Sparebanken Møre - the Group. Presentation Preliminary Results PDF

Sparebanken Møre - the Group Presentation Preliminary Results 2011 Results The second best result ever NOK million Favourable operating environment a strong county in a strong Norwegian economy

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Sparebanken Møre - the Group Presentation Preliminary Results 2011 Results The second best result ever NOK million Favourable operating environment a strong county in a strong Norwegian economy Stable development in net interest income Low loan losses and low volume of loans in default Strong growth in all areas Good solvency and strong liquidity Rising funding cost due to market turmoil Trainee scheme focusing young, talented employees 15/02/2012 2 Area of operation 15/02/2012 3 Area of operation Founding and vision Sparebanken Møre was established in 1985 through a merger of several local savings banks. The oldest of these savings banks was established in 1843 Sparebanken Møre is a fully independent bank, and the bank follows the contract banking principle The bank has today 23 district banks, with a total of 30 branches The bank's head office is located in Ålesund in Møre og Romsdal county, and the county is defined as Sparebanken Møre's operating area Sparebanken Møre has been listed at Oslo Stock Exchange since 1989 (Primary Capital Certificates/PCCs, now Equity Certificates ECs) The banks vision is described within the framework Møre a vision based on an extensive effort throughout the organisation - where we aim to be the leading financial institution in Møre og Romsdal 15/02/2012 4 Area of operation Sparebanken Møre a brief overview Sparebanken Møre is the 6th largest Norwegian bank the bank serves customers from the county of Møre og Romsdal The population of Møre og Romsdal is , and the population in the municipalities where the bank is located is The bank serves about customers, whereof customers in the retail market customers in the corporate market The activity is based on traditional banking services Loans to the retail market: 62,2 % Loans to the corporate sectors (incl. public): 37,8 % Sparebanken Møre is a fully fledged foreign exchange bank Sparebanken Møre is rated A2 (Neg.) by Moody`s 15/02/2012 5 Area of operation Contract Banking Lev. Prov. av of prod/tj prod/serv. ä nst Kontrakt Contract Lev. Prov. av of prod/tj prod/serv. ä nst Kontrakt Contract Prov. Lev. of av adm.supp. ö d Kontrakt Contract Kontrakt Contract Prov. Lev. of av adm. supp. ö d Prod,/serv. Prod/tj ä nster in-house i egen regi Bankens Bank s own egna resources resurser Kontrakt Contract Advisor Kund - Kontrakt Contract ansvarig Relation Relationship v ä rde Kontrakt Contract Adm.supp. ö d i in-house egen regi Bankens Bank s total totala resources resurser Customer The business model Contract Banking means that the Bank has opted to conduct operations and manage all development inhouse or together with partners/providers based on what is best for the Bank`s customers and what provides the best revenue generation for the Bank. Contract Banking involves requirements for: - Competence to identify partners when this creates value both for our customers and the Bank - Competence to identify partners, enter into agreements with these partners, develop, maintain and discontinue relationships with partners 15/02/2012 6 Area of operation Dominant industrial and commercial sectors in Møre og Romsdal Fisheries Fish and fish products/ Foodstuff industry Chemical industry Shipbuilding/ Ship equipment industry Furniture industry Shipping/Offshore Oil Tourism 15/02/2012 7 Area of operation The preferred bank in the county Market shares in the retail market Market shares in the corporate market , ,4 24, ,6 17,6 8, ,2 21,4 14,1 17, /02/2012 8 A strong county in a strong Norwegian economy 15/02/2012 9 A strong county in a strong Norwegian economy Total production lower than before the most countries 15/02/ A strong county in a strong Norwegian economy Still favourable outlook for Norway The current