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SpareBank 1 Sørøst-Norge
Quarterly Report • Feb 7, 2020
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Quarterly Report
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INTERIM REPORT FOR THE 4TH QUARTER DELÅRSRAPPORT 3. KVARTAL
We are together Vi er med
Together we create value Learning – Engaged – Close Sammen skaper vi verdi Lærende – Engasjert – Nær
SPAREBANK 1 BV NO 944 521 836 TEL. +45 915 02480 SPAREBANK 1 BV NO 944 521 836TELEFON 915 02480 2
Business idea, vision/values and goals
Business idea
Business areas
SpareBank 1 BV aims to contribute to value creation in the local communities by providing a wide range of financial services, as well as relevant advice to individuals and businesses.
In all the business areas, we aim to offer a product range that is competitive in breadth, quality and timeliness. Operations within all business areas should be characterised by good advice and an active focus on sales. Sales and consultancy should be based on competence, good quality and ethical norms in line with the traditions in the savings banking industry.
Market area
SpareBank 1 BV's geographical market area covers Buskerud, centred around Kongsberg and Drammen, and Vestfold, where the Bank's geographical area extends from Holmestrand in the north to Larvik in the south.
The SpareBank 1 BV Group has a business address in Tønsberg, and branches in Drammen, Mjøndalen, Lier, Kongsberg, Holmestrand, Horten, Tønsberg, Nøtterøy, Sandefjord and Larvik.
Resource management
Within the priority areas described in the business idea, the resources should be used in the way that yields the best return on capital, in the best interests of equity certificate holders, customers, employees and the district.
Vision, values and goals
Vision Together we create value
Our core values
Customer first – Together we are best.
Our values Learning – engaged – close
Main strategic objective
The Group's main strategic objective is to create value for its customers and the region in which the Group is a part. We want to promote local initiatives, companies and people living in the region so that together we can contribute to growth and development. This will also create value for the owners and employees of the business.
- BUSINESS AREAS
- INTERIM REPORT FROM THE BOARD OF DIREC TORS
- INTERIM FINANCIAL STATEMENTS
- SUMMARY OF RESULTS AND KEY FIGURES
- INCOME STATEMENT
- BAL ANCE SHEE T
- RESULTS FROM QUARTERLY FINANCIAL STATEMENTS
- CHANGE IN EQUITY
- CASH FLOW STATEMENT
- NOTES TO THE FINANCIAL STATEMENTS
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- ACCOUNTING POLICIES
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- LOSSES ON LOANS AND GUARANTEES
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- LOSS PROVISIONS ON LOANS AND WARRANTIES
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- LOANS TO CUSTOMERS BROKEN DOWN INTO GROUPS 1, 2 AND 3
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- OTHER ASSETS
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- OTHER LIABILITIES
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- DEPOSITS FROM CUSTOMERS BROKEN DOWN BY SECTOR AND INDUSTRY
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- LENDING TO CUSTOMERS BROKEN DOWN BY SECTOR AND INDUSTRY
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- CAPITAL ADEQUACY
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- DERIVATIVES
- 1 1 . NE T INCOME FROM OTHER FINANCIAL INVESTMENTS
- 1 2 . SECURITIES DEBT AND SUBORDINATED LOAN CAPITAL
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- SEGMENT INFORMATION
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- CRITIC AL ACCOUNTING ESTIMATES AND DISCRETIONARY VALUATIONS
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- SALE OF LOANS
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- LIQUIDITY RISK
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- ASSESSING FAIR VALUE OF FINANCIAL INSTRUMENTS
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- NET INCOME FROM OWNERSHIP INTERESTS
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- IMPLEMENTATION IFRS 16
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- EVENTS AFTER THE BALANCE SHEET DATE
- DECL AR ATION BY THE BOARD AND MANAGING DIRECTOR
- THE BANK'S EQUITY CERTIFICATES
- STATEMENTS ON FUTURE MATTERS
Business areas
Retail market
SpareBank 1 BV has a solid position in the retail market. Knowledge of the Bank is on the increase throughout the market area. 1 in 4 private customers in the market area has a customer relationship with the Bank, and approximately 16% use the Bank as their main bank. Lending growth has been 5.7% over the last 12 months, while overall market growth was 5.2% in the same period.
The Bank has almost 77,000 active customers in the retail market.
A combined offer of good digital services, a modern customer service centre and a well-developed branch network provides the customer with quick and easy access to financial services and competence in all channels.
Customers are pleased with the Group's services, and customer satisfaction is high. The Group uses customer data in a way that makes it easy to be a customer and for us to take relevant initiatives in relation to the customer. This is about both simplifying customers' everyday lives and improving the efficiency of the Bank's processes; in both cases with digitalisation as a clear driver. Building strong customer relationships is about combining the best of two worlds; artificial intelligence through smart technology and robotics, and emotional intelligence through personal contact with highly qualified employees.
As at 31.12.2019, Eiendomsmegler 1 BV and Z-eiendom AS had a total housing turnover of NOK 7.0 billion spread across approx. 2,400 units.
Corporate market
The corporate market customer portfolio consists of about 8,000 active SME customers. The major part of the lending portfolio is within the real estate industry. A great focus on interaction between the business areas means that the customer can be offered an integrated product range.
SpareBank 1 BV is a supplier of package solutions for financial services to businesses. Work is ongoing to put in place more digital sales and self-service solutions for corporate customers.
1 of 4 corporate customers (SMEs) in the market area has a customer relationship with the Bank.
The Bank has a solid market position in Kongsberg, Sandefjord and in Færder municipality, and has a challenger position in the other market areas. The corporate market aims to be perceived by customers as: Easy to deal with, accessible, important contributors and socially involved.
The SpareBank 1 BV Group
The SpareBank 1 BV Group is a regional business with its market area in Nedre Buskerud and Vestfold.
The Group's main activity consists of the parent bank, as well as the wholly-owned subsidiaries EiendomsMegler 1 BV AS and SpareBank 1 Regnskapshuset BV AS. It also owns 60% of Z-Eiendom AS. The companies are located in Kongsberg, Mjøndalen, Drammen, Lier, Norway, Horten, Tønsberg, Vestfold, Sandefjord and Larvik.
The quarterly accounts have been prepared in accordance with IAS 34 on Interim reporting.
The comments and figures below refer to the Group unless explicitly stated otherwise. Figures in brackets relate to the corresponding period last year.
Highlights of the fourth quarter
- Earnings after tax: NOK 112.3 million (84.5 million).
- Annualised return on equity: 9.1% (7.4%).
- Net interest income: NOK 187.3 million (155.9 million).
- Net commission and other income: NOK 104.5 million (103.3 million).
- Net income from financial assets: NOK 15.9 million (-10.4 million).
- Operating costs: NOK 167.2 million (149.3 million).
- ° Previous year included NOK -10.0 million from winding up of pension schemes.
- Net losses on loans and guarantees: NOK -3.5 million (-9.4 million).
Highlights January – December
- Earnings after tax: NOK 538.6 million (596.1 million). See following items related to one-time effects.
- Annualised return on equity: 11.3% (13.6%).
- Net interest income: NOK 656.5 million (592.9 million).
- Net commission and other income: NOK 427.1 million (506.7 million).
- ° The previous year included gains from sales of own office buildings for NOK 90.7 million.
- Net income from financial assets: 171.9 million (NOK 99.2 million).
- ° Including gains from insurance merger (Fremtind) of NOK 71.9 million
- ° Including one-time effect from revaluation of properties in the SpareBank 1 Group's life company of NOK 18.1 million.
- ° Previous year included positive value adjustment from Vipps merger of NOK 24.6 million.
- Operating costs: NOK 588.3 million (466.2 million).
- ° The previous year included a one-time effect from winding up defined-benefit pension schemes of NOK -102.2 million.
- Net losses on loans and guarantees: NOK 2.3 million (0.7 million).
- Total growth in lending for last 12 months, including portfolio transferred to SpareBank 1 Boligkreditt/ Næringskreditt: 5.8% (8.2%).
- Deposit growth last 12 months: 10.4% (5.4%).
- Tier 1 capital ratio, proportional consolidation: 19.8% (17.9%).
- Common equity tier 1 capital, proportional consolidation:
- 18.3% (16.7%).
- Leverage ratio, proportional consolidation: 8.5% (8.2%).
- The board proposes a dividend of NOK 2.95 (2.95) per equity certificate
Financial performance
Cumulative figures as at 31 December unless explicitly stated otherwise.
Profit/loss
The SpareBank 1 BV Group had a net profit from ordinary operations before losses of NOK 667.1 million (732.6 million). Earnings after tax were NOK 538.6 million (596.1 million), which represents 1.41% (1.67%) of average total assets. The Group's annualised return on equity was 11.3% (13.6%).
The Group's return on equity as at 31.12.2019 was affected by gains from the insurance merger (Fremtind) of NOK 71.9 million, while the corresponding period last year was affected by the sale of own commercial buildings for NOK 90.7 million and a one-time effect from winding up defined-benefit pension schemes of NOK 102.2 million. Without these items, the Group's annualised return on equity was 9.8% (9.9%).
Earnings per equity certificate in the parent bank were NOK 4.43 (4.98).
Quarterly change in income after tax and return on equity:
Profit/loss after tax
Net interest income
Quarterly change in net interest income: 2,0 %
Net interest income amounted to NOK 656.5 million (592.9 million). Net interest income as a percentage of average total assets was 1.72% (1.67%).
At the end of the quarter, the Bank had transferred mortgages worth NOK 12,040 million (11,740 million) to SpareBank 1 Boligkreditt AS, and NOK 843 million (582 million) in mortgages on commercial property to SpareBank 1 Næringskreditt AS. Earnings from these loan portfolios are shown under net commission income and amounted to NOK 101.5 million (94.9 million). The ownership interest in SpareBank Næringskreditt AS amounts to 11.7 % as at 31 December. A notice regarding this stake has been submitted to the Financial Supervisory Authority of Norway in accordance with paragraph 6.1 of the Financial Enterprises Act.
Lending rates increased by up to 0.25 percentage points in the fourth quarter. The interest rate change took full effect from December. Compared to the second quarter of 2019, net interest income (excluding mortgage companies) increased by NOK 15.2 million (+0.16% of average total assets).
The improvement in 2019 margins is largely related to increased margins on deposits.
Net commission and other income
Net commission and other income totalled NOK 427.1 million (506.7 million).
Net commission income
Net commission income amounted to NOK 280.2 million (266.2 million).
Other operating income
Other operating income amounted to NOK 146.8 million (240.5 million). Last year's figure included gains of NOK 90.7 million from the sale of own commercial buildings.
Net income from financial assets
Net income from financial assets amounted to NOK 171.9 million (99.2 million). The key items in 2019 are made up of dividends received totalling NOK 25.5 million (32.0 million) and net income from ownership interests of NOK 125.4 million (47.8 million). The last item includes gains from the Insurance merger (Fremtind) of NOK 71.9 million, and approx. NOK 18 million related to our share of extraordinary revaluation of properties in the SpareBank 1 Group's life companies. Net income from other financial assets also amounted to NOK 20.9 million (19.4 million). The bank has made a write-down on a financial investment of NOK 14.5 million in 2019.
Quarterly change in income (NOK million);
Net interest income
- Commission income from SB 1 Boligkreditt/Næringskreditt
- Net commission and other income
- Net income from financial assets
- Revaluation Eiendom SB1 Forsikring
- Profit in the future
Operating costs
Total operating costs were NOK 588.3 million (466.2 million). Operating costs as a percentage of total operating income for the Group came to 46.9% (38.9%). The corresponding cost ratio for the parent bank was 41.6% (33.0%).
