Sparebanken Møre

Investor Presentation • Aug 15, 2018

Sparebanken Møre - the Group 15. August 2018

PRESENTATION

2 N D QUARTER 2018

Runar Sandanger EVP

• Introduction and highlights
• Results
• Deposits and Loans
• Liquidity and Capital
• Main targets

The largest bank in the county

Strong local presence

28 OFFICES IN MØRE OG ROMSDAL

356 MAN YEARS

70.6 BILLION IN TOTAL ASSETS

Strong loan growth: 5.0 per cent over the last 12 months

High and stable Net Interest Income: Growth both in NOK and in per cent compared to the same period last year

High efficiency: Cost/Income ratio at 42.1 per cent by half year end – down 3.6 p.p. compared with first two quarters last year

Very low losses: Net NOK 3 million in loan loss reversals in H1 2018

Strong liquidity and solidity: Deposit to Loan ratio at 58.2 per cent, CET1 at 15.5 per cent

Good Return on Equity: 11.2 per cent

Return on Equity

Cost/Income

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

Positive outlook

• Sparebanken Møre is well capitalized and has a very good liquidity by half year end. The bank has a healthy financial structure and a strong balance sheet. 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 still good. Going forward, we expect an increase in production and employment in most sectors and industries. The main reasons for this are
• o a weak Norwegian currency
• o low level of interest rates
• o expansionary fiscal policy
• o high oil prices
• o good growth in our export markets
• o high adaptability in local business and industry
• It also appears that the danger of a major fall in house prices has been reduced. However, the risk of growth-dampening international trade barriers seems to have increased somewhat

Result after taxation Return on Equity

Growth in income, stable cost level and low losses H1 2018 compared with H1 2017

Higher Net Interest Income in NOK

Stable operating costs

Higher level of Other Income

Low level of losses also in H1 2018

	H1 2018		H1 2017			Changes
Results (NOK million and %)	NOK	%	NOK	%	NOK	p.p.	%
Net Interest Income	580	1.71	529	1.69	51	0.02	9.6
Net Income Financial Investments	22	0.06	20	0.06	2	0.00	10.0
Gains/losses liquidity portfolio	-3	-0.01	22	0.08	-25	-0.09	-
Gains/losses on shares	13	0.05	-5	-0.02	18	0.07	-
Other Income	99	0.29	92	0.30	7	-0.01	7.6
Total Other Income	131	0.39	129	0.42	2	-0.03	1.6
Total Income	711	2.10	658	2.11	53	-0.01	8.1
Personnel costs	169	0.50	170	0.54	-1	-0.04	-0.6
Other costs	130	0.38	131	0.42	-1	-0.04	-0.8
Total operating costs	299	0.88	301	0.96	-2	-0.08	-0.7
Profit before losses	412	1.22	357	1.15	55	0.07	15.4
Losses on loans, guarantees etc	-3	-0.01	8	0.03	-11	-0.04	-
Pre tax profit	415	1.23	349	1.12	66	0.11	18.9
Taxes	100	0.29	88	0.27	12	0.02	13.9
Profit after taxation	315	0.94	261	0.85	54	0.09	20.6

	30.06.2018	30.06.2017	Changes
Balance in NOK million	NOK	NOK	NOK	%
Total Assets	70,578	65,652	4,926	7.5
Loans to customers	58,869	56,040	2,829	5.0
Deposits from customers	34,239	33,514	725	2.2
Net Equity and Subordinated Loans	6,477	6,534	-57	-0,9

Key Figures	30.06.2018	30.06.2017	Changes p.p.
Return on Equity	11.2	10.0	1.2
Cost/Income Ratio	42.1	45.7	-3.6
Total Capital	19.1	18.9	0.2
Tier 1 Capital	17.1	16.9	0.2
CET1	15.5	14.3	1.2
Leverage Ratio	8.0	8.3	-0.3
Results per EC (NOK, the Group)	15.45	13.10	2.35
Results per EC (NOK, the Bank)	18.40	17.60	0.80

Quarterly development in Net Interest Income

Increased NII in NOK, lower in per cent

Net Interest Income Net Interest Income

• NOK million - % of Average Assets

Quarterly development in Other Income

Negative effects from financial instruments

Other Income Other Income

• The updated value measurement following the merger between Vipps, Bank Axept and BankID Norge gave a profit effect of approximately MNOK 10 for the second quarter of 2018
• Market value of the liquidity portfolio is reduced by NOK 11 million compared with H1 2017

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

70.6

40,1 43,0 43,0 44,0 45,6 40,6

2014 2015 2016 2017 Q2-17 Q2-18

Operating Costs Operating Costs

• NOK million - % of Average Assets

Cost/Income ratio

Target

Total Assets and Man Years

Strong underwriting

Persistent low losses

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

• % of Average Assets

Losses on loans and guarantees

• NOK million

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

• Total calculated ECL by second quarter end is NOK 5 million lower than by 1.1.2018
• Individual impairments and other losses of NOK 4 million for retail customers and NOK -2 million for corporate customers
• Total losses are -NOK 3 million by half year end

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)

Problem Loans are loans and guarantees more than 90 days over due and performing loans with individual impairments.

