Sparebanken Møre

Investor Presentation • Apr 24, 2018

Sparebanken Møre - the Group 24. April 2018

PRESENTATION

1 S T. QUARTER 2018

Runar Sandanger EVP

• Introduction and highlights
• Results
• Deposits and Loans, overview and details
• Liquidity and Capital
• Main targets

The largest bank in the county

Strong local presence

28 OFFICES IN MØRE OG ROMSDAL

363 MAN YEARS

68.6 BILLION IN TOTAL ASSETS

Positive development in key figures

Strong loan growth: 7.8 per cent over the last 12 months

High and stabile Net Interest Income: Growth both in NOK and in per cent compared to first quarter last year

Efficiency: Cost Income ratio at 43,6 per cent by the end of first quarter 2018 – down 2.3 p.p. compared with first quarter last year

Very low losses: NOK 2 million in first quarter. We expect losses to stay at low levels in 2018

Strong liquidity and solidity: Deposit to Loan ratio at 57.6 per cent. CET1 at 15.1 per cent

Good Return on Equity: 10.1 per cent in first quarter 2018

Return on Equity

Cost/Income

Losses on Loans and Guarantees Common Equity Tier1 Capital (CET1)

Positive outlook

• Sparebanken Møre is well capitalized, with a healthy financial structure and a strong balance. The results have been strong and stable and losses have been at a low level for many years
• The economic outlook for Møre og Romsdal is good. Production is high in most industries, and the decline in oil-related industries seems to be changing to a slight upturn
• o a weak Norwegian currency
• o low level of interest rates
• o expansionary fiscal policy
• o higher oil prices
• o good growth in our export markets
• o high adaptability in local business and industry
• It also appears that the decline in house prices is about to level out. However, the danger of increased protectionism represents a risk factor in terms of world trade prospects

Result after taxation Return on Equity

• NOK million - in percent (ROE)

7

Growth in income, stable cost level and low losses

First quarter 2018 compared with first quarter 2017

Higher Net Interest Income in NOK

Stable operating costs

Lower level of Other Income

Low level of losses also in Q1 2018

	Q1 2018		Q1 2017			Changes
Results (NOK million and %)	NOK	%	NOK	%	NOK	p.p.	%
Net Interest Income	289	1.73	261	1.69	28	0.04	10.7
Net Income Financial Investments	4	0.02	8	0.05	-4	-0.03	-50.0
Gains/losses liquidity portfolio	3	0.02	16	0.11	-13	-0.09	-81.3
Other Income	46	0.28	42	0.27	4	0.01	9.5
Total Other Income	53	0.32	66	0.43	-13	-0.11	-19.7
Total Income	342	2.05	327	2.12	15	-0.07	4.6
Personnel costs	84	0.50	85	0.55	-1	-0.05	-1.2
Other costs	65	0.39	65	0.42	0	-0.03	0.0
Total operating costs	149	0.89	150	0.97	-1	-0.08	-0.7
Profit before losses	193	1.16	177	1.15	16	0.00	9.0
Losses on loans, guarantees etc	2	0.01	2	0.01	0	0.00	0.0
Pre tax profit	191	1.15	175	1.14	16	0.01	9.1
Taxes	50	0.29	44	0.28	6	0.01	14.4
Profit after taxation	141	0.86	131	0.86	10	0.00	7.4

	31.03.2018	31.03.2017	Changes
Balance in NOK million	NOK	NOK	NOK	%
Total Assets	68,607	63,124	5,483	8.7
Loans to customers	58,194	53,993	4,201	7.8
Deposits from customers	33,539	32,656	883	2.7
Net Equity and Subordinated Loans	6,479	6,238	241	3.9

Key Figures	31.03.2018	31.03.2017	Changes p.p.
Return on Equity	10.1	10.1	0.0
Cost/Income Ratio	43.6	45.9	-2.3
Total Capital	18.6	18.6	0.0
Core Capital	16.6	17.1	-0.5
CET1	15.1	14.9	0.2
Leverage Ratio	8.1	8.6	-0.5
Results per EC (NOK, the Group)	7.00	6.55	0.45
Results per EC (NOK, the Bank)	12.00	12.60	-0.60

