Storebrand ASA — Interim / Quarterly Report 2020

Jul 15, 2020

Interim report 2020

Storebrand Boligkreditt AS (unaudited)

Contents

Half-yearly report	3
Income statement	5
Statement of comprehensive income	5
Statement of financial position.	6
Statement of changes in equity	7
Statement of cash flow	8

NOTES

	Note 1 Accounting principles. 9
	Note 2 Estimates. 9
	Note 3 Tax. 9
	Note 4 Related parties. 9
	Note 5 Financial risk. 10
	Note 6 Valuation of financial instruments. 10
	Note 7 Segment information. 11
	Note 8 Liabilities to credit institutions. 12
	Note 9 Commercial papers and bonds issued. 12
	Note 10 Capital adequacy 13
	Note 11 Loan to value rations and collateral 14
	Note 12 Key figures 15
	Note 13 Net interest income 16
	Note 14 Off balance sheet liabilities and contingent liabilities 16
	Note 15 Non-performing loans and loan losses 17
	Note 16 Quarterly profit and loss 20
	Declaration by the Board of Directors and the Chief Executive Officer 21

This document may contain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may be beyond the Storebrand Group's control As a result, the Storebrand Group's actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in these forward-looking statements. Important factors that may cause such a difference for the Storebrand Group include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) market related risks such as changes in equity markets, interest rates and exchange rates, and the performance of financial markets generally. The Storebrand Group assumes no responsibility to update any of the forward-looking statements contained in this document or any other forward-looking statements it may make.

Storebrand Boligkreditt AS

• Half-yearly report for the first half of 2020

(Profit figures for the corresponding period in 2019 are shown in brackets. Balance sheet figures in brackets are for the end of 2019)

• Low interest margins due to special Covid-19 market conditions
• Decreased lending volume for the quarter

FINANCIAL PERFORMANCE

Pre-tax profit was NOK 7 million (NOK 18 million) for the second quarter and a pre-tax profit of NOK 24 (NOK 38 million) year to date.

Net interest income was NOK 28 million (NOK 40 million) in the second quarter and NOK 75 million (NOK 77 million) year to date As a percentage of average total assets, net interest income was 0.54 per cent (0.88 per cent) for the second quarter and 0 73 per cent (0 84 per cent) year to date. In March there was a pressure in the market to let the reductions in policy rate and NIBOR, caused by the Covid-19 situation, to have immediate effect on the home loan rates even though funding rates did not decrease just as quickly. This led to significantly lowered margins in the second quarter

Other operating income in the second quarter amounted to NOK 0 1 million (minus NOK 2 million) and minus NOK 4 million (NOK 0 1 million) year to date, and are related to commission income on loans and net loss on financial instruments at fair value and amortised cost.

Operating expenses remained stable in the quarter and totalled NOK 21 million (NOK 20 million) in the second quarter and NOK 43 million (NOK 39 million) year to date

Loan losses in the second quarter amounted to NOK 0 5 million recognised as income (expense of NOK 0 2 million) and expense of NOK 4 million (income of NOK 0 1 million) year to date

BALANCE SHEET DEVELOPMENT

The lending volume has decreased by NOK 1 5 billion since the end of 2019 and amounted to NOK 18 9 billion (NOK 20 4 billion) Storebrand Bank ASA and Storebrand Boligkreditt AS operate with restrictive lending practices. The average loan-to-value ratio in the portfolio was 54 per cent at the end of the quarter, and unchanged from year end 2019. On the date of transfer, the loan-to-value ratio never exceeds 75 per cent. The company has over-collateralisation of 114 per cent (140 per cent)

Defaulted loans at the end of the second quarter amounted to NOK 32 million (NOK 35 million), equivalent to 0.17 per cent of gross loans in the company (0.17 per cent). All the loans have a loan-to-value ratio within 75 per cent of market value or have mainly been written down. Loan loss provisions amounted to NOK 5 million (NOK 2 million) at the end of the half-year

The company's loan programme is AAA rated by S&P Global Ratings.

At the end of the second quarter of 2020, the company had a liquidity portfolio consisting of fixed-income securities with a AAA rating and AA+ rating from S&P Global Ratings with a market value of NOK 745 million, of which NOK 42 million is classified at amortised cost and NOK 703 million is classified at fair value in the balance sheet with changes in value through profit or loss.

The company's total assets under management as at 30 June 2020 were NOK 19.7 billion (NOK 20.6 billion), a decrease of NOK 0.9 billion compared with the end of 2019.

At the end of the first half-year of 2020, Storebrand Boligkreditt AS had issued covered bonds with a total carrying amount of NOK 17.0 billion with remaining terms of approximately 12 months to 4 years. NOK 16.3 billion of these bonds has been placed in the market, while NOK 0.7 billion is being held by the parent bank.

Storebrand Boligkreditt AS has two credit facilities with Storebrand Bank ASA. One of these is a normal overdraft facility, with a ceiling of NOK 6.0 billion. This has no expiry date, but can be terminated by the bank on 15 months' notice. The other facility may not be terminated by Storebrand Bank ASA until at least 3 months after the maturity date of the covered bond and the associated derivatives with the longest period to maturity. Both agreements require a sufficient ceiling at all times to be able to cover interest and repayment on covered bonds and associated derivatives for the next 31 days.

