Sparebanken Møre

Quarterly Report • Aug 10, 2023

Presentation Sparebanken Møre Group 2nd quarter 2023

Trond Lars Nydal CEO

John Arne Winsnes CFO

Oslo, 10 August 2023

H1 2023 - Highlights

Loans: 9.3 % Deposits: 3.1 % (Last 12 months)

Stronger Net Interest Income

In NOK: 907 million In per cent: 1.96

Low Losses

In NOK: 30 million In per cent: 0.07 (loans and guarantees)

Low level of loans in default

Strong liquidity and solidity

Deposit-to-loan ratio: 58.4 % LCR: 183 NSFR: 127 CET1: 17.6 % Leverage Ratio: 7.4 %

Results in H1 Profit after tax

• The result for the first six months of 2023 was strong
• Profitability continues rising and Return on Equity ended at 12.2 per cent
• Profit per Equity Certificate in H1 2023 is NOK 4.42 (Group) compared with NOK 3.35 (Group) for the same period in 2022

- NOK million

343

Return on Equity - in per cent

Results compared Profit after tax in H1 2023 compared with H1 2022

• Good activity and growth, rising interest rates and the composition of the bank's balance sheet have contributed to stronger Net Interest Income
• Financial income contributes to the increase in other income
• Higher activity, investments and general inflation result in increased costs compared with the same period last year
• Low losses so far this year, but somewhat higher than per the first half of 2022

Q2 2023

Stronger profitability Profit after tax

• The result for the second quarter was NOK 255 million, corresponding to a Return on Equity of 13.6 per cent

• Profit per Equity Certificate in the second quarter of 2023 is NOK 2.46 (Group) compared with NOK 1.78 (Group) in the second quarter of 2022

• NOK million

Return on Equity - in per cent

Total income Total Income in the quarter - NOK million

Total Income in the quarter

• in per cent of Average Assets

• Net Interest Income continues the growth rate from the previous quarters
• Other customer-related income has a positive development and in Q2 there is also a positive effect from financial instruments

Growing Net Interest Income

• Interest rate changes and growth contribute to an increase in Net Interest Income of 3.8 per cent compared with Q1 2023
• Interest rate changes on loans and deposits were carried out on 10 May and 21 June
• New interest rate changes have been announced with effect from 8 August

Net Interest Income in the quarter -NOK million

Net Interest Income in the quarter - in per cent of Average Assets

Gaining market shares

• Over the last 12 months, there has been an increase in lending to customers of a total of NOK 6,699 million, corresponding to 9.3 per cent
• The 12-month deposit growth was NOK 1,4 billion
• Albeit lower growth in deposits compared to growth in lending, the bank`s deposit-to-loan ratio is still high

Loans

64,0

6,1 %

0,000

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

• NOK billion and per cent (y/y)

Deposits - NOK billion and per cent (y/y)

• Customer lending over the last 12 months: 9.3 %

• Deposit growth of 3.1 % over the last 12 months
• High deposit-to-loan ratio of 58.4 %

46,3

Strong lending growth

• Solid growth in both the retailand the corporate markets
• Lending growth to the retail market in the previous 3 quarters is around NOK 1 billion per quarter and this development continues in Q2 as well
• Lending growth to corporates was somewhat high in Q1, it is, however, expected to normalise during the year. The development in Q2 underpins this and the y/y growth is reduced from 15.5 per cent to 12.0 per cent

Retail market

• NOK billion and per cent (y/y)

Corporate market

• NOK billion and per cent y/y

• Retail lending has increased by 7.9% over the last 12 months
• Loans to the retail market amount to 66.4 % of total loans

• Corporate lending has increased by 12.0 % over the last 12 months
• Loans to the corporate market amount to 33.6 % of total loans

Deposits

• Good growth in deposits from retail customers, which in the last 12 months have increased by 6.8 per cent
• The deposits from the corporate market have decreased by 2.2 per cent y/y

