gjensidige.com Interim report second quarter and first half of 2010 gjensidige bank boligkreditt as

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1 gjensidige.com Interim report second quarter and first half of 2010 gjensidige bank boligkreditt as

2 INTERIM REPORT FOR second Quarter AND first Half 2010 Gjensidige Bank boligkreditt OPERATIONS Gjensidige Bank Boligkreditt AS was established in the spring of 2009 and later that year received a license from the Financial Supervisory Authority of Norway for the establishment of a housing credit firm able to issue covered bonds. The company has its head office in Førde. Services such as customer management and loan management as well as day-to-day management and administrative services are provided by Gjensidige Bank ASA and Gjensidige Forsikring ASA. Banking and administrative services are purchased from Sparebanken Sogn og Fjordane. The company s mission is to offer and/or obtain residential mortgages, commercial mortgages, loans secured by mortgages on other real property or public loans. In the second quarter the company had only residential mortgage loans. Gjensidige Bank Boligkreditt AS is a wholly-owned subsidiary of Gjensidige Bank ASA. Gjensidige Bank ASA is a wholly-owned subsidiary of Gjensidige Bank Holding AS, which in turn is a wholly-owned subsidiary of Gjensidige Forsikring ASA. The company has issued covered bonds totalling NOK 1,500 million with maturities ranging from five to seven years. The company started operating in the third quarter of 2009 and therefore has no comparative figures from the second quarter of PROFITABILITY Profit before tax for the quarter was NOK 1.4 million. Profit before tax for the first half of 2010 was NOK 3.1 million. This performance was in keeping with expectations. NET INTEREST INCOME Net interest income in the quarter was NOK 3.0 million, whilst net interest income for the first half of the year was NOK 5.4 million. Measured against average total assets, the net interest margin was 0.5 percent for the six months to the end of June. OPERATING EXPENSES Operating expenses for the quarter were NOK 1.1 million. For the first half of the year operating expenses totalled NOK 1.8 million. Other operating expenses consist primarily of the purchase of services from Sparebanken Sogn og Fjordane and Gjensidige Bank ASA, as well as depreciation. LOSSES ON LOANS/GUARANTEES The Company uses the Gjensidige Bank Group s guidelines for assessing and writing down losses on loans. No individual write-downs related to individual commitments have been made. The company had no delinquencies over 30 days at the end of the second quarter. As a result of growth in the loan portfolio, group write-downs were increased by NOK 0.6 million for the quarter. At the end of the first half of the year group write-downs amounted to NOK 1.8 million, which represents 0.07 percent of gross loans. Group write-downs are designed to cover potential losses on loans in the portfolio that have not been individually identified as doubtful. CUSTOMER LOANS At the end of the second quarter gross loans amounted to NOK 2,667.1 million, while gross loans at the end of the first quarter amounted to NOK 1,614.8 million. Loan growth for the quarter totalled NOK 1,052.3 million. This was partly because in May the company purchased a loan portfolio worth NOK 1,178.5 million from Gjensidige Bank ASA, which it intends to use to issue new covered bonds. The entire loan portfolio was purchased from Gjensidige Bank ASA and consists of variable rate loans. The average loan commitment in the mortgage portfolio is just over NOK 1 million. There is no single exposure over NOK 10 million. The average loan-to-value ratio was 42.5 percent at the end of the second quarter. SEGMENTS The target group of Gjensidige Bank Boligkreditt AS is retail customers. This segment is made up of organisations, loyalty programme customers, employees of the Gjensidige Group and other customers. These customers are spread throughout Norway. 2