CAPITAL ADEQUACY

Equity in the company at the end of the first half-year amounted to NOK 1.6 billion (NOK 1.5 billion) after group contributions paid/received. The eligible capital (Tier 1 capital + Tier 2 capital) at the end of the quarter amounted to NOK 1.5 billion (NOK 1.5 billion). The capital base of Storebrand Boligkreditt AS consists entirely of Core Equity Tier 1 (CET1). The CET1 adequacy ratio in the company was 21.1 per cent (19.7 per cent) at the end of the first-half year. The requirement for the capital base was 14.5 per cent as of 30 June 2020. The company has satisfactory solvency and liquidity based on the company's business activities. The company satisfied the combined capital and capital buffer requirements by a good margin at the end of the quarter.

Storebrand Boligkreditt AS must comply with an LCR of 100 per cent. At the end of the first half-year of 2020, the company's LCR was 928 per cent.

CREDIT RISK

The loan portfolio at 30 June 2020 is not significantly changed from previous quarters. The portfolio mainly consists of loans and credits secured in real estate. The average LTV's are low and have not changed significantly from previous quarters. Loans in arrear and defaulted loans are on similar levels.

The macroeconomic environment is significantly changed since year end 2019. The unemployment rate including furloughs peaked at approximately 15 per cent (including part time unemployment), however, the unemployment rate including furloughs and part time unemployment is reduced to less than 10 per cent and full time unemployment to less than 5 per cent at the end of the first half year. There is thus signs of macroeconomic improvement.

There is, however, still a significant uncertainty of the macroeconomic outlook, for example regarding duration and level of the downturn both domestically and internationally. The severity of the downturn will be dependent upon amongst others containment of the Covid-19 pandemic, and the effectiveness of economic measures, locally and globally. The severity will affect economic activity, unemployment and housing prices. Default levels and loan losses in the loan portfolio are dependent on these parameters. The macro economic uncertainty is still reflected in the IFRS 9 expected credit losses, even though there are signs of improvement. Storebrand Boligkreditt AS has not changed the outlook significantly from the first quarter. The expected credit losses are therefore not significantly changed in the second quarter. There is still a higher uncertainty in the point estimate of expected credit losses compared to year end 2019, and there is a higher possibility in larger variations in expected credit losses in the next quarters.

STRATEGY AND FUTURE PROSPECTS

In 2020, Storebrand Boligkreditt AS will continue its core activity, which is the acquisition and management of mortgages from Storebrand Bank ASA. The company is aiming for moderate growth in collateralisation during 2020. Storebrand Boligkreditt AS will continue to monitor the development of Covid-19 and adjust its operations to the changing conditions, both in terms of macroeconomic development and impact on individual customers.

The market trends and the non-performing loans are being closely monitored. Efforts to ensure good working procedures and high data quality will continue and thereby ensure that government and rating requirements continue to be fulfilled. Developments in the Norwegian and international capital markets, interest rates, unemployment and the property market are regarded as the key risk factors that can affect the results of Storebrand Boligkreditt AS in 2020.

New issues of covered bonds will be made available when the company decides it is favourable to do so and there is sufficient collateral. Storebrand Boligkreditt AS will continue to contribute to Storebrand Bank ASA having diversified financing.

The Board of Directors are not aware of any events of material importance to the preparation of the interim financial statements that have occurred since the balance sheet date.

Lysaker, 14 July 2020 The Board of Directors of Storebrand Boligkreditt AS

Storebrand Boligkreditt AS Income statement

		Q2				Full Year
(NOK million)	note	2020	2019	30.06.2020	30.06.2019	2019
Interest income from financial instruments valued at
amortised cost	4, 13	0.2	0.9	0.6	1.2	3.0
Interest income from financial instruments valued at fair value	4, 13	110.9	114.9	265.2	227.8	493.7
Interest expense	4, 13	-83.5	-76.0	-191.0	-152.5	-336.2
Net interest income	13	27.6	39.8	74.8	76.5	160.5
Net gains on financial instruments valued at amortised cost		-0.1		-4.1
Net gains on other financial instruments		0.4	-1.6	-0.1	0.2	-2.2
Other income		-0.1	-0.1	-0.2	-0.1	-0.2
Total other operating income		0.1	-1.6	-4.4	0.1	-2.4
Staff expenses		-0.1		-0.1	-0.1	-0.2
General administration expenses
Other operating costs	4	-21.4	-19.5	-42.4	-38.8	-75.7
Total operating costs		-21.5	-19.5	-42.5	-38.9	-75.9
Operating profit before loan losses		6.3	18.7	27.9	37.7	82.2
Loan losses for the period	15	0.5	-0.2	-3.8	0.1	-0.3
Profit before tax		6.8	18.4	24.1	37.8	81.9
Tax	3	-1.5	-4.1	-5.3	-8.3	-18.0
Profit for the year		5.3	14.4	18.8	29.5	63.9

Statement of comprehensive income

		Q2			Full Year
(NOK million)	2020	2019	30.06.2020	30.06.2019	2019
Profit for the period	5.3	14.4	18.8	29.5	63.9
Other comprehensive income
Total comprehensive income for the period	5.3	14.4	18.8	29.5	63.9