Personnel costs
Personnel costs amounted to NOK 344.2 million (237.4 million). The previous year includes a one-time effect from winding up defined-benefit pension schemes of NOK 102.2 million.Corrected for the positive one-off effect in 2018, the Group's personnel costs have increased by NOK 4.6 million or approx. 1.4% compared with the same period last year.
Other operating costs
Other operating costs amounted to NOK 244.2 million (228.8 million). The increase from last year is mainly related to development/IT costs.
Quarterly change in operating costs (*):
(*) personnel costs in the fourth quarter of 2018 included revenue recognition of NOK 10 million related to the winding-up of pension schemes
Losses and loss provisions
The bank has reported low net losses over a longer period of time. This is due to the good quality and stable development of the bank's lending portfolios in both the retail and corporate markets. Step three lending constitutes 0.58% (0.76%) of gross lending including loans transferred to SpareBank 1 Bolig og Næringskreditt.
Net losses on loans and guarantees amounted to NOK 2.3 million (0.7 million) as at 31 December. Net losses as a percentage of average gross lending amounted to 0.01% (0.00%).
Quarterly change in loss provisions (*);
Loss provisions as % of lending
(*) Loss provisions, step 1 are presented here prior to being reversed to fair value over extended profit/loss.
Balance sheet performance
The Group's total assets amounted to NOK 38,822 million. This represents an increase of NOK 2,242 million over the last 12 months. The group's business capital (total assets including loans transferred to SpareBank 1 Boligkreditt AS and SpareBank 1 Næringskreditt AS) amounted to NOK 51,705 million (48,903 million).
Lending and deposit performance
Gross lending (including volume transferred to Spare-Bank 1 Boligkreditt AS/SpareBank 1 Næringskreditt AS) amounted to NOK 44,292 million. In the last 12 months there has been an increase of NOK 2,438, equivalent to 5.8%. The growth was made up of NOK 1,943 million, or 5.7%, in the retail market and NOK 495 million, or 6.5%, in the corporate market. The retail market share of lending (including SpareBank 1 Boligkreditt) at the end of the quarter was 82% (82%).
In September 2018, the bank launched new deposit products that have contributed to a positive growth in deposits in 2019. At the end of the quarter, the Group had a deposit volume of NOK 24,443 million (22,139 million) with deposit growth of 10.4% in the last 12 months. The growth was made up of NOK 1,936 million, or 14.5%, in the retail market and NOK 369 million, or 4.2%, in the corporate market. The Group had deposit coverage of 77.8%, compared with 75.0% at the same time last year. Including the volume transferred to SpareBank 1 Boligkreditt AS/ SpareBank 1 Næringskreditt AS, deposit coverage amounts to 55.2% (52.9%). The retail market share of deposits at the
Liquidity
end of the quarter was 63% (60%).
The bank's liquidity situation at the end of the quarter is good. The Bank has a liquidity portfolio of NOK 4,210 million as at 31 December. The Bank aims to keep the liquidity risk at a low level. In a normal market, Spare-Bank 1 BV's goal is to be able to maintain ordinary
operations for a minimum of 12 months without access to external financing. As at 31 December, the Bank is well above this target. The bank can report a LCR of 230% (206%) as at 31 December.
At the end of the quarter, mortgage loans totalling NOK 12,040 million had been transferred to SpareBank 1 Boligkreditt AS, an increase of NOK 300 million from the start of year. As at 31 December, the Bank has a portfolio of loans approved for transfer to SpareBank 1 Boligkreditt AS worth NOK 11,600 million.
In 2019, the Group's target is to increase the average time to maturity of its bond debt to 3.0 years. At the end of the year, the average term to maturity was 3.1 years.
SpareBank 1 BV has an issuer rating from Moody's of A2 with a stable outlook; see Moody's latest credit analysis dated 9 July 2020.
Quarterly change in loans and deposits:
Equity Capital adequacy
SpareBank 1 BV uses the standard method for calculating credit risk and the basic method for operational risk.
At the end of the fourth quarter, the regulatory requirement for common equity tier 1 capital is a minimum of 12.5%. In September 2018, the Financial Supervisory Authority of Norway set new Pillar 2 requirements for SpareBank 1 BV of 1.9% from 31 December 2018, but at least NOK 457 million above the minimum requirement and buffer requirements in Pillar 1. The current total requirement for common equity tier 1 capital is thus 14.4%. The Group's target for common equity tier 1 capital ratio is a minimum of 15.5% at the end of 2019.
At the end of the quarter, the common equity tier 1 capital ratio was 18.3% (16.7%). Unweighted tier 1 capital coverage (the leverage ratio) amounted to 8.5% (8.2%) at the end of the quarter. The regulatory requirement for unweighted tier 1 capital is 5.0%.
In the event of proportionate consolidation of the cooperative group, there is a positive effect on common equity tier 1 capital of approximately 0.3% percentage points when introducing the SME discount and a corresponding positive impact of approximately 1.2% on common equity tier 1 capital in the event of the loss of the Basel 1 floor in Sparebank 1 Boligkredit AS and BN Bank ASA.
In December, the Ministry of Finance adopted changes relating to capital requirements for banks. The systemic risk buffer has been increased by 1.5% percentage points as at the end of 2020 for the IRBA banks and this will apply by the end of 2022 for the standard banks. Additionally, SME discounts for commitments of less than EUR 1.5 million and the removal of the Basel 1 floor for IRB banks were introduced as measures on 31 December 2019.
SpareBank 1 BV is expected to receive requirements for primary capital and eligible liabilities during the second half of 2020.
This capital can be written down or converted to equity (MREL). This will produce a need to issue subordinated debt (tier 3). The tier 3 capital will replace portions of today's unsecured senior debt when this falls due. SpareBank 1 BV does not expect the effect of new Tier 3 capital to increase the bank's financing costs substantially.
The Financial Supervisory Authority of Norway will set a new pillar 2 requirements effective from the end of 2020.
Equity certificates
The bank's policy is that a minimum 50% of the equity certificate holders' share of each year's profit should be paid out as a cash dividend. The dividend policy is discussed in more detail in the section on the 'Bank's equity certificates'.
Based on the current dividend policy, the bank's board recommends a cash dividend for 2019 of NOK 2.95 (67%) per equity certificate and provisions for the risk equalisation fund corresponding to NOK 1.48 (33%) per equity certificate. Kvartalsvis utvikling kapitaldekning (morbank frem til 4. kvartal 2017, forholdsmessig konsolidert fra
Quarterly change in capital adequacy (proportional consolidation); 1. kvartal 2018)
Subsidiaries
| Supplementary capital | |
|---|---|
| ----------------------- | -- |
| Excluding parent bank eliminations |
EiendomsMegler 1 BV AS |
Z-Eiendom AS | SpareBank 1 Regnskapshuset BV AS |
Other subsidiaries |
Total subsidiaries | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| NOK millions | 31.12.2019 | 31.12.2018 | 31.12.2019 | 31.12.2018 | 31.12.2019 | 31.12.2018 | 31.12.2019 | 31.12.2018 | 31.12.2019 | 31.12.2018 |
| Operating income |
77.6 | 82.1 | 29.6 | 29.7 | 38.2 | 36.0 | 0.2 | 38.0 | 145.6 | 185.7 |
| Operating costs |
(71.7) | (73.0) | (27.6) | (25.7) | (34.3) | (32.9) | (1.7) | (1.8) | (135.2) | (133.4) |
| Financial items | 1.0 | (1.1) | 0.0 | (0.0) | (0.4) | (0.4) | (0.7) | (0.6) | (0.1) | (2.2) |
| Earnings before tax |
7.0 | 8.0 | 2.0 | 3.9 | 3.5 | 2.8 | (2.2) | 35.6 | 10.3 | 50.2 |
Apart from Z-Eiendom AS, the Bank has a 100% ownership interest in all of its subsidiaries and subsidiaries of these. The bank's stake in Z-Eiendom AS is 60%.
EiendomsMegler 1 BV AS includes the joint venture EiendomsMegler 1 Næringsmegling AS (the brokerage business is owned 50/50 with SpareBank 1 Telemark). EiendomsMegler 1 BV AS has a good position in the Group's market area, and is part of the national EiendomsMegler 1 chain, which has been the market leader in Norway for ten years in a row. The business activities consist of commercial real estate brokerage, property settlement, purchase and sale of holiday homes, new construction and resale homes.
Z-Eiendom AS has a solid market share in the Tønsberg region. The business activities consist of brokerage of resale homes, new construction and holiday homes.
SpareBank 1 Regnskapshuset BV AS has accounting offices in Larvik, Sandefjord, Vestfold, Drammen and Kongsberg. The company offers a broad range of services, including accounting, payroll, annual reports and accounts and advisory services. The company focuses on good customer experiences from simplifying and digitalising accounting services, and offers several different systems adapted to different industry needs.
The decrease in operating income for other subsidiaries is due to gains from the sale of the Bank's properties during 2018.
Transactions with related parties
Apart from the insurance merger discussed in the section below, the Group has not carried out any transactions with related parties that had a significant impact on the company's position or results during the reporting period.
Insurance merger
The merger between SpareBank 1 Skadeforsikring and DNB Forsikring AS took effect on 1 January 2019, with SpareBank 1 Skadeforsikring the acquiring company. SpareBank 1 Gruppen AS has a stake of 65% and DNB ASA has a stake of 35% in Fremtind Forsikring AS. Please refer to our Q1 and Q2 reports in 2019 for details of the accountancy- and liquidity-related consequences of this transaction.
On 2 January 2019, Fremtind Forsikring AS was granted permission by the Financial Supervisory Authority of Norway to operate a life insurance business through its wholly-owned subsidiary company Fremtind Livsforsikring AS. Personal risk insurance policies issued by SpareBank 1 Forsikring and DNB Livsforsikring, as well as company-paid personal risk insurance policies issued by SpareBank 1 Forsikring, were transferred to Fremtind Livsforsikring on 1 January 2020.
The merger of SpareBank 1 Forsikring with DNB Livsforsikring and subsequent transfer to Fremtind Livsforsikring, for which the fee was issued by Fremtind Forsikring, took effect in accounting terms on 1 January 2020.
It is based on a total value of the personal risk area of approx. NOK 6.25 billion. The merger will result in an increased stake for the SpareBank 1 Gruppen at group level. The majority share (the SpareBank 1 banks and LO) of this increase was approx. NOK 1.7 billion. Spare-Bank 1 BV's stake (3.04 %) in this increase constitutes approx. NOK 52 million and will be recognised during Q1 of 2020.
SpareBank 1 Gruppen AS (the parent company) will receive a tax-free gain of approximately NOK 937 million as a result of this transaction. SpareBank 1 Gruppen AS has increased its dividend base to match this gain. SpareBank 1 BVs share (3.04%) of a dividend on the approx. NOK 937 million is approx. NOK 28 million.
DNB has an option to increase its stake in Fremtind Forsikring from 35% to 40% prior to 31 March 2020. If DNB exercises this option, SpareBank 1 Gruppen AS (the parent company) will make a gain of approx. NOK 890 million. SpareBank 1 Gruppen AS' dividend base will increase to match this gain.
Exercising this option will also result in increased equity for SpareBank 1 Gruppen at a group level. The majority (SpareBank 1banks and LO) share of that increase will be approximately NOK 590 million. SpareBank 1 BV's share (3.04%) of this increase amounts to approximately NOK 18 million and will be recognised during the course of 2020.
Any extraordinary or ordinary dividend from SpareBank 1 Gruppen AS will be contingent upon the capital situation, decisions in the Company's governing bodies and the regulations for extraordinary dividends from financial services companies at the time in question.
Outlook for the future
The Board is very satisfied with the profits recorded for the core business during Q4 of 2019. The Group's return on equity amounts to 11.3% in 2019. Excluding gains from the insurance merger (Fremtind) totalling NOK 71.9 million, the return on equity amounts to 9.8%.