situation in the Norwegian economy: Low unemployment Record high housing prices Increasing private consumption High activity in the oil sector Expansion in the public sector Low inflation Factors contributing to growth in the Norwegian economy from 2010: Expansionary fiscal policy Expansionary monetary policy Credit policy measures Improvements abroad 15/02/ A strong county in a strong Norwegian economy Growth in Møre og Romsdal will continue Statistic Norway s yearly report on economic development in our county (dated November 2011, conclusions for 2012 and 2013): Strong growth in private services Stronger activity in the public sector Higher production in the building- and construction sector Strong activity within oil business, shipbuilding and infrastructure development in power supply sector Higher production in the corporate sector Stabilized activity in fishing and agriculture Production Employment Investment (r. h. scale) 15/02/2012 side Private service sector in M&R Production Employment Intestment (r. h. scale) Public services in M&R A strong county in a strong Norwegian economy The main risk factors concerning growth locally are developments in international economy, the oil price and the NOK Unemployment in Møre og Romsdal will, according to Statistics Norway, stay at a low level or become slightly Manufacturing in M&R lower in 2012 and 2013 About 2/3 of the employment in the county is in private and public services Increased demand for labour resulting from higher demand for goods and services 97 35, Production Employment Investment (r. h. scale) Per cent of total production and employment in M&R 98 Less potential for productivity growth 30,0 25,0 20,0 Production Employment 15,0 10,0 5,0 0,0 Sources: Statistics Norway, Sparebanken Møre Prim Constr. Public s. Priv. serv. Manuf. Others 15/02/ A strong county in a strong Norwegian economy Export oriented county with 37 million meals of Norwegian seafood - every day! Møre og Romsdal is the third largest export county in Norway Exports of seafood in NOK billion* Food, and especially seafood, is important for the county and both the country and our district have experienced a positive development the last years In 2010 the export value from the county was 25 per cent higher than in in 2011 the export value stabilised Source: Eksportutvalget for fisk 15/02/ A strong county in a strong Norwegian economy unelastic demand Møre og Romsdal has over the last years been the largest or the second largest food producing county in Norway Fish and fish products Salmon, trout, codfish, herring, mackerel, etc Agriculture Potatoes, fruit and berries Other foodstuff industry Pizza, cured ham, salami, etc The county is responsible for approximately 1/3 of the nations total export of food Rogaland Møre og Romsdal Oslo Hordaland Sør-Trøndelag Nordland Østfold Hedmark Akershus Troms Nord-Trøndelag Sogn og Fjordane Oppland Vestfold Buskerud Finnmark Vest-Agder Telemark Aust-Agder Food production by county NOK million Agriculture Fish and fish farming Other food producing industry 15/02/ Norwegian housing prices will stay high... 15/02/ Norwegian housing market Norwegian housing and mortgage market Selected Cities Average prices 2011 (m2) Oslo Stavanger Sandnes Bergen Trondheim Tromsø Selected Regions Northern Norway (except Tromsø) Trøndelag (except Trondheim) Møre og Romsdal out of 5 households own their own home The market is predominantly a floating rate market Hordaland (except Bergen) Rogaland (except Stavanger & Sandnes) Country Norway (average) Banks can reset the floating interest rates giving the debtor 6 weeks notice Interest costs in Norway are tax deductible at 28 % of interest paid 15/02/ Norwegian housing market Norwegian housing prices Housing starts in Norway is up from record lows in 2009/10 Interest rates will stay low in the foreseeable future Unemployment will stay low Good social benefits will help service debt when unemployed Personal liability for debt, gives strong incentive to service debt 15/02/ Housing market Møre