Storebrand Boligkreditt AS Statement of financial position

(NOK million)	Note	30.06.2020	30.06.2019	31.12.2019
Loans to and deposits with credit institutions	6	15.3	691.2	6.8
Loans to customers	6, 11, 14, 15	18,899.7	17,111.0	20,403.3
Financial assets designated at fair value through profit and loss:
Bonds and other fixed-income securities	6, 11	702.6		100.7
Derivatives	6		41.6
Bonds at amortised cost	6	42.1	42.7	42.5
Deferred tax assets
Other current assets	4, 6	40.1	26.4	7.5
Total assets		19,699.7	17,912.9	20,560.9
Liabilities to credit institutions	4, 6, 8	1,117.9	864.4	4,467.4
Other financial liabilities:
Commercial papers and bonds issued	6, 9	17,019.3	15,536.0	14,538.5
Other liabilities	4, 6	6.6	10.1	17.9
Provisions for accrued expenses and liabilities
Deferred tax		1.3	0.9	1.3
Total liabilities		18,145.1	16,411.5	19,025.1
Paid in equity		1,507.0	1,444.4	1,444.4
Retained earnings		47.6	57.0	91.4
Total equity	10	1,554.6	1,501.4	1,535.8
Total liabilities and equity		19,699.7	17,912.9	20,560.9

Lysaker, 14 July 2020 The Board of Directors of Storebrand Boligkreditt AS

Storebrand Boligkreditt AS Statement of changes in equity

			Other	Total		Total
(NOK million)	Share capital	Share premium	paid-in equity	paid-in equity	Other equity	retained earnings	Total equity
Equity at 31.12.2018	490.0	550.1	355.2	1,395.3	76.7	76.7	1,472.0
Profit for the period					63.9	63.9	63.9
Other comprehensive income
Total comprehensive income for the
period	0.0	0.0	0.0	0.0	63.9	63.9	63.9
Equity transactions with the owner:
Group contribution received			49.1	49.1			49.1
Provision for group contribution					-49.1	-49.1	-49.1
Equity at 31.12.2019	490.0	550.1	404.3	1,444.4	91.4	91.4	1,535.8
Profit for the period					18.8	18.8	18.8
Other comprehensive income
Total comprehensive income for the
period	0.0	0.0	0.0	0.0	18.8	18.8	18.8
Equity transactions with the owner:
Group contribution received			62.6	62.6			62.6
Provision for group contribution					-62.6	-62.6	-62.6
Equity at 30.06.2020	490.0	550.1	467.0	1,507.0	47.6	47.6	1,554.6
	Share	Share	Other paid-in	Total paid-in	Other	Total retained	Total
(NOK million)	capital	premium	equity	equity	equity	earnings	equity
Equity at 31.12.2018	490.0	550.1	355.2	1,395.3	76.7	76.7	1,472.0
Profit for the period					29.5	29.5	29.5
Other comprehensive income
Total comprehensive income for the
period	0.0	0.0	0.0	0.0	29.5	29.5	29.5

Equity at 30.06.2019	490.0	550.1	404.3	1,444.4	57.0	57.0	1,501.4
Provision for group contribution					-49.1	-49.1	-49.1
Group contribution received			49.1	49.1			49.1
Equity transactions with the owner:

Storebrand Boligkreditt AS is 100 per cent owned by Storebrand Bank ASA. Number of shares are 35 000 000 of nominal value NOK 14 per share.

Storebrand Boligkreditt AS Statement of cash flow

(NOK million)	30.06.2020	30.06.2019
Cash flow from operations
Net receipts of interest, commissions and fees from customers	274.8	227.8
Net disbursements/payments on customer loans	1,470.4	1,357.2
Net receipts/payments on securities	-604.6	-1.2
Payments of operating costs	-47.3	-36.1
Net cash flow from operating activities	1,093.4	1,547.7
Cash flow from financing activities
Payments - repayments of loans and issuing of bond debt	-5,858.4	-2,437.8
Receipts - new loans and issuing of bond debt	5,000.0	1,500.0
Payments - interest on loans	-208.9	-152.1
Receipts - group contribution	62.6	49.1
Payments - group contribution	-80.3	-63.8
Net cash flow from financing activities	-1,084.9	-1,104.5
Net cash flow in the period	8.4	443.1
Cash and bank deposits at the start of the period	6.8	248.0
Cash and bank deposits at the end of the period	15.3	691.2

Storebrand Boligkreditt AS has credit facility agreements with Storebrand Bank ASA .The amount drawn on the credit facilities is recognised in the item "Liabilities to credit institutions" as at 30.06.2020. See also Note 8.

Storebrand Boligkreditt AS Notes

Accounting principles

The financial statements are prepared in accordance with IAS 34 Interim Financial Reporting. The interim financial statements do not contain all the information that is required in full annual financial statements. The financial statements of Storebrand Boligkreditt AS have been prepared in accordance with International Financial Reporting Standards (IFRS) and appurtenant interpretations.

A description of the accounting policies applied in the preparation of the financial statements is provided in the 2019 annual report, and the interim financial statements are prepared with respect to these accounting policies.

There are none new or changed accounting standards that entered into effect in 2020.

Note 02

Estimates

Critical accounting estimates and judgements are described in the 2019 annual financial statements' note 2 and valuation of financial instruments at fair value are described in note 8.

In preparing financial statements the management are required to make judgements, estimates and assumptions of uncertain amounts. The estimates and underlying assumptions are reviewed on an ongoing basis and are based on historical experience and expectations of future events and represent the management's best judgment at the time the financial statements were prepared.

Actual results may differ from these estimates.

The uncertainty of the economic development causes an increase in expected credit losses from year end 2019. There is also a higher uncertainty in the point estimate of expected credit losses, and there is a higher possibility in larger variations in expected credit losses in the next quarters. See further information in note 5 financial risk and note 15 non-performing loans and loan losses.

Tax Note 03

Storebrand Boligkreditt AS has activities within "Section K" (financing and insurance activities as defined in Standard Industrial Classification 2007) which exceed 30 per cent and are therefore subject to the financial tax, but since the company does not have any employees it is not subject to finance tax. A tax rate of 22 per cent has been used for capitalizing deferred tax asset in the balance sheet.