Good, stable conditions for business and households in the group's market areas in recent years have contributed to the group's good growth rate and development in its performance.
The group is very robust and has a common equity tier 1 capital ratio of 18.3% as at 31.12.19. This means the group has a good ability to grow and issue dividends, as well as the robustness to meet increased capital requirements. The Group also has good liquidity.
Amended capital requirements from the Ministry of Finance involve the equal treatment of IRBA and standard banks in terms of the level of increase in systemic risk buffer by 1.5% percentage points - the only difference are the introductory phases for when these increased requirements take effect. The Board believes that tighter capital requirements for standard banks in parallel with the removal of the Basel 1 floor for IRBA banks will cause some distortion of competition for the lending business in favour of Norwegian and Nordic banks with IRBA approval.
SpareBank 1 BV has taken on an active role in the development of products and services through the SpareBank 1 partnership. It is important for the group to maintain and further develop a diversified business model with good breadth in the services we offer that is based on both customer satisfaction and profitability.
Increased market interest rates during 2019 contribute to an increase return on equity as a result of repricing customer interest rates and improving the return on the group's equity.
Sparebank 1 BV will seek to maintain its strong position as a relevant bank in all channels for our retail customers. Additionally, the group will seek to increase its market share among small and medium enterprises in Vestfold and Buskerud.
Slightly lower rates of growth are anticipated in the Norwegian economy moving forward. In addition, a low rate of interest is expected, as well as declining growth in employment. House price trends are expected to remain stable and unemployment is expected to remain relatively low.
Based on somewhat lower growth in the Norwegian economy and changes to the capital regulations with the removal of the Basel 1 floor for major Norwegian banks, tougher competition is expected in the lending field during 2020.
SpareBank 1 BV's long-term target return on equity remains at a minimum of 10% for 2020.
Tønsberg, 6th February 2020 The Board of Directors of SpareBank 1 BV
Finn Haugan Chair of the Board
Heine Wang Deputy Chair
Janne Sølvi Weseth Gisle Dahn
Hanne Myhre Gravdal (Employee representative)
Geir A. Vestre (Employee representative) Elisabeth Haug
Rune Fjeldstad Managing Director
Interim financial statements
Summary of results and key figures (Group)
| (NOK thousands) | 31.12.2019 | % | 31.12.2018 | % |
|---|---|---|---|---|
| Net interest income | 656,524 | 1.72 | 592,916 | 1.67 |
| Net commission and other income | 427,065 | 1.12 | 506,706 | 1.42 |
| Net income from financial assets | 171,875 | 0.45 | 99,208 | 0.28 |
| Total net income | 1,255,464 | 3.29 | 1,198,830 | 3.37 |
| Total operating costs | 588,334 | 1.54 | 466,182 | 1.31 |
| Earnings before losses/profit before losses and tax | 667,130 | 1.75 | 732,648 | 2.06 |
| Losses on loans and guarantees | 2,318 | 0.01 | 650 | 0.00 |
| Earnings before tax | 664,812 | 1.74 | 731,998 | 2.06 |
| Tax costs | 126,247 | 0.33 | 135,912 | 0.38 |
| Earnings after tax | 538,564 | 1.41 | 596,086 | 1.67 |
| Total other profit/loss items recognised in equity | 4,838 | 0.01 | 3,404 | 0.01 |
| Total profit/loss | 543,403 | 1.43 | 599,490 | 1.68 |
| 31.12.2019 | 31.12.2018 | |||
| Profitability | ||||
| Return on equity, profit/loss before other earnings 1 | 11.3% | 13.6% | ||
| Return on equity, comprehensive income | 11.4% | 13.7% | ||
| Cost-income ratio 2 | 46.9% | 38.9% | ||
| Cost-income ratio excl. financial investments | 54.3% | 42.4% | ||
| Balance sheet figures | ||||
| Gross lending to customers | 31,409,938 | 29,531,949 | ||
| Gross lending to customers incl. SpareBank 1 | ||||
| Boligkreditt/Næringskreditt | 44,292,346 | 41,854,035 | ||
| Deposits from customers | 24,443,290 | 22,138,580 | ||
| Deposit coverage | 77.8% | 75.0% | ||
| LCR (liquidity coverage ratio), liquidity reserve | 230.0% | 206.0% | ||
| Loan growth incl. SpareBank 1 Boligkreditt/ Næringskreditt last 12 months |
5.8% | 8.2% | ||
| Deposit growth last 12 months | 10.4% | 5.4% | ||
| Total assets | 38,822,442 | 36,580,907 | ||
| Business capital (incl. Sparebank 1 Boligkreditt/ | ||||
| Næringskreditt) | 51,704,849 | 48,902,992 | ||
| 31.12.2019 | 31.12.2018 |
| Loss | |||
|---|---|---|---|
| Loss rate on lending 3 | 0.01% | 0.00% | |
| Loans in step 3 as % of gross lending | 0.82% | 1.08% | |
| Loss (incl. Sparebank 1 Boligkreditt/Næringskreditt) | |||
| Loss rate on lending 3 (incl. Sparebank 1 Boligkreditt/ | |||
| Næringskreditt) | 0.01% | 0.00% | |
| Loans in group 3 as % of gross lending (incl. Sparebank 1 Boligkreditt/Næringskreditt) |
0.58% | 0.76% | |
| Financial strength in terms of proportional consolidation |
|||
| Capital adequacy ratio | 21.9% | 20.0% | |
| Tier 1 capital ratio | 19.8% | 17.9% | |
| Common equity tier 1 capital ratio | 18.3% | 16.7% | |
| Net primary capital | 5,430,920 | 4,988,542 | |
| Tier 1 capital | 4,916,520 | 4,470,112 | |
| Common equity tier 1 capital ratio | 4,545,866 | 4,160,617 | |
| Basis for calculation | 24,780,728 | 24,917,577 | |
| Leverage ratio, proportional consolidation | 8.5% | 8.2% | |
| Offices and staffing | |||
| Number of bank branches | 10 | 10 | |
| Number of brokerage offices | 12 | 12 | |
| Number of accounting offices | 5 | 5 | |
| Number of FTEs, parent bank (avg. YTD) | 230 | 227 | |
| Number of FTEs, Group (avg. YTD) | 337 | 335 | |
| Equity certificates | 31.12.2019 | 31.12.2018 | 31.12.2017 |
| Equity certificate fractions | 56.15% | 57.99% | 59.45% |
| Market price | 39.60 | 35.60 | 33.90 |
| Market value (NOK thousands) | 2,498,814 | 2,246,408 | 2,139,136 |
| Recognised equity per certificate (parent bank) | 42.27 | 40.73 | 38.11 |
| Recognised equity per certificate (Group) | 43.83 | 42.06 | 39.15 |
| Earnings per equity certificate (parent bank) 4 | 4.43 | 4.98 | 4.03 |
| Earnings per equity certificate (Group) 4 | 4.63 | 5.40 | 3.84 |
| Dividend per equity certificate 5 | - | 2.95 | 2.40 |
| Price/earnings per equity certificate (parent bank) | 8.94 | 7.15 | 8.41 |
| Price/earnings per equity certificate (Group) | 8.56 | 6.59 | 8.83 |
| Price/recognised equity (parent bank) | 0.94 | 0.87 | 0.89 |
| Price/recognised equity (Group) | 0.90 | 0.85 | 0.87 |
-
Surplus as a percentage of average equity (OB+CB)/2, excl. hybrid capital
-
Total operating costs as % of total operating income
-
Net loss as a percentage of average gross lending so far this year
-
Adjusted profit/loss for the year (see section on 'The bank's equity certificates') multiplied by equity certificate ratio and divided by the average number of outstanding equity certificates.
-
The Board proposes a dividend per equity certificate of NOK 2.95 for 2019.
Income Statement IFRS
| Parent bank | Group | |||||||
|---|---|---|---|---|---|---|---|---|
| Q4/2018 | Q4/2019 | 31.12.2018 | 31.12.2019 | (NOK thousands) Note |
31.12.2019 | 31.12.2018 | Q4/2019 | Q4/2018 |
| 36,628 | 38,544 | 124,073 | 151,610 | Interest income measured at fair value |
151,610 | 124,073 | 38,544 | 36,628 |
| 215,974 | 278,156 | 819,505 | 974,467 | Interest income measured at amortised cost |
975,018 | 819,349 | 278,124 | 215,828 |
| - 96,125 |
- 128,436 |
- 349,855 |
- 468,398 |
Interest income Interest costs |
- 470,104 |
- 350,506 |
- 129,323 |
- 96,554 |
| 156,478 | 188,264 | 593,723 | 657,679 | Net interest income | 656,524 | 592,916 | 187,345 | 155,903 |
| 72,889 | 76,838 | 281,605 | 296.832 | Commission income | 296.832 | 281,605 | 76,838 | 72,889 |
| 3,988 | 3,924 | 15,372 | 16,617 | Commission costs | 16,617 | 15,372 | 3,924 | 3,988 |
| 1,310 | 1,467 | 18,789 | 5,983 | Other operating income | 146,849 | 240,473 | 31,623 | 34,447 |
| 70,211 | 74,382 | 285,022 | 286,198 | Net commission and other income |
427,065 | 506,706 | 104,538 | 103,348 |
| - | 6,868 | 76,586 | 128,793 | Dividends | 25,522 | 31,988 | 6,868 | - |
| - | - | 42,571 | 7,536 | Net income from ownership 18 interests |
125,437 | 47,816 | 3,544 | 9,154 |
| (19,359) | 5,452 | 21,136 | 20,916 | Net income from other financial investments 11 |
20,916 | 19,405 | 5,452 | (19,542) |
| (19,359) | 12,320 | 140,293 | 157,245 | Net income from financial assets |
171,875 | 99,208 | 15,864 | (10,388) |
| 207,329 | 274,966 | 1,019,039 | 1,101,122 | Total net income | 1,255,464 | 1,198,830 | 307,747 | 248,862 |
| 61,520 | 75,509 | 132,153 | 239,064 | Personnel costs | 344,184 | 237,426 | 100,644 | 88,248 |
| 55,113 | 57,905 | 204,310 | 218,627 | Other operating costs | 244,150 | 228,756 | 66,521 | 61,061 |
| 116,633 | 133,415 | 336,463 | 457,691 | Total operating costs | 588,334 | 466,182 | 167,164 | 149,310 |
| 90,697 | 141,551 | 682,576 | 643,431 | Earnings before losses and tax | 667,130 | 732,648 | 140,582 | 99,553 |
| (9,174) | (3,520) | 1,250 | 2,718 | Losses on loans and 2 guarantees |
2,318 | 650 | (3,520) | (9,374) |
| 99,871 | 145,071 | 681,326 | 640,713 | Earnings before tax | 664,812 | 731,998 | 144,102 | 108,927 |
| 24,406 | 32,382 | 132,750 | 124,997 | Tax costs | 126,247 | 135,912 | 31,782 | 24,387 |
| 75,465 | 112,689 | 548,576 | 515,717 | Earnings before other profit/ loss items |
538,564 | 596,086 | 112,320 | 84,540 |
| - | - | - | - | Majority share of profit | 537,930 | 594,891 | 112,840 | 210,707 |
| - | - | - | - | Minority share of profit | 634 | 1,195 | (521) | 419 |
| - | 531 | - | 8,318 | Items reversed through profit/ loss Value changes on lending classified at fair value |
8,318 | - | 531 | 9,995 |
