InterIm r e p o r t 1st half-year & 2nd quarter

Transcription

1 InterIm r e p o r t 1st half-year & 2nd 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 Declaration under the Norwegian Securities Trading Act Report on Review of Interim Financial Information [ 2 ]

3 Bolig- og Næringskreditt AS Coordination with SpareBank 1 The SpareBank 1 banking alliance acquired BNbank ASA (BNbank) in December Since then, attention has been focused on stabilising BNbank s customer base, reducing defaults, securing financing for the Bank and strengthening its capital. In addition, BNbank has carried out a strategic process to assess how best to coordinate and integrate its operations with those of the owner banks, and to develop earnings and profitability in BNbank. BNbank 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 BNbank s operations and products to be based on cost-effectiveness, low risk, simplicity and predictability. This is in line with BNbank s original strategy prior to the merger with the former KredittBanken. In the field of commercial real estate, BNbank 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, BNbank shall strengthen its position as a leading player in financing low-risk commercial real estate. The most important source of BNbank s funding will be the Norwegian bond market. Historically, BNbank 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 BNBank Group s and the 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. Work is being done to advance these aims, but no final decision has as yet been taken. A decision is expected in the second half of 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. BNbank has no equity interest in the company. 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 BNbank is permitted to transfer loans to the company and, as part of BNbank s funding strategy NOK 3.8 billion in loans was transferred from BNkreditt at the end of June. BNbank 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. There are no plans to transfer more loans to SpareBank 1 Næringskreditt. 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 34 million for first-half 2009, compared with NOK 89 million for the same period in The Company s pre-tax profit for the second quarter 2009 was NOK 17 million. Net interest income was NOK 162 million for first-half 2009, compared with NOK 155 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 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. For firsthalf 2009 this had a negative effect on earnings of NOK 52 million, while the effect in first-half 2008 was positive, by NOK 19 million. These effects will even out over time. To date this year, operating expenses have totalled NOK 49 million, which is at the same level as operating expenses for first-half The Company purchases all its operation management services from BNbank. The Company s underlying costs are at a stable level. There were several signs during the second quarter that the weakening in the Norwegian and international economies had lessened. Various stimulus packages from the authorities have begun to work, but further developments are uncertain. It will take time before greater demand helps reduce unemployment and strengthens the economy. The key interest rate was set very low during the first half-year. Combined with a weaker krone and rising oil prices, this has been positive for the Norwegian economy. As a consequence, there was a positive trend in losses and defaults in first-half Not including individual write-downs, non-performing and doubtful loans totalled NOK 558 million at the end of the second 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 first-half 2009 totalled NOK 14 million, compared with NOK 1 million for first-half The write-downs in first-half 2009 were group write-downs in their entirety. Group write-downs totalled NOK 52 million as of the second quarter 2009, which is 0.26 per cent of lending. Balance sheet development The loan portfolio at 30 June 2009 totalled NOK 20.4 billion, compared with NOK 21.3 billion at 30 June At the end of June 2009, BNkreditt had NOK 8.8 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 were falling in the second quarter but still exceed the Company s average financing costs. Risk and capital adequacy The picture with respect to risk developed positively in the second quarter. Various stimulus packages made available by the authorities, falling and low interest rates, and positive tendencies in a number of sub-markets have helped to reduce defaults and lessened the need for write-downs. The overall risk in the loan portfolio is considered relatively low, but because of economic developments and the impairment of 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. [ 4 ]

5 As a result of the transfer of loans to SpareBank 1 Næringskreditt and the fall in the volume of lending, capital adequacy strengthened in first-half BNkreditt s capital base was NOK million at the end of the period. This is equivalent to a capital adequacy ratio of 16.4 per cent, which is 1.8 percentage points up on the first quarter Tier 1 capital was NOK million, equal to a capital adequacy ratio of 14.1 per cent at 30 June 2009, which is 1.6 percentage points up on March Risk-weighted assets totalled NOK million at 30 June 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 Although some indicators suggest that the negative trend in the economy is starting to turn, there is considerable uncertainty attached to future developments. This uncertainty applies particularly to developments in the commercial real estate market. The Company s entire portfolio is low-risk, but a continuing decline in the value of commercial buildings and increased unemployment are likely to have a negative effect. Low interest rates are, however, having a positive impact on this segment. 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. BNkreditt enjoys a good position in selected markets. Further growth in lending will depend on BNbank s strategy for financing commercial real estate, the Company s financial strength and financing opportunities. The Board does not expect to see any growth in lending in Priority will be given to existing customers and loan commitments. Future growth in margins and volumes in the lending business is burdened with uncertainty. Interest rates, economic conditions, the general demand for credit, and competition in the market all have an effect. The Board of Directors Trondheim, 7. august 2009 [ 5 ]

