SPV
SECOND QUARTER
AND FIRST HALF-YEAR
2013
22 August 2013
Stein Klakegg
Managing Director
BRIEF INFORMATION ABOUT SPAREBANKEN VEST
Key facts
 Norway’s third biggest savings bank
 Established in 1823 – Norway's second oldest
savings bank
 NOK 128 billion in assets under management and
more than 250,000 retail customers
 More than 800 employees and 55 branch offices
extending from the north of Sogn og Fjordane to the
south of Rogaland
 Listed on Oslo Stock Exchange since 1995
 The biggest savings bank in Norway that is
independent of alliances. Has entered into
cooperation with 13 other independent savings
banks.
2
KEY DEVELOPMENTS IN THE SECOND QUARTER
 Pre-tax profit of NOK 332 million (NOK 171 million)
 Return on equity after tax of 12.7% (7.3%)
 Repricing of lending portfolios in the retail and corporate markets in the first quarter has
had an effect in relation to stated targets
 Positive trend in cost developments continues – implementation of additional measures
on schedule
 Progress in associated companies continues – all four making a positive contribution also
in this quarter
 Core Tier 1 capital of 10.6% – up 0.1 percentage points from the previous quarter
3
KEY DEVELOPMENTS IN THE FIRST HALF-YEAR
 Pre-tax profit of NOK 605 million (NOK 405 million)
 Return on equity after tax of 11.6% (8.9%)
 Progress driven by improved core banking operations – increased net interest and
reduced costs
 Underlying cost growth in the parent bank of -1.2%, within the target of 2% average annual
growth
 Moderate growth in lendings to strengthen capitalisation
 Robust, improved financial strength, combined with continued good profit performance,
underline that the goal of self-financed growth still applies
4
KEY FIGURES
Key figures for the second quarter and first half-year 2013
2Q 2013
2Q 2012
1. half year
2013
1.half year
2012
2012
Operating profit / loss before write-downs and tax
362 mkr
199 mkr
657 mkr
483 mkr
1.338 mkr
Pre-tax profit
332 mkr
171 mkr
605 mkr
405 mkr
1.191 mkr
Profit / equitiy certificate
1,62 kr
0,93 kr
2,95 kr
2,23 kr
6,10 kr
Net interest (annualised)
1,72 %
1,44 %
1,60 %
1,42 %
1,45 %
50,9 %
64,0 %
52,6 %
59,5 %
59,5 %
Return on equity (annualised)
12,7 %
7,3 %
11,6 %
8,9 %
12,3 %
Deposits / Loans ratio
57,4 %
55,8 %
57,4 %
55,8 %
56,2 %
Liquidity indicator
100,6 %
105,6 %
100,6 %
105,6 %
106,8 %
Common equity
10,6 %
9,5 %
10,6 %
9,5 %
10,6 %
Total capital
12,6 %
11,4 %
12,6 %
11,4 %
12,6 %
Common equity (Basel II)
14,2 %
12,9 %
14,2 %
12,9 %
14,0 %
Total capital (Basel II)
16,7 %
15,6 %
16,7 %
15,6 %
16,6 %
Cost ratio
1)
1)
Cost ratio exluding one-offs related to change in pension scheme (262 mnok ) in 2012
5
KEY FIGURES – EQUITY CERTIFICATES
Return on equity
after tax (%)
Q2 13
Q1 13
12,7 %
10,4 %
Q4 12
18,5 %
Q3 12
Q2 12
6
Profit per
equity certificate (NOK)
12,5 %
7,3 %
Q2 13
Q1 13
1,62
2,43
1,56
Q3 12
Q2 12
0,88
Q2 13
Q1 13
1,33
Q4 12
Book equity per equity
certificate (NOK)
52,0
50,6
Q4 12
Q3 12
Q2 12
52,7
50,4
48,8
EQUIPPED TO MEET FUTURE CAPITAL REQUIREMENTS
...BUT EQUAL COMPETITIVE CONDITIONS VITAL TO THE BANK'S ROLE
 Sparebanken Vest is keen to maintain its key role in relation to
regional economic and social activities and has therefore made
active efforts to prevent the authorities from introducing
regulations that distort competition and limit this role
 The Norwegian authorities’ proposal for risk weights on housing
loans entail more stringent requirements than the European
regulations
 Combined with increased capital requirements, this means that it is
still necessary to accumulate capital through operations