| Items not reversed through profit/loss Estimation difference, IAS 19 |
||||||||
| 3,458 | (2,275) | 3,458 | (2,275) | Pensions | (3,479) | 3,404 | (3,479) | 3,404 |
| 3,458 | (1,744) | 3,458 | 6,043 | Total other profit/loss items recognised in equity |
4,838 | 3,404 | (2,949) | 13,399 |
| 78,923 | 110,945 | 552,034 | 521,759 | Total profit/loss | 543,403 | 599,490 | 109,371 | 97,939 |
| - | - | - | - | Majority share of profit | 542,768 | 598,295 | - | - |
| - | - | - | - | Minority share of profit | 634 | 1,195 | - | - |
| 0.73 | 0.97 | 4.98 | 4.43 | Earnings before other profit/ loss items per equity certificate |
4.63 | 5.40 | 0.98 | 0.82 |
Balance sheet
| Parent bank | Group | ||||
|---|---|---|---|---|---|
| 31.12.2018 | 31.12.2019 | (NOK thousands) | Note | 31.12.2019 | 31.12.2018 |
| 98,026 | 94,784 | Cash and receivables from central banks | 94,784 | 98,026 | |
| 992,490 | 1,034,557 | Loans to and receivables from credit institutions | 1,070,874 | 1,024,799 | |
| 29,398,101 | 31,286,021 | Net lending to customers | 3, 4, 8 | 31,265,305 | 29,374,483 |
| 4,033,240 | 4,129,073 | Certificates, bonds and other securities at fair value | 4,129,073 | 4,033,240 | |
| 1,320,974 | 1,418,440 | Stocks, shares and other equity interests | 1,418,440 | 1,320,974 | |
| 36,682 | 36,682 | Ownership interests in Group companies | - | - | |
| 391,414 | 454,943 | Ownership interests in joint ventures and associated companies | 615,878 | 530,270 | |
| 24,841 | 97,271 | Tangible assets | 18 | 121,536 | 34,919 |
| - | - | Goodwill | 24,654 | 24,654 | |
| 11,911 | 9,872 | Deferred tax assets | 10,829 | 12,633 | |
| 109,904 | 56,593 | Other assets | 5, 10 | 71,068 | 126,910 |
| 36,417,583 | 38,618,237 | Total assets | 38,822,442 | 36,580,907 | |
| - | - | Deposits from credit institutions | - | - | |
| 22,162,337 | 24,463,240 | Deposits from customers | 7 | 24,443,290 | 22,138,580 |
| 8,756,890 | 8,279,389 | Debt from the issuance of securities | 12 | 8,279,389 | 8,756,890 |
| 115,816 | 125,688 | Tax payable | 128,257 | 118,418 | |
| 245,410 | 288,831 | Other liabilities | 6, 3, 10 | 333,927 | 273,328 |
| 445,258 | 444,404 | Subordinated loan capital | 12 | 444,404 | 445,258 |
| 31,725,711 | 33,601,552 | Total debt | 33,629,268 | 31,732,473 | |
| 946,516 | 946,501 | Equity share capital | 946,501 | 946,516 | |
| 1,026,427 411,299 |
1,026,427 411,299 |
Share premium fund Risk equalisation fund |
1,026,427 411,299 |
1,026,427 411,299 |
|
| 6,540 | 6,540 | Endowment fund | 6,540 | 6,540 | |
| 1,855,062 | 1,855,062 | Sparebanken fund | 1,855,062 | 1,855,062 | |
| 9,879 | 9,879 | Fund for unrealised gains | 9,879 | 9,879 | |
| 250,000 | 250,000 | Hybrid capital | 250,000 | 250,000 | |
| 186,149 | 6,043 | Other equity | 159,143 | 341,129 | |
| - | 504,933 | Unallocated | 527,147 | - | |
| - | - | Minority share | 1,175 | 1,581 | |
| 4,691,873 | 5,016,685 | Total equity | 5,193,174 | 4,848,433 | |
| 36,417,583 | 38,618,237 | Debt and equity | 38,822,442 | 36,580,907 |
Results from quarterly financial statements
Group
| (NOK thousands) | Q4/2019 | Q3/2019 | Q2/2019 | Q1/2019 | Q4/2018 | Q3/2018 | Q2/2018 | Q1/2018 | Q4/2017 |
|---|---|---|---|---|---|---|---|---|---|
| Interest income | 316,668 | 293,881 | 267,182 | 248,896 | 252,456 | 239,268 | 232,726 | 218,971 | 220,189 |
| Interest costs | 129,323 | 121,725 | 115,442 | 103,614 | 96,554 | 88,758 | 86,595 | 78,599 | 76,007 |
| Net interest income | 187,345 | 172,156 | 151,740 | 145,283 | 155,903 | 150,510 | 146,131 | 140,372 | 144,182 |
| Commission income | 76,838 | 78,654 | 72,771 | 68,569 | 72,889 | 69,192 | 67,963 | 71,562 | 72,900 |
| Commission costs | 3,924 | 4,177 | 4,331 | 4,185 | 3,988 | 3,703 | 4,249 | 3,431 | 4,031 |
| Other operating income | 31,623 | 35,353 | 44,993 | 34,880 | 34,447 | 37,427 | 64,061 | 104,537 | 32,845 |
| Net commission and other income | 104,538 | 109,829 | 113,434 | 99,265 | 103,348 | 102,916 | 127,775 | 172,668 | 101,714 |
| Dividends | 6,868 | 14 | 2,270 | 16,370 | - | 4,351 | 9,055 | 18,582 | 6,474 |
| Net income from ownership interests | 3,544 | 10,588 | 31,680 | 79,626 | 9,154 | 13,157 | 15,291 | 10,215 | 24,252 |
| Net income from other financial | |||||||||
| investments | 5,452 | (7,996) | 8,567 | 14,894 | (19,542) | 11,424 | 27,255 | 267 | 14,464 |
| Net income from financial assets | 15,864 | 2,606 | 42,516 | 110,889 | (10,388) | 28,932 | 51,600 | 29,063 | 45,191 |
| Total net income | 307,747 | 284,591 | 307,690 | 355,436 | 248,862 | 282,358 | 325,506 | 342,104 | 291,087 |
| Personnel costs | 100,644 | 76,912 | 81,144 | 85,485 | 88,248 | 76,674 | (14,432) | 86,936 | 96,464 |
| Other operating costs | 66,521 | 57,907 | 60,503 | 59,220 | 61,061 | 55,154 | 57,421 | 55,120 | 62,626 |
| Total operating costs | 167,164 | 134,818 | 141,647 | 144,704 | 149,310 | 131,827 | 42,989 | 142,056 | 159,091 |
| Earnings before losses and tax | 140,582 | 149,773 | 166,043 | 210,732 | 99,553 | 150,531 | 282,517 | 200,048 | 131,996 |
| Losses on loans and guarantees | (3,520) | 2,139 | (2,108) | 5,808 | (9,374) | (8,074) | 11,294 | 6,804 | (7,377) |
| Earnings before tax | 144,102 | 147,634 | 168,151 | 204,924 | 108,927 | 158,604 | 271,223 | 193,244 | 139,374 |
| Tax costs | 31,782 | 36,081 | 33,502 | 24,882 | 24,387 | 32,017 | 50,689 | 28,818 | 21,211 |
| Earnings before other profit/loss items | 112,320 | 111,553 | 134,649 | 180,042 | 84,540 | 126,587 | 220,534 | 164,426 | 118,163 |
| Parent bank | |||||||||
| Earnings per equity certificate (quarter in isolation) |
0.97 | 0.82 | 1.76 | 0.87 | 0.73 | 0.99 | 2.42 | 0.83 | 0.91 |
| Diluted earnings per equity certificate (quarter in isolation) |
0.97 | 0.82 | 1.76 | 0.87 | 0.73 | 0.99 | 2.42 | 0.83 | 0.91 |
Change in equity as at Q4/2019
Group
| Share | Risk | Fund for | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Ownership | premium | equalisation | Endowment | SpareBanken | unrealised | Hybrid | Other | Minority | Total | ||
| (NOK thousands) | interest 1 | fund | fund | fund | fund | gains | capital | equity Unallocated | share | equity | |
| Equity at 31.12.2017 | 946,194 1,025,989 | 281,336 | 6,540 1,626,054 | 16,870 | 350,000 | 261,184 | - | 1,393 4,515,560 | |||
| Implementation effect of IFRS 9 | - | - | - | - | - | - | - | (2,361) | - | - | (2,361) |
| Interest costs on subordinated bonds reclassified as equity |
- | - | - | - | - | - | - | (11,543) | - | - | (11,543) |
| Subordinated bond maturity | - | - | - | - | - | - | (100,000) | - | - | - | (100,000) |
| Dividends from 2017, for payment 2018 |
- | - | - | - | - | - | - | (151,443) | - | (1,043) | (152,486) |
| Employee equity certificate savings scheme |
321 | 438 | - | - | - | - | - | 28 | - | - | 787 |
| Change in carrying value JVs/ associates/subsidiaries |
- | - | - | - | - | - | - | (1,050) | - | 36 | (1,014) |
| Earnings before other profit/loss items |
- | - | 127,958 | - | 227,555 | (6,991) | - | 246,369 | - | 1,195 | 596,086 |
| Items not reversed through profit/ loss: |
|||||||||||
| Estimation difference, IAS 19 Pensions |
- | - | 2,005 | - | 1,453 | - | - | (54) | - | - | 3,404 |
| Equity at 31.12.2018 | 946,516 1,026,427 | 411,299 | 6,540 1,855,062 | 9,879 | 250,000 | 341,129 | - | 1,581 4,848,433 | |||
| Equity at 31.12.2018 | 946,516 1,026,427 | 411,299 | 6,540 1,855,062 | 9,879 | 250,000 | 341,129 | - | 1,581 4,848,433 | |||
| Employee equity certificate savings scheme |
(15) | - | - | - | - | - | - | - | - | - | (15) |
| Interest costs on subordinated bonds reclassified as equity |
- | - | - | - | - | - | - | - | (10,783) | - | (10,783) |
| Issued subordinated bond | - | - | - | - | - | - | 150,000 | - | - | - | 150,000 |
| Buy-back and subordinated bond maturity |
- | - | - | - | - | - | (150,000) | - | - | - | (150,000) |
| Dividends from 2018, for payment 2019 |
- | - | - | - | - | - | - | (186,149) | - | (1,040) | (187,189) |
| Change in carrying value JVs/ associates/subsidiaries |
- | - | - | - | - | - | - | (674) | - | - | (674) |
| Earnings before other profit/loss items |
- | - | - | - | - | - | - | - | 537,930 | 634 | 538,564 |
| Items reversed through profit/loss: | |||||||||||
| Value changes on lending classified at fair value |
- | - | - | - | - | - | - | 8,318 | - | - | 8,318 |
| Items not reversed through profit/ loss: |
|||||||||||
| Estimation difference, IAS 19 Pensions |
- | - | - | - | - | - | - | (3,479) | - | - | (3,479) |
| Equity at 31.12.19 | 946,501 1,026,427 | 411,299 | 6,540 1,855,062 | 9,879 | 250,000 | 159,143 | 527,147 | 1,175 5,193,174 | |||
- The equity share capital has been deducted 20' in own holdings
19
| Parent bank | ||
|---|---|---|
| ------------- | -- | -- |
| Ownership | Share premium |
Risk equalisation |
Endowment | SpareBanken | Fund for unrealised |
Hybrid | Other | Total | ||
|---|---|---|---|---|---|---|---|---|---|---|
| (NOK thousands) | interest 1 | fund | fund | fund | fund | gains | capital | equity Unallocated | equity | |
| Equity at 31.12.2017 | 946,194 | 1,025,989 | 281,336 | 6,540 | 1,626,054 | 16,870 | 350,000 | 151,415 | - | 4,404,399 |
| Implementation effect of IFRS 9 | - | - | - | - | - | - | - | (2,361) | - | (2,361) |
| Interest costs on subordinated bonds reclassified as equity |
- | - | - | - | - | - | - | (11,543) | - | (11,543) |
| Subordinated bond maturity | - | - | - | - | - | - | (100,000) | - | - | (100,000) |
| Dividends from 2017, for payment 2018 |
- | - | - | - | - | - | - | (151,443) | - | (151,443) |
| Employee equity certificate savings scheme |
321 | 438 | - | - | - | - | - | 28 | - | 787 |
| Earnings before other profit/loss items |
- | - | 127,958 | - | 227,555 | -6,991 | - | 200,053 | - | 548,576 |
| Items not reversed through profit/ loss: |
||||||||||
| Estimation difference, IAS 19 Pension adjustment |
- | - | 2,005 | - | 1,453 | - | - | - | - | 3,458 |
