INTERIM REPORT Q1 2016

INTERIM REPORT Q1 2016

First quarter 2016 Pre-tax profit: NOK 322 million (NOK 407 million) Weaker performance by financial instruments: NOK -35 million (NOK 50 million) Higher nominal net interest: NOK 609 million (NOK 586 million) Net interest as a percentage: 1.51 (1.63) Good underlying cost development: NOK 358* million (NOK 356 million) Low write-downs on loans and guarantees: NOK 26 million (NOK 39 million), group provisions increased by NOK 157 million last five quarter Return on equity: 8.8% (13.6%), 9.8% excl. financial instruments Profit per equity certificate: NOK 0.99 Book equity per equity certificate: NOK 45.6 Capital accumulation according to plan, Core Tier 1 capital 13.8% (12.3%)** Key figures Q1 2016 Q1 2015 2015 Pre-tax profit NOK 322 mill. NOK 407 mill. NOK 1,386 mill. Profit/diluted profit per equity certificate NOK 0.99 NOK 1.88*** NOK 6.32 Net interest (annualised) 1.51% 1.63% 1.55% Cost ratio 51.5% 44.4% 48.9% Return on equity (ROE), annualised 8.8% 13.6% 11.0% Core Tier 1 capital adequacy ratio (Basel I floor) 13.8% 12.3% 13.7% Core Tier 1 capital adequacy ratio (IRB) 15.7% 12.8% 15.1% * Excl. restructuring and non recurring costs ** The capital adequacy figure for the first quarter includes 80% of the profit for the period *** The profit/loss and book equity per equity certificate are not comparable due to the issue of equity certificate capital in 2015 2

Report for the first quarter 2016 Main Figures NOKm Q1 2016 Q1 2015 2015 Net interest income and credit commissions 586 566 2 320 Commissions receivable and income from banking services 120 114 490 Commissions payable and cost of banking services 20 21 90 Net banking services 100 93 400 Income from owner interests in group companies 14 18 74 Net gain/(loss) on financial instruments 50 221 248 Other operating income 52 39 188 Net operating income 216 371 910 Net operating income 802 937 3 230 Salaries and general administration expenses 269 280 1 131 Depreciation 26 29 109 Other operating expenses 61 55 230 Total operating expenses 356 364 1 470 Profit before write-downs and tax 446 573 1 760 Net gain on fixed assets 0 0 143 Write-downs and losses on loans and guarantees 39 47 410 Profit before tax 407 526 1 493 Taxes 100 114 305 Profit for the period 307 412 1 188 First quarter 2016 Sparebanken Vest achieved a pre-tax profit of NOK 322 million (NOK 407 million) in the first quarter, and a return on equity of 8.8% (13.6%). The profit was positively affected by higher nominal net interest, good cost control, low losses and growth in line with the target. The negative contribution from financial instruments pulls in the opposite direction. The Group s cost development is good and in line with targets. Total expenses amounted to NOK 370 million in the first quarter (NOK 356 million). Combined, associated companies contribute a share of profit of NOK 8 million (NOK 14 million) for the first quarter 2016. The Core Tier 1 capital ratio is 13.8% (12.3%), and Sparebanken Vest is on schedule with its capital plan for the period up until 2016. Net interest income in the first quarter amounted to NOK 609 million (NOK 586 million). The bank is periodising the fee for the Norwegian Banks Guarantee Fund as previous years.the increase of NOK 23 million can be ascribed to repricing in the corporate market and a reduction of NIBOR by four basis points. Reduced lending margins in the retail market pull in the opposite direction. Net interest as a percentage of average assets under management was 1.51% (1.63%) for the first quarter. That is an increase of five basis points compared with the fourth quarter 2015. The lending margins in the retail and corporate markets measured against the average 3-month NIBOR were 1.90 (2.36) and 3.04 (3.09) percentage points, respectively, in the first quarter, a reduction of 46 and 5 basis points for the retail and corporate markets, respectively. Compared with the fourth quarter 2015, the lending margins in the retail market were reduced by 11 basis points, due to the reduction of average NIBOR and a decrease in customer interest rates of 15 basis points. During the same period, there was an increase of 21 basis points in the corporate market mainly due to the effect of a previously announced repricing of the lending portfolio. The deposit margins in the retail and corporate markets in the first quarter measured against the average 3-month NIBOR were 0.15 (0.47) and 0.21 (-0.06) percentage points, respectively. Compared with the fourth quarter 2015, the deposit margins in the retail market increased by 13 basis points, due to the reduction in the average NIBOR by 4 basis points and the increase in customer interest rates of 17 basis points. During the same period, there was an increase of 10 basis points in customer interest 3