Quarterly development in Net Interest Income

Increase in NII compared to first quarter 2017

Net Interest Income Net Interest Income

• NOK million - % of Average Assets

Quarterly development in Other Income

Negative effects from financial instruments

• Market value of the liquidity portfolio is reduced by NOK 13 million compared with Q1 2017
• Negative change in other financial investments mainly from financial instruments

Other Income Other Income

• NOK million - % of Average Assets

Continued good growth in our Discretionary Portfolio Management Department contributes positively during the quarter

Total Income Total Income

• NOK million - % of Average Assets

Strong cost control – improved efficiency

Positive development

• NOK million - % of Average Assets

Cost/Income ratio

• In per cent of income

Total Assets and Man Years

• Total Assets in NOK billion

Strong underwriting

Presistent low losses

0,01

Losses on loans and guarantees Losses on loans and guarantees

• NOK million - % of Average Assets

Losses on loans and guarantees

• NOK million

Losses on loans and guarantees

0,01 0,03 0,04

• % of Average Assets

Q1-17 Q2-17 Q3-17 Q4-17 Q1-18

-0,01

Losses on loans and guarantees

• NOK million

• The expected credit loss (ECL) model is compliant with IFRS 9 and used to calcultate losses

• Total calculated ECL by first quarter end is NOK 7 million lower than by 1.1.2018
• Individual impairments and other losses of NOK 2 million for retail customers and NOK 7 million for corporate customers
• Total losses in first quarter 2018 is NOK 2 million

Impairments Impairments

• NOK million - % of Gross Loans

ECL/Group of loans Not in default Loans in default> 90 days

ECL/Group of loans Not in default Loans in default> 90 days

Problem Loans and Impairments

Low level of problem loans and good coverage

Problem Loans and Impairments (per cent)

Profit after losses Profit after losses

• NOK million - % of Average Assets

Continued good growth

Strong loan growth and high deposit to loan ratio

Customer lending has increased by 7.8 % the last 12 months

Loans Deposits

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

• Deposit growth of 2.7 % the last 12 months

• High deposit to loan ratio of 57.6 %

• NOK billion and per cent y/y - NOK billion and per cent y/y

Retail market Corporate market

• Retail lending has increased by 6.3 % the last 12 months

• Loans to the retail market amount to 68.9 % of total loans

• Corporate lending has increased by 11.8 % the last 12 months

• Loans to the corporate market amount to 31.1 % of total loans

Diversified loan book

Loans by sector

Other:

Other Industry	2.5 %	Agriculture	0.8 %
Financial services	2.1 %	Fishing Industry	0.2 %
Building and construction	1.0 %	Furniture	0.1 %
Ship Yards	1.5 %	Other	0.3 %
Retail/wholesale trade	1.1 %

Good quality in our retail portfolio

High proportion of secured loans

Loans to retail customers Loan to value – retail loans

• The bank complies with the regulations from the Norwegian authorities (Boliglånsforskriften)
• Deviations reported in the first quarter of 2018 were 3.8 % outside Oslo, and 16.1% in Oslo but at a very low volume
• 96.1 % of mortgage-backed loans to retail customers are within 85% of value

House prices

- Development from January 2008 to March 2018

Key information (Sold pre-owned dwellings)	Norway	Mid-Norway**	Greater Ålesund*	Greater Stavanger*	City of Oslo
Price development last 12 months	-2.2 %	-0.9 %	-1.3 %	-2.0 %	-6.6 %
Price per square meter (NOK)	39,726	31,522	28,184	35,440	66,354
Average days on market (DOM) sold units in March 2018	49 days	66 days	61 days	80 days	30 days
Price median dwelling (NOK)	3,000,000	2,625,181	2,400,000	3,200,000	3,746,000

*Ålesund and Stavanger including surrounding municipalities

** Mid-Norway include county of Møre og Romsdal and county of Trøndelag

• NOK billion and per cent y/y - NOK billion and per cent y/y

Retail market Corporate and public

• Retail deposits have increased by 5.3 % over the last 12 months
• Deposits from the retail market amount to 59.4 % of total deposits
• Deposits from corporate and public customers have been reduced by 0.4 % the last 12 months and ended at NOK 13.6 billion by quarter end