og Romsdal Growth in housing prices Growth in housing prices will probably level out due to uncertainty abroad and gradually rising interest rates in Norway Price developement, year over year Housingprices per square meter (NOK 1000) Source: Norwegian Association of Real Estate Agents NEF Lower prices on housing, and also somewhat lower growth in Møre og Romsdal compared to the overall Norwegian housing market 15/02/ Deposits and loans 15/02/ Deposits and loans Good growth in total assets NOK mill Growth during the last 12 months Total assets 8.9 % Loans 7.0 % Deposits 3.2 % Total assets Loans Deposits 15/02/ Deposits and loans Breakdown of gross lending Mill. kroner Annual net lending growth 2007: 14.2 % 2008: 12.7 % 2009: 1.6 % 2010: 5.1 % : 7.0 % Lending growth last 12 months Gross, retail banking 7.0 % Gross, corporate 6.7 % Gross, public sector - 0 Public sector Retail banking Corporate banking 15/02/ Deposits and loans Loans by sector Other 13.1 % Property 12.6 % Supply 4.5 % Retail 62.2% Fisheries 7.6 % Other 13.1 % Private and public services 3.2 Building /Construction 1.8 Financial servives Fishing Industry 1.6 Agriculture 1.2 Other Restaurant/ hotel Retail/wholesale trade 1.7 Ship Yards 0.7 Furniture /02/ Deposits and loans Breakdown of deposits NOK mill Annual deposit growth 2007: 15.1 % 2008: 6.6 % 2009: 5.4 % 2010: 12.7 % 2011: 3.2 % Deposit growth during the last months Retail banking 7.8 % 0 Corporate banking 5.9 % Public sector % Corporate banking Retail banking Public sector 15/02/ Funding and hedging 15/02/ Funding and hedging Long term funding in place 110 % 105 % 100 % 95 % 90 % 85 % Long term financing as a percentage of illiquid assets (defined by the Norwegian FSA) has been the main quantitative target in Sparebanken Møre`s funding strategy since December 2008 The bank`s target is to stay above 100 % By the end of Q the indicator stands at % 80 % Dec 07 mar.08 jun.08 sep.08 Dec 08 mar.09 jun.09 sep.09 Dec 09 mar.10 jun.10 sep.10 Dec. 10 mar.11 jun.11 sep.11 Dec. 11 Indicator Minimum 15/02/ Funding and hedging Unrest, but good access to the market Margins 3Y senior 5Y senior 5Y covered Møre Boligkreditt Covered bonds issued by Møre Boligkreditt AS has replaced senior bonds as the Group`s main source of long-term financing Unrest in the financial markets has contributed to higher margins (especially for senior bonds) Sparebanken Møre`s refinancing needs the coming years can primarily be met by issuing Covered Bonds 20 0 Sparebanken Møre is rated A2 and Covered Bonds issued by Møre Boligkreditt AS are rated Aaa by Moody's 15/02/ Funding and hedging Deposit to loan ratio about 80 % - total financing by year end High deposit to loan ratio, 79.7 % in the bank (62.8 % in the Group) - focus on long term market funding Total market funding close to NOK 17.2 billion 75 % with remaining maturity of more than one year (20-25% of market funding is renewed annually) Senior Bonds: Weighted average maturity of 1.85 years Deposits Covered Bonds Senior Bonds CDs F-loan Subordinated Loans Bilateral NOK Other Covered Bonds with a weighted average maturity of 5.32 years 15/02/ Funding and hedging The quality of the liquidity portfolio is good Rating Value Country Value AAA AA AA AA A A A BBB BBB BBB Total Norway Sweden UK Finland Denmark Luxembourg Germany US Austria Netherlands Total and no exposure towards the most vulnerable European economies 15/02/ Funding and hedging Off-balance activity - quarterly NOK MLN Moderate risk profile in the interest rate, equity and FX markets Sparebanken Møre has no trading portfolio in these or other similar markets/instruments Client's positions are hedged in the market IRS (NOK & Curr.) Forward FX Cross Currency Swap FRA (NOK & Curr.) Caps/Floors FX-Options The bank's positions are hedged Increased volume especially in IRS 15/02/ Funding and hedging Payments No of SWIFT Commercial payments No of outgoing SWIFT commercial payments by currency Incoming Outgoing Others; PLN; 4388; 7 % GBP; 2229; 4 % 4086 ; 7 % DKK; 3756; 6 % SEK; 5325; 9 % EUR; 17090; 28 % USD; 6812; 11 % NOK; 16556; 28 % 15/02/ Results 15/02/ Results Main figures Change during last 12 months From the Profit and Loss Account NOK mill. % NOK mill. % NOK mill. P. points % Net interest income/av. int. margin Other (non-interest) income Total income 1, , Personnel costs Other costs Total ordinary operating costs Result before credit losses Losses on loans and guarantees Result before tax cost Tax cost Result after tax cost From the Balance Sheet Total assets 48,406 44,441 3, Net lending 40,305 37,676 2, Deposits 25,325 24, Equity and related capital 4,175 3, Capital adequacy ratio Core capital ratio Percentage return on equity capital Costs as a percentage of income Earnings per EC (the Bank) /02/ Results Result as a percentage of average assets 2,25 2,2 1,95 1,93 1,75 1,25 1,65 1,09 1,10 1,68 1,34 1,54 1,44 1,41 1,32 1,40 1,32 1,44 1,27 1,35 1,15 1,52 1,45 1,22 1,13 Result from ordinary operations before losses Result before taxation 0,75 0,86 0,83 0,25 0,55 0,34 0,1 0-0,01 0,17 0,2 0,07 0,09 Losses -0,25 15/02/ Results Stable and high net interest income 3,00 AS A PERCENTAGE OF AVERAGE ASSETS Net interest income NOK 47 million higher than in ,50 2,00 2,09 2,17 1,97 2,03 1,96 Lower measured against average assets, 0.07 p.p. Changes: 1,50 High competition on loan and deposits 1,00 More liquidity on the balance- sheet with higher quality Low interest rate level: Less return on free capital 0,50 0,00 15/02/ Results Other operating income 1,00 AS A PERCENTAGE OF AVERAGE ASSETS Lower other operating income, NOK 214 million against NOK 304 million in ,75 0,67 0,63 0,72 Higher income Guarantees 0,52 FX and IRS business 0,50 0,46 Lower income e.g. from Part of fair value valuation - IFRS 0,25 Gains on shares 0,00 15/02/ Results Cost/Income beats the target ,3 49, ,4 46,7 44, /02/ Results Net loans in default declines NOK million 250 As a percentage of Gross Loans 0,6 0, ,5 0, ,4 0,38 0,34 0,40 0, ,3 0,2 50 0, /02/ Results Losses at a very low level 0,40 Total losses totalled NOK 40 million 0,20 Corporate Retail Group of loans Other NOK 31 million NOK 2 million NOK 5 million NOK 2 million 0,17 0,2 0,07 0,09 Total provisions amounted to NOK 396 million by ,00-0,01-0,20 15/02/ Results Losses - details /02/ Equity and ECs 15/02/ Equity Equity and related capital: Strong capital NOK mill Miscellaneous Supplementary capital Capital Bonds Savings Bank's Fund Dividend Equalisation Fund Premium Fund ECs % 15,00 14,00 13,00 12,00 11,00 10,00 9,00 8,00 7,00 6,00 5,00 4,00 3,00 2,00 1,00 0,28 0,18 0,16 1,67 1,56 1,75 1,51 1,44 1,61 1,70 1,68 0,91 0,87 1,69 0,71 5,45 5,53 5,09 5,36 1,57 5,27 4,80 1,39 1,43 1,27 1,34 1,13 0,65 0,36 0,35 0,68 0,44 0,61 2,50 2,39 2,09 2,36 2,74 2,64 0 0,00 Target ratio for core capital: 11.0 % :Actual Core Capital % 15/02/ The Board of Directors: Future prospects The Board of Sparebanken Møre expects Norwegian companies to face international market challenges in the next few years, especially in the European market Based on these observations, the Board expects that loss and default levels in Sparebanken Møre will be moderate going forward. The Bank is experiencing strong growth in all areas. Parts of the business sector in Møre og Romsdal is export oriented and competes to sell its goods and services in the global market Nonetheless, the Board expects stable growth for large parts of the business sector in Møre og Romsdal in the next few years. This as a result of expected good demand for the most important goods and services produced in the county The order situation in the maritime industry is satisfactory for 2012 The resource situation for the fishing industry is good, and demand for Norwegian fish is good and stable The employment situation in Møre og Romsdal is very good at the start of 2012, and is expected to remain at a good level during the year 15/02/ Sparebanken Møre and peers 15/02/ Sparebanken Møre and peers ROE per cent 25, , ,0 14,0 20,2 19,2 16,5 17,7 17,1 17,3 16,4 14,9 15,0 11,5 10,1 10,2 15,6 14,0 13,4 14,1 12,8 16,0 