Related Parties Note 04

ISSUED COVERED BONDS

Storebrand Bank ASA has invested NOK 711 million in covered bonds issued by Storebrand Boligkreditt AS as of 30 June 2020.

LOANS TRANSFERRED FROM STOREBRAND BANK ASA

Storebrand Bank ASA sells loans to the mortgage company Storebrand Boligkreditt AS. Once the loans are transferred, Storebrand Boligkreditt AS assumes all the risks and benefits of owning the loan portfolio. It is Storebrand Boligkreditt AS that receives all the cash flows from the loan customer. Storebrand Bank ASA shall arrange the transfer and return of loans when changes have to be made in case of change from variable to fixed interest and conversion to a flexible mortgage. In some cases Storebrand Bank ASA shall arrange the transfer and return of loans when changes of loan amount or conversion to another mortgage product have to be made. The costs are included in the contractual administration fee.

Non-performing loans in Storebrand Boligkreditt AS remain in the company. These loans will, pursuant to the service agreement with Storebrand Bank ASA, be treated in the same way as non-performing loans in the bank. Specific reports are prepared for non-performing loans in Storebrand Boligkreditt AS. These loans are not included in the cover pool.

Loans to employees can be transferred to Storebrand Boligkreditt AS. The difference between the market interest rate and the subsidised interest rate is covered monthly by the company in which the debtor is employed.

Storebrand Bank ASA has not pledged any guarantees in connection with loans to Storebrand Boligkreditt AS.

CREDIT FACILITIES WITH STOREBRAND BANK ASA

Storebrand Boligkreditt AS has two credit facilities with Storebrand Bank ASA. See note 8 for more information.

OTHER

Storebrand Boligkreditt AS has no employees, and purchases personnel resources from Storebrand Bank ASA and services including accounting functions from Storebrand Livsforsikring AS.

Storebrand Boligkreditt AS conducts transactions with close associates as part of its normal business activities. The terms for transactions with senior employees and related parties are stipulated in note 27 in the 2019 annual report for Storebrand Boligkreditt AS.

Financial risk

Notes 4 to 8 in the 2019 annual report provide a detailed overview of the company's financial risk. The descriptions are applicable at 30 June 2020, however, with the following amendments and further comments.

CREDIT RISK – CREDIT EXPOSURE

There are no significant changes to PD, EAD and LGD estimates from 31 December 2019 to 30 June 2020. The LTV's are not significantly changed. There are no significant changes to loans in arrear and defaulted loans at 30 June 2020 compared to previous quarters.

The second quarter has also been affected by the development linked to the Coronavirus spread. From the last part of February, the contagion, and the consequences of containment both in Norway and globally, has led to financial turmoil with falling economic activity, increased unemployment, and falling oil price. In Norway the unemployment has fallen significantly from the peak in the beginning of the second quarter, and full time unemployment is reduced by more than 50% since the peak. The uncertainty going forward is still elevated, lockdowns may be re-imposed in the second half of 2020 and in 2021 due to increase in Corona virus infections, locally and internationally. If and when an effective vaccine will be widely available is still uncertain. The sudden significant change in the macroeconomic outlook in the first quarter led to an increase in expected credit losses for the first quarter. In the second quarter there are signs of macroeconomic improvement, however, due to uncertainties going forward, Storebrand Bank has not altered the outlook significantly, see note 15. Expected credit losses are therefore not significantly changed from the first quarter.

LIQUIDITY RISK

Storebrand Boligkreditt AS has had solid liquidity buffers previous quarters, and the company still has substantial liquidity buffer at 30 June 2020. The LCR ratio for the company is at 928 per cent, well above the requirement of 100 per cent. Storebrand Boligkreditt AS issued NOK 5 billion covered bond in the first quarter. The funding structure is balanced with regards to maturity.

The covered bond programme is rated "AAA".

MARKET RISK

The interest rate risk is not significantly changed since year end 2019. Market value of financial instruments has been affected by spread decrease during the second quarter, affecting other revenues positively.

Note 06

Valuation of financial instruments

The Storebrand group categorises financial instruments on three different levels. Criteria for the categorisation and processes associated with valuing are described in more detail in note 8 in the 2019 annual report for Storebrand Boligkreditt AS.

The levels express the differing degrees of liquidity and different measurement methods used. The company has established valuation models to gather information from a wide range of well-informed sources with a view to minimising the uncertainty of valuations.

VALUATION OF FINANCIAL INSTRUMENTS AT AMORTISED COST

(NOK million)	Fair value 30.06.2020	Book value 30.06.2020	Fair value 31.12.2019	Book value 31.12.2019
Financial assets
Loans to and deposits with credit institutions	15.3	15.3	6.8	6.8
Loans to customers - retail market
Other current assets	40.1	40.1	7.5	7.5
Bonds classified as loans and receivables	42.2	42.1	42.4	42.5
Financial liabilities
Liabilities to credit institutions	1,117.9	1,117.9	4,467.4	4,467.4
Commercial papers and bonds issued	17,092.1	17,019.3	14,529.8	14,538.5
Other liabilities	6.6	6.6	17.9	17.9

VALUATION OF FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS (FVTPL)

	Stage 1	Stage 2	Stage 3
	Quoted	Observable	Non-observable	Book value	Book value
(NOK million)	prices	assumptions	assumptions	30.06.2020	31.12.2019
Government and government guaranteed bonds
Mortgage and asset backed bonds		702.6		702.6	100.7
Total bonds 30.06.2020	0.0	702.6	0.0	702.6
Total bonds 31.12.2019		100.7
Interest rate derivatives
Total derivatives 30.06.2020	0.0	0.0	0.0	0.0
Derivatives with a positive fair value
Derivatives with a negative fair value
Total derivatives 31.12.2019

There have not been any changes between quoted prices and observable assumptions on the various financial instruments in the quarter.

