Sparebanken Møre Group
Presentation 2nd quarter 2021
Runar Sandanger Act EVP Finance
- August 2021
Contents
- Introduction and highlights
- Outlook and Main Targets
- Results
- Deposits and Loans
- Liquidity and Capital
Key figures H1
The year has started well and the bank is delivering an improvement in profit after tax compared with the first half of last year.
There is good activity in the bank and we are experiencing positive development in several areas.
The bank's advisers are also doing a good job and we are strengthening our market position in our market area Nordvestlandet.
Return on Equity Cost/Income
In per cent of Average Assets
Losses on Loans and Guarantees Common Equity Tier 1 Capital (CET1)
Improved results
Results H1 2021 vs. 2020
The bank's net interest income is higher than last year.
Other income was up in H1 inter alia due to changes in the value of the bond- and fixed income portfolios.
Costs are NOK 6 million lower than in H1 2021.
Losses have decreased compared to last year.
Q2 2021 - highlights
Balance growth
Lending growth was 6.2 per cent over the last 12 months. Growth in deposits was also 6.2 per cent
Net Interest Income
In NOK: 307 million In per cent: 1.53
Efficiency Cost/Income ratio at 42.9 per
cent in the quarter
Losses
NOK 28 million in losses on loans and guarantees in Q2
Strong liquidity and solidity
Deposit-to-loan ratio at 59.7 per cent, LCR at 128 and CET1 at 16.9 per cent. Leverage Ratio at 7.6 per cent
Return on Equity
Return on Equity ended at 8.5 per cent for the second quarter of 2021
MORG – strong price development
- With a MORG price of NOK 368 at the end of the quarter, the price to book ratio has increased to 1.08 from 0.89 as of 31.12.2020
- As the figure shows, the MORG price has increased by 26.1 per cent during H1, more than the average growth (22.5 per cent) in the EC-market in the same period (Total Return for the EC-index (OSEEX))
- The CET1-ratio ended at 16.9 per cent by quarter end
Development at Oslo Stock Exchange YTD (MORG vs. EC-index)
Balance sheet and key figures
|
30.06.2021 |
30.06.2020 |
Changes |
|
| Balance in NOK million |
NOK |
NOK |
NOK |
% |
| Total Assets |
82,830 |
81,239 |
1,591 |
2.0 |
| Loans to customers |
69,132 |
65,094 |
4,038 |
6.2 |
| Deposits from customers |
41,484 |
39,055 |
2,429 |
6.2 |
| Net Equity and Subordinated Loans |
7,056 |
6,889 |
167 |
2.4 |
| Key Figures |
30.06.2021 |
30.06.2020 |
Changes p.p. |
| Return on Equity |
9.4 |
8.2 |
1.2 |
Cost/Income
Ratio |
41.7 |
43.5 |
-1.8 |
| Total Capital |
20.6 |
21.2 |
-0.8 |
| Tier 1 Capital |
18.6 |
19.1 |
-0.7 |
| CET1 |
16.9 |
17.3 |
-0.6 |
| Leverage Ratio |
7.6 |
7.7 |
0.0 |
Profit per EC (NOK, the
Group) |
15.11 |
12.62 |
2.49 |
| Profit per EC (NOK, the Bank) |
20.92 |
19.23 |
1.69 |
Outlook for the region and the bank
- Despite periodic shutdowns in parts of the service sector, unemployment fell in Møre og Romsdal during the second quarter. This indicates that the activity level in the county remained well up throughout the spring. At the end of June, the number of completely unemployed was 2.4 per cent of the labor force according to NAV. In comparison, unemployment on a national basis was 2.9 per cent. In recent months, there has been a clear increase in the number of vacancies advertised, including in the health sector, tourism, construction and transportation
- In the longer term, there is reason to expect a further increase in production and demand in the county. The outlook for the Norwegian and international economy has improved as a result of previously implemented infection control measures and because an increasing proportion of the population has been vaccinated. In addition, it is likely that the financial support measures for the business community will be maintained as long as this is considered necessary. However, there is a danger that the aftermath of the pandemic could lead to more bankruptcies
- The bank has a solid capital base and good liquidity and will continue to be a strong and committed supporter for our customers. The focus is always on having good operations and profitability
Financial targets remain unchanged