rates in the corporate market due to the effect of previously announced repricing. Operating expenses in the first quarter 2016 amounted to NOK 370 1) million (NOK 356 million). The increase of NOK 14 million is primarily due to expenses linked to the move to the new head office and organisational restructuring. The underlying expenses are at the same level as the first quarter 2015. The number of full-time equivalents in the Group is 784 (805). That is 21 fewer than in the corresponding period last year. As announced in connection with the presentation of the Q4 2015 report, the bank is in the process of reducing the number of branch offices to 35 and downsizing staff by approximately 100 full-time equivalents. This is a consequence of changed customer behaviour and increased automation. Table 2: Number of full-time equivalents Quarterly Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Full-time equivalents 805 799 809 803 784 Net commission income amounted to NOK 98 million (NOK 100 million) in the first quarter. The development in commission income from the sale of insurance products, profit commission on insurance and card sales is stable. Net commission income from savings and investments is up NOK 2 million. Net income from financial instruments amounted to minus NOK 35 million (plus NOK 50 million). The start of 2016 was marked by increased uncertainty in the market, with a broad downturn in Norwegian and European stock markets. Sparebanken Vest sold its listed holding in the fourth quarter, and has thus been relatively unaffected by this downturn. The bank s other holding of shares and high-yield bonds together show a negative development in value of NOK 18 million. A loss of NOK 185 million on financial derivatives is linked to the hedging of fixed-interest loans and bonds on the assets side. Falling interest rates result in a gain on the bank s fixed-interest portfolio and bonds of NOK 150 million. The prices for basis swaps that the bank uses to hedge the financing of covered bonds in foreign currency have increased, and the bank has recognised a gain of NOK 28 million in the first quarter. The gain must be expensed against the maturing of the covered bonds. 1) Incl. restructuring and non recurring costs Table 3: Gain on financial instruments NOKm Q1 2016 Q1 2015 2015 Dividend 1 0 18 Gain/(loss) on commercial papers and bonds 59-30 -224 Gain/(loss) on shares -7 28 14 Gain/(loss) on financial derivatives -185 38-164 Gain/(loss) on financial instruments, recognised at fair value 54-33 166 Gain/(loss) on currency 10 10 41 Net gain/(loss) on financial instruments designated for hedge accounting 29 39 78 Of which gain/loss related to basisswaps 28 37 78 Other 4-2 -12 Net gain on financial instruments -35 50-83 The contribution to profit from associated companies amounted to NOK 8 million (NOK 14 million), which breaks down as follows: See the section on business in subsidiaries and associated companies for more information about the individual companies. Table 4: Associated companies NOKm Q1 2016 Q1 2015 2015 Frende Forsikring 6 8 50 Norne Securities -3 1 2 Brage Finans 3 3 9 Verd Boligkreditt 2 2 7 Jonsvollkvartalet 0 0 1 Net profit from associated companies 8 14 70 Total write-downs on loans and guarantees amounted to NOK 26 million (NOK 39 million) in the first quarter. See the section on risk and capital factors and Notes 6 and 7, which describe the write-downs and the development in default of payment. Developments in lending and deposits Gross lending increased by NOK 9.3 billion (NOK 5 billion) to NOK 131 billion (NOK 121.7 billion) from the first quarter 2015, corresponding to year-on-year growth of 7.7%. Average growth last three years is 3.1% in the corporate market and 7.9% in the retail market. Table 5: Growth in lending Growth last 12 months Growth last quarter Lending total 7,7 % 0,9 % Lending retail market 7,7 % 1,0 % Lending corporate market 7,7 % 0,5 % Of gross lending, loans to the retail market amounted to NOK 99.4 billion (NOK 92.3 billion), NOK 54.9 billion 4

of which were loans transferred to Sparebanken Vest Boligkreditt. Gross lending to the corporate market amounted to NOK 31.7 billion (NOK 29.4 billion), NOK 0.2 billion of which can be attributed to the exchange rate effect for the first quarter 2016. The growth in lending in the corporate market is within the SME segment, which is in line with the bank s strategy. quarter 2015. The increase in the fourth quarter is mainly due to one potential bad debt. Figure 1 Defaults and potential bad debt 1600 1400 1200 1000 5 % 4 % 3 % Customer deposits decreased by NOK 1.4 billion to NOK 63.5 billion (NOK 64.9 billion), corresponding to a negative year-on-year growth of 2.2%. Table 6: Growth in deposits Growth last 12 months Growth last quarter Deposits total -2,2 % -0,7 % Deposits retail market 4,3 % -0,3 % Deposits corporate market -12,5 % -1,4 % Deposits break down as follows: NOK 41.5 billion (NOK 39.8 billion) from retail customers and NOK 22 billion (NOK 25.1 billion) from corporate customers. The current low-interest climate has led to an increase in savings and investment products as an alternative to bank saving. Fund savings agreements have more than doubled in the last three years and have now exceeded NOK 500 million per year in volume. Sparebanken Vest manages a total of NOK 6.4 billion on behalf of its customers, the number of whom has risen steadily in recent years. The breakdown between deposits and lending is specified in Notes 8 and 9. Risk and capital factors Credit risk The risk in the bank s retail market portfolio is stable and low. A total of 95% of the portfolio is secured by mortgages with a low loan-to-asset-value ratio. The risk-adjusted return on the portfolio is good. In 2014 and 2015, the bank completed the restructuring of a number of defaults and potential bad debt in the corporate market portfolio. The risk in the corporate market portfolio is deemed to be moderate, and the risk-adjusted return has continued to improve in 2016. Defaults and potential bad debt amounted to NOK 1,267 million (NOK 1,080 million) for the corporate market and NOK 220 million (NOK 230 million) for the retail market. This is largely unchanged from the fourth 800 600 400 200 0 The total losses on lending and guarantees amounted to NOK 26 million in the first quarter. NOK 50 million of this amount relates to group write-downs, where the write-down reflects a somewhat more uncertain macroeconomic situation. Confirmed losses in the period amounted to NOK 0 million, while the change in individual write-downs is minus NOK 24 million. The reversals can primarily be attributed to one commitment. The total loss provision for the portfolio remains stable at 0.78%. The loss costs are specified in Note 6. Figure 2: Write-downs Write-downs as % of gross lendings 0,9 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0,0 1.080 0,94 % 230 1.092 0,92 % 229 1.053 0,87 % Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Market risk and operational risk The bank s interest rate and currency risk is managed within limits adopted by the Board of Directors and is considered to be low. The bank is exposed to credit spread risk, primarily through the management of interestbearing securities 220 Retail Corporate % of total 0,70 % 0,70 % 373 476 409 465 0,72 % 424 492 1.256 0,99 % 218 0,77 % 1.267 0,99 % Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 435 563 220 0,78 % Individual write-downs Group write-downs Write-downs as % of gross lendings 484 528 0 2 % 1 % 0 % 1200 1000 800 600 400 200 Capitalised write-downs (MNOK) 5