 Focus on efficient operations and reduced costs
 Interest margin that reflects increased equity capital requirements
 Moderate and selective growth in lendings
 The financial strength of the bank is good, however, and has
increased during the second quarter – development in line with
revised ICAAP
The bank's goal of self-financed growth still applies
GOAL OF SELF-FINANCED GROWTH STILL APPLIES DESPITE
INCREASED CAPITAL REQUIREMENTS AND RISK WEIGHTS
ON HOUSING LOANS
CET1 2015 pursuant to revised ICAAP with different risk
weights
Risk weight CM
Risk weight RM
55%
60%
65%
70%
…on the fulfilment of the following main
conditions
 Growth in lendings in line with ICAAP
 6.0% in RM, 2.5% in CM
75%
80%
10%
20.2%
19.4%
18.7%
18.0%
17.4%
16.8%
15%
18.2%
17.6%
17.0%
16.4%
15.9%
15.4%
 Further margin increases in addition to
those already carried out are not included
 Costs in line with cost targets
 'Normalised' losses (25 bp)
20%
16.6%
16.0%
15.6%
15.1%
14.7%
14.3%
 Dividend policy is maintained (50% / 5%)
25%
15.2%
14.8%
14.4%
14.0%
13.6%
13.2%
= Room for manoeuvre given 14.5% CET1
30%
14.1%
13.7%
13.3%
13.0%
12.7%
12.4%
= No room for manoeuvre given the
conditions
As of 30 June, the bank is ahead of ICAAP schedule in relation to capital accumulation
8
GROWTH IN LENDINGS IN ACCORDANCE WITH CAPITAL PLAN
GROWTH IN FIRST HALF-YEAR MAINLY IN LINE WITH C21 GROWTH
Retail market
Growth
target
Corporate market
Growth
target
6,0 %
Growth 1H,
annualised
7,6 %
Growth 1H,
annualised
7,3 %
C2 30 June
Total
Growth
target
2.5%
Growth 1H,
annualised
-0.8%
5.0%
5.3%
of
C2 30 June
CAGR*
2009 - 2012
9
9,6 %
C2 30 June
4.3%
CAGR*
2009 - 2012
*) Average, annual gross growth in lendings 2009–2012 incl. non-organic growth
1) Credit indicator C2 published by Statistics Norway
8.0%
CAGR*
2009 - 2012
6.3%
9.2%
STRONG INCREASE IN NET INTEREST IN THE SECOND QUARTER
REPRICING HAS HAD EFFECT IN RELATION TO STATED TARGETS
Development in net interest and credit commission income
Comments
 Nominal net interest up NOK 90
million during the quarter –
primarily as a result of repricing
in the lending portfolios in RM
and CM in the first quarter
 Repricing reflects more stringent
capital requirements and
increased risk weights on
housing loans
 A fee of NOK 13 million to the
Norwegian Banks’ Guarantee
Fund was charged to net interest
in the quarter – corresponding to
-4 bp
10
POSITIVE TREND IN COST DEVELOPMENTS CONTINUES
Reduced costs in both the parent bank and subsidiaries compared with
the same period last year
Planned development*
Development as of 30 June 2013
758
1,582
1,335*
2%
1,415*
1,415
666
729
-3%
648
Comments
 Reported operating costs in
the parent bank** as of 30
June are down -2.7%
compared with the same
period last year
 Adjusted for non-recurring
expenses of NOK 10 million
in the same period last year,
underlying growth amounts
to -1.2%
2012
2015
Subsidiaries
1H 2012
1H 2013
Parent bank**
 Both pension expenses and
other operating expenses
are down, which shows that
the measures carried out in
2012 have had effect
The Group employed 37 fewer full-time equivalents as of 30 June than at the turn of the year
*) the 2012 figures excl. non-recurring effects related to pensions amount to a total of NOK 262
11million, plus bonuses in the parent bank. Planned development in the parent bank is excl. bonus.
**) Including Sparebanken Vest Boligkreditt
Slightly lower investment level in Western Norway – in
line with the development in C2 growth for non-financial
enterprises
12
Main findings from Vestlandsindeks no 2 /2013