- Sparebanken Møre`s strategic financial performance targets are a return on equty exceeding 11 per cent and a cost income ratio below 40 per cent. The activity-reducing measures due to the coronavirus pandemic have impacted and will continue to affect the market so that the targets will not be achieved in 2021
- The Board expects an improvement in our targets figures in the second half of 2021, and steps have been taken aimed at achieving the targets in 2022
Results
Results 2021
Profit after tax - NOK million
Return on Equity (ROE)
• Return on Equity was 8.5 per cent in the quarter compared to 9.2 per cent in Q2 2020
Total Income
- Total revenues were NOK 373 million in the second quarter
- Net interest income somewhat higher than in Q1 and markedly higher than in Q2 2020
- Other income lower than the same period last year and the previous quarters
Total income - NOK million
Total income
Net Interest Income Other Income
Net Interest Income rebounds
Net Interest Income - NOK million
Net Interest Income
Q2-20 Q3-20 Q4-20 Q1-21 Q2-21
Quarterly development in Other Income
Other Income is lower in Q2 compared with the previous quarters
- Negative development in income from financial instruments and the bond portfolio
- Higher income from guarantees and real estate brokerage activities
- Still lower income from payment services
Other Income - NOK million
Other Income
Other Income Financial Instruments
Strong Costs control
• Total costs in the quarter were MNOK 160 and the cost/income ratio was 42.9
• The cost as of the first half of 2021 is MNOK 6 (1.9%) lower than at the same time in 2020
Operating Costs - NOK million
44,0
C/I target
42,5
Operating Costs
Cost/Income ratio Total Assets and Man Years
- Total Assets in NOK billion
Losses
• Losses on Loans and Guarantees were NOK 28 million in the quarter
- Total impairments were increased from NOK 326 million at the end of 2020 to NOK 364 million at the end of the quarter
- Despite the macroeconomic conditions improving and low level of default, the Covid-19 situation and the consequences of the fall in oil prices still reigns. The losses are mainly linked to oil related activity
Losses on loans and guarantees
- NOK million
Losses on loans and guarantees
0,19 0,18
0,21
Q2-20 Q3-20 Q4-20 Q1-21 Q2-21
Q2-20 Q3-20 Q4-20 Q1-21 Q2-21
0,07
0,14
Losses by sector
Losses on loans and guarantees
Impairments at comfortable levels
Impairments - NOK million
Individual impairments on other credit-impaired commitments Total
Credit-impaired loans
Credit-impaired Loans in % of Gross Loans and Guarantees (left hand scale)
Impairments in % of Credit-impaired Loans and Guarantees
Credit-impaired Loans are loans and guarantees more than 90 days over due and loans with individually assessed impairments.
Results in details
|
H1 2021 |
|
H1 2020 |
|
Changes |
|
| Results (NOK million and %) |
NOK |
% |
NOK |
% |
NOK |
p.p. |
| Net Interest Income |
612 |
1.53 |
608 |
1.57 |
4 |
-0.04 |
| Net Income Financial Investments |
3 |
0.01 |
-13 |
-0.04 |
16 |
0.05 |
Gains/losses
liquidity portfolio |
12 |
0.03 |
5 |
0.01 |
7 |
0.02 |
| Gains/losses on shares |
31 |
0.08 |
40 |
0.11 |
-9 |
-0.03 |
| Other Income |
105 |
0.26 |
104 |
0.27 |
1 |
-0.01 |
| Total Other Income |
151 |
0.38 |
136 |
0.35 |
15 |
0.03 |
| Total Income |
763 |
1.91 |
744 |
1.92 |
19 |
-0.01 |
| Salaries and wages |
170 |
0.42 |
170 |
0.44 |
0 |
-0.02 |
| Other costs |
148 |
0.38 |
154 |
0.40 |
-6 |
-0.02 |
| Total operating costs |
318 |
0.80 |
324 |
0.84 |
-6 |
-0.04 |
| Profit before losses |
445 |
1.11 |
420 |
1.08 |
25 |
0.03 |
Losses on loans, guarantees
etc |
42 |
0.11 |
78 |
0.20 |
-36 |
-0.09 |
| Pre tax profit |
403 |
1.00 |
342 |
0.88 |
61 |
0.12 |
| Taxes |
90 |
0.23 |
75 |
0.19 |
15 |
0.04 |
| Profit after tax |
313 |
0.77 |
267 |
0.69 |
46 |
0.08 |
Balance sheet
High activity and good growth
- Annual growth in lending ended at 6.2 per by quarter end
- Deposit growth over the last 12 months also ended at 6.2 per cent
Loans Deposits
- NOK billion and per cent (y/y) - NOK billion and per cent (y/y)
Customer lending has increased by 6.2 % over the last 12 months.
Deposit growth of 6.2 % over the last 12 months.