in the bank s liquidity portfolio, and to a lesser extent through proprietary trading. The portfolio mainly consists of securities issued by Norwegian banks, residential mortgage companies, municipalities, county authorities, the Norwegian state and non-financial enterprises. The bank s credit spread risk has been reduced by approximately NOK 100 million compared with the end of the first quarter 2015. This is due to the reduced credit risk in the liquidity portfolio as a result of adaptation to LCR. The bank s stock market exposure mainly consists of strategic investments and venture investments in its own market area. Total investments (excluding subsidiaries and associated companies) at the end of the first quarter amounted to NOK 393 million (NOK 549 million). The identification, analysis and follow-up of operational risk is addressed at a general level through management confirmations, continuous assessments and the registration of events. No matters that are critical to the bank s operations were uncovered during the quarter. Liquidity and financing The Group s liquidity situation is good. In the first quarter 2016, it has been managed at the overall level using liquidity indicators and LCR. Stable deposits (covered by the deposits guarantee scheme) and deposits from the retail market and SMEs are treated favourably in the new liquidity standards. A large proportion of Sparebanken Vest s deposits come from such sources; see the table below. Table 7: Deposits Deposit Private SMB Corporate Finance Total 0-850.000 31 289 4 796 777 229 37 091 850.000-2.000.000 5 525 2 062 751 176 8 514 Over 2.000.000 2 952 2 128 8 207 10 095 23 164 Total 39 766 8 986 9 735 10 500 68 769 capital market financing. The proportion of financing with a remaining term to maturity of more than three years was approximately 52% (41%) at the end of the quarter. Rating Sparebanken Vest is rated by Moody s and Fitch Ratings. On 16 March 2016, Moody s changed Sparebanken Vest s rating from A1 Stable to A1 Negative Outlook. Fitch confirmed all the bank s ratings on 19 May 2015, including the bank s rating for longterm borrowings of A-, with a stable outlook. Bonds issued by Sparebanken Vest Boligkreditt AS are rated by Moody s and have an AAA rating with a stable outlook. Capital adequacy The bank s Core Tier 1 capital adequacy ratio, taking into account the Basel I floor, is up 0.1 percentage points from the fourth quarter 2015, at 13.8%. This is largely due to profit accumulation. The bank meets the applicable combined minimum and buffer requirement of at least 11% Core Tier 1 capital. From 1 July 2016, a countercyclical capital buffer of 1.5 percentage points will be introduced, which will increase the total requirement to 11.5%. Sparebanken Vest thus already meets this requirement. The bank wishes to meet regulatory minimum requirements through maximum use of hybrid capital (1.5%) and supplementary capital (2%). At the end of the first quarter, the level of hybrid capital was 1.3%, and supplementary capital 1.9%. The overall capital adequacy is 17.0%. After carrying out the bank s ICAAP process in the fourth quarter 2015, the bank has increased its goal for the Core Tier 1 capital adequacy ratio to 14.5% by year-end 2016. At the end of the first quarter 2016, the Group s liquidity indicator (6-month rolling average) was 105.9% (104.5%). The deposits/loans ratio was somewhat lower than in the corresponding period last year: 49% (53.7%). At the end of the quarter, the Group s holdings of bonds and certificates amounted to approximately NOK 20.6 billion (NOK 16.5 billion). The total capital market financing amounted to NOK 78.6 billion (NOK 64.4 billion). The bank s relative proportion of covered bonds at the end of the first quarter was approximately 70% (67%) of the bank s 6

Figure 3: Capital adequacy, Basel I floor 18 % 16 % 14 % 12 % 10 % 8 % 6 % 4 % 2 % 0 % Total Capital Tier Capital Add. Tier 1 Cap. Core Tier 1 Capital 15,7 % 2,0 % 1,4 % 12,3 % 2015 Q1 15,7 % 2,0 % 1,4 % 12,3 % 15,6 % 1,9 % 1,4 % 12,3 % 2015 Q2 15,6 % 1,9 % 1,4 % 12,3 % Compared with the previous quarter, the Core Tier 1 capital adequacy ratio has increased from 15.1% to 15.7%. This is due to increased profit accumulation and a reduced calculation basis. Figure 4: Capital adequacy IRB 20 % 18 % 16 % 14 % 12 % 10 % 16,3 % 2,1 % 1,4 % 16,7 % 2,1 % 1,4 % 15,3 % 1,9 % 1,9 % 1,3 % 12,2 % 2015 Q3 15,3 % 1,9 % 1,3 % 12,2 % 16,4 % 2,0 % 1,4 % 16,9 % 1,3 % 13,7 % 2015 Q4 16,9 % 1,9 % 1,3 % 13,7 % 18,6 % 2,0 % 1,4 % 17,0 % 1,8 % 1,3 % 13,8 % 2016 Q1 17,0 % 1,8 % 1,3 % 13,8 % 19,3 % 2,0 % 1,5 % this requirement. The bank s capital adequacy is specified in Note 11. Business in subsidiaries and associated companies Subsidiaries Eiendomsmegler Vest (holding 100%) sold 630 houses in the first quarter 2016, compared with 903 in the same period last year, a decrease of 30%. It recorded a pre-tax loss of NOK 8 million (plus NOK 6.3 million) in the first quarter 2016. The profit performance was affected by lower income due to a weaker property market and a general increase in competition. The first quarter was also characterised by uncertainty spreading across Western Norway, which led to less activity in the market. In Stavanger, 40.1% fewer houses have been sold compared with the first quarter 2015, while 11.8% fewer houses were sold in Bergen during the same period. The year 2016 is expected to be challenging for Eiendomsmegler Vest, but measures to cut costs and increase sales and efficiency have been initiated. The measures are expected first to give full effect towards the end of 2016. Sparebanken Vest Boligkreditt AS (holding 100%) manages housing loans in the amount of NOK 54.9 billion (NOK 50.1 billion), and, at the end of the first quarter 2016, the company had issued covered bonds in the amount of NOK 51.6 billion (NOK 41.4 billion). 8 % 6 % 4 % 2 % 12,8 % 13,2 % 13,0 % 15,1 % 15,7 % Associated companies The share of profit/loss from associated companies amounted to a total of NOK 8 million. It was included in the accounts in accordance with the equity method in the first quarter. 0 % Total Capital Tier 2 Capital Add. Tier 1 Cap. Core Tier 1 Capital 2015 Q1 16,3 % 2,1 % 1,4 % 12,8 % 2015 Q2 2015 Q3 16,7 % 16,4 % 2,1 % 2,0 % 1,4 % 1,4 % 13,2 % 13,0 % 2015 Q4 18,6 % 2,0 % 1,4 % 15,1 % 2016 Q1 19,3 % 2,0 % 1,5 % 15,7 % Frende Holding (holding 39.7%) recorded a profit after tax in the first quarter of NOK 13 million, compared with NOK 16.3 million in the first quarter 2015. In the first quarter, the Financial Supervisory Authority of Norway issued its annual advice concerning which financial institutions should be regarded as systemically important. There are still three institutions that should be regarded as systemically important in Norway: DNB, Nordea and Kommunalbanken. The Financial Supervisory Authority of Norway and Norges Bank have also both recommended that a potential leverage ratio requirement should be at least 6%. Sparebanken Vest already meets Sparebanken Vest s share of profits was NOK 6.2 million for the first quarter (NOK 7.7 million). The company is expected to maintain its position and meet its growth targets in 2016. At the end of the first quarter 2016, Frende Skade had a total of NOK 1,449 million (NOK 1,303 million) in premiums, divided between 123,800 customers (112,000). The company s market share continues to 7