Retail market

• NOK billion and per cent y/y

Corporate and public

-NOK billion and per cent y/y

• Retail deposits have increased by 6.8 % over the last 12 months
• Deposits from the retail market amount to 61.0 % of total deposits

2019 2020 2021 2022 H1 23

• Corporate deposits have decreased by 0.5 % y/y to NOK 17.4 billion

• Public deposits are reduced by 30.8 % to NOK 0.7 billion

• Other income ended 65 per cent higher than in Q2 2022

• Other customer-related income shows positive development
• Other income is negatively affected in the quarter by the valuation of our bond portfolio offset by a positive value adjustment of the fixed-rate loans ^{59 65}

Other Income Other Income in the quarter - NOK million

Other Income in the quarter

• in per cent of Average Assets

Financial instruments

operating income

67

Q2-22 Q3-22 Q4-22 Q1-23 Q2-23

35

102

-10 -30

35

49

0,34

Costs

Cost/Income ratio

C/I target

Cost/Income ratio

• Quarterly

Q2 Operating costs in the quarter - NOK million

2019 2020 2021 2022 H1 23

40,2 41,4 42,2 42,5

39,3

Operating costs in the quarter - in per cent of Average Assets

• The cost income ratio in H1 was 39.3 per cent

• The target is a cost income ratio below 40 per cent
• The quarterly trend of falling cost income ratio continues and reaches 38.9 per cent in

Losses and portfolio quality

• Net reversal of losses amounted to MNOK 3 in the quarter, of which MNOK 7 is related to reduced modelbased loss provisions
• From December 2022, credit-impaired commitments include commitments in probation. The comparable figure for Q2-2023 according to the old definition would be 0.71 per cent
• The bank is solid and has reassuring loss provisions

Losses on loans and guarantees - NOK million

Losses on loans and guarantees

• in per cent of Average Assets

Credit-impaired commitments (net) - in per cent of loans and guarantees

Impairments - NOK million

Ind. impairments on comm. in default>90 days 14

Ind.impairments on other credit-impaired ECL on loans and guarantees

Diversified loan book

• The bank has a stable share of exposure to the corporate sector
• There is good industry risk diversification and a low level of risk in the portfolio
• The lending growth in Q2 has decreased after high growth in Q1. The growth is expected to normalise during the year
• Weakening of the Norwegian krone affects the exposure towards oil-related industries

Loans by sector

Exposure to Commercial Real Estate (CRE)

• Stable and well-diversified property portfolio
• 74 per cent of the portfolio within our county Møre and Romsdal. central office and hotel properties in Oslo make up 21 per cent
• 95 per cent of the portfolio is in the low and medium risk category

Good quality in our retail portfolio

• Low risk in the portfolio with 97 per cent of the loans within 85 per cent of loan-to value
• More customers experiencing tighter finances, but still few having payment problems
• The level of credit-impaired commitments is still low and the number of customers applying for payment holidays or reduced term payments is moderate
• The proportion of loans with deviations (the flexibility quota) is on par with the previous quarter

• In per cent of total loans (LTV)

Loans to retail customers Loan-to-Value – retail loans

• Deviation from Boliglånsforskriften reported in Q2-2023:
  • o 7.4 % outside Oslo (flexibility quota 10 %)
  • o 7.7 % in Oslo (flexibility quota 8 %)

• 97 % of mortgages are within 85 % of LTV

We take action together

Everyone is now experiencing the high price growth and the increased interest rates.

We take action to assist our customers experiencing a difficult financial situation.

House prices

June 2023 is the first month with house price fall since November 2022, seasonal adjusted down by 0.5 per cent.

Last twelve months house prices are down in average by 0.7 per cent.

The number of pre-owned dwellings sold, as well as put up for sale, at same level as in 2022.

The City of Ålesund and the Mid-Norway region have over time experienced moderate growth in house prices compared with the national average, both indexed development and in price per square meter.