Discretionary Portfolio Management

NOK 4 billion under management

Sparebanken Møre - Aktiv Forvaltning

• Portfolio in NOK million

• In addition to deposits, increasingly more of the Bank's customers also ask for other investments

• Sparebanken Møre Aktiv Forvaltning (Møre Discretionary Portfolio Management) offers the Bank's clients professional management services
• Our local Asset Managers continuously monitor the portfolio:
  • o 9 municipalities
  • o 9 foundations
  • o 1 pension fund
  • o 2 insurance companies
  • o 146 investment companies
  • o 194 wealthy private individuals

Deposits are the Group`s most important source of funding Deposits from customers and market funding

• NOK million

Deposits and market funding Sparebanken Møre with good access to the market – diversifying the investor base

• Total market funding ended at NOK 27.0 billion by quarter end – more than 85 per cent with remaining maturity of more than one year
• Senior Bonds: Weighted average maturity of 2.27 years (FSA defined key figures)
• Covered Bonds issued through Møre Boligkreditt AS have a weighted average maturity of 3.58 years (FSA defined key figures)
• By end of Q1-18, six of Møre Boligkreditt`s bond issues qualifies for level 2A liquidity in LCR
• In an updated Credit Opinion dated 14 December 2017 Moodys confirmed Sparebanken Møres A2 stable rating. Møre Boligkreditt AS`issues are all rated Aaa

Equity and related capital

Capital and leverage ratio (LR) well above regulatory requirements

• % of risk weighted assets - % of risk weighted assets

Tier 1 capital in Sparebanken Møre CET 1 requirement for Sparebanken Møre

10,0 % 2,0 % 1,8 % 0,5 % 14,3 % LR; 5,0 % 31.03.2018 Management buffer Pillar 2 requirement Countercyclical buffer Pillar 1 requirement

By quarter end our Common Equity Tier 1 capital stood at 15.1 %, Tier 1 capital at 16.6 % and total capital at 18.6 %

• Sparebanken Møre's capital targets are:
• Total Capital: Minimum 17.8 %
• Tier 1 capital: Minimum 15.8 %

• CET1: Minimum 14.3%

• The Group's Capital shall follow the announced regulatory capital escalation plan

• Our capital is calculated according to the IRB Foundation Approach for corporate commitments, IRB Approach for the retail market

28

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

Equity per MORG is calculated on Group figures

• Sparebanken Møre aim to achieve financial results which provide 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% of the profit for the year will be distributed as dividends

• Sparebanken Møre's allocation of earnings shall ensure that all equity owners are guaranteed equal treatment

• The PCCs/ECs of Sparebanken Møre have been listed at Oslo Stock Exchange since 1989

• Total EC capital: NOK 989 million by March 2018
• Good return total return for Sparebanken Møre 7 per cent higher than the EC index in Q1

Dividend pr. EC Sparebanken Møre:
1990	10	2005	20
1991	0	2006	20
1992	0	2007	23
1993	13	2008	20
1994	12	2009	12
1995	13	2010	12
1996	13	2011	8
1997	13	2012	12
1998	15	2013	8
1999	16	2014	13.50
2000	17	2015	11.50
2001	17	2016	14.00
2002	15	2017	14.00
2003	16
2004	18

GOALS IN OUR STRATEGIC PLAN «MØRE 2021»

• CET1 > 14.3 %
• Cost/Income < 45%
• ROE > 10 %
• Low level of losses
• Healthy financial structure

We achieve our goals.

Contact

Trond Lars Nydal, CEO

Phone: E-mail: + 47 951 79 977 trond.nydal@sbm.no

Runar Sandanger, EVP

Phone: E-mail: +47 950 43 660 runar.sandanger@sbm.no sbm.no facebook.com/sbm.no Instagram @sbmno engasjert.sbm.no

Disclaimer

This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Sparebanken Møre (the "Company"), in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. If any such offer or invitation is made, it will be done so pursuant to separate and distinct documentation in the form of a prospectus, offering circular or other equivalent document (a "prospectus") and any decision to purchase or subscribe for any securities pursuant to such offer or invitation should be made solely on the basis of such prospectus and not these materials.

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