grow and is estimated to be 3% for Norway as a whole. The loss ratio at the end of the first quarter (month of March) was 65.6% (82.4%). The company s combined ratio for the first quarter was 85.1% (99%). Frende Liv recorded a pre-tax profit of NOK 13.9 million (loss of NOK 2.6 million) in the first quarter. The return on financial assets in the first quarter amounted to NOK 6.6 million (NOK 7.6 million). Premiums in Frende Liv increased by NOK 48 million in the first quarter compared with the corresponding period in 2015 and amounted to NOK 743 million at the end of the first quarter (NOK 695 million). Norne Securities AS (holding 47.6%) made a negative contribution to profits of minus NOK 2.7 million (NOK 0.8 million). Sales are evenly distributed between the business areas, but with a preponderance in Corporate Finance. The capital markets are still characterised by uncertainty and unrest, which have led to challenging market conditions so far in 2016. At the end of the first quarter, Norne had been mandated to take on more arrangement assignments, which is expected to contribute to increased earnings and profit improvement. Norne s board of directors has initiated efforts to find a new managing director for the company. Verd Boligkreditt AS (holding 40%) is a housing credit company that is owned by Sparebanken Vest and eight independent savings banks. The company is run by Sparebanken Vest Boligkreditt AS and manages housing loans in the amount of NOK 5.8 billion (NOK 4.7 billion). The share of profit/loss from Verd Boligkreditt in the first quarter amounted to NOK 2.4 million (NOK 2.1 million). Brage Finans AS (holding 49.9%) is a financing company that offers leasing and loans secured by the purchased object to the corporate and retail markets. The company recorded a pre-tax profit of NOK 7.2 million (NOK 7.8 million) in the first quarter 2016. The first quarter of 2015 was positively affected by a relatively large realised gain on an acquired asset. At the end of the first quarter 2016, the company had a gross portfolio of NOK 3,527 million (NOK 2,654 million). The company has experienced growth of 25% in new sales and increased interest income, which corresponds to NOK 28 million (NOK 22.4 million). Sparebanken Vest s share of the profit in Brage Finans amounted to NOK 2.5 million (NOK 3.2 million) in the first quarter. Post balance sheet events No significant events have taken place since the balance sheet date (31 March 2016) that affect the quarterly accounts. Outlook Macroeconomic developments According to figures from Statistics Norway, growth in the Norwegian mainland economy only increased by 1.0% in 2015, which is the weakest growth since the financial crisis in 2009. The fall in the oil price has had a significant negative effect on the Norwegian economy. Norway s economy will probably see a further slowdown in growth in 2016 as a result of the continued reduction in oil-related investments. The effects of the lower activity level and prospects of lower earnings in oil-related businesses are now spreading to other sectors where growth has not been affected until now. Unemployment is therefore expected to increase, while the growth in employment is expected to be very modest. Lower growth has resulted in increased unemployment and weaker wage growth. Last year, wage growth was at its lowest level for more than 20 years. This development is expected to continue. Low wage growth will probably reduce the growth in housing prices and consumption and further reduce domestic inflation. On the other hand, the weakening of the exchange rate has improved industry s competitiveness, and exports from mainland Norway increased last year. Exports from mainland Norway, excluding exports from suppliers to the oil industry, are expected to continue to rise in the time ahead. The traditional export sector and public sector demand will thereby help to maintain growth in the mainland economy. A more expansive monetary and fiscal policy will also stimulate activity. The likelihood of Norges Bank cutting the key interest rate two more times has increased during 2016. Western Norway The year s first Western Norway Index, 1/2016, shows 8

that the negative trend in Western Norway has stopped temporarily. Enterprises in Western Norway report a development that is more or less identical to the preceding three months. A few more enterprises in the counties of Hordaland, Sogn og Fjordane and Møre og Romsdal are expecting a positive growth trend in the coming six months, however. By comparison, the negative trend in Rogaland continues. There are still negative expectations of the development of oil-related enterprises over the next six months, while the weakening of the Norwegian krone and the low interest rate improve the outlook for more traditional industries in Western Norway. Sparebanken Vest The issue of equity certificate capital amounting to NOK 750 million in the fourth quarter 2015, together with the profit from ordinary operations, will help Sparebanken Vest to meet its target of 14.5% Core Tier 1 capital by the end of 2016. Developments in the first quarter show that the bank is accumulating capital in line with the capital plan. The bank s financial target of a return on equity of more than 11% still applies. However, as announced in connection with the issue, a slightly lower return on equity is expected in 2016. During the first quarter, the bank has continued its work on the Customer 2016 project, which is a restructuring project that involves ambitious measures aimed at addressing future trends. New service concepts, the establishment of a new direct bank, increased automation and utilisation of robot technology shall contribute to a simplification of the bank s work processes, changed distribution, a shift in expertise and downsizing. Tighter regulation and a more uncertain macroeconomic situation are also a strong influence on the restructuring process. The work on implementing the changes in the organisation is going according to plan. The bank maintains its estimate that the process will entail NOK 110 million in restructuring expenses in 2016, and expects to be able to say more about the restructuring process when the results for the second quarter are presented. The bank s net interest has increased in the first quarter, as a result of positive effects from repricing in the corporate market in particular. At the same time, the strong competition prevails, and further interest rate cuts in the retail market can weaken the bank s lending margins in the time ahead. The bank is on schedule with measures to ensure a flat cost development in 2016 and 2017. Sparebanken Vest has started work on evaluating the bank s pension schemes, including the possible conversion of the bank s defined benefit scheme into a defined contribution scheme. Endeavours will be made to implement any changes in the coming year. The bank s growth in the first quarter is within the stipulated limits (5% in the retail market and 2.5% in the corporate market). The growth is expected to be within these limits for the year as a whole. Sparebanken Vest had low losses in the first quarter. However, group write-downs have been increased to allow for increased individual losses in the time ahead. The bank s previous expectation of write-downs somewhere in the region of NOK 250-300 million in 2016 still applies, but with a pre-ponderance of probability that the figure will be in the lower part of the interval. In accordance with the bank s capital accumulation plan, a fifty per cent dividend was paid out for 2015. Sparebanken Vest s dividend policy prescribes a 50 80% cash dividend of the equity certificate holders share of profits. The bank s capital accumulation plan assumes that dividend for 2016 will in the lower part of the interval. 9

