Banking. SpareBank 1 Nord-Norge Tromsø, Norway. Company Profile. Moody s Global. Company Overview. June Analyst Contacts:

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1 Company Profile Moody s Global Banking June 2009 Tromsø, Norway Analyst Contacts: London Eeva Antila Analyst Janne Thomsen Senior Vice President 0 Reynold Leegerstee Team Managing Director Company Overview is a leading regional savings bank in northern Norway, including Finnmark, Troms, Nordland and Svalbard counties, and the ninth largest bank in Norway in terms of consolidated assets at 31 December Its consolidated assets totalled NOK65.5 billion ( 6.6 billion) at 31 December provides a range of banking products and services including finance, savings and placement facilities as well as insurance and payment transmission services to retail and corporate customers. It is one of four founding members and one of the largest banking members of the SpareBank 1 Alliance, which had total assets of NOK534 billion ( 64.4 billion) as of 30 September The alliance is coordinated through SpareBank 1 Gruppen AS, a holding company owned collectively by Sparebanken Nord-Norge, SpareBank 1 SR-Bank, Sparebanken Midt-Norge, Sparebanken, Samarbeidende Sparebanker, Sparebanken Hedmark and the Norwegian Confederation of Trade Unions/Federation of Trade Unions. It also includes joint-product companies (including fund management and life and non-life insurance businesses), joint marketing and the development of common IT and Internet platforms. The bank was established via a series of mergers between 1989 and 1992, starting with the merger of Sparebanken Nord and Tromsø Sparebank in Its Primary Capital Certificates (PCCs) are listed on the Oslo Stock Exchange. As of 31 December 2008, the 10 largest PCC holders accounted for 20.0% of PCCs issued, with Pareto Aksjer Norge the largest holder with a 4.94% stake. In autumn 2008, the banks in SpareBank 1 Alliance together acquired BNbank (formerly Glitnir Bank ASA). s share in the bank is 20%. Note: Currency converted using exchange rate of NOK- as of date of the event Source: Company Reports, Norwegian Financial Services Association, Moody s research This report, exclusively provided to you by Moody s, presents a convenient summary of as reported, publicly available information. The information is not adjusted for Moody s analytic purposes. For Moody s Ratings, Opinion and Analytics on this company, please [Click here]. To access the latest Moody's Credit Opinion on this company, please [Click here].

2 December 2008 Financial Highlights (as Reported) Note: The financials presented below are those reported by the entity and are not adjusted for Moody s analytic purposes. For Moody s generated ratios on, please see <SpareBank 1 Nord-Norge page on moodys.com>. NOK million 31-Dec Dec Dec-06 NOK/, Period end % change 08/07 % change 07/06 Total Assets 65,507 60,969 54, Total Shareholders Equity 4,458 4,254 3, Shareholders Equity excluding Minority Interest 4,452 4,245 3, Equity and related capital resources 4,731 3,746 3, Tier 1 Ratio (%) bps (85) bps Net Income (50.50) (7.82) Net Income Attributable to Equity Holders (50.50) (7.74) Note: 1) Consolidated figures are considered 2) Shareholders' Equity excluding Minority Interest is calculated after deducting Minority Interest from Total Shareholders' Equity 3) The bank reports Regulatory Capital as Equity and related capital resources 4) Net Income is calculated by adding Minority Interest to Net Income Attributable to Equity Holders 5) Total assets reported for 2007 have been restated owing to transactions directly related to the equity capital included in SpareBank 1 Gruppen s annual accounts that had not been included in Investment in associated companies and joint ventures Source: Company Report (preliminary annual report and accounts 2008), Business Activities is a regional savings bank offering a range of products and services including finance, savings and placement facilities, insurance and payments transmission services. Through its subsidiaries, the bank provides various services including securities related facilities (through SpareBank 1 Nord-Norge Securities ASA), leasing (SpareBank 1 Finans Nord-Norge AS), factoring (SpareBank 1 Nord- Norge Factoring AS), real estate management (Eiendomsdrift AS), real estate brokerage (EiendomsMegler 1 Nord-Norge AS) and owns an investment company ( Invest AS). The bank organises its business activities through the following divisions: Retail Market and Corporate Market. Retail Market: This division provides financing, savings and insurance products (life and non-life), payment transmission services, and professional advisory services to individuals, clubs and associations. In addition, it offers products and services including deposits, loans and credit cards. Savings products include unit trusts, savings-linked insurance, property savings funds, structured products and portfolio management services. Given s origins as a savings bank, the retail market is a core business for the bank. The Retail Market division accounted for 62.5% of the bank s total loans as of 31 December Corporate Market: This division mainly provides services to SMEs and corporates but also services public sector clients. It provides a range of financial solutions such as deposits and finance activities. Other facilities offered include pensions, cash management, insurance, capital market and foreign exchange services, and real estate brokerage services. The bank s largest corporate sectors are property management, and transport and communication. The Corporate Market division accounted for 37.5% of the bank s total loans as of 31 December June 2009 Company Profile -

