InterIm. 3rd.Quarter. Bnkreditt

Transcription

1 InterIm r e p o r t 3rd.Quarter 2009 Bnkreditt

2 contents Report of the Directors... 3 Financial Ratios... 6 Income Statement... 7 Balance Sheet...8 Change in Equity... 9 Cash Flow Statement...10 Notes Report of Review of Interim Financial Information [ 2 ]

3 Bolig- og Næringskreditt AS Coordination with SpareBank 1 BN Bank s main areas of concentration will be commercial real estate financing, deposits and home loans. As well as focusing on these areas, the Bank will offer various SpareBank 1 products. The general aim is for BN Bank s operations and products to be based on cost-effectiveness, low risk, simplicity and predictability. This is in line with BN Bank s original strategy prior to the merger with the former KredittBanken. In the field of commercial real estate, BN Bank shall have cutting-edge expertise in commercial real estate, good customer relations, and be a partner for the owner banks. Through a more highly focused strategy, BN Bank shall strengthen its position as a leading player in financing low-risk commercial real estate. The most important source of BN Bank s funding will be the Norwegian bond market. Historically, BNkreditt has been a player in the bond market and will develop its position further in this market. The work to further develop and coordinate the operations of the credit institutions BNkreditt, BN Boligkreditt and SpareBank 1 Boligkreditt, aimed at strengthening the funding of the BN Bank Group s and the banking alliance s operations, will continue. The operations in Ålesund, which largely comprise lending to the corporate market, will be organisationally subordinate to SpareBank 1 SMN from the fourth quarter this year. SpareBank 1 Næringskreditt AS SpareBank 1 Næringskreditt AS was established in 2009 and granted a licence by the Financial Supervisory Authority of Norway to operate as a credit institution. The company is owned by the savings banks that form the SpareBank 1 alliance and is co-located with SpareBank 1 Boligkreditt AS in Stavanger. The purpose of setting up the company is to secure the banks within the alliance a source of stable and long-term financing for commercial real estate at competitive rates. SpareBank 1 Næringskreditt procures loans with mortgages on commercial property and issues covered bonds within the regulations governing such bonds established in BN Bank is permitted to transfer loans to the company and, as part of BN Bank s funding strategy NOK 7.5 billion in loans had been transferred from BNkreditt at the end of September this year. BN Bank is responsible for administering the transferred loans and BNkreditt receives a commission based on the net return on the loans transferred by the Bank and the costs to the company. See Note 7 for more information on SpareBank 1 Næringskreditt. [ 3 ]

4 Operations The financing of low-risk commercial real estate is done chiefly through BNkreditt. BNkreditt is funded by issuing securities and by intercompany funding. Results BNkreditt posted a pre-tax profit of NOK 83 million for the three quarters to 30 September 2009, compared with NOK 195 million for the same period in The Company s pre-tax profit for the third quarter 2009 was NOK 36 million. Net interest income was NOK 216 million for the three quarters to 30 September 2009, compared with NOK 241 million for the same period in The Company s unrestricted funds (equity) have a shortterm investment horizon, and return on these assets has been lower as a result of falling interest rates. The Company still has borrowings raised prior to the turmoil in the financial markets, on terms that were in effect before the crisis began. Repricing of these borrowings on market terms will over time exert pressure on the Company s earnings. Transferring loans to SpareBank 1 Næringskreditt will have an overall positive effect on the Company s revenues, but will also lower net interest income that will have to be compensated for with an increase in other income. The Company s derivatives and financial instruments that mature after one year are carried at fair value. Interest rate risk in the Company is low, and fluctuations in interest rates should have a limited net effect on earnings. During periods when interest rate spreads between different instruments develop differently, effects on earnings may arise. To date this year, this had a negative effect on earnings of NOK 46 million, while the effect in the first three quarters of 2008 was positive, by NOK 30 million. These effects will even out over time. To date this year, operating expenses have totalled NOK 72 million, the same level as operating expenses for the same prior-year period. The Company purchases all its operation management services from BN Bank. The Company s underlying costs are at a stable level. The key interest rate was set very low during the first halfyear, and a cautious rise is expected in the fourth quarter of As a result, the krone has strengthened considerably in the past few weeks. Oil prices remained stable at a relatively high level in the third quarter, which is positive for the Norwegian economy. There has been a positive trend in losses and defaults to date this year. Not including individual write-downs, non-performing and doubtful loans totalled NOK 124 million at the end of the third quarter. At the start of the year, the comparable volume was NOK 653 million. Developments during the quarter have been positive and the Company will continue to maintain a keen focus on the quality of the loan portfolio and on following up doubtful loans. See Note 4 for more information on non-performing and doubtful loans. Losses on loans for the three quarters to 30 September totalled NOK 15 million, compared with NOK 2 million for the same prior-year period. Write-downs to date this year have been collective write-downs in their entirety. Collective write-downs totalled NOK 53 million as of the third quarter 2009, which is 0.38 per cent of lending. Balance sheet development The loan portfolio at 30 September 2009 was NOK 13.8 billion, compared with NOK 20.8 billion at 30 September The decrease is attributable to loan transfers to Sparebank 1 Næringskreditt. NOK 7.5 billion in loans had been transferred by 30 September. Utilising SpareBank 1 Næringskreditt in this manner will reduce the Company s liquidity risk and lay a foundation for growth, greater financial strength and better earning power. At the end of September 2009, BNkreditt had NOK 9.6 billion in own securities borrowings, of which NOK 3.5 billion have been purchased by the parent bank. Other interest-bearing debt consists mainly of debt to the parent bank. The bond market is steadily improving and the Company has noted increased demand for long-dated bonds issued by BNkreditt. Prices in the bond market fell considerably in the third quarter. The third quarter saw several positive signs of development in the Norwegian and international economies. Various stimulus packages introduced by the authorities are working, and several of the arrangements are now starting to be phased out. It will however take time before greater demand helps reduce unemployment and strengthens the economy. [ 4 ]