Bergen, 27 April 2016 The Board of Directors of Sparebanken Vest Trygve Bruvik Marit Solberg Birthe Kåfjord Lange Chair of the Board Deputy Chair of the Board Arild Bødal Richard Rettedal Øyvind A. Langedal Anne Marit Hope Sivert Sørnes Kristin Axelsen Jan Erik Kjerpeseth Managing Director 10

Income statement, group Notes 01/01-16 -31/03-16 01/01-15 -31/03-15 2015 Interest income and similar income 1 087 1 208 4 653 Interest expenses and similar expenses 478 622 2 299 Net interest and credit commission income 3 609 586 2 354 Commission income and income from banking services 120 120 489 Commission expenses and expenses relating to banking services 22 20 86 Income from ownership interests in associated companies 8 14 70 Net gain/(loss) on financial instruments -35 50-83 Other operating income 38 52 204 Net other operating income 4 109 216 594 Net operating income 718 802 2 948 Payroll and general administration expenses 280 269 1 083 Depreciation 30 26 118 Other operating expenses 60 61 242 Total operating expenses 5 370 356 1 443 Profit before write-downs and tax 348 446 1 505 Net gain on fixed assets 15 0 0 76 Write-downs on loans and guarantees 6 26 39 185 Pre-tax profit 322 407 1 396 Tax 80 100 349 Profit for the period 242 307 1 047 Majority share of the profit for the period 242 307 1 047 Minority share of the profit for the period 0 0 0 Profit/Diluted profit per equity certificate 0,99 1,88 6,32 Statement of comprehensive income 01/01-16 -31/03-16 01/01-15 -31/03-15 2015 Profit/loss for the period 242 307 1 047 Estimate variance, pensions 0 0 48 Tax effect of estimate variance, pensions 0 0-13 Effect of change in tax rules 0 0 3 Other profit/loss elements that will not be reclassified to profit or loss after tax 0 0 38 Other profit/loss elements that will be reclassified to profit or loss after tax 0 0 0 Total other profit/loss elements in the period 0 0 38 Total profit for the period 242 307 1 085 Majority share of the total profit for the period 242 307 1 085 Minority share of the total profit for the period 0 0 0 11

Balance sheet, group Notes 31/03-16 31/03-15 31/12-15 Assets Cash to and receivables from central banks 455 252 631 Loans to and receivables from credit institutions 1 990 1 597 2 167 Net lendings 7, 8 130 058 120 868 128 927 Shares at fair value through profit or loss 393 549 380 Commercial papers and bonds 20 562 16 489 21 455 Financial derivatives 5 317 4 836 6 728 Shareholdings in associated companies 872 694 841 Other intangible assets 269 309 279 Tangible fixed assets 188 854 177 Prepaid expenses 48 59 21 Other assets 174 355 57 Total assets 160 326 146 862 161 663 Liabilities and equity Liabilities to credit institutions 4 416 3 907 4 849 Deposits 9 63 457 64 862 63 900 Securitised liabilities 13 76 224 63 308 77 069 Financial derivatives 1 802 1 719 1 611 Accrued expenses and pre-paid income 118 152 196 Pension commitments 227 307 226 Deferred tax 10 0 12 Other provision for commitments 2 2 2 Tax payable 265 342 414 Subordinated loan capital 13 1 848 2 428 1 838 Other liabilities 519 614 232 Total liabilities 148 888 137 641 150 349 Equity certificates 12 1 476 794 1 476 Own equity certificates -1-1 0 Premium reserve 617 570 617 Equalisation reserve 490 350 555 Total equity certificate capital 2 582 1 713 2 648 Primary capital 7 713 6 903 7 733 Gift fund 150 175 175 Compensation fund 14 14 14 Total primary capital 7 877 7 092 7 923 Other equity 402 416 166 Hybridcapital 577 0 577 Minority interests 0 0 0 Total equity 11 438 9 221 11 314 Total liabilities and equity 160 326 146 862 161 663 12

Cash flow statement, group 01/01-16 -31/03-16 01/01-15 -31/03-15 2015 Cash flows from operations Interest, commission and customer fees received 1 177 1 327 5 192 Interest, commission and customer fees paid -91-57 -1 014 Interest received on other assets 103 100 375 Interest payments on other funding -481-407 -1 400 Payments to other suppliers for goods and services -168-183 -553 Payment to employees, pension schemes, National Insurance contributions, tax withholdings etc. -205-193 -735 Payment of taxes -229-161 -343 Dividends received on securities for trading purposes 0 0 8 Net receipts/payments on sales/purchases of securities for trading purposes -3 48 231 Net cash flow from operations 103 474 1 761 Cash flows from investment activities Payments received/made relating to customers' loans -691-2 289-10 572 Net receipts/payments on loans to credit institutions 181-53 -606 Dividends received on securities not for trading purposes 1 0 10 Net receipts/payments on sales/purchases of securities not for trading purposes -15 3 12 Net receipts/payments on sales/purchases of other financial instruments 746-35 -4 770 Payment received from sale of associated companies 0 0 13 Payments related to associated companies -45 0 0 Payments received from the sale of operating assets etc. 0 0 876 Payments made on purchases of operating assets etc. -32-92 -277 Net cash flows from investment activities 145-2 466-15 314 Cash flows from financing activities Payments received/made relating to customer deposits -594-1 760-2 549 Payments received/made on deposits from Norges Bank and other financial institutions -548-468 526 Receipts related to issues of subordinated loan capital 0 0 0 Payments related to redemptions of subordinated loan capital 0 0 0 Receipts related to issues of bonds and commercial papers 5 161 4 349 26 187 Payments related to redemptions of bonds and commercial papers -4 373-2 080-12 735 New equity certificates 0 0 731 Dividends paid / Gifts for the public benefit -70-6 -185 Net cash flow from financing activities -424 35 11 975 Net cash flow for the period -176-1 957-1 578 Net change in cash and cash equivalents -176-1 957-1 578 Cash and cash equivalents at beginning of period 631 2 209 2 209 Cash and cash equivalents at end of period 455 252 631 13