Indexed development

• January 2015 = 100

Price per square meter

• January 2015 – June 2023

Key information on pre-owned dwellings sold in June 2023	Norway	Mid-Norway	Greater Ålesund	City of Oslo
Seasonal adj. development last month	-0.5 %	-0.6 %	-0.2 %	-0.2 %
Development last 12 months	-0.7 %	-0.5 %	+2.8 %	-0.1%
Development last 10 years	+56.7 %	+38.8 %	+42.2 %	+85.8 %
Per square meter (NOK)	52,559	41,672	37,087	90,945
Average number of days on market	30 days	31 days	32 days	19 days
Price median dwelling (NOK)	3,884,000	3,250,000	3,200,000	5,235,329

Strong Capital gives competitive financing

Deposits are the Group`s most important source of funding. The bank has high Deposit-to-Loan ratio.

Sparebanken Møre with good access to the market

• Our deposit-to-loan ratio stood at 58.4 per cent by quarter end
• Total net market funding ended at NOK 37.9 billion by end of Q2 2023 about 82 per cent with remaining maturity of more than one year
• The senior bonds with a remaining term of more than one year have a weighted remaining maturity of 2.37 years while the financing through Møre Boligkreditt AS has a correspondingly weighted remaining maturity of 3.21 years - in total for market financing in the Group the remaining maturity is 3.16 years
• 26 July 2023 Moody's confirmed the bank's A1 rating with a stable outlook. All issues from Møre Boligkreditt AS are rated Aaa
• Møre Boligkreditt AS has outstanding bonds of NOK 28.2 billion at the end of Q2 2023, of which just about 30 percent are issued in currencies other than NOK. Two of the company's Euro issues are green
• This year, the bank has issued subordinated loan capital, senior loans and a 6-year loan from Nordiska Investeringsbanken. In early May, Møre Boligkreditt AS issued a 1B-Covered Bond in the Norwegian market
• The adaptation to the MREL requirement must be completed during 2023. This entails a further phasing in of both SNP and senior restricted capital

Strong solidity

• Sparebanken Møre has a long-term target for Common Equity Tier 1 capital (CET1) which must be the sum of pillar 1, pillar 2 (P2R) and P2G
• The Norwegian Financial Supervisory Authority (FSA) has notified the bank that it plans to carry out SREP in 2023. This will affect the capital composition
• The bank has applied to the FSA for model and calibration changes and in a letter from the Financial Supervisory Authority of 22.06.23 the applied models for the corporate market are granted
• Sparebanken Møre will incorporate the new models during the second half of 2023. Based on figures at the end of the 1st quarter this year, the new risk weights resulting from the model changes would have given a CET1 coverage of around 0.5 p.p. higher than reported
• The FSA further states that it aims to complete the processing of the model changes for lending to the retail market during 2023

CET1- status and requirement

Leverage Ratio

• Throughout the first quarter of this year, we saw a weaker development of the MORG compared to the equity certificate index (OSEEX)
• This development continued in the second quarter, and with a price of NOK 77.20 by half year end, MORG has declined by 3.84 per cent compared to a positive development of 11.32 in OSEEX

MORG: Weak H1 Development at Oslo Stock Exchange (MORG vs EC-index, Total Return)

Dividend policy

• Sparebanken Møre aims to achieve financial results providing a good and stable return on the bank's equity capital
• Sparebanken Møre's profit allocation must ensure that all equity owners are guaranteed equal treatment
• If the solvency ratio does not indicate otherwise, the aim is that around 50 per cent of the year's profit overall can be distributed as dividends

MORG – price and Price/Book (P/B) value*

• Equity. price and P/B

*Equity per MORG is calulated on Group figures. Figures for 2019-2021 stated before the split in 2022