VALUATION OF FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVOCI)

				Book value	Book value
(NOK million)	Stage 1	Stage 2	Stage 3	30.06.2020	31.12.2019
Loans to customers - retail market			18,899.7	18,899.7	20,403.3
Total loans to customers			18,899.7	18,899.7	20,403.3

Note 07

Segment information

Business segments are the company's primary reporting segments. The company has only one segment, Retail Lending. This segment comprises lending to private individuals, and all loans are purchased from Storebrand Bank ASA. The company's accounts for the 2nd quarter of 2020 therefore relate entirely to the Retail Lending segment.

Liabilities to credit institutions Note 08

Storebrand Boligkreditt AS has two credit facilities with Storebrand Bank ASA. One of these facilities is a normal overdraft facility, with a commitment of NOK 6 billion. This has no expiry date, but can be terminated by the bank on 15 months' notice.

The amount of the other facility is the payment obligations of Storebrand Boligkreditt the following 31 days on interest and principal amounts regarding Covered Bonds, including any connected derivatives. This facility may not be terminated by Storebrand Bank ASA until at least 3 months after the maturity date of the covered bond and the associated derivatives with the longest period to maturity.

In 2020 all covenant requirements are fulfilled.

Commercial papers and bonds issued Note 09

COVERED BONDS

(NOK million)					Book value
ISIN Code	Nominal value	Currency	Interest	Maturity 1)	30.06.2020
NO0010760192	4,000.0	NOK	Floating	16.06.2021	4,009.6
NO0010786726	4,000.0	NOK	Floating	15.06.2022	4,010.4
NO0010813959	4,000.0	NOK	Floating	20.06.2023	4,003.3
NO0010873177	5,000.0	NOK	Floating	19.06.2024	4,996.0
Total commercial papers and bonds issued 2)	17,000.0				17,019.3
Total commercial papers and bonds issued as at 31.12.2019	14,500.0				14,538.5

1) Maturity date in this summary is the first possible maturity date (Call date).

2) For covered bonds (CBs) that are allocated to the company's security, regulatory requirements for over-collateralisation of 102 per cent and an over-collateralisation requirement of 109.5 per cent apply for bonds issued prior to 21 June 2017. In 2020 all covenants are fulfilled. See note 11.

Capital Adequacy Note 10

ELIGIBLE CAPITAL

(NOK million)	30.06.2020	31.12.2019
Share capital	490.0	490.0
Other equity	1,064.6	1,045.8
Total equity	1,554.6	1,535.8
Deductions
Profit not included in the calculation of eligible capital	-18.8
AVA adjustments	-19.6	-20.5
Provision for group contribution		-62.6
Additions
Group contribution received		62.6
Core Equity Tier 1 (CET1)	1,516.2	1,515.3
Additional Tier 1 capital
Capital instruments eligible as Additional Tier 1 capital
Additions
Tier 1 capital	1,516.2	1,515.3
Tier 2 capital
Subordinated loans
Tier 2 capital deductions
Eligible capital (Tier 1 capital + Tier 2 capital)	1,516.2	1,515.3

MINIMUM CAPITAL REQUIREMENT

(NOK million)	30.06.2020	31.12.2019
Credit risk	552.6	591.3
Of which:
International organisations
Local and regional authorities
Institutions	0.8	0.2
Retail market
Loans secured against real estate	525.9	566.9
Loans past-due	2.5	3.2
Covered bonds	5.6	0.8
Other	17.8	20.1
Total minimum requirement for credit risk	552.6	591.3
Total minimum requirement for market risk	0.0	0.0
Operational risk	22.6	22.6
CVA risk
Deductions
Minimum requirement for net primary capital	575.3	613.9

CAPITAL ADEQUACY

(NOK million)	30.06.2020	31.12.2019
Capital ratio	21.1 %	19.7 %
Tier 1 capital ratio	21.1 %	19.7 %
Core equity Tier 1 (CET1) capital ratio	21.1 %	19.7 %

The standard method is used for credit risk and market risk and the basis method is used for operational risk. Total requirement to Core Equity Tier 1 (CET1) and eligible capital (Tier 1 capital + Tier 2 capital) are 11 per cent and 14.5 per cent. The countercyclical capital buffer requirement has decreased to 1.0 percentage from 31 Mars 2020.

BASIS OF CALCULATION (RISK-WEIGHTED VOLUME)

(NOK million)	30.06.2020	31.12.2019
Credit risk	6,907.9	7,390.7
Of which:
International organisations
Local and regional authorities
Institutions	10.3	2.7
Retail market
Loans secured against real estate	6,574.1	7,086.6
Loans past-due	31.2	39.6
Covered bonds	70.2	10.1
Other	222.2	251.8
Total basis of calculation credit risk	6,907.9	7,390.7
Total basis of calculation market risk	0.0	0.0
Operational risk	283.0	283.0
CVA risk
Deductions
Total basis of calculation of minimum requirements for capital base	7,190.9	7,673.7

Note 11

Loan to value ratios and collateral

(NOK million)	30.06.2020	31.12.2019
Gross loans 1)	18,904.9	20,404.9
Average loan balance per customer	2.2	2.2
No. of loans	9,058	10,076
Weighted average seasoning (months)	38	36
Weighted average remaining term (months)	273	269
Average loan to value ratio	54 %	54 %
Over-collateralisation 2)	114 %	140 %
Cover pool:
Residential mortgages 1)	18,817.4	20,284.2
Supplementary security	602	2.0
Total	19,419.3	20,286.2