3 CAPITAL ADEQUACY At the close of the second quarter the company had a core capital adequacy ratio of 12.0 percent, and NOK million of equity and subordinated debt. At year-end 2009 the company had a core capital adequacy ratio of 11.9 percent. The increase in the core capital adequacy ratio was due to a capital increase of NOK 50.0 million during the quarter. The capital increase was carried out so that the company could buy more customer loans from Gjensidige Bank ASA. DEBT SECURITIES ISSUED Covered bonds totalling NOK 1,500 million have been issued, comprising four loans, the first of which matures on 19 September No new bonds were issued in the second quarter. Mortgage loans account for percent of the issued bonds. LIQUIDITY At the end of the quarter, the company had bank deposits totalling NOK million. In addition, the company had unused credit facilities, including vendor financing, of NOK million available from the parent company. Credit risk includes risk of loss resulting from the customers and other counterparties fail to meet its obligations when due. The company uses a risk classification system for calculating customer risk. The company s loan loss situation is satisfactory, and is monitored closely. Liquidity risk is the risk that the company fails to meet all financial obligations as they fall due for payment. It is also risk associated to financing the company s lending. It is provided framework for necessary access to liquid assets. In order to reduce the risk, ongoing liquidity projections are calculated. There is also adequate liquidity (buffer capital) to give reasonable time to implement necessary measures if an acute liquidity drought hits the market. Interest rate risk is the risk that equity falls in value due to unexpected changes in the general interest rates. Such changes in interest rates may cause reduced market value of assets with fixed rate. Alternatively, the market value of debt obligations with fixed rate increase. The company should have a low interest rate risk, measured in terms of core capital. EVENTS AFTER THE BALANCE SHEET DATE No significant events have occurred after the end of the period. Principal risks and uncertainty factors Financial risk The Gjensidige Bank Boligkreditt s financial risk consists primarily of credit, liquidity and interest rate risk. Risks are reported monthly and reviewed in accordance with the principles, strategies and risk limits approved by the Board. OUTLOOK The company is considering issuing further covered bonds, as the company has customer loans that can be used as collateral. The conditions are in place for further growth and development and the Board of Directors believes that Gjensidige Bank Boligkreditt AS will develop in a satisfactory manner in the future. Oslo, 4 August 2010 bjørn Walle erik Ranberg Gro Tønder Chairman of the Board solbjørg Lie jørgen Ringdal Managing Director 3

4 Income statement and Balance sheet INCOME STATEMENT Figures in NOK 1000 Notes Q Interest income 16,504 28,387 15,780 Interest costs 13,468 22,947 11,677 Net interest / Net interest income 3,035 5,440 4,104 Commission income and income from bank services 9 9 Total income excluding net interest 9 9 Total income 3,045 5,450 4,104 Wages, salaries & gen. admin. expenses Depreciation of fixed assets Other operating expenses 784 1,314 1,722 Total operating expenses 1,094 1,785 1,936 Profit before loss 1,951 3,665 2,168 Write-downs on loans / rev. of write-downs ,231 Profit before tax 1,373 3, Tax expense Profit for the period 989 2, Earnings per share NOK (basic and diluted) BALANCE SHEET Figures in NOK ASSETS Loans to / claims from credit institutions 117,556 70,250 Loans to / claims from customers 2,667,084 1,681,632 Write-downs 4 (1,754) (1,231) Net loans to customers 2,665,331 1,680,401 Intangible assets 1,390 1,711 Advance payments and earned income 1,912 1,301 Total assets 2,786,189 1,753,664 LIABILITIES Debt to credit institutions 1,145, ,650 Debt incurred through issue of securities 3 1,500,000 1,500,000 Other liabilities 1, Accrued costs and advance income 6,611 5,056 Provisions for liabilities and charges Total liabilities 2,653,232 1,672,969 EQUITY Share capital 130,000 80,000 Premium reserve Other equity 2, Total equity 132,957 80,695 Total liabilities and equity 2,786,189 1,753,664 4

5 components of other comprehensive income Figures in NOK 1000 Q Profit/loss of the period 989 2, Components of other comprehensive income Components of other comprehensive income Total comprehensive income for the Period 989 2, STATEMENT OF CHANGES IN EQUITY Figures in NOK 1000 Share capital Premium reserve Total paid-up equity Other equity Total equity Capital expansion ) 80, ,020 80,020 Total profit/loss for the period Equity as at , , ,695 Equity , , ,695 Capital expansion ,000 50,000 50,000 Total profit/loss for the period ,262 2,262 Components of other comprehensive income Total profit for the period 2,262 2,262 Equity as at , ,020 2, ,957 Number of shares at the end of the period 130,000 1) Established , operation of the business from the third quarter

6 Cash flow statement Figures in NOK ) Operating activities Net loans to customers (985,452) Interest payments by customers 25,690 14,126 Net interest received from credit institutions, etc Net other commission income 9 Operating expenses (1,464) (1,722) Net cash flow from operating activities (960,285) 12,958 Investment activities Net purchase of intangible assets and fixed assets (1,924) Net cash flow from investment activities (1,924) Financing activities Net inflow / outflow from loans from credit institutions 977,828 13,982 Net interest payment on financing activities (22,443) 8,930 Net inflow / outflow from other short-term items 2,205 2,098 Paid-up equity 50,000 80,030 Net cash flow from financing activities 1,007,590 59,216 Total cash flow 47,306 70,250 Cash flow for the period Cash and cash equivalents at the start of the period 70,250 Cash and cash equivalents at the end of the period 117,556 70,250 Net cash inflow / outflow 47,306 70,250 Specification of cash and cash equivalents Loans to and receivables from financial institutions 117,556 70,250 Cash and cash equivalents on cash flow statement 117,556 70,250 1) ) As part of its participation in the government swap facility for covered bonds, Gjensidige Bank Boligkreditt AS has received loans from Gjensidige Bank ASA in the amount of NOK 1,681,632. Settlement of the loans is made by issuing covered bonds that are overtaken by Gjensidige Bank ASA as well as vendor financing. All components are presented under the section Net inflow / outflow from loans from credit institutions. 6