1,12 1,13 1,24 1,15 1,29 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18

Continued good growth

Strong loan growth and high deposit-to-loan ratio

Customer lending has increased by 5.0 % over the last 12 months

Loans Deposits

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

• Deposit growth of 2.2 % over the last 12 months

• High deposit-to-loan ratio of 58.2 %

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

Retail market Corporate market

• Retail lending has increased by 5.6 % over the last 12 months

• Loans to the retail market amount to 69.0 % of total loans

• Corporate lending has increased by 4.2 % over the last 12 months

• Loans to the corporate market amount to 31.0 % of total loans

Diversified loan book

Loans by sector

Other:

Financial services	2.1 %	Agriculture	0.8 %
Other Industry	1.6 %	Fishing Industry	1.3 %
Building and construction	1.2 %	Furniture	0.1 %
Ship Yards	1.0 %	Other	0.4 %
Retail/wholesale trade	1.1 %

Good quality in our retail portfolio

High proportion of secured loans

• % of total loans

• The bank complies with the regulations from the Norwegian authorities (Boliglånsforskriften)

• Deviations reported in the second quarter of 2018 were 4.3 % outside Oslo, and 4.9 % in Oslo

Loans to retail customers Loan to value – retail loans

96.3 % of mortgage-backed loans to retail customers are within 85% of value

House prices

- Development from January 2008 to June 2018

Key information (Sold pre-owned dwellings)	Norway	Mid-Norway**	Greater Ålesund*	Greater Stavanger*	City of Oslo
Price development last 12 months	+1.5 %	+0.4 %	+0.9 %	-0.3 %	+1.6 %
Price per square meter (NOK)	40,976	33,700	29,245	35,025	69,060
Average days on market (DOM) sold units in June 2018	38 days	50 days	65 days	61 days	21 days
Price median dwelling (NOK)	3,108,688	2,730,000	2,550,000	3,250,000	3,951,017

*Ålesund and Stavanger including surrounding municipalities

** Mid-Norway including the county of Møre og Romsdal and the county of Trøndelag

Deposits Growth in deposits over the last 12 months

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

Retail market Corporate and public

• Retail deposits have increased by 3.9 % over the last 12 months
• Deposits from the retail market amount to 60.9 % of total deposits
• Deposits from corporate and public customers have increased by 0.6 % the last 12 months and ended at NOK 12.6 billion by quarter end

Discretionary Portfolio Management

Strong growth - close to NOK 4,4 billion under management

Sparebanken Møre - Aktiv Forvaltning

• Portfolio in NOK million

• In addition to deposits, increasingly more of the Sparebanken Møre`s customers also ask for other investments

• Sparebanken Møre Aktiv Forvaltning (Discretionary Portfolio Management) offers the Bank's clients professional management services
• Our local Asset Managers continuously monitor the portfolio:
  • o 9 municipalities
  • o 10 foundations
  • o 1 pension fund
  • o 2 insurance companies
  • o 156 investment companies
  • o 204 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 net market funding ended at NOK 28.5 billion by quarter end – close to 85 per cent with remaining maturity of more than one year
• The bank has very strong liquidity at the end of H1 and sufficient surplus to meet balance sheet growth and refinancing in the third quarter without compromising the fulfillment of key figures for liquidity and financing
• Senior Bonds: Weighted average maturity of 2.44 years (FSA defined key figures)
• Covered Bonds issued through Møre Boligkreditt AS have a weighted average maturity of 3.88 years (FSA defined key figures)
• Møre Boligkreditt AS has issued eight loans qualifying for Level 2A liquidity in LCR. In June this year, the mortgage company issued it's second sub-benchmark Public Issue of EUR 250 million in the European market, the first issued last summer
• June 14 this year, Moody`s confirmed the bank's A2 stable rating. Issuances from Møre Boligkreditt AS are 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

30.06.18

• By quarter end our Common Equity Tier 1 capital stood at 15.5%, Tier 1 capital at 17.1 % and total capital at 19.1 %
• Sparebanken Møre's capital targets are:
• Total Capital: Minimum 18.3 %
• Tier 1 capital: Minimum 16.3 %

• CET1: Minimum 14.8 %

• 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

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

Equity per MORG is calculated on Group figures

• Sparebanken Møre aims to achieve financial results providing a good and stable return on the Bank's equity capital
• Sparebanken Møre's results should ensure that the owners of the equity receive a competitive long-term return in the form of cash dividends and capital appreciation on their equity
• Unless the capital strength dictates otherwise, about 50% 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 (MORG) have been listed at Oslo Stock Exchange since 1989

• Total EC capital NOK 989 million by June 2018
• Good return Total Return for Sparebanken Møre is 5 per cent higher than the EC index in H1

Annual dividend per EC
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

About equity certificates

• Equity certificates are a special kind of equity instrument first introduced by savings banks in 1988. A total of 32 banks have now issued such certificates, and 19 of them are listed on the stock exchange
• Equity certificates are an important part of savings banks' capital base and confer ownership of between 14 % and 97 % of the individual bank
• A savings bank that has issued equity certificates has two types of equity. One is its primary capital, or "ownerless" equity, consisting of retained earnings built up by the bank over the years. The other is the certificate-holders' equity, consisting of equity certificate capital and related reserves (equalization reserve and premium account)
• Equity certificates have clear similarities to shares. The main differences lie in their owners' rights to the bank's assets and influence over the bank's governing bodies. The key principle is that profits are distributed proportionally on the basis of ownership share and the bank's other capital
• In a limited company, losses hit shareholders' equity directly. In a savings bank, losses are first absorbed by the primary capital and the equalization reserve before hitting the equity certificate capital

GOALS IN OUR STRATEGIC PLAN «MØRE 2022» FOR THE PERIOD 2018-2022

• CET1 > 14.8 %
• Cost/Income < 40 %
• ROE > 11 %
• 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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