3 reports its business activities under the following business segments: Retail Market, Corporate and Public Market, Leasing, and Unallocated. The Unallocated segment comprises the bank s own investment activities and other activities that cannot be allocated to either the retail or corporate market segments. Source: Company Reports (preliminary annual report and accounts presentation 2008, annual report Dec 07), Moody s research Business Segment (% of Net Interest Income, as of December 2008) Leasing 5% Corporate and Public Market 38% Retail Market 57% Note: Excludes 'Unallocated' segment whose contribution was negative in FY 2008 Source: Company Report Pre-tax Profit per Business Segment (in NOK million) (100) Retail Market Corporate and Public Market Leasing -97 Unallocated Note: In FY 2007 and 2006, the bank reported 'Leasing' segment as 'SP1 Finans AS' Source: Company Report 3 June 2009 Company Profile -

4 The bank s gross loan portfolio (excluding loans transferred to Sparebank 1 Boligkreditt) according to sectors is as follows: Gross Loans by Sector (%) 31-Dec Dec-07 Agriculture and forestry Fishing vessels Fish farming Extraction of crude oil and natural gas Mining Fishing industry Other industries Power and water supply Building and construction Retail trade Wholesale trade Hotel and restaurant International shipping and pipeline transport Transport and communication Finance and insurance Property Housing cooperatives Property project Property hiring out Real estate business Business services Other sectors Insurance and financial services Central government and social security Counties and municipalities Corporate sector (including public sector) Retail sector Total Source: Company Report (preliminary annual report and accounts 2008 presentation) Distribution Capacity and Market Share operates mainly in northern Norway, including the counties of Finnmark, Troms, Nordland and Svalbard. The bank is headquartered in Tromsø with regional offices in Bodø, Hammerfest, Harstad, Mo i Rana and Tromsø. As of 31 December 2008, operated through a network of 81 local branches as well as a representative office in Murmansk, Russia. also benefits from SpareBank 1 Alliance s network comprising around 350 branches located throughout Norway. In addition, the bank distributes its offering through a number of alternative channels including ATMs as well as telephone and internet banking. Like most Nordic banks, a significant proportion of SpareBank 1 Nord- Norge s customers (over 50%) are active users of the bank s Internet banking services. 4 June 2009 Company Profile -

5 s market includes five regions covering the three most northern counties in Norway. In these regions, the bank holds around 30% and 25% shares of retail and corporate markets, respectively. As of 31 December 2008, was the ninth largest bank in Norway in terms of total consolidated assets and the twelfth largest in terms of total net consolidated loans. According to the following metrics, the bank s comparative position among the top five banks in Norway based on consolidated financials is as follows: Comparative Position of Largest Norwegian Banks As of 31 December 2008 Assets (in NOK million) DnB NOR Bank 1,638,205 Nordea Bank Norge 549,076 Fokus Bank 302,626 Handelsbanken 172,140 SpareBank 1 SR-Bank 125,877 Skandinaviska Enskilda Banken 121,472 Sparebanken Vest 94,895 SpareBank 1 Midt-Norge 84,679 65,507 BNbank 54,239 Net Loans to Customers (% Share) DnB NOR Bank 33.3 Nordea Bank Norge 12.3 Fokus Bank 5.1 Kommunalbanken 3.3 Handelsbanken 3.1 Eksportfinans 3.1 Statens lånekasse for utdanning 2.8 Husbanken 2.8 SpareBank 1 SR-Bank 2.7 Sparebanken Vest 2.1 SpareBank 1 Midt-Norge BNbank 1.3 Storebrand Bank 1.1 Sparebanken Hedmark 0.9 Source: Company Reports, Norwegian Financial Services Association, Moody s research Ownership and Structure As a Norwegian savings bank, has a distinctive ownership status. The bank is an independent foundation with Primary Capital Certificate (PCC) bearers in place of stockholders or traditional owners. No single entity can own more than 10% of the savings bank s primary capital and permission must be sought from Kredittilsynet (the Financial Supervisory Authority of Norway) in order to do so. The main differences between PCCs and ordinary shares are that PCCs create ownership interests in specific constituents of the bank s capital, and governing bodies of a savings bank enjoy broader representation than those of a commercial bank. 5 June 2009 Company Profile -