7 Notes 1 Accounting policies Gjensidige Bank Boligkreditt AS adheres to the simplified international financial reporting standards (IFRS), and the interim report for the first half of 2010 has been presented in accordance with IAS 34 - Interim financial reporting, to the extent it is applicable. The company uses the same accounting policies and calculation methods used in the annual accounts for For more information about accounting policies, please see the company s Annual Report for Based on the assessments that have been made so far, the IFRSs and interpretations issued up until 4 August 2010 that were not mandatory as at 30 June 2010, i.e. IFRS 9, IFRIC 19, amendments to IFRIC 14, revised IAS 24 and proposed improvements to IFRSs, are not expected to have a significant impact on reported figures. Preparation of the interim accounts involves the use of assessments, estimates and assumptions that affect the application of accounting policies and recognised amounts for assets and liabilities, revenues and expenses. Actual results may deviate from these estimates. The most material assessments connected with the use of the company s account ing policies and the key sources of uncertainty in the estimates are the same in preparing the interim accounts as in the annual accounts for Comparative figures are based on simplified IFRS. The company first started operating in the third quarter of 2009 and therefore has no comparative figures. In the interim report figures are therefore presented as at 31 December 2009 and 30 June All amounts are shown in thousands of NOK unless otherwise indicated. Due to rounding differences, figures and percentages may not exactly add up to the totals indicated. 2 Segment information Gjensidige Bank Boligkreditt AS has only one business segment and that is lending to private customers. The segment consists of loans to private customers and the entire loan portfolio is purchased from Gjensidige Bank ASA. The company s full accounts fall therefore in their entirely under the segment «Consumer». 3 Debt incurred through the issue of securities Figures in NOK Commercial paper and other short-term borrowings Bond debt 1,500,000 1,500,000 Own commercial paper/bonds, not amortised Total debt incurred through the issue of securities 1,500,000 1,500,000 Maturity Remaining term to maturity (face value) Payable on request Maximum 3 months 3 months-1 year 1-5 years 750, ,000 More than 5 years 750, ,000 Total 1,500,000 1,500,000 Issued during the reporting period 1,500,000 Repaid during the reporting period Figures in NOK 1000 Book value ISIN NUMBER Face value Currency Rate Issued Due NO ,000 NOK Variable ,000 NO ,000 NOK Variable ,000 NO ,000 NOK Variable ,000 NO ,000 NOK Variable ,000 Total debt incurred through the issue of securities 1,500,000 Standard contract terms (loan terms) apply to the signed loan agreements. 7

8 4 Losses on loans and guarantees Figures in NOK Change in individual write-downs over the reporting period Change in Group impairment over the reporting period 523 1,231 Losses realised during the period covered by previous write-downs Losses realised during the period not covered by previous ind. write-downs Recoveries for the period against previous periods realised losses = Loan losses for the period 523 1,231 Provisions against loans and guarantees Individual write-downs at the start of the period + Increase in ind. write-downs against loans prev. written down - Recoveries against ind. write-downs from previous periods + Write-downs against loans not prev. ind. written down - Losses realised for which ind. write-downs had prev. been made Individual write-downs at the end of the period Losses realised during the reporting period Group impairment at the start of the period 1,231 + Change in Group impairment over the reporting period 523 1,231 Group impairment at the end of the period 1,754 1,231 Total write-downs at the end of the period 1,754 1,231 Loans in default and at risk of default Loans in default Gross defaults over 30 days - individual write-downs Net loans in default Loss severity 0 % 0 % Other loans at risk of default Loans at risk of default (not in default) - individual write-downs Net other loans at risk of default Loss severity 0 % 0 % 8