1) In accordance with the Regulation for credit institutions that issue covered bonds, lending cannot exceed 75% of the value of collateral (i.e. value of properties pledged as collateral). As per 30 June 2020, the company had NOK 55 million that exceeds the loan to value limit and has therefore not been included in the cover pool. As per 30 June 2020, the company has 12 non-performing loans without evidence of impairment, equivalent to NOK 27 million. There are 4 non-performing loans with evidence of impairment of NOK 6 million where the impairment is assessed to be NOK 1.1 million. Non-performing loans with and without evidence of impairment, are not included in the cover pool.

2) Over-collateralisation has been calculated based on total volume of issued covered bonds of NOK 17.0 billion (nominal value).

Key figures Note 12

		Q2			Full Year
(NOK million)	2020	2019	30.06.2020	30.06.2019	2019
Profit and loss account: (as % of avg. total assets) 1)
Net interest income	0.54 %	0.88 %	0.73 %	0.84 %	0.86 %
Main balance sheet figures:
Total assets			19,699.7	17,912.9	20,560.9
Average total assets	20,537.3	18,149.9	20,535.1	18,315.7	18,710.6
Gross loans to customers			18,904.9	17,112.2	20,404.9
Equity			1,554.6	1,501.4	1,535.8
Other key figures:
Loan losses and provisions as % of average total lending	-0.01 %	0.01 %	0.08 %	0.00 %	0.00 %
Individual loan loss provisions as % of gross loss-exposed loans 2)			19.5 %	7.7 %	5.2 %
Cost/income ratio	77.5 %	51.1 %	60.4 %	50.8 %	48.0 %
Core equity Tier 1 (CET1) capital ratio			21.1 %	22.0 %	19.7 %
LCR 3)			928.0 %	230.0 %	886.0 %

Definitions:

1) Average total assets is calculated on the basis of monthly total assets for the quarter and for the year respectively..

2) Gross loss-exposed loans with evidence of impairment.

3) Liquidity coverage requirement.

Note 13

Net interest income

	Q2			Full Year
(NOK million)	2020	2019	30.06.2020	30.06.2019	2019
Interest on financial assets valued at amortised cost
Interest on loans to credit institutions	0.1	0.8	0.2	1.0	2.5
Interest on loans to customer
Interest on commercial papers, bonds and other interest-bearing securities	0.1	0.1	0.2	0.1	0.5
Total interest on financial assets valued at amortised cost	0.2	0.9	0.4	1.2	3.0
Interest on financial assets valued at fair value through other comprehensive income (OCI)
Interest on loans to customer	110.6	114.9	153.8	227.6	492.8
Total interest on financial assets valued at fair value through other
comprehensive income (OCI)	110.6	114.9	153.8	227.6	492.8
Interest on financial assets valued at fair value through profit and loss
Interest on commercial papers, bonds and other interest-bearing securities	0.3		0.5	0.2	0.9
Total interest on financial assets valued at fair value through profit
and loss	0.3	0.0	0.5	0.2	0.9
Total interest income	111.1	115.8	154.6	229.0	496.6
Interest on financial liabilities valued at amortised cost
Interest on debt to credit institutions	-7.1	-4.4	-12.4	-10.3	-33.1
Interest on securities issued	-76.0	-71.6	-94.1	-142.2	-300.9
Other interes expenses	-0.4		-0.9		-2.2
Total interest on financial liabilities valued at amortised cost	-83.5	-76.0	-107.4	-152.5	-336.2
Total interest expenses	-83.5	-76.0	-107.4	-152.5	-336.2
Net interest income	27.6	39.8	47.2	76.5	160.5

Note 14

Off balance sheet liabilities and contingent liabilities

(NOK million)	30.06.2020	31.12.2019
Unused credit facilities	1,167.6	1,229.2
Total contingent liabilities	1,167.6	1,229.2

Unused credit facilities encompass unused flexible mortgage facilities.

Per 30 June 2020, the company has not pledged any collateral.

Non-performing loans and loan losses

(NOK million)	30.06.2020	31.12.2019
Non-performing loans
Non-performing loans without evidence of impairment	26.7	30.7
Loss-exposed loans with evidence of impairment	5.6	4.1
Gross non-performing and loss-exposed loans	32.3	34.8
Loan loss provisions on individual loans excl. statistical provisions (IFRS9)	-1.1	-0.7
Net non-performing and loss-exposed loans	31.2	34.1
Key figures
Net non-performing and loss-exposed loans as % of gross loans	0.17 %	0.17 %

Loans are regarded as non-performing and loss-exposed:

• when a credit facility has been overdrawn for more than 90 days and the overdrawn amount minimum is NOK 2,000

• when an ordinary mortgage has arrears older than 90 days and thee arrears minimum is NOK 2,000

• when a credit card has arrears older than 90 days

When one of the three situations described above occurs, the specific loan is considered as non-performing.

without taking into account the customers other engagements.

