritetsinteresser 9 9 Payments from Donations Fund Total transactions with owners Egenkapital Equity at Total comprehensive income for the Period result Other comprehensive income: Recalculation differences Net change in fair market value of investment in joint ventures Effective part of change in fair market value in cash flow hedging Net change in fair market value of cash flow hedging which has been transferred to the profit and loss account Tax on other comprehensive income Total other comprehensive income Total comprehensive income for the period Transactions with owners Equity issue Changes in minority interests Dividend paid Other transactions Payments from Donations Fund Total transactions with owners Equity at ECC ratio overall Parent Bank Original Revised calculation calculation ( ) ( ) ( ) Equity Certificate capital Equity Certificate premium reserve Dividend Equalisation Fund Set aside dividend Share Fund Fair Value Options A. Equity attributable to Equity Certificate holders of the Bank The Savings Bank's Fund Allocated dividends to ownerless capital Donations Share Fund Fair Value Options B. Total ownerless capital Equity Certificate Ratio overall (A/(A+B)) % % % % % Following the equity issues in June 2011, the Equity Capital fraction has been recalculated. 13/28

14 Statement of cash flows Parent Bank Group Result before tax Ordinary depreciation Write-downs, gains/losses fixed assets Losses on loans and guarantees Tax Group contributions Dividends/donations Provided from the year's operations Change in sundry liabilities: + increase/ - decrease Change in various claims: - increase/ + decrease Change in gross lending to and claims on customers: - increase/ + decrease Change in short term-securities: - increase/ + decrease Change in deposits from and debt owed to customers: + increase/ - decrease Change in debt owed to credit institutions: + increase/ - decrease A. Net liquidity change from operations Investment in fixed assets (incl merger effects) Sale of fixed assets Change in holdings of long-term securities: - increase/ + decrease B. Liquidity change from investments Change in borrowings through the issuance of securities: + increase/ - decrease Change in Equity Certificate/subordinated loan capital: + increase/ - decrease C. Liquidity change from financing A + B + C. Total change in liquidity Liquid funds at the start of the period = Liquid funds at the end of the period Liquid funds are defined as cash-in-hand, claims on central banks, plus loans to and claims on credit institutions. 14/28

15 Notes Note 1 - Accounting Principles The Group s quarterly accounts have been prepared in accordance with stock exchange rules and regulations and International Financial Reporting Standards (IFRS), including IAS 34 relating to interim reporting. The quarterly accounts do not comprise all information which is required in complete annual accounts and should be read in conjunction with the 2008 Annual Accounts. IAS 1 presentation of the financial accounts has been amended in 2009, involving several changes in the presentation of the profit and loss account now Statement of comprehensive income as well as the statement of changes in equity capital. Items which are recognised directly in equity capital shall now also be presented in the Statement of comprehensive income as extended profit and loss account items. In the equity capital statement transactions between the owners and other transactions are kept separate. In accordance with the rules and regulations dated 16 October 2008 issued by the Ministry of Finance, it is now permitted to reclassify securities in a trading portfolio from the category Market value with any value changes shown through the profit and loss account to the category Hold until maturity and Loans and claims. The SNN Group decided to apply such reclassification to large parts of its interest-bearing portfolio with ef fect f rom Future assessments within these categories shall be calculated at amortized cost, which means that earlier write-downs of values and interest are to be amortized and included in the profit and loss account as interest income over the remaining life of the items in question. Reference is made to note 12. The remaining portf olio of certif icates and bonds is assessed at market value through the profit and loss account. Note 2 - Capital Adequacy New capital adequacy rules and regulations (Basel II EU s new directives for capital adequacy) were implemented in Norway with effect from 1 January SpareBank 1 Nord-Norge has received permission from The Financial Supervisory Authorityof Norway (FSAN) to apply internal calculation methods (Internal Rating-Based Approach) for credit risk f rom 1 January With ef fect f rom 2007, therefore, the statutory minimum capital adequacy requirement f or credit risk will be based on the Bank s internal assessment of risk. This will make the statutory minimum capital adequacy requirement more risk-sensitive, which means that the capital requirement will to a larger extent correspond to the risk contained in the underlying portf olios in question. The use of internal calculation methods will involve comprehensive demands on the Bank s organisation, competence, risk models and risk management systems. As a result of transitional rules relating to the new directive mentioned above, IRB-banks would not experience the full impact of the reduced regulatory capital requirements until Until 2010, banks had to report on a parallel basis, both according to the old capital adequacy calculations and Basel II. During the period , an annual adjustment of the risk-adjusted calculation basis in relation to the old method (socalled correction of 'floor') was permitted. A resolution has now been reached to postpone this issue, and the transition rules for 2009 will continue to apply in 2010, 2011 and The calculation basis in 2012 therefore amounts to 80 per cent of the calculated basis according to the Basel I rules and regulations. 15/28

