Sydbank — Audit Report / Information 2014

Oct 26, 2014

Aabenraa, Denmark, 2014-10-26 12:01 CET (GLOBE NEWSWIRE) --

Comprehensive assessment of the financial health of European banks
Sydbank has participated in a comprehensive assessment of the financial health
of European banks.

The assessment, carried out across 123 banks, seeks to assess the resilience of
European banks, including the banks’ solvency, to severe shocks under
hypothetical adverse scenarios. The assessment began in November 2013 and has
consequently lasted for 12 months.

The comprehensive assessment comprises two elements:

1. Asset quality review (AQR)
2. EU-wide stress test

Asset quality review (AQR)
The AQR increases the transparency of banks’ exposures, including the valuation
of assets and the adequacy of value adjustments made.

The AQR has been conducted by the Danish FSA according to guidelines
established by the European Central Bank (ECB). The AQR was more comprehensive
compared with previous analyses conducted by the Danish FSA.

The Danish FSA’s statement as regards the AQR has been enclosed as an appendix.
The Danish FSA has assessed that additional impairment charges at 31 December
2013 of DKK 75m should be recorded, which is considered insignificant.

The need for impairment charges of DKK 75m is composed of:

-- Individual impairment charges of DKK 51m which are included in the
impairment charges for Q1 2014.
-- Collective impairment charges of DKK 24m which are included in the Bank’s
impairment charges for Q3 2014.

The result of the review does not give rise to change the expectations
announced in the interim report for the first half of 2014 as regards
impairment charges for loans and advances for 2014 which are still expected to
represent around DKK 700-800m.

2014 EU-wide stress test
The 2014 EU-wide stress test has been conducted by the European Banking
Authority (EBA) in cooperation with national authorities, the European Central
Bank (ECB), the European Commission and the European Systemic Risk Board
(ESRB). From Denmark the Danish FSA participated as the national authority.

The stress test is based on the EBA’s common methodology and guidelines as
described in the EBA’s Methodological note. Neither the result of the baseline
scenario nor the result of the adverse scenario can in any way be construed as
Sydbank’s forecasts or be compared to other information published by Sydbank.

The stress test uses a baseline scenario and an adverse scenario that covers
the period 2014-2016.

The baseline scenario is based on the European Commission’s forecast from
February 2014 which is in line with the current expected economic development
in the case of Denmark.

The adverse scenario has been designed by the ESRB and reflects the systemic
risks that are currently assessed as representing the most pertinent threats to
the stability of the EU banking sector.

The assumptions and methodology were developed to assess banks’ Common Equity
Tier 1 capital against a fixed minimum of 8.0% and 5.5% under the baseline
scenario and the adverse scenario, respectively.

Sydbank is pleased that the EU-wide stress test has been conducted and with the
Group’s individual results indicating:

-- great resilience to adverse economic developments in the period 2014-2016
-- no appreciable exposure to governments and banks in countries with
increased risk
-- a very robust capital structure.

Under the baseline scenario Sydbank’s CET1 ratio rises to 15.5% in 2016
compared with 13.7% at year-end 2013, equal to 7.5 percentage points more than
the fixed minimum of 8.0%.

Under the adverse scenario Sydbank’s CET1 ratio decreases to 12.9% in 2016
compared with 13.7% at year-end 2013, equal to 7.4 percentage points more than
the fixed minimum of 5.5%.

Detailed results
The detailed results of the stress test under the baseline and adverse
scenarios as well as information on banks’ credit exposures and exposures to
central and local governments are provided in the accompanying disclosure
templates based on the common format provided by the EBA.

Further information
See more details on the scenarios, assumptions and methodology on the EBA’s
website:
http://www.eba.europa.eu/risk-analysis-and-data/eu-wide-stress-testing/2014