LOSSES ON LOANS, GUARANTEES AND UNUSED CREDITS

(NOK million)	30.06.2020	31.12.2019
The periods change in impairment losses stage 1	-0.8	0.2
The periods change in impairment losses stage 2	-2.2	0.1
The periods change in impairment losses stage 3	-0.6	-0.2
Realised losses	-0.2
Recoveries on previously realised losses
Credit loss on interest-bearing securities
Other changes
Loss expense for the period	-3.8	0.1

LOAN PORTFOLIO AND GUARANTEES

	30.06.2020	31.12.2019
(NOK million)	Book value	Book value
Loans to customers at amortised cost
Loans to customers at fair value through profit and loss
Loans to customers at fair value through other comprehensive income (OCI)	18,904.9	20,404.9
Total gross loans to customers	18,904.9	20,404.9
Provision for expected loss Stage 1	-1.0	-0.3
Provision for expected loss Stage 2	-2.8	-0.6
Provision for expected loss Stage 3	-1.4	-0.8
Net loans to customers	18,899.7	20,403.3

CHANGE IN GROSS LOANS TO CUSTOMERS VALUED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (OCI)

				Total
(NOK million)	Stage 1	Stage 2	Stage 3	gross loans
Gross loans 01.01.2020	19,225.6	1,144.6	34.8	20,404.9
Transfer to stage 1	168.3	-168.3		0.0
Transfer to stage 2	-1,424.2	1,433.2	-9.0	0.0
Transfer to stage 3	-9.3	-14.6	23.8	0.0
New loans	2,106.9	350.6		2,457.5
Derecognition	-3,482.5	-182.6	-17.4	-3,682.5
Other changes	-249.4	-25.7	0.1	-275.1
Gross loans 30.06.2020	16,335.5	2,537.2	32.3	18,904.9

				Total
(NOK million)	Stage 1	Stage 2	Stage 3	gross loans
Gross loans 01.01.2019	17,416.3	1,039.1	30.7	18,486.0
Transfer to stage 1	196.6	-196.6		0.0
Transfer to stage 2	-371.1	385.7	-14.6	0.0
Transfer to stage 3	-7.2	-21.6	28.8	0.0
New loans	7,592.3	261.8	1.6	7,855.7
Derecognition	-5,247.6	-304.5	-9.1	-5,561.2
Other changes	-353.7	-19.2	-2.6	-375.5
Gross loans 31.12.2019	19,225.6	1,144.6	34.8	20,404.9

CHANGE IN MAXIMUM EXPOSURE FOR GUARANTEES AND UNUSED CREDITS

				Total
(NOK million)	Stage 1	Stage 2	Stage 3	gross loans
Maximum exposure 01.01.2020	1,225.3	3.9		1,229.2
Transfer to stage 1	0.6	-0.6		0.0
Transfer to stage 2	-19.6	19.6		0.0
Transfer to stage 3				0.0
New loans	1.3			1.3
Derecognition	-126.6	-0.7		-127.3
Other changes	60.8	3.5		64.3
Maximum exposure 30.06.2020	1,141.8	25.7	0.0	1,167.6

				Total
(NOK million)	Stage 1	Stage 2	Stage 3	gross loans
Maximum exposure 01.01.2019	1,397.2	3.9		1,401.1
Transfer to stage 1	1.9	-1.9		0.0
Transfer to stage 2	-5.4	5.4		0.0
Transfer to stage 3				0.0
New loans	59.8			59.8
Derecognition	-259.8	-0.6		-260.4
Other changes	31.6	-2.9		28.7
Maximum exposure 31.12.2019	1,225.3	3.9	0.0	1,229.2

TOTAL LOAN LOSS PROVISIONS IN THE BALANCE SHEET

	Stage 1	Stage 2	Stage 3
		Lifetime ECL	Lifetime ECL
		- no objective	- objective
		evidence of	evidence of
(NOK million)	12-month ECL	impairment	impairment	Total
Loan loss provisions 01.01.2020	0.3	0.6	0.8	1.6
Transfer to stage 1 (12-month ECL)	0.1	-0.1		0.0
Transfer to stage 2 ( lifetime ECL - no objective evidence of impairment)		0.1		0.0
Transfer to stage 3 (lifetime ECL - objective evidence of impairment)
Net remeasurement of loan losses	-0.1	0.7	0.8	1.5
New financial assets originated or purchased	0.3	0.7		1.0
Financial assets that have been derecognised		-0.1		-0.2
ECL changes of balances on financial assets without changes in stage in the
period	0.5	1.0	-0.1	1.5
Changes due to modification without any effect in derecognition
ECL allowance on written-off (financial) assets			-0.2	-0.2
Changes in models/risk parameters
Foreign exchange and other changes
Loan loan loss provisions 30.06.2020	1.0	2.8	1.4	5.2
Loan loss provisions on loans to customers valued at amortised cost
Loan loss provisions on loans to customers valued at fair value through
other comprehensive income (OCI)	1.0	2.8	1.4	5.2
Loan loss provisions on guarantees and unused credit limits
Total loan loss provisions	1.0	2.8	1.4	5.2

The macroeconomic environment is significantly changed since year end 2019. The unemployment rate including furloughs peaked at approximately 15 per cent (including part time unemployment), however, the unemployment rate including furloughs and part time unemployment is reduced to less than 10 per cent and full time unemployment to less than 5 per cent at the end of the first half year. There is thus signs of macroeconomic improvement.

The calculation of expected credit losses is based upon various macroeconomic scenarios in accordance with the IFRS 9 standard. The uncertainty of the economic development and outlook therefore causes an increase in expected credit losses from year end 2019. The increase is due to altered weights on the different scenarios. The credit models (PD, LGD, EAD) have not been changed. The increase in expected credit loss and stage migration is virtually completely due to the economic development and outlook, and not linked to portfolio quality in terms of credit ratings, defaults, loan-to-value ratios etc. which have not changed significantly since year end 2019.