Changes in equity, group Equity certificates Own equity certificates Premium reserve Equalisation Primary reserve capital Gift fund Comp. fund Other equity Hybrid capital Minority interests Total Equity at 31 Dec. 2014 794 0 570 478 6 953 175 14 109 0 1 9 094 Profit/loss 2015 0 0 307 307 Other comprehensive income 0 0 0 0 Purchase/sale of own equity certificates -1-1 -2 Distributed dividend and donations -127-50 -1-178 Equity at 31 Mars 2015 794-1 570 350 6 903 175 14 416 0 0 9 221 Equity at 31 Dec. 2014 794 0 570 478 6 953 175 14 109 1 9 094 Profit/loss 2015 192 788 67 1 047 Other comprehensive income 9 27 2 38 Issue of new equity certificates 682 49 731 Correction of prior year errors from Associated Companies 6 6 Purchase/sale of own equity certificates 0 0 0 Fusjon Sparebanken Vest Eiendom AS -2 4 15-17 0 Distributed dividend and donations -127-50 -1-178 Reclassification of hybrid capital at 31 Dec. 577 577 Equity at 31. Dec. 2015 1 476 0 617 555 7 733 175 14 166 577 0 11 314 Profit/loss first quarter 2016 0-2 236 8 242 Other comprehensive income 0 Purchase/sale of own equity certificates -1 0-1 Distributed dividend and donations -65-20 -85 Interest paid on hybrid capital -8-8 Tax on interest on hybrid capital, directly against equity 0 2 2 Donations from gift fund -25-25 Equity at 31 Mars 2016 1 476-1 617 490 7 713 150 14 402 577 0 11 438 Notes Note 1 Accounting principles The consolidated accounts for the first quarter 2016 have been prepared in accordance with IAS 34. The accounts have been prepared on the basis of the same principles and with the same estimate methods as the annual accounts for 2015. The accounting principles are described in the 2015 annual report. Subordinated bonds that do not meet the definition of financial commitment pursuant to IAS 32 are reclassified as equity at 31 Dec. 2015. All amounts are stated in NOK million and apply to the Group unless otherwise specified. 14

Note 2 Segment information The management has evaluated the segments that it is appropriate to report in relation to corporate governance. The segments are: Corporate Banking, Retail, Treasury and Real Estate Markets. Operating expenses are allocated, with the exception of IT costs, staff costs and depreciation. Net interest income is allocated based on internally calculated interest based on 3-month NIBOR. Banking operations Corporate market Retail market Treasury Estate agency business Not allocated by segment Total 01/01-31/03-2016 Income statement Net interest income 206 366 37 0 0 609 Operating income 43 68-39 37 0 109 Operating expenses -32-99 -3-45 -191-370 Losses -28 2 0 0-26 Pre-tax profit 189 337-5 -8-191 322 Tax -80 Profit for the period 242 31/03-2016 Balance sheet Net lendings 29 574 100 484 0 0 0 130 058 Deposits 18 083 43 342 2 032 0 0 63 457 01/01-31/03-2015 Income statement Net interest income 188 366 32 0 0 586 Operating income 39 80 48 49 0 216 Operating expenses -28-90 -4-43 -191-356 Losses -41 2 0 0 0-39 Pre-tax profit 158 358 76 6-191 407 Tax -100 Profit for the period 307 31/03-15 Balance sheet Net lendings 27 870 92 998 0 0 0 120 868 Deposits 18 618 41 397 4 847 0 0 64 862 2015 Income statement Net interest income 757 1 522 73 2 0 2 354 Operating income 160 297-56 193 0 594 Operating expenses -111-355 -13-179 -785-1 443 Net gain on fixed assets 76 76 Losses -174-11 0 0 0-185 Pre-tax profit 632 1 453 4 16-709 1 396 Tax -349 Profit for the period 1 047 31/12-15 Balance sheet Net lendings 29 927 99 000 0 0 0 128 927 Deposits 18 068 43 354 2 478 0 0 63 900 15

Note 3 Net interest and credit commission income Change 01/01-16 - 31/03-16 01/01-15 - 31/03-15 2015 Q1-16 vs Q1-15 Q1-16 vs Q4-15 Interest and similar income from loans to and receivables from credit institutions 3 2 6 1 2 Interest and similar income from loans to and receivables from customers 1 010 1 124 4 314-114 -29 Interest and similar income from commercial papers, bonds and other interest-bearing securities 74 82 333-8 -5 Interest income and similar income 1 087 1 208 4 653-121 -32 Interest and similar expenses on debt to credit institutions 5 8 44-3 -8 Interest and similar expenses on deposits from and debt to customers 146 272 877-126 -23 Interest and similar expenses on issued securities 289 298 1 193-9 -3 Interest and similar expenses on subordinated loan capital 20 27 115-7 -16 Other interest expenses etc. 1) 5 5 21 0 0 Fee Norwegian Banks' Guarantee Fund 13 12 49 1 0 Interest expenses and similar expenses 478 622 2 299-144 -50 Net interest and credit commission income 609 586 2 354 23 18 1) Interest from derivatives entered into to manage the interest rate risk attached to the bank s ordinary portfolios is classified as interest income and recognised as an adjustment of the bank s other interest income/ interest expenses. Note 4 Net other operating income 01/01-16 - 31/03-16 01/01-15 - 31/03-15 2015 Change Q1-16 vs Q1-15 Q1-16 vs Q4-15 Guarantee commissions 9 10 36-1 0 Fees from payment transfers /interbank fee credit 62 60 265 2-3 Other commissions and fees 49 50 188-1 1 Commission income and income from banking services 120 120 489 0-2 Fees payment transfers 14 11 47 3 3 Fees payment transfers/interbank debit 4 4 17 0 0 Other commissions and fees 4 5 22-1 1 Commission expenses and expenses relating to banking services 22 20 86 2 4 Net banking services 1) 98 100 403-2 -6 Income from ownership interests in associated companies 8 14 70-6 -23 Dividend 1 0 18 1-3 Gain/(loss) on commercial papers and bonds 59-30 -224 89 106 Gain/(loss) on shares -7 28 14-35 -16 Gain/(loss) on financial derivatives -185 38-164 -223-180 Gain/(loss) on financial instruments, recognised at fair value 54-33 166 87 101 Gain/(loss) on currency 10 10 41 0-1 Net gain/(loss) on financial instruments designated for hedge accounting 29 39 78-10 8 Of which gain/loss related to basisswaps 28 37 78-9 11 Other 4-2 -12 6 4 Net gain/(loss) on financial instruments -35 50-83 -85 19 Brokerage commission 37 49 194-12 -5 Other operating income 1 3 10-2 -2 Other operating income 38 52 204-14 -7 Net other operating income 109 216 594-107 -17 1) Specification of income and expenses relating to banking services Guarantee commissions 9 10 36-1 0 Payment transfers 51 49 212 2-3 Insurance 26 27 100-1 0 Funds and other placement products 11 9 36 2 1 Other income 1 5 19-4 -4 Net banking services 98 100 403-2 -6 16