5 Risk and capital adequacy There was a positive development in the risk picture in the third quarter. Various packages of measures introduced by the authorities, falling and low interest rates, and positive tendencies in a number of submarkets, have helped to reduce defaults and lessened the need for write-downs. The overall risk in the loan portfolio is deemed relatively low, but because of economic developments and impaired collateral for the Company s lending, risk has increased in the past year. The level of losses over time in BNkreditt is very closely linked to macroeconomic trends. The trend in the real economy and property prices will therefore continue to influence the extent of losses in the time ahead. There is uncertainty attached to predicting further loss trends. The Company will continue to monitor closely the quality of the loan portfolio and to follow up doubtful loans. The liquidity situation was strengthened through the quarter and access to liquidity on competitive terms is increasing. As a result of the loan transfers to SpareBank 1 Næringskreditt and the falling volume of lending, capital adequacy has strengthened in BNkreditt s capital base at the end of the period was NOK million. This is equivalent to a capital adequacy ratio of 20.9 per cent, which is 4.5 percentage points up on the second quarter Tier 1 capital was NOK million, making a tier 1 capital ratio of 18.0 per cent at 30 September 2009, which is 3.9 percentage points up on 30 June Risk-weighted assets were NOK million at 30 September. The Board of Directors considers the ratio between BNkreditt s capital adequacy and relevant risks to be satisfactory. Outlook for the remainder of the year While there is still uncertainty attached to developments in the real economy, there are positive signs of improvement in several areas. BNkreditt s loan portfolio is on the whole low-risk, and the low interest rates are having a positive effect on risk in the portfolio. The main focus of the Company s new strategy for financing commercial real estate will, in the Board s opinion, provide a sound basis for developing the Company s value and assets. By funding lending operations in its own name, and by utilising SpareBank 1 Næringskreditt, BNkreditt has a good foundation for growth. The Board of Directors Trondheim, 27. october 2009 [ 5 ]

6 Financial ratios nok million note % of ata % of ata full year 2008 % of ata Summary of results Net income from interst and credit provisions % % % Total other operating income % % % Total Income % % % Total operating expenses % % % Operating profit/loss before impairment losses % % % Impairment losses on loans and advances % % % Profit/loss before tax % % % Tax charge % % % Result of remaining operations % % % Profitability Return on equity % 6.8 % 6.3 % Net interest income % 1.44 % 1.55 % Cost-income ratio % 27.3 % 25.1 % Balance sheet figures Gross lending Gross lending incl transferred lending to SpareBank 1 Næringskreditt AS n/a n/a Increase/decrease in lending (gross) last 12 months % -9.8 % % Average total assets (ATA) Total assets Losses on loans & non-performing loans Loss ratio, lending % 0.01 % 0.14 % Non-performing loans as % of gross lending 0.89 % 2.16 % 3.25 % Other doubtful loans as % of gross lending 1.29 % 0.00 % 0.00 % Solvency Capital adequacy ratio 20,9 % 14.9 % 14.4 % Tier 1 capital ratio 18.0 % 12.8 % 12.3 % Tier 1 capital Net capital base Offices and staffing NNumber of offices Number of full-time equivalents ShareS Earnings per share (whole NOK) Note 1) Profit after tax as a percentage of average equity 2) Total net interest income to date this year in ratio to average total assets 3) Total operating expenses as a percentage of total operating income 4) Average total assets are calculated as an average of quarterly total assets and at 1 January and 31 December 5) Net loss as a percentage of average gross lending to date this year [ 6 ]