12,2 5 5,3 0 0, ,5 15/02/ Sparebanken Møre and peers Strong and stable Tier 1 capital* Period High Low Average Sparebanken Møre Sparebanken Vest Sparebank 1 SMN Sparebank 1 SR Sparebank 1 Nord Norge * Source: Sparebanken 1 Securities, Sparebanken Møre 15/02/ Sparebanken Møre and peers Stability in ROE Sparebanken Møre Sparebanken Vest Sparebank 1 SMN Sparebank 1 SR Sparebank 1 Nord Norge 15/02/ Sparebanken Møre and peers with lower gearing Sparebanken Møre has focused on a high and stable capital adequacy ratio compared with peers Tier 1 capital % by year-end, Core Tier 1 at % (total Capital 13.60%) The stability is maintained through good results and issues of new capital not by changing the risk weighted asset base Sparebanken Møre has adopted the Basel II Standardised Approach when reporting credit risk and market risk, the Basic Indicator Approach for operational risk More sophisticated models are used internally for assessing risks and Sparebanken Møre has applied to the Norwegian FSA to use IRB basic methods pursuant to the requirements in the Capital Requirements Regulations. The implementation process has started 15/02/ Appendix 15/02/ Board of Directors and Senior Management Leif-Arne Langøy (Chairman) Olav Arne Fiskerstrand (President and CEO) Roy Reite (Dep. Chairman) Magnar Bolstad Tim Solberg Stig Remøy Perdy Lunde Bodil Hollingsæter Ragna B. Bjerkeset Runar Sandanger Bernt Krøvel Ingvild Vartdal Idar Vattøy Kjell Brudevoll Elisabeth M. Støle Kjetil Hauge Terje Krøvel Helge Knudsen Arild Sulebakk Trond Nydal 15/02/2012 side 50 Funding and hedging Long term funding Senior bonds Maturity NOK thousand MORG MORG MORG MORG MORG MORG MORG MORG MORG MORG MORG MORG SUM Covered bonds Maturity NOK thousand MOBK MOBK MOBK MOBK MOBK EMTCN MOBK MOBK MOBK MOBK SUM Central bank Maturity NOK thousand F-lån Bytteordning Bytteordning Bytteordning Bytteordning SUM /02/2012 side 51 Funding and hedging Long term funding Subordinated Maturity NOK thousand NO NO SUM Other LT funding Termloan mv. Maturity NOK thousand Eksportfinans ASA LB Rheinland Pfalz SUM /02/2012 side 52 Equity Certificates Dividend policy Based on the fact that new legal rules relating to capital and organisation forms in the savings bank sector etc. were sanctioned at a Cabinet Meeting on on the basis of coming into force on , Sparebanken Møre changed its dividend policy with effect from the 2009 accounting year. The new dividend policy reads as follows: Sparebanken Møre s aim is to achieve financial results which provide a good and stable return on the Bank s equity capital. The results shall ensure that the owners of the equity capital receive a competitive, long-term return in the form of dividends and increase in the value of the equity capital. The equity capital owners share of the net result being set aside as dividend funds, will be adapted to the Bank s equity capital situation. Sparebanken Møre s allocation of earnings shall ensure that all equity capital owners are guaranteed equal treatment. 15/02/2012 side 53 Equity Certificates Dividend and EC-price The PCCs/ECs of Sparebanken Møre have been listed at Oslo Stock Exchange since 1989 Total EC capital: NOK 784 million by December 2011 Dividend pr. EC: /02/2012 side 54 Contact Head Office International Business and Treasury Division Keiser Wilhelmsgt P.O.Box Ålesund Tel: Telex: Reuters Dealing: spare n MORE Fax: General Management Corporate Division Retail Customers Division Treasury/FX International payments Head of Division Runar Sandanger, EVP and CFO, Chief Economist Inge Furre, Foreign Exchange Aud Janne Myklebust, Vice President, Hilde Sveen, Roger Lervik, Trond Hugo Stenseth, Treasury and Risk Management Ove T. Ness, Vice President, Louis Helge Nordstrand, International Payments and Settlements Karl Otto Hessen, Vice President, Aage Skauvik, Elin Sperre, Solbjørg Lunheim, Else Tomren, Kristin Aarset, Anne Grete Fjørtoft, Astrid-Grethe Rye, Annbjørg H. Dyb, Karin Krogen, Møre Boligkreditt AS Ole A
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