9 5 Capital adequacy Figures in NOK Share capital and premium reserve 130,020 80,020 Other equity Equity 130,695 80,695 Deductions Goodwill and other intangible assets (1,390) (1,711) Core capital 129,305 78,984 Subordinated loan capital, with ded. for own holdings Deductions Net equity and subordinated loan capital 129,305 78,984 Minimum requirement for equity and subordinated loan capital Credit risk Of which: Institutions 1,876 1,124 Consumer loans 3,455 1,535 Loans secured with a residential mortgage 80,206 50,119 Overdue positions 0 Other positions Total minimum requirement credit risk 85,589 52,795 Operational risk Deductions: Group impairment (140) (98) Minimum requirement for equity and subordinated loan capital 86,065 53,313 Surplus subordinated capital: 43,240 25,671 Basis of calculation: 1,075, ,413 Capital adequacy Capital adequacy percentage 12.0 % 11.9 % Core capital ratio 12.0 % 11.9 % 6 Related parties Gjensidige Forsikring ASA, Gjensidige Bank ASA and Gjensidige Bank Boligkreditt AS are considered to be related parties. All transactions and agreements with related parties are carried out as arm s-length transactions. As of 30 June 2010, there were the following significant transactions with related parties: At the time Gjensidige Bank Boligkreditt AS was established, an agree ment was signed with Gjensidige Bank ASA regarding the provision of services relating to loan servicing and the running of the company. Gjensidige Bank Boligkreditt AS was also granted a long-term credit facility of up to NOK 250 million, as well as short-term vendor financing of up to NOK 1.3 billion. The vendor financing agreement was signed in May in conjunction with the transfer of NOK 1.2 billion of customer loans to Gjensidige Bank Boligkreditt, and will be repaid when new covered bonds have been issued. At 30 June 2010, NOK 1.1 billion of the credit facility had been drawn. As at 30 June 2010 the costs and interest relating to these agreements amounted to NOK 5.1 million. Gjensidige Bank ASA has invested a total of NOK 1.2 billion in covered bonds issued by Gjensidige Bank Boligkreditt AS. As at 30 June 2010, interest on the bonds totalled NOK 17.8 million. As at 30 June 2010, Gjensidige Bank Boligkreditt AS had NOK 52.1 million deposited with Gjensidige Bank ASA, of which NOK 0.6 million was interest. 9

10 7 Contingent liabilities Figures in NOK Unused credit facilities 508, ,645 Total contingent liabilities 508, ,645 Unused credit facilities includes approved and unused credit limits on home equity lines of credit. The company has not received or issued any provisions of security by surety. The interim accounts have not been audited. DECLARATION DECLARATION OF THE BOARD AND CEO The Board of Directors and CEO have today reviewed and approved Gjensidige Bank Boligkreditt ASA s interim report and consolidated financial statements for the period 1 January to 30 June We declare that, to the best of our knowledge, the financial statements for the six months from 1 January to 30 June 2010 have been prepared in accordance with IAS 34 Interim Financial Reporting, and that the information contained therein provides a true overall picture of the company s assets, liabilities, financial position and results, and that the interim report gives a true picture of the important events that occurred during that period, explaining their impact on the interim financial statements, as well as setting out the most important areas of uncertainty and potential risks faced by the company in the coming period. Oslo, 4 August 2010 The Board of Gjensidige Bank Boligkreditt AS bjørn Walle erik Ranberg Gro Tønder Chariman of the Board solbjørg Lie jørgen Ringdal Managing director 10

11 QUARTERLY EARNINGS PERFORMANCE Figures in NOK 1000 Q Q Q Q Interest income 16,504 11,884 12,613 3,167 Interest costs 13,468 9,479 9,562 2,115 Net interest income 3,035 2,405 3,051 1,052 Commission income and income from bank services 9 Total income 3,045 2,405 3,051 1,052 Wages, salaries and general administration expenses 150 Depreciation of fixed assets Other operating expenses , Total operating expenses 1, , Profit before loss 1,951 1,714 1, Write-downs on loans 577 (55) (982) 2,213 Profit before tax for the period 1,373 1,769 2,791 (1,855) The company was first active in the third quarter of Key figures Net interest as a percentage of average total assets 1) % Losses as a percentage of gross loans excl. credit institutions % Return on equity annualised 2) % Capital adequacy 3) % Average assets under management NOK ,040,903 1,766,789 1) Net interest in percent, annualised = net interest income / average assets under management 2) Return on equity, annualised = profit before tax / average equity during the period 3) Capital adequacy = equity and subordinated loan capital / basis of calculation for credit risk, market risk and operational risk 11

12 gjensidige.com Gjensidige Bank Boligkreditt AS P.O.Box 313 NO-6802 Førde Telephone: 03100