7 Income Statement q3 q3 full-year nok million note Interest and similar income Interest expense and similar charges Net income from interest and credit commissions Change in value of fin instr carried at fair value Other operating income Total other operating income Salaries and general administrative expenses Other operating expenses Total other operating expenses Operating profit before impairment losses Impairment losses on loans and advances Profit before income tax Income tax expense Net profit for the period [ 7 ]

8 Balance Sheet full-year nok million note Deferred tax assets Repossessed properties Loans and advances 4, Financial derivatives Cash and balances with credit institutions Total assets Share Capital Retained earnings Total equity Deferred tax Subordinated loan capital Liabilities to credit institutions Debt securities in issue Accrued expenses and deferred income Financial derivatives Total Liabilities Total equity and liabilities The Board of Directors Trondheim, 27. october 2009 [ 8 ]

9 Change in Equity Share other Share- premium cpntrib. other total nok million Capital reserve equity reserves equity Balance Sheet at 1 January Result for the period Balance Sheet at 30 September Result for the period Balance Sheet at 31 December Group contribution paid to parent - of which used to cover loss Result for the period Balance Sheet at 30 September The Board of Directors Trondheim, 27. october 2009 [ 9 ]

10 Cash Flow Statement full year nok million Cash flows from operating activities IInterest/commission received and fees received from customers Interest received on other investments Interest paid on other loans Receipts/disbursements (-) on loans and advances to customers Receipts/payments on customer deposits and debt Receipts/payments (-) on liabilities credit institutions Receipts/payments (-) on securities in issue Other receipts/payments Payments to suppliers for goods and services Payments to employees, pensions and social security expenses Tax paid Net cash flow from operating activities Cash flows from investing activities Receipts/payments (-) on balances with credit institutions Net cash flow from investing activities Cash flow from financing activities Payment of dividends/group Contribution Net cash flows from financing activities Net cash flow for the period Cash and balances with central banks at 1 January Cash and receivables from central banks at 30 September [ 10 ]

11 Notes Note 1. Accounting policies The financial statements for the second quarter have been prepared in compliance with IFRS, including IAS 34 on Interim Financial Reporting. IAS 1 (revised), Presentation of financial statements has been applied for the Group as of 1 January A description of the accounting policies applied by the Group in preparing the financial statements is provided in the Annual Report for Note 2. Other operating income and net gain/(loss) q3 q3 full year nok million Net commission income/expense Net gain/loss on securities Net gain/loss on foreign exchange Other operating income Total other operating income and net gain/(loss) Net gain/loss on foreign exchange is mainly attributable to effects of foreign exchange gains/losses which arise when borrowing and lending in foreign currencies is translated at the current exchange rate. Forward exchange contracts are measured at fair value with value changes carried through profit or loss. Exchange gain/loss effects on this line will therefore be wholly or partially equalled by effects with sign reversed under the line for Change in value of financial instruments carried at fair value through profit or loss. Note 3. Change in equity It was in the shareholders` meeting decided to provide at group contribution of 365 MNOK before tax to the parent company for coverage of losses [ 11 ]

12 Note 4. Impairment losses and write-downs on loans carried at amortised cost The various elements included in impairment losses and write-downs on loans are set out in Note 1 in the annual report for Loans past due more than 3 months are defined as loans not serviced under the loan agreement for 3 months or more. As a first mortgage lender, the Group can however gain access to revenue, either through the courts or by some voluntary solution. Impairment losses and write-downs on loans described in this note apply to loans carried at amortised cost. q3 q3 full year nok million Write-offs in excess of prior-year write-downs Write-offs on loans without prior write-downs Write-downs for the period: Change in group write-downs IFRS adjustment of group write-downs Total change in group write-downs Increase in loans with prior-year write-downs Provisions against loans without prior write-downs Decrease in loans with prior-year write-downs Total change in individual write-downs Gross impairment losses Recoveries on prior write-offs Impairment losses Revenue recognition of interest on written-down loans q3 q3 full year nok million Individual write-downs to cover imp. losses at the start of the period Write-offs covered by prior-year individual write-downs Write-downs for the period: Increase in loans with prior-year individual write-downs Write-down on loans without prior individual write-downs Decrease in loans with prior-year individual write-downs Individual write-downs to cover imp. losses at the end of the period Group write-downs to cover imp. losses at the start of the period Group write-downs for the period to cover impairment losses Group write-downs to cover imp. losses at the end of the period [ 12 ]