0

1

2

1,2 1,4 1,6 1,8

0,2 0,4 0,6 0,8

24

Future prospects

• High interest rates and high inflation, combined with weak growth in our export markets, help to dampen economic growth going forward. However, the level of activity is high
  • ✓ According to NAV's business survey, 22 per cent of companies in the county expect increased employment in one year's time, while 11 per cent expect a decrease. The survey indicates prospects for moderate growth in production and employment going forward
  • ✓ Continued increase in seafood exports. Increased tourist inflow to Norway and the county as a result of the weak NOK. Continued positive production development within oilrelated industries. Rising trend within traditional export of goods
  • ✓ The nervousness in the financial markets linked to the development of interest rates and inflation decreased throughout the second quarter. This is due to the fact that interest rates will probably peak in several countries and regions. Inter alia, this applies in the United States, where inflation is on the way down
• The bank is solid and has good liquidity, and will continue to be a strong and committed supporter for our customers and our region

COMMITTED-CLOSE-CAPABLE

Sparebanken Møre

• The good growth confirms that we are an attractive and competitive bank for both retail and corporate customers
• In a highly competitive market, more than 2,700 new customers have chosen us as their bank since the beginning of the year
• The activity in the local business sector is good and the housing market has held up well in the region
• Strong solidity makes us well equipped for further growth and we have increased our staffing and set ourselves ambitious growth targets

Highlights H1 2023

Nye

• The Retail Market continues its' strong development and total lending growth in H1 is NOK 2 billion
• Good insurance sale within the Corporate Market and we are well ahead of the target
• Our Real Estate agency Møremegling: Continues the good development and gains a stronger position in the county
• Good activity in asset management. More than 50 new customers so far in 2023 and an almost NOK 600 million increase in gross volume in the first half-year confirms this
• We are working on several projects to streamline the bank's operations and to enhance customer experince
• Næringsbasen is well underway with the establishment of customers from Conta and the profitability of the customers is increasing

Experiences with the cooperation with Conta so far

• We hit the market with this service. Making it simple and seamless is valued by the customers
• So far, more than 400 corporate customers have used the models – this without any kind of marketing
• Our aim is to get the companies up and running with all the products needed already in the start -up phase, as well as establishing personal customer relationships

Good customer experiences produce good results

The bank's Customer Centre named the Best Customer Service in the banking sector – for the 5th year in a row.

A strong and market-oriented organisation provides growth

Financial targets

ROE > 11.0%	C/I < 40 %	Sparebanken Møre has a long-term target for Common Equity Tier 1 capital (CET1) which must be the sum of pillar 1, pillar 2 (P2R) and P2G	Low level of losses	Healthy financial structure

• The bank's Return on Equity for the first half of 2023 was 12.2 per cent and the Cost/Income ratio was 39.3 per cent.

• The Board expects that these financial results will be at least as good in the second half of 2023.

Contact

sbm.no facebook.com/sbm.no @sbmno engasjert.sbm.no

CEO Trond Lars Nydal

+47 95 17 99 77 trond.nydal@sbm.no

Disclaimer

R

This presentation has been prepared solely for promotion purposes of Sparebanken Møre. The presentation is intended as general information and should not be construed as an offer to sell or issue financial instruments.

The presentation shall not be reproduced. redistributed. in whole or in part. without the consent and Sparebanken Møre. Sparebanken Møre assumes no liability for any direct or indirect losses or expenses arising from an understanding of and/or use of the presentation. of Sparebanken Møre.