Note 5 Operating expenses Change 01/01-16 - 31/03-16 01/01-15 - 31/03-15 2015 Q1-16 vs Q1-15 Q1-16 vs Q4-15 Salaries 156 149 621 7-12 Pensions 16 17 57-1 12 Other personnel expences 20 17 64 3 2 Fees 18 17 70 1-9 ICT expenses 56 54 211 2 8 Marketing and public relations 14 15 60-1 0 Payroll and general administration expenses 280 269 1 083 11 1 Depreciation 30 26 118 4-10 Operating expenses, premises 29 26 100 3 6 Wealth tax 0 5 17-5 -1 Other operating expenses 31 30 125 1 3 Total other operating expenses 60 61 242-1 8 Total operating expenses 370 356 1 443 14-1 17

Note 6 Losses and defaults on loans and guarantees Change 01/01-16 - 31/03-16 01/01-15 - 31/03-15 2015 Q1-16 vs Q1-15 Q1-16 vs Q4-15 Change in individual write-downs during period -24-29 24 5-89 Confirmed losses on loans for which provisions have been made 6 43 72-37 4 Confirmed losses on loans for which no provision has been made 2 6 20-4 -4 Recoveries of previously recognised losses -8-16 -28 8-5 Net effect of individual write-downs -24 4 89-28 -94 Change in group write-downs in period 50 36 97 14 39 The period`s net losses on loans 26 40 186-14 -56 Confirmed losses on guarantees 0 0 0 0 0 Change in provision for bad debt 0-1 -1 1 0 The period`s net losses on guarantees 0-1 -1 1 0 Write-downs on loans and guarantees 26 39 185-13 -56 Defaults and other problem loans The table shows booked value of total loans in default based on Basel II definitions. 31/03-2016 Retail market Corporate market Total Gross loans in defaults of payment exceeding 90 days 156 177 333 Gross other defaults and other problem loans 78 1 054 1 132 Gross default and other problem loans 234 1 231 1 465 - Individual write-downs -23-505 -528 Net default and other problem loans 211 726 937 31/03-2015 Retail market Corporate market Gross loans in defaults of payment exceeding 90 days 211 80 291 Gross other defaults and other problem loans 37 950 987 Gross default and other problem loans 248 1 030 1 278 - Individual write-downs -26-450 -476 Net default and other problem loans 222 580 802 Total Age distribution of commitments in default The table shows defaults of payment exceeding 30 days where the amount in default is more than NOK 1,000 in one of the commitment s accounts not caused by payment service delays. 31/03-2016 Retail market Corporate market Up to 30 days 768 524 1 292 31-60 days 103 30 133 61-90 days 35 31 66 More than 90 days 156 177 333 Gross loans in default of payment 1 062 762 1 824 Total 31/03-2015 Retail market Corporate market Up to 30 days 657 743 1 400 31-60 days 189 169 358 61-90 days 36 16 52 More than 90 days 211 80 291 Gross loans in default of payment 1 093 1 008 2 101 Total 18

Note 7 Capitalised write-downs on loans and guarantees 31/03-16 31/03-15 31/12-15 Individual write-downs Individual write-downs of loans at 1 January (nominal values) 563 501 501 Realised losses on loans covered by previous write-downs -7-47 -80 Increase in write-downs of loans written down previously 0 2 8 Write-downs of loans not written down previously 30 19 105 Reduction in previous years' write-downs on individually assessed loans -47-3 -11 Changes due to exchange rate movement -11 4 39 Individual write-downs 528 476 562 Group write-downs Group write-downs at 1 January (nominal values) 435 338 338 Change in group write-downs for the period 50 36 97 Group write-downs 484 373 435 Total write-downs on loans 1 012 849 997 Provision for bad debt for guarantees Provision for bad debt to cover losses on guarantees at 1 January 2 2 2 Change in write-downs 0-1 -1 Total write-downs on guarantees 2 1 2 Note 8 Loans by sector and industry 31/03-16 31/03-15 31/12-15 Gross loans Primary industries 2 880 2 798 2 870 Manufacturing and mining 1 377 1 041 1 346 Power and water supply 1 488 1 163 1 447 Building and construction 3 654 3 500 3 648 Commerce 1 589 1 324 1 403 International shipping and pipeline transport 5 054 5 609 5 261 Hotel and restaurants 494 383 463 Property management 12 313 11 129 12 337 Services 2 602 2 328 2 559 Municipal/public sector 32 27 26 Other financial corporations 236 146 204 Total corporate sector 31 719 29 448 31 564 Retail customers 99 351 92 269 98 360 Gross loans to customers 131 070 121 717 129 924 Write-downs Primary industries 0 0 0 Manufacturing and mining 7 3 7 Power and water supply 18 3 0 Building and construction 11 8 11 Commerce 9 12 9 International shipping and pipeline transport 410 372 457 Hotel and restaurants 0 0 0 Property management 35 32 41 Services 17 20 14 Municipal/public sector 0 0 0 Other financial corporations 0 0 0 Individual write-downs corporate sector 507 450 539 Individual write-downs retail customers 21 26 23 Group write-downs 484 373 435 Total write-downs on loans 1 012 849 997 Net loans to customers 130 058 120 868 128 927 19