13 Loans past due more than 3 months full year nok million Gross principal Individual write-downs Net principal Other loans with individual write-downs full year nok million Gross principal Individual write-downs Net principal Loans past due more than 3 months by sector and as a percentage of loans gross outstanding gross outstanding gross outstanding nok million % % 2008 % Corporate marked 124 0, , ,25 Note 5. Funding The Company had issued bonds and certificates in the nominal amount of NOK million at 30 September 2009, either as new issues or increases in existing tap issues. Fixed-rate loans are measured at fair value on the balance sheet, while variable-rate loans are measured at amortised cost. nok million CertificateS Bonds total Net debt (nominal) at 1 January New issues Increase in existing issues Purchase and maturity of existing issues Net debt (nominal) at 31 March New issues Increase in existing issues Purchase and maturity of existing issues Net debt (nominal) at 30 June New issues Increase in existing issues Purchase and maturity of existing issues Net debt (nominal) at 30 September [ 13 ]

14 Recognised values full year nok million Certificates carried at amortised cost Certificates carried for fair value carrying Total recognised value of bonds Bonds carried at amortised cost Bonds carried for fair value carrying Total recognised value of bonds Total recognised value of debt securities in issue Note 6. Contingent outcomes, events after the balance sheet date There are no assets or liabilities that are associated with the contingent outcome and where these outcomes can have a significant impact on its financial position and results. There have been no significant events after balance sheet date. Note 7. Transfer to SpareBank 1 Næringskreditt SpareBank 1 Næringskreditt AS was established in 2009 and is licensed by the Financial Supervisory Authority of Norway to operate as a credit institution. The company is owned by the savings banks that form the SpareBank 1 alliance and is colocated with SpareBank 1 Boligkreditt AS in Stavanger. BN Bank hold 8.2 per cent of SpareBank 1 Næringskreditt`s equity. The purpose of the creditt institution is to secure for the banks in the alliance a source of stable and long-term financing of commercial real estate at competitie rates. SpareBank 1 Næringskreditt procures loans with mortgages on commercial property and issues covered bonds within the regulations governing such bonds established in As part of the alliance, BN Bank is permitted to transfer loans to the company and, as part of BN Bank`s funding stragegy, NOK 3.8 billion in loans was transferred from BNkreditt at the end of June, while another 3.7 was transferred in September. BN Bank is responsible for administration of the transferred loans and BNkreditt receives a commision based on the net return on the loans transferred by the Bank and the costs to the company. In order to attend to the interests of existing bondholders, in connection with the transfer BN Bank guaranteed to ensure that Bnkreditt`s capital adequacy ratio would be at least 20 per cent at all times. Should the capital adequacy ratio fall below 20 per cent, the parent bank is required to make its receivable subordinate to other debt in BNkreditt and/or put ut a guarantee. At 30 September, BNkreditt`s capital adequacy ratio was 20.9 per cent. BN Bank has provided guarantees for loan commitments transferred where the loan commitments exceed 25 per cent of SpareBank 1 Næringskreditt`s capital base. In addition, BN Bank guaranteed for 2 per cent of transferred lending volume. At 30 September this two guarantees amounted to NOK million. [ 14 ]

15 Note 8. Quarterly income statement q3 q2 q1 q4 q3 nok million NInterest and similar income Interest expense and similar charges Net income from interst and credit commissions Change in value of fin instr carried at fair value Other operating income and net gain/(loss) Total other operating income Salaries and general administrative expenses Other operating expenses Total other operating expenses Operating profit before impairment losses Impairment losses Profit before income tax Income tax expense Net profit for the period [ 15 ]

16 PricewaterhouseCoopers AS Brattkaia 17B NO-7492 Trondheim Telefon Telefaks To the Board of Directors of Bolig- og Næringskreditt AS Report on Review of Interim Financial Information We have reviewed the accompanying condensed balance sheet of Bolig- og Næringskreditt AS as of 30 September 2009 and the related condensed statements of income, changes in equity and cash flows for the nine-month period then ended. The interim financial reporting shows a net profit of NOK 60 millions. Management is responsible for the preparation and presentation of this condensed interim financial information in accordance with International Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of Review We conducted our review in accordance with Norwegian Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with standards on auditing adopted by Den Norske Revisorforening, and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting". Trondheim, 27 October 2009 PricewaterhouseCoopers AS Rune Kenneth S. Lædre State Authorised Public Accountant (Norway) Note: This translation from Norwegian has been prepared for information purposes only. Alta Arendal Bergen Bodø Drammen Egersund Florø Fredrikstad Førde Gardermoen Gol Hamar Hardanger Harstad Haugesund Kongsberg Kongsvinger Kristiansand Kristiansund Lyngseidet Mandal Mo i Rana Molde Mosjøen Måløy Namsos Oslo Sandefjord Sogndal Stavanger Stryn Tromsø Trondheim Tønsberg Ulsteinvik Ålesund PricewaterhouseCoopers navnet refererer til individuelle medlemsfirmaer tilknyttet den verdensomspennende PricewaterhouseCoopers organisasjonen Medlemmer av Den norske Revisorforening Foretaksregisteret: NO [ 16 ]

17 [ 17 ] Styrets beretning / BNbank årsberetning 2007 Bolig- og næringskreditt as Ono