| Equity at 31.12.2018 | 946,516 | 1,026,427 | 411,299 | 6,540 | 1,855,062 | 9,879 | 250,000 | 186,149 | - | 4,691,873 |
| Equity at 31.12.2018 | 946,516 | 1,026,427 | 411,299 | 6,540 | 1,855,062 | 9,879 | 250,000 | 186,149 | - | 4,691,873 |
| Employee equity certificate savings scheme |
(15) | - | - | - | - | - | - | - | - | (15) |
| Interest costs on subordinated bonds reclassified as equity |
(10,783) | (10,783) | ||||||||
| Issued subordinated bond | - | - | - | - | - | - | 150,000 | - | - | 150,000 |
| Buy-back and subordinated bond maturity |
- | - | - | - | - | - | (150,000) | - | - | (150,000) |
| Dividends from 2018, for payment 2019 |
- | - | - | - | - | - | - | (186,149) | - | (186,149) |
| Earnings before other profit/loss items |
- | - | - | - | - | - | - | - | 515,717 | 515,717 |
| Items reversed through profit/loss: | ||||||||||
| Value changes on lending classified at fair value |
- | - | - | - | - | - | - | 8,318 | - | 8,318 |
| Items not reversed through profit/ loss: |
||||||||||
| Estimation difference, IAS 19 Pension adjustment |
- | - | - | - | - | - | - | (2,275) | - | (2,275) |
| Equity at 31.12.2019 | 946,501 | 1,026,427 | 411,299 | 6,540 | 1,855,062 | 9,879 | 250,000 | 6,043 | 504,933 | 5,016,685 |
- The equity share capital has been deducted 20' in own holdings
Cash flow statement
| Parent bank | Group | |||
|---|---|---|---|---|
| 31.12.2018 | 31.12.2019 | (NOK thousands) | 31.12.2019 | 31.12.2018 |
| 681,326 | 640,713 | Profit/loss for the year before tax | 664,812 | 731,998 |
| (158,056) | (188,027) | Dividends/endowments paid | (188,547) | (159,661) |
| 29,094 | 5,210 | Value changes to financial assets measured at fair value | 5,210 | 29,094 |
| 6,516 | 21,626 | Depreciation and impairments | 28,370 | 8,192 |
| 1,250 | 2,718 | Losses on loans | 2,317 | 650 |
| (103,547) | (115,293) | Taxes payable | (118,418) | (115,657) |
| 456,583 | 366,948 | Cash flow from operations before change in current assets and current liabilities |
393,743 | 494,616 |
| (2,076,709) | (1,887,603) | Change in lending/and other assets | (1,890,504) | (2,074,180) |
| 1,123,353 | 2,298,189 | Change in deposits from customers | 2,301,997 | 1,137,153 |
| (111,984) | - | Change in debt to credit institutions | - | (111,984) |
| (237,037) | (104,566) | Change in certificates and bonds | (104,566) | (237,037) |
| (26,207) | 53,311 | Change in other receivables | 55,842 | (25,590) |
| (114,404) | 35,236 | Change in other current liabilities | 52,021 | (110,022) |
| (986,405) | 761,516 | A Net cash flow from operations | 808,534 | (927,044) |
| Cash flow from investment activities | ||||
| 54,899 | (94,056) | Change in tangible assets | (114,988) | 121,253 |
| (101,430) | (166,712) | Change in shares and ownership interests | (188,791) | (212,599) |
| (46,531) | (260,768) | B Net cash flow from investment activities | (303,779) | (91,346) |
| Cash flow from financing activities | ||||
| 922,081 | (450,564) | Change in borrowing, securities | (450,564) | 922,081 |
| (51,555) | (575) | Change in borrowing, subordinated loans | (575) | (51,555) |
| (111,543) | (10,783) | Change in hybrid capital over equity | (10,783) | (111,543) |
| 758,983 | (461,922) | C Net cash flow from financing activities | (461,922) | 758,983 |
| (273,954) | 38,826 | A + B + C Net change in cash and cash equivalents for the year | 42,833 | (259,407) |
| 1,364,470 | 1,090,516 | Cash balance at start of period | 1,122,825 | 1,382,232 |
| 1,090,516 | 1,129,342 | Cash balance on end of period | 1,165,658 | 1,122,825 |
| (273,954) | 38,826 | Net change in cash and cash equivalents for the year | 42,833 | (259,407) |
Note 1 Accounting policies
The interim report for SpareBank 1 BV covers the period 1 January 2019 - 31 December 2019. The interim financial statements have been prepared in accordance with IFRS and IAS 34 Interim Financial Reporting, and according to the same principles used in the annual financial statements for 2018, but including the policy changes mentioned in the annual report for 2018 as being planned for implementation in 2019.
For a more detailed description of the accounting principles used, refer to Note 2 and Note 39 (Implementation of IFRS 16) to the bank's official accounts for 2018.
Reassessment/change in measurement method IFRS9/IFRS13
Upon implementation of IFRS 9, the bank classified and measured mortgages that were not to be transferred to the Boligkreditt company at amortised cost in accordance with IFRS 9.4.1.2. In the case of mortgages to be transferred to the Boligkreditt company, these were classified and measured at fair value over the profit/ loss in accordance with IFRS 9.4.1.4. As of Q3 in 2019, lending to and receivables from customers with floating rates of interest secured on residential property were
measured and classified at fair value with value changes over other income and costs (OCI). This is because the business model's purpose is considered to be to receive contractual cash flows and sales of loans (transfer of mortgages to SB1 Boligkreditt AS).
The fair value of such mortgages is understood to be:
- Loans in loss category 1 the loan's nominal value (not equal to amortised cost)
- Loan in loss category 2, and 3J the loan's nominal value decreases by the expected losses (= amortised cost)
- Loans in loss category 3K the loan's nominal value decreases by individual loss provisions (= amortised cost)
The effect of this reassessment (not the change in principle) as at 30.09.2019 amounted to NOK 10.4 million before tax and has been adjusted in its entirety to the fair value over OCI in the accounts for Q3/2019.
The aforementioned reassessment takes effect in the presentation of Notes 3, 8 and 17 in the interim financial statements.
Note 2 Losses on loans and guarantees
| Parent bank | Group | |||
|---|---|---|---|---|
| 31.12.2018 | 31.12.2019 | (NOK thousands) | 31.12.2019 | 31.12.2018 |
| 596 | 6,337 | Change in the period in loss provisions, group 1 | 6,337 | 596 |
| (13,198) | 4,427 | Change in the period in loss provisions, group 2 | 4,427 | (13,198) |
| 10,593 | (9,655) | Change in the period in loss provisions, group 3 | (10,055) | 9,993 |
| 4,469 | 859 | Losses for the period with previous write-downs | 859 | 4,469 |
| (199) | 1,496 | Losses for the period with previous write-downs | 1,496 | (199) |
| (183) | (565) | Previously recognised write-downs at start of period. | (565) | (183) |
| (828) | (181) | Other corrections/amortisation of write-downs | (181) | (828) |
| 1,250 | 2,718 | Losses for the period on loans and guarantees | 2,318 | 650 |
Note 3 Loss provisions on loans and guarantees
| Parent bank | ||||
|---|---|---|---|---|
| Loan provisions on loans and guarantees | Group 1 | Group 2 | Group 3 | Total |
| 01.01.2019 | 35,263 | 37,201 | 96,510 | 168,975 |
| Loss provisions transferred to group 1 | 7,435 | (6,259) | (1,176) | - |
| Loss provisions transferred to group 2 | (2,646) | 3,434 | (788) | - |
| Loss provisions transferred to group 3 | (188) | (2,718) | 2,907 | - |
| New issued or purchased financial assets | 25,941 | 4,896 | 2,765 | 33,602 |
| Increase in drawing on existing loans | 2,589 | 18,887 | 18,156 | 39,632 |
| Reduction in drawing on existing loans | (13,755) | (4,194) | (18,677) | (36,626) |
| Financial assets that have been deducted | (13,038) | (9,620) | (11,982) | (34,640) |
| Changes due to recognised impairments (recognised losses) | (859) | (859) | ||
| 31.12.2019 | 41,600 | 41,628 | 86,855 | 170,083 |
| (*) reversal of loss provisions related to fair value over extended profit/ | ||||
| loss * | (11,090) | - | - | (11,090) |
| Loss provisions recognised as at 31.12.2019 | 30,510 | 41,628 | 86,855 | 158,993 |
| Of which: loss provisions on capitalised loans | 22,784 | 40,755 | 86,069 | 149,609 |
| Of which: loss provisions on unused credits and guarantees | 7,726 | 873 | 786 | 9,385 |
| Of which: loss provisions, retail market - Amortised cost | 830 | 17,792 | 22,782 | 41,403 |
| Of which: loss provisions, corporate market - Amortised cost | 29,681 | 23,836 | 64,073 | 117,590 |
*) Please refer to Note 1 for comments regarding reassessment/changes in measurement method as at 31.12.2019.
| Group | |||||
|---|---|---|---|---|---|
| Loss provisions on loans and guarantees | Group 1 | Group 2 | Group 3 | Total | |
| 01.01.2019 | 35,263 | 37,201 | 91,935 | 164,400 | |
| Loss provisions transferred to group 1 | 7,435 | (6,259) | (1,176) | - | |
| Loss provisions transferred to group 2 | (2,646) | 3,434 | (788) | - | |
| Loss provisions transferred to group 3 | (188) | (2,718) | 2,907 | - | |
| New issued or purchased financial assets | 25,941 | 4,896 | 2,765 | 33,602 | |
| Increase in drawing on existing loans | 2,589 | 18,887 | 17,756 | 39,232 | |
| Reduction in drawing on existing loans | (13,755) | (4,194) | (18,677) | (36,626) | |
| Financial assets that have been deducted | (13,038) | (9,620) | (11,982) | (34,640) | |
| Changes due to receipts for previous impairments (recognised) | - | - | (859) | (859) | |
| 31.12.2019 | 41,600 | 41,628 | 81,880 | 165,108 | |
| - reversal of loss provisions related to fair value over extended profit/ | |||||
| loss * | (11,090) | - | - | (11,090) | |
| Loss provisions recognised as at 31.12.2019 | 30,510 | 41,628 | 81,880 | 154,018 | |
| Of which: loss provisions on capitalised loans | 22,784 | 40,755 | 81,094 | 144,634 | |
| Of which: loss provisions on unused credits and guarantees | 7,726 | 873 | 786 | 9,385 | |
| Of which: loss provisions, retail market - Amortised cost | 830 | 17,792 | 22,782 | 41,403 | |
| Of which: loss provisions, corporate market - Amortised cost | 29,681 | 23,836 | 59,098 | 112,615 |
*) Please refer to Note 1 for comments regarding reassessment/changes in measurement method as at 31.12.2019.