6 The bank s PCCs are traded on the Oslo Stock Exchange (Stock code: NONG), which is regulated by Kredittilsynet. As of 31 December 2008, had 17,912,073 PCCs in issue. No single entity held over 5% of PCCs with Pareto Aksjer Norge the largest holder with a 4.94% stake. The 10 largest PCC holders jointly accounted for 20.0% of total PCCs issued and the top 20 accounted for 27.3%, as of 31 December Ownership Structure (as of 31 December 2008) Group Parent Bank SpareBank 1 Nord- Norge Invest AG Investment company Equity stake 100% SpareBank 1 Nord- Norge Securities ASA Securities firm Equity stake 54% Tromsø Bodø Sandnessjøen SpareBank 1 Finans Nord-Norge AG Leasing Equity stake 100% SpareBank 1 Gruppen AS Financial services group Equity stake 19.9% Tromsø Bodø Alta Hammerfest Kirkenes Mo i Rana SpareBank 1 Nord- Norge Factoring AS Factoring Equity stake 100% EiendomsMegler 1 Nord-Norge AS Real estate brokerage Equity stake 100% SpareBank 1 Boligkreditt AS Covered Bonds Mortgage financing Equity stake 18.99% Eiendomsdrift AS Real estate management Equity stake 100% Harstad Sandnessjøen Finnsnes Ownership Structure As of 31 December 2008, s top 10 PCC holders were as follows: Top 10 PCC Holders Number % Held Pareto Aksjer Norge 884, Pareto Aktiv 517, Frank Mohn AS 431, MP Pensjon 356, Tonsenhagen Forretningssentrum A/S 319, JPMorgan Chase Bank - client account 294, Framo Development AS 238, June 2009 Company Profile -

7 Top 10 PCC Holders Number % Held Mellon Bank - client account 214, Sparebankstiftelsen DnB NOR 173, Karl Ditlefsen 154, Source: Company Reports (preliminary annual report and accounts 2008, preliminary annual report and accounts 2008 presentation), SpareBank 1 SR-Bank preliminary accounts 2008 presentation Feb 09, Oslo Stock Exchange, Moody s research Government Support Programme In October 2008, the Norwegian government introduced a package of banking support measures to improve the sector s access to funding. All banks eligible to sign up to Norges Bank's fixed-rate lending facility (Floans), which is the case for, can use the swap arrangement, which amounts to NOK350 billion of issued government bonds and maturities up to five years. can utilise the facility when needed. In February 2009, the government further announced a crisis relief package in which it proposed the establishment of two new funds one to provide core capital to Norwegian banks and another to invest in fixed-income securities issued by Norwegian banks and other corporates. Company Management Key Company Directors Current Title Age Tenure Committees Hans Olav Karde Chief Executive Officer N/A 19 N/A Oddmund Åsen Deputy Chief Executive Officer N/A 12 N/A Rolf Eigil Bygdnes Senior Group General Manager Chief Financial Officer N/A 4 N/A Geir Andreassen Risk Manager N/A 4 N/A Board of Directors Affiliation Age Tenure Committees Kjell Olav Pettersen Chairman of the Board of Directors; COOP Nord BA: Chief Executive Officer N/A 3 N/A Erik Sture Larre jr. Vice Chairman of the Board of Directors N/A N/A N/A Roar Dons Director N/A 1.5 N/A Elisabeth Johansen Director N/A N/A N/A Hanne B. Bentsen Director N/A 2 N/A Pål Andreas Pedersen Director N/A N /A N/A Ann-Christine Nybacka Director N/A N/A N/A Vivi Ann Pedersen Director (elected from the employees) N/A N/A N/A Gunnar Kristiansen Director (elected from the employees, deputy) N/A N/A N/A Note: Tenure in years in current position As a savings bank, is required to have a supervisory board, an audit committee and a board of directors. Its statutory supervisory board comprises 40 members, who represent PCC holders (16 members), county councils (7 members), depositors (7 members) and employees (10 members). 7 June 2009 Company Profile -