Index for future investments down from 60 to 57
 29% of the businesses in Western Norway will increase
investments in the next half-year compared with 34% in
Q1

This is in line with the development in C2 growth and may be
due to expectations of slightly lower growth in the Norwegian
economy and to the banks introducing more restrictive
lending practices

At the same time, Vestlandsindeks no 2/2013 shows that the
businesses in Western Norway are doing well overall
 30% expect to increase employment
 Capacity challenges are still being reported
 24% expect retail prices to increase in the next half-year

The projects that apply for funding from the bank are
therefore still expected to be of high quality
OUTLOOK FOR SPAREBANKEN VEST

Strong net interest continuing into the second half-year
 Supported by falling money market interest rates and the need for capital accumulation

Focus on completing the implementation of cost-cutting measures with effect from 2014
 On schedule in first half-year to reach target of 2% cost growth in the parent bank

Associated companies are expected to deliver an overall positive contribution to profits in
2013 as well
 Ambition that the return on equity on the investment will exceed the bank’s ROE target in the
long term

Moderate and selective growth in lendings continuing, with prioritisation of own customers
 Planned growth in lendings in RM on a par with estimated C2 growth, slightly lower in CM with
prioritisation of SMEs
 The work on ensuring competitive framework conditions for the savings banks will continue

Expectation of stable risk situation in the region and for the bank
13
#
Q2
ACCOUNTING AND FINANCE
Ragnhild J Fresvik
Acting CFO
CHANGE IN PROFIT PERFORMANCE, SECOND QUARTER 2012–2013
15 *) The comparison shows the comparison with the actual figures reported for 2012 and not revised figures
pursuant to IAS-19 R
CHANGE IN PROFIT PERFORMANCE, FIRST HALF-YEAR 2012–2013
16 comparison shows the comparison with the actual figures reported
*) The
for 2012 and not revised figures pursuant to IAS-19 R
CHANGE IN NET INTEREST, SECOND QUARTER 2012–2013
17
CHANGE IN NET INTEREST, FIRST HALF-YEAR 2012–2013
18
INCREASED LENDING MARGINS IN ACCORDANCE WITH TARGETS
Deposit margins up 2 bp for CM and down 6 bp for
RM from the previous quarter
Corporate market
Lending margins up 48 bp for CM and 27 bp for RM
from the previous quarter
Retail market
19
Definition: The quarter's average customer interest rate minus average 3-month NIBOR
Retail market
Corporate market
CONTINUED PROGESS IN ASSOCIATED COMPANIES
UNDERLYING CONTRIBUTION TO PROFITS UP NOK 11 MILLION IN 1H 2013*
Change in share of profits 1H 2012–1H 2013 (NOK
million)
3,7*
3,2
2,4
1,5
Comments
 Frende is still reporting good profit performance
combined with strong growth in customers and
premiums in both Frende Liv and Frende Skade
 The company expects profitable growth in the time
ahead
 Norne recorded a profit again in the second quarter,
and has increased its income in all business areas
 Based on the positive development, the board of Norne
will work on structural solutions to strengthen the
company’s strategic platform in the time ahead
 Brage also recorded an improved profit performance
combined with strong growth in the first half-year
 The improved profit performance is due to growth
in the lending portfolio, repricing and efficient
operations
 Verd also reported an improved profit performance,
primarily due to increased lending margins in the
company’s portfolio
20
*) The improved profit performance in Frende has been corrected for non-recurring effects of NOK 14 million in the first half-year 2012 as the
result of changes in the bank's treatment for accounting purposes of the security provisions in Frende Skade
REDUCED OPERATING EXPENSES ALSO IN Q2
Change in operating expenses Q2 2012–Q2 2013
Operating cost 2Q 2013
Operating cost 2Q 2012
Change in operating costs in the quarter
Comments
375
382
-7
Split as follows:
Change in pension scheme
Provisions for incentive schemes
Ordinary pension costs
IT costs
Provisions for restructuring
Other operating expenses
Total Sparebanken Vest
Total Eiendomsmegler Vest
-4
25
-16
2
8
-18
-3
-4
21 comparison shows the comparison with the actual figures reported
*) The
for 2012 and not revised figures pursuant to IAS-19 R
 The reduction in expenses is still driven by a reduction
in other operating expenses and pension expenses in
the parent bank
 NOK 10 million of the reduction in pension expenses of
NOK 16 million is due to the transition to IAS 19-R
 Ordinary payroll and personnel expenses are down NOK
4 million for the quarter seen in isolation – staff
downsizing is beginning to have an effect on expenses
 Increased allocations for incentive schemes are due to
changed accrual accounting. The upper limit for the
schemes has been reduced since 2012, however.
STRENGETHENED DEPOSITS/LOANS RATIO DURING THE QUARTER
Growth in deposits of 8.5% in the last 12 months
Growth in deposits of 8.2% in CM and 8.8% in RM
22
HIGH PROPORTION IN SME SEGMENT AND STABLE
RISK PROFILE FOR HEALTHY PORTFOLIO IN CM
Development in proportion of volume* in the
corporate market broken down by size of
commitment
Composition
of liquidity
portfolio
Q3 portfolio
2012
Low**
expected losses
in majority
of CM
100 %
22%
22%
21%
21%
20%
90 %
80 %
23%
22%
23%
24%
60 %
28%
70 %
50 %
40 %
54%
56%
56%
55%
20 %
51%
30 %
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
High
Medium
Low
10 %
0%
23 *) Measured on company-specific basis
**) Low expected losses <0.2%, Medium 0.2–0.75%, High >0.75%
DEVELOPMENT IN DEFAULTS AND OTHER
POTENTIAL BAD DEBT
Development in defaults* and other potential bad debt** (NOK million) and proportion of total volume of lendings*** (%)
*) Includes all defaults, not only default of payment
24 **) Includes commitments with individual write-downs
***) Calculated as % of total volume of lendings
COVERED BONDS STILL IMPORTANT FOR THE
BANK’S FUNDING AND LIQUIDITY PORTFOLIO
Development – assets
25
Composition
of liquidity– liabilities
portfolio Q3 2012
Development
GOOD, IMPROVED FINANCIAL STRENGTH
UP 0.1 PERCENTAGE POINTS FROM Q1 DUE TO ACCUMULATED PROFITS
Pursuant to the transitional arrangement*
26
Pursuant to Basel II*
* The figures for the quarter include 50% of the accumulated profit after tax, with the exception of the fourth quarter
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