Note 4 Loans to customers broken down into groups 1, 2 and 3
| Parent bank | ||||
|---|---|---|---|---|
| Loans to customers broken down into groups 1, 2 and 3 | Group 1 | Group 2 | Group 3 | Total |
| 01.01.2019 | 25,013,929 | 1,683,413 | 334,703 | 27,032,045 |
| Loans transferred to group 1 | 472,576 | (464,455) | (8,121) | - |
| Loans transferred to group 2 | (902,138) | 908,251 | (6,113) | - |
| Loans transferred to group 3 | (26,849) | (58,760) | 85,609 | - |
| New issued or purchased financial assets | 14,673,731 | 486,821 | 12,105 | 15,172,656 |
| Increase in drawing on existing loans | 211,520 | 65,135 | 2,372 | 279,027 |
| Reduction in drawing on existing loans | (919,676) | (88,392) | (102,520) | 1,110,588 |
| Financial assets that have been deducted | (11,082,164) | (584,778) | (43,618) | (11,710,561) |
| Changes due to recognised impairments (recognised losses) | (1,291) | (1,291) | ||
| 31.12.2019 | 27,440,928 | 1,947,235 | 273,126 | 29,661,289 |
| Loss provisions as % of gross lending | 0.15% | 2.14% | 31.80% | 0.57% |
| Group | ||||
|---|---|---|---|---|
| Loans to customers broken down into groups 1, 2 and 3 | Group 1 | Group 2 | Group 3 | Total |
| 01.01.2019 | 25,001,046 | 1,683,413 | 319,392 | 27,003,852 |
| Loans transferred to group 1 | 472,576 | (464,455) | (8,121) | - |
| Loans transferred to group 2 | (902,138) | 908,251 | (6,113) | - |
| Loans transferred to group 3 | (26,849) | (58,760) | 85,609 | - |
| New issued or purchased financial assets | 14,673,731 | 486,821 | 12,105 | 15,172,656 |
| Increase in drawing on existing loans | 211,520 | 65,135 | 2,086 | 278,741 |
| Reduction in drawing on existing loans | (916,888) | (88,392) | (102,520) | (1,107,800) |
| Financial assets that have been deducted | (11,082,164) | (584,778) | (43,618) | (11,710,561) |
| Changes due to recognised impairments (recognised losses) | - | - | (1,291) | (1,291) |
| 31.12.2019 | 27,430,833 | 1,947,235 | 257,529 | 29,635,597 |
| Loss provisions as % of gross lending | 0.15% | 2.14% | 31.79% | 0.56% |
Note 5 Other assets
| Parent bank | Group | |||
|---|---|---|---|---|
| 31.12.2018 | 31.12.2019 | (NOK thousands) | 31.12.2019 | 31.12.2018 |
| 15,173 | 21,058 | Prepaid, unaccrued costs, and accrued income not yet received | 32,420 | 30,884 |
| 46,061 | 16,117 | Other assets | 19,230 | 47,355 |
| 48,670 | 19,418 | Derivatives and other financial instruments at fair value | 19,418 | 48,670 |
| 109,904 | 56,593 | Total other assets | 71,068 | 126,910 |
Note 6 Other liabilities
| Parent bank | Group | |||
|---|---|---|---|---|
| 31.12.2018 | 31.12.2019 | (NOK thousands) | 31.12.2019 | 31.12.2018 |
| 55,481 | 46,181 | Accrued expenses and unaccrued income received | 62,100 | 55,175 |
| 56,779 | 71,151 | Provision for accrued expenses and liabilities | 71,627 | 56,037 |
| 94,070 | 134,052 | Other liabilities | 162,752 | 123,035 |
| 39,080 | 37,447 | Derivatives and other financial instruments at fair value | 37,447 | 39,080 |
| 245,410 | 288,831 | Total other debt | 333,927 | 273,328 |
Note 7
Deposits from customers broken down by sector and industry
| Parent bank | Group | ||||
|---|---|---|---|---|---|
| 31.12.2018 | 31.12.2019 | (NOK thousands) | 31.12.2019 | 31.12.2018 | |
| 13,350,242 | 15,285,830 | Salaried staff, etc. | 15,285,830 | 13,350,242 | |
| 2,822,879 | 3,197,454 | Property management/business services, etc. | 3,177,504 | 2,799,122 | |
| 750,927 | 754,043 | Merchandising/hotels and restaurants | 754,043 | 750,927 | |
| 180,879 | 188,906 | Agriculture/forestry | 188,906 | 180,879 | |
| 593,131 | 633,708 | Building and construction | 633,708 | 593,131 | |
| 1,201,043 | 1,412,784 | Transport and service Industries | 1,412,784 | 1,201,043 | |
| 197,312 | 307,646 | Production (manufacturing) | 307,646 | 197,312 | |
| 1,930,624 | 1,969,637 | Public administration | 1,969,637 | 1,930,624 | |
| 1,135,300 | 713,232 | Abroad and others | 713,232 | 1,135,300 | |
| 22,162,337 | 24,463,240 | Total deposits | 24,443,290 | 22,138,580 |
Note 8
Lending to customers broken down by sector and industry
| Parent bank | Group | |||
|---|---|---|---|---|
| 31.12.2018 | 31.12.2019 | (NOK thousands) | 31.12.2019 | 31.12.2018 |
| 22,496,782 | 24,140,703 | Salaried staff, etc. | 24,140,703 | 22,496,782 |
| 5,394,522 | 5,513,943 | Property management/business services, etc. | 5,488,251 | 5,366,328 |
| 320,710 | 348,044 | Merchandising/hotels and restaurants | 348,044 | 320,710 |
| 271,589 | 236,036 | Agriculture/forestry | 236,036 | 271,589 |
| 303,591 | 324,524 | Building and construction | 324,524 | 303,591 |
| 324,053 | 346,830 | Transport and service Industries | 346,830 | 324,053 |
| 248,317 | 277,769 | Production (manufacturing) | 277,769 | 248,317 |
| 2,355 | 1.843 | Public administration | 1,843 | 2,355 |
| 198,223 | 245,938 | Abroad and others | 245,938 | 198,223 |
| 29,560,142 | 31,435,630 | Gross lending | 31,409,938 | 29,531,949 |
| 27,032,045 | 8,353,979 | - Of which: valued at amortised cost * | 8,328,288 | 27,003,852 |
| - | 21,307,310 | - Of which assessed at fair value over extended profit/loss * | 21,307,310 | - |
| 2,528,098 | 1,774,341 | - Of which: valued at fair value | 1,774,341 | 2,528,098 |
| (162,041) | (149,609) | - Loss provisions on loans | (144,634) | (157,466) |
| 29,398,101 | 31,286,021 | Net lending | 31,265,305 | 29,374,483 |
| 29,560,142 | 31,435,630 | Gross lending | 31,409,938 | 29,531,949 |
| 11,740,255 | 12,039,621 | Gross lending transferred to SB1 Boligkreditt | 12,039,621 | 11,740,255 |
| 581,830 | 842,787 | Gross lending transferred to SB1 Næringskreditt | 842,787 | 581,830 |
| 41,882,228 | 44,318,037 | Gross lending including SB1 Boligkreditt and Næringskreditt | 44,292,346 | 41,854,035 |
*) Please refer to Note 1 for comments regarding reassessment/changes in measurement method as at 31.12.2019.
Note 9 Capital adequacy
SpareBank 1 BV uses the standard method for credit risk and the basic method for operational risk. As at 31 December 2019, the requirement for the capital conservation buffer is 2.5%, for the systemic risk buffer 3.0%, and for the countercyclical capital buffer 2.5%. These requirements are in addition to the common equity tier 1 capital requirement of 4.5%, meaning that the overall minimum requirement for common equity tier 1 capital is 12.5%. The Financial Supervisory Authority of Norway has also established a Pillar 2 requirement for SpareBank 1 BV of 1.9%. The total minimum requirement for common equity tier 1 capital, including the Pillar 2 requirement, is thus 14.4%.
The Group's target common equity tier 1 capital ratio is a minimum of 15.5% at the end of 2019, taking account of increased regulatory requirements for the countercyclical buffer from 31 December 2019. The targets for the tier 1 capital ratio and total capital ratio are 16.5% and 18.5%, respectively.
Extended consolidation for owner companies in the Samarbeidende Sparebanker grouping
Under the CRD IV rules, SpareBank 1 BV is currently below the materiality threshold for reporting fully consolidated capital adequacy. Consequently, capital adequacy is not worked out at a consolidated level.
As of 2018, the bank carries out proportionate consolidation of shareholdings held by the partnership.
The provision applies to shareholdings in other financial enterprises that carry out activities that are encompassed by the partnership (cf. Section 17-13 of the Financial Institutions Act).
Proportional consolidation
| 31.12.2019 | 31.12.2018 | |
|---|---|---|
| Primary capital | ||
| Common equity tier 1 capital | 4,545,866 | 4,160,617 |
| Tier 1 capital | 4,916,520 | 4,470,112 |
| Primary capital | 5,430,920 | 4,988,542 |
| Basis for calculation | 24,780,728 | 24,917,577 |
| Capital adequacy | ||
| Common equity tier 1 capital ratio | 18.34% | 16.70% |
| Tier 1 capital ratio | 19.84% | 17.94% |
| Capital adequacy | 21.92% | 20.02% |
| Unweighted tier 1 capital ratio (leverage ratio) | 8.52% | 8.24% |
The following companies are included in proportional consolidation:
- SpareBank 1 Boligkreditt
- SpareBank 1 Næringskreditt
- SpareBank 1 Kredittkort AS
- SpareBank 1 SMN Finans AS
- BN Bank
Parent bank
| Primary capital | 31.12.2019 | 31.12.2018 |
|---|---|---|
| Equity share capital | 946,501 | 946,516 |
| Share premium fund | 1,026,427 | 1,026,427 |
| Risk equalisation fund | 411,299 | 411,299 |
| Sparebankens fund | 1,855,062 | 1,855,062 |
| Fund for unrealised gains/losses | 9,879 | 9,879 |
| Endowment fund | 6,540 | 6,540 |
| Allocated dividend classified as equity | - | 186,149 |
| Other equity (IAS pensions and interest paid on hybrid capital) | (4,740) | - |
| Profit/loss for the period | 515,717 | - |
| Total capitalised equity (excluding hybrid capital) | 4,766,685 | 4,441,873 |
| Value adjustments on stocks and bonds measured at fair value (AVA) | (7,425) | (7,950) |
|---|---|---|
| Allowance for non-material interests in the financial sector | (957,252) | (1,149,921) |
| Dividends allocated for distribution, classified as equity | - | - |
| Profit/loss for the period | (515,717) | (534,671) |
| Interim profit/loss included in tier 1 capital | 329,568 | 348,523 |
| Total common equity tier 1 capital | 3,615,859 | 3,097,853 |
| Hybrid capital | 250,000 | 250,000 |
| Subordinated bond | 24,000 | 32,000 |
| Allowance for non-material interests in the financial sector | - | (39,074) |
| Total tier 1 capital | 3,889,859 | 3,340,779 |
| Supplementary capital in excess of tier 1 capital | ||
| Time-limited primary capital | 400,000 | 400,000 |
| Allowance for non-material interests in the financial sector | (4,944) | (31,262) |
| Net primary capital | 4,284,915 | 3,709,517 |
| Risk-weighted basis for calculation | ||
| Assets not included in the trading portfolio | 17,442,387 | 16,105,698 |
| Operational risk | 2,048,828 | 1,758,783 |
| Position risk in the trading portfolio | - | - |
| CVA surcharge (counterparty risk derivatives) | 27,781 | 27,459 |
| Total basis for calculation | 19,518,997 | 17,891,940 |
| Common equity tier 1 capital ratio | 18.52% | 17.31% |
| Tier 1 capital ratio | 19.93% | 18.67% |
| Capital adequacy | 21.95% | 20.73% |
| Unweighted tier 1 capital ratio (leverage ratio) | 9.95% | 9.14% |
| Buffer requirements | ||
| Capital conservation buffer (2.50%) | 487,975 | 447,299 |
| Countercyclical buffer (2.5%/2.0%) | 487,975 | 357,839 |
| Systemic risk buffer (3.00%) | 585,570 | 536,758 |
| Total buffer requirement for common equity tier 1 capital | 1,561,520 | 1,341,896 |
| Minimum requirement for common equity tier 1 capital (4.50%) | 878,355 | 805,137 |
| Available common equity tier 1 capital beyond minimum requirement | 1,175,984 | 950,820 |
| 31.12.2019 | 31.12.2018 | |
|---|---|---|
| Local and regional authorities | 83,717 | 44,838 |
| Publicly owned companies | 10,134 | 18,171 |
| Institutions | 111,259 | 106,207 |
| Companies | 2,655,744 | 1,997,340 |
| Mass market | 2,197,800 | 2,581,078 |
| Mortgaged against residential and holiday property | 8,504,153 | 8,009,171 |
| Mortgaged against commercial property | 2,040,958 | 2,230,810 |
| Overdue commitment | 150,127 | 82,578 |
| High-risk commitments | - | - |
| Bonds with preferential rights | 203,526 | 255,003 |
| Receivables on institutions and companies with short-term ratings | 145,911 | 137,498 |
| Shares in mutual funds | 25,858 | 47,698 |
| Equity items | 1,192,942 | 528,815 |
| Other commitments | 120,258 | 66,491 |
| Total credit risk | 17,442,387 | 16,105,698 |
Note 10 Derivatives
| 2019 | 2018 | |||||
|---|---|---|---|---|---|---|
| Contract sum Fair value | 31.12.2019 | Contract sum Fair value | 31.12.2018 | |||
| 31.12.2019 Assets | Liabilities | (NOK thousands) | 31.12.2018 Assets | Liabilities | ||
| Derivatives – hedging | ||||||
| 4,870,000 19,418 | 37,447 | Derivatives at fair value | 4,300,000 48,670 | 39,080 | ||
| 4,870,000 19,418 | 37,447 | Total derivatives for fair value hedging | 4,300,000 48,670 | 39,080 |
Note 11 Net income from other financial investments
| Parent bank | ||||
|---|---|---|---|---|
| 31.12.2018 | 31.12.2019 | (NOK thousands) | 31.12.2019 | 31.12.2018 |
| 21,596 | 19,099 | Net change in value of stocks, shares etc. measured at fair value | 19,099 | 19,865 |
| (16,704) | (6,430) | Net change in value of bonds/certificates measured at fair value | (6,430) | (16,704) |
| 9,021 | 2,158 | Net change in value of financial derivatives measured at fair value | 2,158 | 9,021 |
| 7,223 | 6,089 | Exchange rate gains/losses on currency | 6,089 | 7,223 |
| 21,136 | 20,916 | Net income from other financial investments | 20,916 | 19,405 |
Note 12 Securities debt and subordinated loan capital
SpareBank 1 BV issues and redeems securities debt as part of its liquidity management. The refinancing requirement has also been partly funded by the transfer of the loan portfolio to SpareBank 1 Boligkreditt AS. The breakdown is the same for the parent bank and the Group.