6 Financial ratios nok million note % of ata % of ata full year 2008 % of ata Summary of results Net income from interest and credit commissions % % % Total other operating income % % % Total income % % % Total other 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 % 6.5 % 6.3 % Net interest income % 1.37 % 1.55 % Cost-income ratio % 28.2 % 25.1 % Balance sheet figures Gross lending to customers Increase/decrease in lending (gross) last 12 months -4.3 % -9.8 % % Average total assets (ATA) Total assets Losses on loans & non-performing loans Impairment losses on loans and advances % 0.00 % 0.14 % Non-performing loans as % of gross lending 1.97 % 0.96 % 3.25 % Other doubtful loans as % of gross lending 0.87 % 0.00 % 0.00 % Solvency Capital adequacy ratio 16.4 % 14.3 % 14.4 % Tier 1 capital ratio 14.1 % 12.2 % 12.3 % Tier 1 capital Net capital base Offices and staffing Number 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 q2 q2 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, 7. august 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 June 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 June The Board of Directors Trondheim, 7. august 2009 [ 9 ]

10 Cash Flow Statement full year nok million Cash flows from operating activities Interest/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 June [ 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) q2 q2 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. q2 q2 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 q2 q2 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 Loans past due more than 3 months full year nok million Gross principal Individual write-downs Net principal [ 12 ]

13 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 403 1, , ,25 Note 5. Funding The Company had issued bonds and certificates in the nominal amount of NOK 413 million at 30 June 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 Recognised values full year nok million Certificates carried at amortised cost Certificates selected for fair value carrying Total recognised value of Certificates Bonds carried at amortised cost Bonds selected for fair value carrying Total recognised value of Certificates Total recognised value of debt securities in issue [ 13 ]

14 Note 6. Contingent outcomes, events after the balance sheet date Apart from the matters mentioned in the note above, there are no assets or liabilities to which contingent outcomes are attached and where those outcomes could have a significant impact on the Group`s financial position and results. There were no significant events after the 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 co-located with SpareBank 1 Boligkreditt AS in Stavanger. BNbank has no equity interest in SpareBank 1 Næringskreditt. The purpose of the credit institution is to secure for the banks in the alliance a source of stable and long-term financing of 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 As part of the alliance, BNbank is permitted to transfer loans to the company and, as part of BNbank s funding strategy, NOK 3.8 billion in loans was transferred from BNkreditt at the end of June. Payment for the loans was received in July and the receivable from SpareBank 1 Næringskreditt is classified as lending as of 30 June BNbank is responsible for administration of 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. In order to attend to the interests of existing bondholders, in connection with the transfer BNbank 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 up a guarantee. At 30 June, BNkreditt s capital adequacy ratio was 16.4 per cent and NOK 642 million of the parent bank s receivable is accordingly subordinate to the bond debt in the company. BNbank has provided guarantees for loan commitments transferred where the loan commitments exceed 25 per cent of SpareBank 1 Næringskreditt s capital base. At 30 June this guarantee amounted to NOK 235 million. [ 14 ]

15 Declaration under the Norwegian Securities Trading Act, section 5-6 We certify that the Company s half-yearly financial statements for the period 1 January to 30 June 2009 have to the best of our belief been prepared in accordance with IAS34 Interim Reporting, and that the disclosures in the half-yearly report give a true and fair view of the Company s assets, liabilities, financial position and results as a whole. The half-yearly report gives to the best of our belief a true and fair view of important events during the accounting period and their impact on the half-yearly financial statements, and a description of the most important risk and uncertainty factors likely to affect the business in the next accounting period. Trondheim, 7. august 2009 The Board of Directors of Bolig- og Næringskreditt AS Lisbet K. Nærø Kjell Fordal Kari Elise Gisnås (Chair) (Deputy Chair) Arve Austestad Gunnar Jerven (Managing Director) [ 15 ]

16 PricewaterhouseCoopers AS Beddingen 10 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 June 2009 and the related condensed statements of income, changes in equity and cash flows for the six-month period then ended. The interim financial reporting shows a net profit of NOK 34 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, 7 August 2009 PricewaterhouseCoopers AS Rune Kenneth S. Lædre State Authorised Public Accountant (Norway) Note: This translation from Norwegian has been prepared for information purposes only. Kontorer: Arendal Bergen Drammen Fredrikstad Førde Hamar Kristiansand Mo i Rana Molde Måløy Narvik Oslo Stavanger Stryn Tromsø Trondheim Tønsberg 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