8 Corporate Governance Structure Supervising, Management and Other Bodies Independent Control Bodies Supervisory Board Control committee Election committee External auditor Main Board of Directors Internal Auditor Chief Executive Officer Risk Management Source: Company Reports (preliminary annual report and accounts 2008, annual report Dec 07), Reuters, Moody s research Company History (formerly Sparebanken Nord-Norge) was created via a series of mergers between 1989 and 1992, starting with the merger of Sparebanken Nord and Tromsø Sparebank in 1989 and the absorption of Nordkapp Sparebank and Sparebanken Nordland in 1991 and 1992, respectively. However, the bank s roots can be traced back to 1836 with the establishment of Tromsø Sparebank. In 1996 co-founded the SpareBank 1 Alliance with three other Norwegian savings banks in response to increasing competitive pressures within the Norwegian banking sector. The Alliance was later extended to include other members. The alliance is coordinated through SpareBank 1 Gruppen AS, which is collectively owned by SpareBank 1 SR-Bank, Sparebanken Midt-Norge, Sparebanken Nord-Norge, Samarbeidende Sparebanker AS, Sparebanken Hedmark and the Norwegian Confederation of Trade Unions (LO) and affiliated trade unions. While the Alliance has no legally binding joint or several liability guarantees amongst members, there are both commercial and moral obligations between them if another member is in distress. These are, however, complex with any member able to veto any decision concerning SpareBank 1 Gruppen AS, a jointly owned financial company of SpareBank 1 members. Members preferred an alliance to a merger in deference to each member savings bank s strong local ties. In January 2004, a founding member, Sparebanken Vest, left the Alliance. In 2000, SpareBank 1 Gruppen acquired Vår Bank. Each member bank integrated operations with Vår Bank units within its own region, while Vår Bank s operations in Oslo were maintained as a group branch, currently known as Bank 1 Oslo. In May 2008, agreed to buy a 10% stake in Russia-based Bank Tavrichesky OJSC (Bank Tavrichesky). In addition, as part of this agreement, Bank Tavrichesky s branch in Murmansk will be isolated and converted into a separate bank. The new bank is expected to commence banking operations with owning 75% of the company and Bank Tavrichesky 25%. Bank Tavrichesky is the 11th largest regional bank in North-Western Russia, mainly servicing medium-sized corporate customers. 8 June 2009 Company Profile -

9 In May 2008, the bank was renamed. In October 2008, together with other banks in the SpareBank 1 Alliance acquired Glitnir Bank ASA (renamed BNbank ASA in January 2009), one of the leading mortgage lenders in Norway, together with its subsidiary Glitnir Factoring (now SpareBank 1 Factoring AS) for a total of NOK300 million ( 34.9 million). acquired a 20% stake in Glitnir Bank ASA. The acquisition was approved by the authorities in December In the fourth quarter of 2008, the bank entered into an agreement to sell its factoring business to SpareBank 1 Gruppen AS for up to NOK40 million ( 4.0 million). The company will be merged into SpareBank 1 Factoring AS. In February 2009, increased its stake in Hurtigruten ASA, a Norwegian travel industry company, from 8.7% to 15.3% by subscribing for 50.0 million shares in a share issue. Following Hurtigruten ASA s subsequent share issue in March 2009 in which did not participate the stake was reduced to 12.5%. Note: Currency converted using exchange rate of NOK- as of date of the event Source: Company Reports, Moody s research, Peer Group Aktia Bank p.l.c. Länsförsäkringar Bank AB (publ) Ringkjøbing Landbobank A/s SpareBank 1 SMN SpareBank 1 SR-Bank Sparebanken Vest Sparebanken Øst Spar Nord Bank A/S Storebrand Bank Sydbank A/S Related Websites and Information Sources For additional information, please see: the company's website: the regulator s website: MOODY S has provided links or references to third party World Wide Websites or URLs ("Links or References") solely for your convenience in locating related information and services. The websites reached through these Links or References have not necessarily been reviewed by MOODY S, and are maintained by a third party over which MOODY S exercises no control. Accordingly, MOODY S expressly disclaims any responsibility or liability for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on any third party web site accessed via a Link or Reference. Moreover, a Link or Reference does not imply an endorsement of any third party, any website, or the products or services provided by any third party. 9 June 2009 Company Profile -

10 Moody s Related Research Credit Opinion: Banking System Outlook: Norway, November 2008 (112965) Banking Statistical Supplement: Norway, May 2008 (109203) To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients. Report number: Authors Editor Production Associate Soline Poulain Janne Thomsen Justin Neville Steven Prudames CREDIT RATINGS ARE MOODY'S INVESTORS SERVICE, INC.'S (MIS) CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MIS DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. 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