| Securities debt | Parent bank/Group | |||
|---|---|---|---|---|
| (NOK thousands) | 31.12.2019 | 31.12.2018 | ||
| Certificate debt, nominal value | - | - | ||
| Bond debt, nominal value | 8,290,000 | 8,742,000 | ||
| Value adjustments and accrued interest | (10,611) | 14,890 | ||
| Total securities debt | 8,279,389 | 8,756,890 |
| Change in securities debt | Parent bank/Group | |||
|---|---|---|---|---|
| (NOK thousands) | 31.12.2019 | Issued 2019 | Redeemed 2019 |
31.12.2018 |
| Certificate debt, nominal value | - | - | - | - |
| Bond debt, nominal value | 8,290,000 | 1,500,000 | (1,952,000) | 8,742,000 |
| Value adjustments and accrued interest | (10,611) | - | - | 14,890 |
| Total securities debt | 8,279,389 | 1,500,000 | (1,952,000) | 8,756,890 |
| Subordinated loan capital | Parent bank/Group | |||
|---|---|---|---|---|
| (NOK thousands) | 31.12.2019 | 31.12.2018 | ||
| Subordinated loan capital | 440,000 | 440,000 | ||
| Value adjustments and accrued interest | 4,404 | 5,258 | ||
| Total subordinated loan capital | 444,404 | 445,258 |
| Change in subordinated loan capital | Parent bank/Group | |||
|---|---|---|---|---|
| Redeemed | ||||
| 31.12.2019 | Issued 2019 | 2019 | 31.12.2018 | |
| Subordinated loan capital | 440,000 | - | - | 440,000 |
| Value adjustments and accrued interest | 4,404 | - | - | 5,258 |
| Total subordinated loan capital | 444,404 | - | - | 445,258 |
Note 13 Segment Information
The segment information is related to the way in which the Group is managed and followed up internally by the business through performance and capital reporting, proxies and procedures. The reporting of segments is divided into the following areas: Retail market (RM) and corporate market (CM) customers,
which include the parent bank and subsidiaries related to real estate and accounting services. Other subsidiaries include subsidiary companies that manage property. Group eliminations are shown together with undivided operations in a separate column (nonreportable segments).
Group 31.12.2019
| (NOK thousands) | RM | CM | subsidiaries | segments | Total |
|---|---|---|---|---|---|
| Profit/loss | |||||
| Net interest income | 367,898 | 248,748 | (742) | 40,620 | 656,524 |
| Net commission and other income | 339,218 | 103,005 | 240 | 156,477 | 598,940 |
| Operating costs | 394,895 | 159,367 | 1,719 | 32,353 | 588,334 |
| Earnings before losses | 312,221 | 192,386 | (2,221) | 164,744 | 667,130 |
| Losses on loans and guarantees | 8,365 | (5,614) | (433) | 2,318 | |
| Earnings before tax | 303,856 | 198,000 | (2,221) | 165,177 | 664,812 |
| Other | Non-reportable | ||||
|---|---|---|---|---|---|
| (NOK thousands) | RM | CM | subsidiaries | segments | Total |
| Balance sheet | |||||
| Net lending to customers | 23,358,345 | 6,967,092 | - | 939,868 | 31,265,305 |
| Other assets | 91,591 | 25,163 | 12,219 | 7,428,164 | 7,557,137 |
| Total assets per segment | 23,449,936 | 6,992,255 | 12,219 | 8,368,032 | 38,822,442 |
| Deposits from and debt to customers | 15,451,151 | 8,577,994 | - | 414,145 | 24,443,290 |
| Other equity and liabilities | 7,998,785 | (1,585,739) | 12,219 | 7,953,887 | 14,379,152 |
| Total equity and debt per segment | 23,449,936 | 6,992,255 | 12,219 | 8,368,032 | 38,822,442 |
Group 31.12.2018
| Other | Non-reportable | ||||
|---|---|---|---|---|---|
| (NOK thousands) | RM | CM | subsidiaries | segments | Total |
| Profit/loss | |||||
| Net interest income | 348,923 | 230,806 | (638) | 13,825 | 592,916 |
| Net commission and other income | 345,603 | 88,005 | 37,984 | 134,322 | 605,914 |
| Operating costs | 405,988 | 160,033 | 1,783 | (101,622) | 466,182 |
| Earnings before losses | 288,538 | 158,778 | 35,563 | 249,769 | 732,648 |
| Losses on loans and guarantees | (1,317) | 1,713 | - | 254 | 650 |
| Earnings before tax | 289,855 | 157,065 | 35,563 | 249,515 | 731,998 |
| Other | Non-reportable | ||||
|---|---|---|---|---|---|
| RM | CM | subsidiaries | segments | Total | |
| Balance sheet | |||||
| Lending to customers | 21,858,901 | 6,830,304 | - | 842,744 | 29,531,949 |
| Loss provisions on loans | (44,455) | (112,371) | - | (640) | (157,466) |
| Other assets | 105,208 | 11,902 | 13,530 | 7,075,784 | 7,206,424 |
| Total assets per segment | 21,919,654 | 6,729,835 | 13,530 | 7,917,887 | 36,580,907 |
| Deposits from and debt to customers | 13,783,259 | 7,761,562 | - | 593,759 | 22,138,580 |
| Other equity and liabilities | 8,136,395 | (1,031,727) | 13,530 | 7,324,128 | 14,442,327 |
| Total equity and debt per segment | 21,919,654 | 6,729,835 | 13,530 | 7,917,887 | 36,580,907 |
Note 14 Critical accounting estimates and discretionary valuations
In preparing the consolidated accounts, the management makes estimates and discretionary assessments, as well as assumptions that affect the impact of applying the accounting policies. This will therefore affect the reported amounts for assets, liabilities, income and expenditure.
In the financial statements for 2018, Note 3 'Critical estimates and assessments regarding the use of accounting policies', gives more details of significant estimates and assumptions.
Note 15 Sale of loans
SpareBank 1 BV and other owners have agreed to establish a liquidity facility for SpareBank 1 Boligkreditt AS. This means that the banks commit to buy mortgage bonds issued by the company up to a total value of twelve months' term to maturity. Each owner is principally liable for its share of the requirement, and secondarily for twice the primary liability under the same agreement. The bonds can be deposited with Norges Bank, so carry no significant added risk for SpareBank 1 BV.
The Bank has signed an agreement for the legal sale of loans with high security and collateral in real estate to SpareBank 1 Boligkreditt AS and SpareBank 1 Næringskreditt AS.
For more information on the accounting treatment of the agreements, see Note 2 and Note 9 to the financial statements for 2018.
Note 16 Liquidity risk
Liquidity risk is the risk that the Bank may be unable to meet its payment obligations, and/or the risk of not being able to finance the desired growth in assets. SpareBank 1 BV draws up an annual liquidity strategy which addresses the Bank's liquidity risk, among other things.
The Group's liquidity risk is covered by the Bank's liquidity reserve/buffer. The main objective of Spare-Bank 1 BV is to maintain the viability of the Bank in a normal situation, without external funding, for 12
months. The Bank should also survive a minimum of 120 days in a 'highly stressed' situation where there is no access to funding from the capital markets. The Bank exercises daily governance according to the above goals. A contingency plan has also been established to handle liquidity crises. The average remaining term to maturity in the portfolio of senior bond loans was 3.1 years as at 31 December 2019. Overall LCR was 230% at the end of the third quarter and average total LCR was 214% in the quarter.
Note 17 Assessing fair value of financial instruments
Financial instruments at fair value are classified in different levels.
Level 1: Valuation based on quoted prices on an active market. The fair value of financial instruments traded on active markets is based on the market price at the balance sheet date. A market is considered to be active if the market prices are easily and regularly available from a stock exchange, dealer, broker, economic grouping, pricing service or regulatory authority, and these prices represent actual and regularly occurring market transactions at arm's length. The category includes listed shares and units in mutual funds, treasury bills, government bonds and certificates that are traded in active markets.
Level 2 Valuation based on observable market data. Level 2 consists of instruments which are valued using information other than quoted prices, but where prices are directly or indirectly observable for the assets or liabilities, and also include
quoted prices on inactive markets.
- These valuation methods maximise the use of observable data where it is available and rely as little as possible on the Bank's own estimates.
- The fair value of interest rate swaps is calculated as the present value of estimated future cash flows based on the observable rate curve.
- The fair value of bonds and certificates (assets and liabilities) is calculated as the present value of the estimated cash flow based on the observable yield curve, including an indicated credit spread on the issuer from a reputable brokerage firm or Reuters/ Bloomberg pricing services.
- This category includes bonds, certificates, equity instruments, own securities debt at fair value, and derivatives.
Level 3: Valuation based on other than observable data. If no valuation is available in relation to level 1 and 2, valuation methods based on non-observable information are used.