Note 9 Deposits by sector and industry 31/03-16 31/03-15 31/12-15 Primary industries 1 699 1 655 1 566 Manufacturing and mining 1 718 1 859 1 812 Power and water supply 313 859 298 Building and construction 2 218 2 135 2 237 Commerce 1 592 1 703 1 673 International shipping and pipeline transport 2 198 1 870 2 163 Hotel and restaurants 186 194 224 Property management 3 122 3 582 3 355 Services 5 097 5 451 5 108 Municipal/public sector 1 643 2 176 1 595 Other financial corporations 2 180 3 613 2 243 Total corporate sector 21 966 25 097 22 274 Retail customers 41 491 39 766 41 626 Total deposits to customers 63 457 64 862 63 900 Note 10 Valuation hierarchy for financial instruments at fair value Level 1 Financial instruments traded in active markets are classified as level 1. A market is deemed to be active if the market prices are easily and regularly available from a stock exchange, broker, industry group, pricing service or regulatory authority, and these prices represent actual and regularly occurring market transactions at arm s length. The market price used for financial assets is the applicable purchase price, while the applicable sales price is used for financial commitments. Instruments included in level 1 comprise listed shares, investments in unit trusts and treasury certificates. Level 2 The fair value of financial instruments that are not traded in an active market is determined by using valuation methods. These valuation methods maximise the use of observable data where available and, as far as possible, are not based on the group s own estimates. If all the material data required to determine the fair value of an instrument are observable data, the instrument is included in level 2. Instruments included in level 2 comprise loans to customers, equity instruments on the OTC list, other certificates and bonds, financial derivatives and all financial commitments valued at fair value. Level 3 If one or more data items are not based on observable market information, the instrument is included in level 3. Non-listed equity instruments, certain equity instruments on the OTC list and loans to customers valued at fair value are classified at level 3. Financial instruments valued at fair value 31/03-2016 Level 1 Level 2 Level 3 Total Assets Loans to customers 24 344 24 344 Shares valued at fair value through profit or loss 47 61 285 393 Certificates and bonds 1 298 18 678 19 976 Financial derivatives 903 903 Financial derivatives designated for hedge accounting 4 414 4 414 Total 1 345 24 056 24 629 50 030 Liabilities Debt to credit institutions 198 198 Deposits from and debt to customers 132 132 Securitised debt 4 050 4 050 Financial derivatives 1 802 1 802 Subordinated loan capital 472 472 Total 0 6 654 0 6 654 Loans to customers Shares Financial Instruments valued pursuant to level 3 at 31 Dec. 2015 23 857 268 Additions/acquisitions 1 210 20 Sales / redemption / repayment -803 0 This years value adjustment 80-3 Reclassification between levels 2 and 3 0 0 Financial instruments valued pursuant to level 3 at 31 Mar. 2016 24 344 285 20

Note 10 Valuation hierarchy for financial instruments at fair value (cont.) 31/3-2015 Level 1 Level 2 Level 3 Total Assets Loans to customers 15 094 15 094 Shares valued at fair value through profit or loss 201 71 277 549 Certificates and bonds 16 409 16 409 Financial derivatives 1 513 1 513 Financial derivatives designated for hedge accounting 3 323 3 323 Total 201 21 316 15 371 36 888 Liabilities Debt to credit institutions 187 187 Deposits from and debt to customers 30 30 Securitised debt 3 822 3 822 Financial derivatives 1 719 1 719 Subordinated loan capital 478 478 Total 0 6 236 0 6 236 Financial instruments valued pursuant to level 3 at 31 Dec. 2014 9 847 283 Additions/acquisitions 6 208 3 Sales / redemption / repayment -908-12 This years value adjustment -53 3 Reclassification between levels 2 and 3 0 0 Financial instruments valued pursuant to level 3 at 31 Mar. 2015 15 094 277 21

Note 11 Financial strength Capital adequacy 31/03-16 31/03-15 31/12-15 Risk-weighted volume Corporate 23 266 21 373 22 610 Specialised Lending (SL) 2 178 2 855 2 364 Corporate - Other 2 614 3 774 3 048 Mass market secured on property - SMB 417 411 414 Mass market secured on property - Not SMB 19 088 19 506 19 947 Mass market - Other SMB 59 68 62 Mass market - Other not SMB 1 920 2 772 2 540 Total credit risk IRB 49 542 50 759 50 985 Debt risk 683 751 645 Equity risk 12 335 12 Operational risk 5 079 5 680 5 078 Commitments under the standard method 8 193 8 159 8 559 Risk of impaired creditworthiness of the counterparty (CVA) 1 979 1 047 1 745 Total risk-weighted volume before transitional rules 65 488 66 731 67 024 Correction to the transitional arrangement 8 924 2 518 6 621 Total risk-weighted volume 74 412 69 249 73 645 Capital base Equity certificates 1 476 794 1 476 Deductions for own equity certificates -1-1 0 Premium reserve 617 570 617 Saving bank`s reserve 7 713 6 903 7 733 Share premium reserve 14 14 14 Endowment fund 150 175 175 Equalisation reserve 490 350 555 Other equity 402 416 166 Share of other equity in ownership interests 0 0 0 Total book equity excluding hybrid capital 10 861 9 221 10 737 Deductions Deferred taxes, goodwill and other intangible assets -281-339 -301 Including effects of regulatory scope of consolidation -37-55 -46 Adj. for unrealised losses/(gains) on debt recorded at fair value -15 34-15 Value adjustments due to the requirements for prudent valuation -53-42 -53 Adjusted expected losses IRB-portfolios -181-277 -185 Allocated dividends 0 0-85 Year-to-date profit not included in Core Capital -236-307 0 Common Equity Tier 1 capital 10 095 8 290 10 098 Additional Tier 1 capital 966 966 966 Total Tier 1 capital 11 061 9 256 11 064 Tier 2 instruments 1 370 1 369 1 370 Total supplementary capital 1 370 1 369 1 370 Own funds 12 431 10 625 12 434 22