CFO John Arne Winsnes

+47 46 28 09 99 jaw@sbm.no

Runar Sandanger Senior Economist SVP

+47 95 04 36 60 runar.sandanger@sbm.no

Attachments

Results Q2 Key figures Q2 23 and Q2 22

	In Q2 2023		In Q2 2022			Changes
Results (NOK million and %)	MNOK	%	MNOK	%	MNOK	p.e.	%
Net Interest Income	462	1.94	353	1.65	109	0.29	30.9
Gains/losses liquidity portfolio	-4	-0.02	-35	-0.16	31	0.14	88.6
Gains/losses on shares	1	0.01	14	0.06	-13	-0.05	-92.9
Net income Financial Instruments	24	0.10	11	0.05	13	0.05	118.-2
Other Income	60	0.25	59	0.28	1	-0.03	1.7
Total Other Income	81	0.34	49	0.23	32	0.11	65.3
Total Income	543	2.28	402	1.88	141	0.40	35.1
Salaries and wages	116	0.49	100	0.47	16	0.02	16.0
Other expenses	95	0.40	74	0.35	21	0.05	28.4
Total operating expenses	211	0.89	174	0.82	37	0.07	21.3
Profit before losses	332	1.39	228	1.06	104	0.33	45.6
Losses on loans. guarantees	-3	-0.01	-8	-0.04	5	0.03	62.5
Pre-tax profit	335	1.40	236	1.10	99	0.30	41.9
Taxes	80	0.33	53	0.25	27	0.08	50.9
Profit after tax	255	1.07	183	0.85	72	0.22	39.3
Return on equity (ROE) %	13.6		10.4			3.2
Cost/Income ratio	38.9		43.3			-4.4
Profit per EC (NOK)	2.46		1.78			0.68	35

Results per H1 Key figures in H1 2023 and H1 2022

	H1 2023		H1 2022			Changes
Results (NOK million and %)	MNOK	%	MNOK	%	MNOK	p.p.	%
Net Interest Income	907	1.96	687	1.64	220	0.32	32.0
Gains/losses liquidity portfolio	-16	-0.04	-66	-0.16	50	0.12	75.8
Gains/losses on shares	6	0.01	25	0.06	-19	-0.05	76.0
Net income Financial Instruments	31	0.07	29	0.07	2	0.00	6.9
Other Income	115	0.25	114	0.27	1	-0.02	0.9
Total Other Income	136	0.29	102	0.24	34	0.05	33.3
Total Income	1 043	2.25	789	1.88	254	0.37	32.2
Salaries and wages	227	0.49	205	0.49	22	0.00	10.7
Other expenses	182	0.39	147	0.35	35	0.04	23.8
Total operating expenses	409	0.88	352	0.84	57	0.04	16.2
Profit before losses	634	1.37	437	1.04	197	0.33	45.1
Losses on loans. guarantees	30	0.07	-8	-0.02	38	0.09	.-
Pre-tax profit	604	1.30	445	1.06	159	0.24	35.7
Taxes	142	0.30	99	0.24	43	0.06	43.4
Profit after tax	462	1.00	346	0.82	116	0.18	33.5
Return on equity (ROE) %	12.2		9.9		2.3
Cost/Income ratio	39.2		44.7		-5.4
Profit per EC (NOK)	4.42		3.35		1.07

Balance sheet and key figures

Key figures H1 2023 and H1 2022

	30.06.23	30.06.22	Changes
Balance in NOK million			MNOK	%
Total Assets	96 406	85 314	11 092	13.0
Loans to customers	78 999	72 300	6 699	9.3
Deposits from customers	46 339	44 946	1 393	3.1
Net Equity and Subordinated Loans	8 083	7 540	543	7.2

Key Figures	30.06.23	30.06.22	Changes p.p.
Return on Equity	12.2	9.9	2.3
Cost/Income ratio	39.3	44.7	-5.4
Primary Capital	22.0	22.4	-0.4
Tier 1 Capital	19.4	19.9	-0.5
CET1	17.6	18.1	-0.5
Leverage Ratio	7.4	7.7	-0.3
Profit per EC (NOK. the Group)	4.42	3.35	1.07
Profit per EC (NOK. the bank)	5.02	4.90	0.12

Specification of other income

H1 2023 and H1 2022

(NOK million)	30.06.23	30.06.22	Changes y/y
Guarantee commission	13	20	-7
Income from the sale of insurance services (non-life/personal)	14	12	2
Income from the sale of shares in unit trusts/securities	8	9	-1
Income from Discretionary Portfolio Management	23	22	1
Income from payment transfers	43	40	3
Other fees and commission income	17	13	4
Commission income and income from banking services	118	116	2
Commission expenses and expenses from banking services	19	17	2
Income from real estate brokerage	16	15	1
Other operating income	0	0	0
Total other operating income	16	15	1
Net commission and other operating income	115	114	1
Interest rate hedging (for customers)	5	7	-2
Currency hedging (for customers)	18	21	-3
Dividend received	1	1	0
Net gains/losses on shares	6	25	-19
Net gains/losses on bonds	-16	-66	50
Change in value of fixed-rate loans	5	4	1
Change in value of issued bonds	4	-3	7
Net gains/losses related to buy back of outstanding bonds	-2	-1	-1
Net result from financial instruments	21	-12	33
Total other income	136	102	34