High deposit-to-loan ratio of 59.7%
Lending
Retail market Corporate market
Retail lending has increased by 4.8 % over the last 12 months
Loans to the retail market amount to 67.6 % of total loans
Corporate lending has increased by 9.2, % over the last 12 months
Loans to the corporate market amount to 32.4 % of total loans
23
Diversified loan book
• The bank is diversified with high credit quality in the portfolio
Loans by sector
Other;
| Financial services |
0.7 % |
Other
Industry |
2.2 % |
Building
and Construction |
1.3 % |
Fishing Industry |
1.6 % |
Retail/wholesale
trade |
1.6 % |
Ship
Yards |
0.8 % |
| Agriculture |
0.9
% |
Other |
0.3 % |
Good quality in our retail portfolio
The bank complies with the lending regulations (Boliglånsforskriften)
Deviation from Boliglånsforskriften reported in the second quarter of 2021 were 7.7 % outside Oslo, and 7.3 % in Oslo
96.4 % of mortgages are within 85 % of LTV
Housing prices Price per square meter
Based on pre-owned dwellings sold in June 2021, Norwegian seasonal adjusted housing prices increased by 0.2 per cent in June 2021.
Last twelve months Norwegian housing prices have increased in average by 10.1 per cent.
The City of Ålesund and the Mid-Norway region has over time experienced moderate growth in housing prices compared to the national average, both indexed development and in price per square meter.
Indexed development
-
January 2015 = 100
-
January 2015 – June 2021
Key information
(Sold pre-owned
dwellings
in
June 2021) |
Norway |
Mid
Norway |
Greater
Ålesund |
Greater
Stavanger |
City of
Oslo |
| Seasonal adj. development month |
+0.2 % |
+1.0 % |
+0.2 % |
+ 1.2 % |
+0.1 % |
Development
12 months |
+10.1 % |
+9.3 % |
+6.6 % |
+10.0 % |
+10.3 % |
Per square
meter (NOK) |
48,835 |
38,332 |
32,917 |
38,360 |
85,613 |
Average
days
on
market |
29 days |
39 days |
36 days |
31 days |
17 days |
Price median dwelling
(NOK) |
3,620,000 |
3,000,000 |
2,790,000 |
3,450,000 |
4,865,609 |
|
|
|
|
|
|
Low exposure towards Oil Services
1,77 %
Loans to Oil Service EAD* by type of vessel
- In per cent of total loans - In NOK million
Expected Credit Losses
| (EAD in NOK million) |
Loans |
Guarantees |
Total
EAD* |
Individually
assessed
impairments |
ECL-IFRS 9 |
Total |
Per cent
of
EAD |
Low
Risk (Risk Class A-C) |
151 |
199 |
249 |
0 |
2,3 |
2,3 |
0.9 % |
| Medium Risk (Risk Class D-G) |
158 |
66 |
224 |
0 |
1,4 |
1,4 |
0.6 % |
| High Risk (Risk Class H-M) |
157 |
205 |
362 |
0 |
19,1 |
19,1 |
5.3 % |
Loans and guarantees
with
individually
assessed
impairments |
764 |
127 |
891 |
195 |
- |
195 |
21.9 % |
| Total |
1,230 |
497 |
1,726 |
195 |
22,8 |
217,8 |
12.6 % |
* Sparebanken Møre`s total EAD ended at MNOK 72,136 by quarter end
Deposits
• Deposit growth for both the retail market and the corporate market is good
- We experience good access and growth from both retail customers and companies
- Deposit growth is expected to remain high
Retail market Corporate and public
- NOK billion and per cent y/y - NOK billion and per cent y/y
Retail deposits have increased by 5.2 % over the last 12 months
Deposits from the retail market amount to 60.0 % of total deposits
Deposits from corporate and public customers have increased by 7.8 % the last 12 months
Liquidity and Capital
Deposits from customers and market funding – strong rating
Deposits are the Group`s most important source of funding
Sparebanken Møre with good access to the market – diversifying the investor base
- Our deposit-to-loan ratio stood at 59.7 per cent by half year end
- Total net market funding ended at NOK 31.1 billion by end of the quarter – more than 77 per cent with remaining maturity of more than one year
- Senior Bonds: Weighted average maturity of 3.16 years (FSA defined key figures)
- Covered Bonds issued through Møre Boligkreditt AS have a weighted average maturity of 3.0 years (FSA defined key figures)
- By quarter end Møre Boligkreditt AS had issued seven loans qualifying for Level 2A liquidity in LCR. At the end of the second quarter of 2021, the company had bonds in the market corresponding to MNOK 26,340, of which 30 per cent is issued in a currency other than NOK
- January 2021, Moody`s upgraded the banks rating from A2- stable to A1 with stable outlook. Issuances from Møre Boligkreditt AS are rated Aaa
Sparebanken Møre ESG scoring
- Rated by Sustainalytics
- Analysis conducted and finished in May 2021
- Received ESG risk rating at 20.6 resulting in medium risk – in the strong end
|
|
Medium Risk |
|
|
| NEGL |
LOW |
|
HIGH |
|
| UNIVERSE |
RANK PERCENTILE
$(1^{51}$ = lowest risk) $(1^{51}$ = lowest risk) |
|
|
|
| Global Universe |
3231/13774 |
24th |
|
|
Banks
INDUSTRY |
168/1034 |
17th |
|
|
Regional Banks
SUBINDUSTRY |
16/422 |
5th |
|
|
First in the world to measure its sustainability