- Fair value of fixed rate deposits and loans: The Bank uses the base rate/reference rate on the loans, and discounts using its own swap curve to calculate the funding margin. The Bank has no 'day 1 profit'. For valuations at later dates, the Bank reads in reads customer interest and adjusts for funding and customer margins. Swap interest will be charged on the discount date. This is then compared with the swap rate on the calculation date taking account of the remaining term to maturity. Changes to the customer margin (administrative markup, markup for anticipated losses and return on equity) in the term of the loan are not assessed/taken into account.
- Equity investments are valued at fair value under the following conditions:
-
- Price at the time of the last capital increase or last sale between independent parties, adjusted for changes in market conditions since the capital increase/sale.
-
- Fair value based on expected future cash flows for the investment.
-
- On the remaining financial instruments, fair value is determined on the basis of value estimates obtained from external parties. For those unlisted shares where it is not possible to make a sufficiently reliable measurement of fair value, acquisition cost or impaired book value is used.
- This category includes other equity instruments, loans at fair value over extended profit and the Bank's own fixed rate loans.
- The fair value of mortgages is understood to be: Loans in loss category 1 - the loan's nominal value (not equal to amortised cost). Loan in loss category 2, and 3 - the loan's nominal value decreases by the expected losses (= amortised cost). Loans in loss category 3K the loan's nominal value decreases by individual loss provisions (= amortised cost)
The Group's assets and liabilities measured at fair value as at 31 December 2019
| Assets | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at fair value | ||||
| - Fixed rate loans | - | - | 1,775 | 1,775 |
| - Loans at fair value over extended profit/loss * | - | - | 21,307 | 21,307 |
| - Approved loans to Boligkreditt | - | - | - | - |
| - Bonds and certificates | 703 | 3,412 | - | 4,115 |
| - Equity Instruments | 241 | - | 1,178 | 1,419 |
| - Derivatives | - | 19 | - | 19 |
| Total assets | 944 | 3,431 | 24,260 | 28,635 |
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial liabilities at fair value | ||||
| - Fixed rate deposits | - | - | - | - |
| - Securities at fair value | - | 2,785 | - | 2,785 |
| - Derivatives | - | 37 | - | 37 |
| Total liabilities | - | 2,822 | - | 2,822 |
*) Please refer to Note 1 for comments regarding reassessment/changes in measurement method as at 31.12.2019.
The Group's assets and liabilities measured at fair value as at 31 December 2018
| Assets | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets at fair value through profit/loss | ||||
| - Fixed rate loans | - | - | 1,687 | 1,687 |
| - Approved loans to Boligkreditt | - | - | 821 | 821 |
| - Bonds and certificates | 205 | 3,814 | - | 4,019 |
| - Equity Instruments | 269 | - | 1,052 | 1,321 |
| - Derivatives | - | 49 | - | 49 |
| Total assets | 474 | 3,863 | 3,560 | 7,897 |
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Financial liabilities at fair value through profit/loss |
| Total liabilities | - | 2,362 | - | 2,362 |
|---|---|---|---|---|
| - Derivatives | - | 39 | - | 39 |
| - Securities at fair value | - | 2,323 | - | 2,323 |
| - Fixed rate deposits | - | - | - | - |
Changes in instruments classified under Level 3 as at 31.12.2019
| Fixed rate loans | Shares at fair value through profit/loss |
Fixed rate deposits |
Approved loans to Boligkreditt |
Lending at fair value over extended profit/ loss |
|
|---|---|---|---|---|---|
| Opening balance 01.01.2019 | 1,687 | 1,052 | - | 821 | - |
| Change as a result of the reassessment retail market | - | - | - | - | 21,307 |
| Increase | 332 | 154 | - | 276 | - |
| Decrease | (244) | (20) | - | (1,097) | - |
| Net gain/loss on financial instruments | - | (8) | - | - | - |
| Closing balance 31.12.2019 | 1,775 | 1,178 | - | - | 21,307 |
*) Please refer to Note 1 for comments regarding reassessment/changes in measurement method as at 31.12.2019.
Changes in instruments classified under Level 3 as at 31.12.2018
| Closing balance 31.12.2018 | 1,687 | 1,052 | - | 821 |
|---|---|---|---|---|
| Net gain/loss on financial instruments | 7 | 33 | - | - |
| Decrease | (199) | (8) | - | - |
| Increase | 611 | 166 | - | 821 |
| Change as a result of the transition to IFRS 9 | - | - | (819) | - |
| Opening balance 01.01.2018 | 1,268 | 861 | 819 | - |
| Fixed rate loans | Shares at fair value through profit/loss |
Fixed rate deposits |
Approved loans to Boligkreditt |
Note 18 Net income from ownership interests
The net profit/loss from ownership interests in the group is primarily included in the share of the profit/ loss attributed to Samarbeidende Sparebanker AS (indirect stake in the Sparebank 1 Alliance) and Samarbeidende Sparebanker Bankinvest AS (indirect stake in BN Bank ASA). Effective June 2019, Samarbeidende Sparebanker Bankinvest AS was dissolved and replaced by direct ownership of BN Bank ASA.
The increase in net income share from ownership interests in 2019 is primarily due to gains from the insurance merger (Fremtind) totalling NOK 71.9 million during Q1/2019 and the revaluation of properties in SpareBank 1 Gruppen's life company totalling NOK 18.0 million during Q2/2019.
Note 19 Implementation IFRS 16
SpareBank 1 BV has implemented IFRS 16 Leases with effect from 1 January 2019. IFRS 16 primarily impacts the tenant's accounts and means that substantial leases for the Group are capitalised. The standard removes the current distinction between operational and financial
leases and requires the calculation of a right of use asset (right to use the leased asset) and a financial liability to pay rent for substantial leases. Refer to Note 2 and Note 39 to the annual report for 2018 for more detail. The tables below show the accounting effects in 2019 for the parent bank and the Group.
| Parent bank | Balance sheet | Group | ||
|---|---|---|---|---|
| 01.01.2019 | 31.12.2019 | (NOK thousands) | 31.12.2019 | 01.01.2019 |
| 89,007 | 74,028 | Lease liabilities | 90,178 | 108,945 |
| 89,007 | 73,318 | Right of use | 89,311 | 108,945 |
| Parent bank | Income Statement IFRS 16 | Group |
|---|---|---|
| 31.12.2019 | (NOK thousands) | 31.12.2019 |
| 15,939 | Depreciation | 19,799 |
| 1,604 | Interest | 1,961 |
| 17,543 | Total | 21,760 |
| Effect of IFRS 16 vs IAS 17 | ||
| 16,829 | Reduction in operating costs under IAS 17 | 20,887 |
| 17,543 | Increase in costs under IFRS 16 | 21,760 |
| (714) | Changes in pre-tax income in the period | (873) |
Note 20 Events after the balance sheet date
There have been no events with a material bearing on the accounts after the balance sheet day.
Declaration by the Board and Managing Director
We declare that, to the best of our knowledge and belief, the interim accounts for the period 1 January to 31 December 2019 have been prepared in accordance with IAS 34 'Interim reporting', and that the information in the financial statements gives a true picture of the bank's and the group's assets, liabilities, financial position and results as a whole.
We also declare that, to the best of our knowledge and belief, the interim report provides an accurate summary of key events in the accounting period and their influence on preliminary annual accounts, the major risk and uncertainty factors facing the business In the coming accounting period, and significant transactions with related parties.
Tønsberg, 6th February 2020 The Board of Directors of SpareBank 1 BV
Finn Haugan Chair of the Board
Heine Wang Deputy Chair Elisabeth Haug
Janne Sølvi Weseth Gisle Dahn
Hanne Myhre Gravdal (Employee representative) Geir A. Vestre (Employee representative) Rune Fjeldstad Managing Director
Earnings per equity certificate
Earnings per equity certificate are calculated by dividing the portion of the profit/loss for the year that is assigned to the company's equity certificate holders (minus own equity certificates) by a weighted average of the number of equity certificates over the year.
Diluted earnings per equity certificate
In the calculation of diluted earnings per equity certificate, the weighted average number of issued ordinary equity certificates in circulation is adjusted for the effect of converting potential equity certificates which could lead to dilution. The Bank has no potential equity certificates that could cause dilution at 31 December 2019. Diluted earnings per equity certificate are therefore equal to earnings per equity certificate.
| Parent bank | |
|---|---|
| (NOK thousands) | 31.12.2019 |
| Based on profit/loss for the year divided between equity certificate holders and primary capital | 497,897 |
| Number of equity certificates issued | 63,101 |
| Earnings per equity certificate | 4.43 |
| Par value | 15.00 |
Calculation of equity certificate fraction (based on OB 2019)
| Adjusted primary capital | 01.01.2019 |
|---|---|
| Total equity | 4,691,873 |
| - fund for unrealised gains (FUG) | (9,879) |
| - subordinated bonds | (250,000) |
| - allocated dividends classified as equity | (186,149) |
| Total corrected primary capital | 4,245,845 |
| Equity certificate fraction | |
| Equity certificate capital | 946,515 |
| Share premium fund | 1,026,427 |
| Risk equalisation fund | 411,299 |
| Total equity certificate holders | 2,384,241 |
| Equity certificate fraction | 56.15% |
| Adjusted profit/loss for the year | 31.12.2019 |
| Profit/loss for the year | 515,717 |
| - corrected for interest on subordinated bonds posted directly to equity | (10,783) |
| - corrected for FUG | (7,037) |
| Adjusted profit/loss for the year | 497,897 |
Price development December 2018 - December 2019
20 largest shareholders
| 13,642,787 10,925,503 |
21.62% |
|---|---|
| 17.31% | |
| 2.79% | |
| 1,532,868 | 2.43% |
| 920,000 | 1.46% |
| 850,000 | 1.35% |
| 837,211 | 1.33% |
| 780,000 | 1.24% |
| 731,950 | 1.16% |
| 695,000 | 1.10% |
| 621,230 | 0.98% |
| 588,000 | 0.93% |
| 530,000 | 0.84% |
| 477,633 | 0.76% |
| 400,000 | 0.63% |
| 400,000 | 0.63% |
| 385,321 | 0.61% |
| 372,000 | 0.59% |
| 336,849 | 0.53% |
| 330,000 | 0.52% |
| 37,114,100 | 58.82% |
| 25,987,253 | 41.18% |
| 63,101,353 | 100.00% |
| 1,757,748 |
Dividend policy
SpareBank 1 BV aims to achieve results that deliver a good return on the Bank's equity. This will ensure its owners a competitive, stable, long-term return in terms of dividends and higher prices for its equity certificates.
Each year's profit will be distributed proportionately between equity share capital and the primary capital fund based on their relative share of the Bank's equity.
The Bank's policy is that a minimum 50% of the equity certificate holders' share of each year's profit should be paid out as a cash dividend.
The following factors will be considered in determining the level of the total annual dividend from the Bank:
- The Bank's financial strength
- Financial performance
- External conditions
- Long-term goal of stable ownership fractions
42
Statements on future matters
The report contains statements about future conditions that reflect management's current view of certain future events and potential financial performance.
Although SpareBank 1 BV believes that the expectations expressed in such statements about the future are reasonable, there can be no guarantee that the expectation will prove to have been correct. Results could therefore vary greatly from those assumed in the statements regarding future conditions.
Important factors that can cause such differences for SpareBank 1 BV include, but are not limited to:
- (i) macroeconomic developments,
- (ii) changes in the market, and
- (iii) changes in interest rates.
This report does not mean that SpareBank 1 BV undertakes to revise these statements on future matters beyond that which is required by applicable law or applicable stock exchange rules if and when circumstances arise that will cause changes compared with the situation on the date when the statements were made.
DELÅRSRAPPORT 3. KVARTAL
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2019
SPAREBANK 1 BV NO 944 521 836 TELEFON 915 02480
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