Specification of costs Per H1 2023 and H1 2022

(NOK million)	30.06.23	30.06.22	Changes y/y
Wages	163	151	12
Pension expenses	13	12	1
Employers' social security contribution and Financial activity tax	36	30	6
Other personnel expenses	15	12	3
Wages. salaries. etc.	227	205	22
Depreciations	24	22	2
Operating expenses own and rented premises	10	8	2
Maintenance of fixed assets	4	3	1
IT-expenses	81	73	8
Marketing expenses	22	15	7
Purchase of external services	16	14	2
Expenses related to postage. telephone. newspapers etc.	4	4	0
Travel expenses	3	1	2
Capital tax	5	3	2
Other operating expenses	13	4	9
Total other operating expenses	158	125	33
Total operating expenses	409	352	57

Low level of creditimpaired commitments

Group figures

• in % of total commitments

Retail market - in % of retail commitments

Corporate market - in % of corporate commitments

Corporate market (excl. Oil services/supply) - in % of corporate commitments

Credit-impaired commitments

• The overview shows nonperforming commitments in default above 90 days and other credit-impaired commitments

• in NOK million - in % of commitments

Total credit-impaired commitments Total credit-impaired commitments

Corporate Retail

Corporate Retail Total

Losses by sector Losses on loans and guarantees

• NOK million

Expected credit losses Expected credit losses Expected credit losses

- in NOK million - in % of commitments

ECL Individually assessed impairments

• NOK million - In % of Average Assets

Recognized losses Losses on loans and guarantees Losses on loans and guarantees

Development in CET1 Changes in CET1 from 31.12.2022

EC capital in Sparebanken Møre

The largest owners (1-10) of EC capital

EC holder	Number	of ECs
	30.06.23	31.03.23
Sparebankstiftelsen Tingvoll	4.921.250	4.925.776
Spesialfondet Borea Utbytte	3.002.907	2.383.459
Verdipapirfondet Eika egenkapital	2.310.739	2.060.679
Wenaasgruppen	2.100.000	1.900.000
MP Pensjon	1.798.105	1.698.905
Pareto Aksje Norge	1.737.305	1.459.048
Kommunal Landspensjonskasse	1.548.104	1.148.104
Verdipapirfond Nordea Norge Verdi	1.505.120	1.205.120
Wenaas EFTF AS	1.090.000	1.000.000
Beka Holding AS	750.500	750.500
Total 10 largest	20.764.830	18.531.591
Of which Møre og Romsdal	8.111.250	7.825.776
Of which Møre og Romsdal (in per cent)	39,1	42,2

EC capital in Sparebanken Møre

The largest owners (11-20) of EC capital

EC holder	Number	of ECs
	30.06.23	31.03.23
Lapas AS	617.500	617.500
Pareto Invest Norge AS/Pareto AS	565.753	565.753
Forsvarets personellservice	459.000	459.000
Kverva Finans AS	423.995	148.995
BKK Pensjonskasse	422.600	378.350
Stiftelsen Kjell Holm	419.750	419.750
Hjellegjerde Invest AS	300.000	18.322
U Aandahls EFT AS	250.000	250.000
PIBCO AS	229.500	229.500
Borghild Hanna Møller	201.363	201.363
Total 20 largest	24.654.592	21.820.124
Of which Møre og Romsdal	10.129.363	9.562.211
Of which Møre og Romsdal (in per cent)	41,1	43,8