16 Parent Bank Group Note 2 - Capital Adequacy Equity certificates Own equity certificates Premium reserve Equalisation reserve Savings bank's reserve Endowment fund Other equity Deduction Fund for urealised gains Minority interests Period result Total equity Minority interests Period result Core capital Adjusted subordinated capital from consolidated financial institutions Intangible assets Fund for unrealised gains Deduction for allocated dividends % deduction for subordinated capital in other financial institutions % deduction for expected losses on IRB, net of writedowns % capital adequacy reserve Hybrid Tier 1 bonds Total core capital Supplementary capital Nonperpetual subordinated capital % deduction for subordinated capital in other financial institutions % deduction for expected losses on IRB, net of writedowns % capital adequacy reserve Total supplementary capital Equity and related capital resources Minimum requirements subordinated capital, Basel I I Specialised lending exposure Other corporations exposure SME exposure Property retail mortage exposure Other retail exposure Equity investments Total credit risk IRB Credit risk standardised approach Debt risk Equity risk Currency risk Operational risk Transitional arrangements Deductions Minimum requirements subordinated capital % % % Capital adequacy ratio % % % % % % Core capital ratio % % % 1.37 % 1.38 % 0.94 % Supplementary capital ratio 0.70 % 0.97 % 0.89 % 16/28

17 Parent Bank Note 3 -Net bad and doubtful commitments Group Non-performing commitments Other doubtful commitments Total commitments in default and doubtful commitments Individual write-downs in default Other doubtful individual write-downs Total individual write-downs = Net commitments in default and doubtful commitments % 30 % 25 % Loan loss provision ratio 26 % 29 % 26 % Note 4 - Losses incorporated in the accounts Period's change in individual write-down for impaired value Period's change in collective write-down for impaired value Period's confirmed losses against which individual write-downs were previously made Period's confirmed losses against which individual write-downs were previously not made Recoveries in respect of previously confirmed losses = Total losses on loans Note 5 - Individual- and collective write-downs for impaired value Individual write-downs for impaired value: Individual write-downs for impaired value on loans and guarantees as at Confirmed losses during the period on loans and guarantees, against which individual write-downs for impaired value has prev. been made Reversal of previous years' individual write-downs for impaired value Increase in write-downs for impaired value for commitments against which individual write-downs for impaired value were previously made Write-downs for impaired value for commitments against which no individual write-downs for impaired value was previously raised = Individual write-downs for impaired value on loans and guarantees * Collective write-downs for impaired value: Collective write-downs for impaired value on loans and guarantees as at Period's collective write-downs for impaired value on loans and guarantees = Collective write-downs for impaired value on loans, and guarantees *Individual write-downs for impaired value on guarantees, parent bank NOK 5 million and group NOK 10 million, are included in the Balance Sheet as liabilities under 'Other liabilities'. 17/28

18 Parent Bank Group Note 6 - Loans broken down by sector and industry Mining and quarrying Construction Building of ships and boats Electricity, gas, steam an air conditioning supply Professional, scientific and technical activities Finanicial and insurance activities Fishing Marine aquaculture Other business support activities Activities auxiliary to financial services and insurance activities County muncipalities and muncipalities Manufacturing Information and communication Crop and animal production Foreign industrial Real estate activities Accomodation and food service activities Forestry and logging Central government and social security funds Support activities for petroleum and natural gas extraction Other service industries Transportation and storage International shipping and pipeline transport Development of building projects Extraction of crude oil and natural gas Unspecified Water supply; sewerage, waste management and remediation activities Wholesale and retail trade; repair of motor vehicles and motorcycles Retail banking market - domestic Retail banking market - international Total retail market Total public market Total government Total loans /28

19 Parent Bank Group Note 7 - Losses broken down by sector and industry Mining and quarrying Construction Building of ships and boats Electricity, gas, steam an air conditioning supply Professional, scientific and technical activities Finanicial and insurance activities Fishing Marine aquaculture Other business support activities Activities auxiliary to financial services and insurance activities County muncipalities and muncipalities Manufacturing Information and communication Crop and animal production Foreign industrial Real estate activities Accomodation and food service activities Forestry and logging Central government and social security funds Support activities for petroleum and natural gas extraction Other service industries Transportation and storage International shipping and pipeline transport Development of building projects Extraction of crude oil and natural gas Unspecified Water supply; sewerage, waste management and remediation activities Wholesale and retail trade; repair of motor vehicles and motorcycles Retail banking market - domestic Collective write-downs public market Collective write-downs retail market Losses on loans to customers Recoveries from previously written off losses Net losses /28

20 Parent Bank Group Note 8 - Deposits broken down by sector and industry Mining and quarrying Construction Building of ships and boats Electricity, gas, steam an air conditioning supply Professional, scientific and technical activities Finanicial and insurance activities Fishing Marine aquaculture Other business support activities Activities auxiliary to financial services and insurance activities County muncipalities and muncipalities Manufacturing Information and communication Crop and animal production Foreign industrial Real estate activities Accomodation and food service activities Forestry and logging Central government and social security funds Support activities for petroleum and natural gas extraction Other service industries Transportation and storage International shipping and pipeline transport Development of building projects Extraction of crude oil and natural gas Unspecified Water supply; sewerage, waste management and remediation activities Wholesale and retail trade; repair of motor vehicles and motorcycles Retail banking market - domestic Retail banking market - international Total retail market Total public market Total government Total deposits /28