There is also a higher uncertainty in the point estimate of expected credit losses, and there is a higher possibility in larger variations in expected credit losses the next quarters as well as on stage migration.

Total loan loss provisions	0.3	0.6	0.8	1.6
Loan loss provisions on guarantees and unused credit limits
Loan loss provisions on loans to customers valued at fair value through other comprehensive income (OCI)	0.3	0.6	0.8	1.6
Loan loss provisions on loans to customers valued at amortised cost
Loan loan loss provisions 31.12.2019	0.3	0.6	0.8	1.6
Foreign exchange and other changes
Changes in models/risk parameters
ECL allowance on written-off (financial) assets
Changes due to modification without any effect in derecognition
ECL changes of balances on financial assets without changes in stage in the period	-0.1	-0.1	0.1	-0.1
Financial assets that have been derecognised	-0.1	-0.1		-0.3
New financial assets originated or purchased	0.1	0.1		0.3
Net remeasurement of loan losses	-0.1	0.1	0.5	0.4
Transfer to stage 3 (lifetime ECL - objective evidence of impairment)
Transfer to stage 2 ( lifetime ECL - no objective evidence of impairment)
Transfer to stage 1 (12-month ECL)	0.1	-0.1		0.0
Loan loss provisions 01.01.20019	0.4	0.6	0.2	1.3
(NOK million)	12-month ECL	impairment	impairment	Total
		evidence of	evidence of
		- no objective	- objective
		Lifetime ECL	Lifetime ECL

Note 16

Quarterly income statement

	Q2	Q1	Q4	Q3	Q2
(NOK million)	2020	2020	2019	2019	2019
Interest income	111.1	154.6	138.6	129.1	115.8
Interest expense	-83.5	-107.4	-98.8	-84.9	-76.0
Net interest income	27.6	47.2	39.8	44.2	39.8
Net gains on financial instruments	0.2	-4.5	-0.6	-1.8	-1.6
Other income	-0.1		-0.1	-0.1	-0.1
Total other operating income	0.1	-4.5	-0.7	-1.9	-1.6
Staff expenses	-0.1		-0.1
General administration expenses
Other operating cost	-21.4	-21.0	-18.7	-18.2	-19.5
Total operating costs	-21.5	-21.1	-18.8	-18.1	-19.5
Operating profit before loan losses	6.3	21.6	20.3	24.2	18.7
Loan losses for the period	0.5	-4.3	-0.6	0.2	-0.2
Profit before tax	6.8	17.3	19.7	24.3	18.4
Tax	-1.5	-3.8	-4.4	-5.3	-4.1
Profit for the year	5.3	13.5	15.4	19.0	14.4

Storebrand Boligkreditt AS - Declaration by the Board of Directors and the Chief Executive Officer

The Board of Directors and the Chief Executive Officer have today considered and approved the interim report and interim financial statements for Storebrand Bank ASA and the Storebrand Bank Group for the first six months of 2020 (the 2020 half-yearly report).

The half-yearly report has been prepared in accordance with the requirements of IAS 34 Interim Financial Reporting as approved by the EU, as well as the additional Norwegian requirements set out in the Securities Trading Act.

In the best judgement of the Board and the CEO, the financial statements for the first six months of 2020 have been prepared in accordance with applicable accounting standards, and the information in the financial statements provides a fair and true picture of the parent company's and Group's assets, liabilities, financial standing and results as a whole as at 30 June 2020. In the best judgement of the Board and the CEO, the half-yearly report provides a fair and true overview of important events during the accounting period and their effects on the financial statements for the first six months for Storebrand Bank ASA and the Storebrand Bank Group. In the best judgement of the Board and the CEO, the descriptions of the most important elements of risk and uncertainty that the Group faces in the remaining six months, and a description of related parties' material transactions, also provide a true and fair view.

Lysaker, 14 July 2020 The Board of Directors of Storebrand Boligkreditt AS

Bernt Uppstad Chairman of the Board

Karin Greve Isdahl-Flaa Thor Bendik Weider Leif Helmich Pedersen Deputy Chairman of the Board

Einar Leikanger Statutory Chief Executive Officer

Finansiell kalender 2015 Financial Calender 2020

11. februar Resultat 4. kvartal 2014 15. april Generalforsamling 11 February 29 April 21 October Result Q3 2020 10 February 2020 Result Q4 2020

Result Q4. 2014 Result Q1. 2015

Investor Relations Investor Relations

kontakter Contacts

Kjetil Ramberg Krøkje Head of IR kjetil.r.krokje@storebrand.no +47 9341 2155 Sigbjørn Birkeland Finance Director sigbjorn.birkeland@storebrand.no +47 9348 0893 Lars Løddesøl CFO lars.loddesol@storebrand.no +47 2231 5624 Kjetil Ramberg Krøkje Head of IR kjetil.r.krokje@storebrand.no +47 9341 2155 Åse Jonassen CEO aase.jonassen@storebrand.no +47 4157 7397

Kjetil Ramberg Krøkje Group Head of Finance, Strategy and M&A kjetil.r.krokje@storebrand.no +47 9341 2155 Einar Leikanger Statutory Chief Executive Officer einar.andreas.leikanger@storebrand.no +47 9342 0379 Daniel Sundahl Head of Investor Relations and Rating daniel.sundahl@storebrand.no +47 9136 1899

P.O Box 474, N-1327 Lysaker, Norway Telephone 08880 storebrand.no Storebrand Boligkreditt AS Professor Kohts vei 9 P.O. Box 474, 1327 Lysaker, Norway Telephone 08880

storebrand.no