- Sparebanken Møre is also continuing to intensify its focus on sustainability, both inside and outside the bank
- Our ESG-rating is important
- Green car loans and green mortgages were recently launched to encourage customers to make sustainable choices
- The bank has also expressed its intention to be a driving force behind sustainable development in Nordvestlandet. Møre og Romsdal County Authority recently published a report showing how the county is doing in relation to the UN Sustainable Development Goals. Møre og Romsdal is the first region in the world to have measured its sustainability under the auspices of the UN, and Sparebanken Møre played an important role in this groundbreaking work
Trond Lars Nydal (CEO Sparebanken Møre), Marielle Furnes Mannseth (Head of United Future Lab Norway) and Espen Remme (Director NHO Møre og Romsdal)
•
Equity and related capital
- We work continuously to maintain and strengthen Sparebanken Møre`s good capital position
- CET1 and Leverage Ratio (LR) ends by quarter end well above current regulatory requirements
- The uncertain situation will persist, but the bank is equipped to withstand increasing defaults and losses and at the same time have the capacity for lending growth
Tier 1 capital in Sparebanken Møre
- % of risk weighted assets
CET1 requirement for Sparebanken Møre
-
% of risk weighted assets and excl. Management Buffer
-
By quarter end our Common Equity Tier 1 capital stood at 16.9 %, Tier 1 capital at 18.6 % and Total Capital at 20.6 %.
- Sparebanken Møre's capital targets are:
- Total Capital: Minimum 18.7 % • Tier 1 capital: Minimum 16.7 %
- CET1: Minimum 15.2 %
LR; 5,0 %
- The Group's capital adequacy ratio is well above the regulatory capital requirements
- Our capital is calculated according to the IRB Foundation Approach for corporate commitments, IRB Approach for the retail market and he Standarised Approach for other items
Development in CET1
Changes in H1
Dividend policy
MORG – price and Price/Book (P/B) value
- Sparebanken Møre aims to achieve financial results providing a good and stable return on the bank's equity capital
- Sparebanken Møre's results should ensure that the owners of the equity receive a competitive long-term return in the form of cash dividends and capital appreciation on their equity
- Unless the capital strength dictates otherwise, about 50 per cent of the profit for the year will be distributed as dividends
- On 23 March 2021, the General Meeting made a decision to authorise the Board of Directors to decide on further distribution of dividends of up to NOK 9.00 per equity certificate. Such distribution will be processed and communicated in connection with the presentation of the bank's accounts for the 3rd quarter of this year
Equity per MORG Price P/B
Equity per MORG is calculated on Group figures
Equity Capital in Sparebanken Møre
- The PCCs/ECs of Sparebanken Møre (MORG) have been listed at Oslo Stock Exchange since 1989. Sparebanken Møre was the first Norwegian savings bank to be listed at OSE
- Total EC capital was NOK 989 million by June 2021
- Good Total Return over many years
Equity Capital in Sparebanken Møre
About equity certificates
- Equity certificates are a special kind of equity instrument first introduced by savings banks in 1988. A total of 32 banks have now issued such certificates, and 19 of them are listed on the stock exchange
- Equity certificates are an important part of savings banks' capital base and confer ownership of between 14 % and 97 % of the individual bank
- A savings bank that has issued equity certificates has two types of equity. One is its primary capital, or "ownerless" equity, consisting of retained earnings built up by the bank over the years. The other is the certificate-holders' equity, consisting of equity certificate capital and related reserves (equalization reserve and premium account)
- Equity certificates have clear similarities to shares. The main difference is the owners' rights to the bank's assets and influence over the bank's governing bodies. The key principle is that profits are distributed proportionally on the basis of ownership share and the bank's other capital
- In a limited company, losses hit shareholders' equity directly. In a savings bank, losses are first absorbed by the primary capital and the equalization reserve before hitting the equity certificate capital
Source: The Norwegian Savings Bank Association https://www.sparebankforeningen.no/en/egenkapitalbevis/about-equity-certificates/
Contact
sbm.no facebook.com/sbm.no @sbmno engasjert.sbm.no
CEO Trond Lars Nydal
+47 951 79 977 [email protected]
Act EVP Finance Runar Sandanger
+47 950 43 660 [email protected]
Disclaimer
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.