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Sydbank Interim / Quarterly Report 2016
3387_rns_2016-08-25_33644caf-9e73-4586-82ee-bd36493e1777.pdf
Interim / Quarterly Report
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Interim Report – First Half 2016
Sydbank Group
Sydbank
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Sydbank’s Interim Report – First Half 2016
Falling costs and high credit quality ensure satisfactory development in performance
Sydbank has delivered a solid performance for the first half of 2016 and continues the positive trend. The Bank’s loans and advances have risen by DKK 4.5bn whereas the Bank’s impairment charges have fallen by 63% compared with one year ago. Moreover the financial statements show a decline in the Bank’s costs (core earnings). In 2016 and 2017 Sydbank will allocate extra resources to develop customer-oriented digital solutions.
CEO Karen Frøsig comments:
- Despite a difficult market situation growth in lending continues and a high credit quality is maintained. The fact that lending has grown for the 10th consecutive quarter is not only positive for the Bank but also for customers and ultimately society, which needs investments and growth. We are also pleased that our impairment charges remain at a low level and that our ongoing efforts to reduce the Bank’s costs have a positive effect on performance.
Sydbank cancels agricultural debt worth DKK 500m. Karen Frøsig comments:
- Sydbank aims to find good solutions for and together with our customers. The purpose of the government’s agricultural package, which is supported by the financial sector, is to create better prospects for the most efficient but indebted farmers who have a future in Danish agriculture. Sydbank wishes to contribute to creating prospects for the most efficient farms with a negative equity and consequently we will offer them the option to convert part of their bank debt to subordinated loan capital during the second half of 2016. This measure will not strain our customers, shareholders or the Bank but it will convert debt of DKK 500m, which has already been written down.
On Sydbank’s 1H result she comments:
- We are pleased to note an increase in profit after tax of DKK 113m compared with 1H 2015. The improvements in costs, impairment charges, investment portfolio earnings and non-recurring items more than make up for the decline in income and this is what creates the increase in profit. The level of activity and the figures for the first six months show that Sydbank is a relevant and excellent bank that masters the balance between personal and digital relationships by offering the best of both worlds. This is characteristic of Sydbank’s values and key to our Blue growth strategy.
1H 2016 – highlights
- Profit of DKK 643m. This is equal to a return on shareholders’ equity of 11.4% p.a. after tax.
- Core income of DKK 2,101m. This is a decline of 6% compared to the same period in 2015 when core income was historically high.
- Total income of DKK 2,224m. This is a drop of 7% compared with the same period in 2015.
- Impairment charges for loans and advances represent DKK 81m and have declined by 63% compared with the same period in 2015.
- Bank loans and advances have risen by DKK 4.5bn, equal to 6.0%.
- The Common Equity Tier 1 capital ratio has climbed by 0.3 percentage points and constitutes 14.8%.
- A share buyback programme of DKK 350m was commenced on 29 February 2016.
Outlook for 2016
Sydbank projects limited positive economic growth in the Danish economy in 2016. Furthermore we expect:
- a slight decline in core income relative to income for 2015.
- unchanged trading income relative to income for 2015 but dependent on financial market developments.
- a reduction in costs (core earnings) – in spite of the general pay rises agreed for the financial sector of 1.80% and a payroll tax increase of 1.40% – as a result of the measures implemented and the discontinuation of payments to the deposit guarantee scheme.
- lower impairment charges in 2016.
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Contents
Financial Review
- Group Financial Highlights ... 4
- Highlights ... 5
- Financial Review – Performance in 1H 2016 ... 7
- Income statement ... 15
- Statement of Comprehensive Income ... 15
- Balance sheet ... 16
- Financial Highlights – Quarterly ... 17
- Financial Highlights – Half-yearly ... 18
- Capital ... 19
- Cash Flow Statement ... 21
- Segment Reporting ... 22
- Notes ... 23
- Management Statement ... 36
- Supplementary Information ... 37
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Group Financial Highlights
| 1H 2016 | 1H 2015 | Index 16/15 | Q2 2016 | Q2 2015 | Full year 2015 | |
|---|---|---|---|---|---|---|
| Income statement (DKKm) | ||||||
| Core income | 2,101 | 2,227 | 94 | 1,051 | 1,112 | 4,329 |
| Trading income | 123 | 152 | 81 | 69 | 34 | 215 |
| Total income | 2,224 | 2,379 | 93 | 1,120 | 1,146 | 4,544 |
| Costs, core earnings | 1,346 | 1,374 | 98 | 665 | 685 | 2,675 |
| Core earnings before impairment | 878 | 1,005 | 87 | 455 | 461 | 1,869 |
| Impairment of loans and advances etc | 81 | 217 | 37 | 43 | 101 | 316 |
| Core earnings | 797 | 788 | 101 | 412 | 360 | 1,553 |
| Investment portfolio earnings | (8) | (95) | 8 | 14 | (64) | (80) |
| Profit before non-recurring items | 789 | 693 | 114 | 426 | 296 | 1,473 |
| Non-recurring items, net | 26 | - | - | 26 | - | - |
| Profit before tax | 815 | 693 | 118 | 452 | 296 | 1,473 |
| Tax | 172 | 163 | 106 | 92 | 70 | 325 |
| Profit for the period | 643 | 530 | 121 | 360 | 226 | 1,148 |
| Balance sheet highlights (DKKbn) | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Loans and advances at amortised cost | 78.8 | 71.4 | 110 | 78.8 | 71.4 | 74.3 |
| Loans and advances at fair value | 6.8 | 9.7 | 70 | 6.8 | 9.7 | 10.2 |
| Deposits and other debt | 79.9 | 81.2 | 98 | 79.9 | 81.2 | 79.9 |
| Bonds issued at amortised cost | 7.1 | 3.7 | 192 | 7.1 | 3.7 | 3.7 |
| Subordinated capital | 2.1 | 2.1 | 100 | 2.1 | 2.1 | 2.1 |
| Shareholders' equity | 11.1 | 11.1 | 100 | 11.1 | 11.1 | 11.4 |
| Total assets | 148.0 | 153.1 | 97 | 148.0 | 153.1 | 142.7 |
| Financial ratios per share (DKK per share of DKK 10) | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| EPS Basic ** | 9.1 | 7.2 | 5.1 | 3.1 | 15.8 | |
| EPS Diluted ** | 9.1 | 7.2 | 5.1 | 3.1 | 15.8 | |
| Share price at end of period | 167.2 | 255.8 | 167.2 | 255.8 | 221.8 | |
| Book value | 157.6 | 153.1 | 157.6 | 153.1 | 160.2 | |
| Share price/book value | 1.06 | 1.67 | 1.06 | 1.67 | 1.38 | |
| Average number of shares outstanding (in millions) | 71.0 | 73.2 | 70.7 | 73.0 | 72.5 | |
| Dividend per share | - | - | - | - | 11.12 | |
| Other financial ratios and key figures | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Common Equity Tier 1 capital ratio | 14.8 | 14.1 | 14.8 | 14.1 | 14.5 | |
| Tier 1 capital ratio | 16.1 | 15.5 | 16.1 | 15.5 | 15.9 | |
| Capital ratio | 18.0 | 17.2 | 18.0 | 17.2 | 17.6 | |
| Pre-tax profit as % of average shareholders' equity ** | 7.3 | 6.2 | 4.1 | 2.6 | 13.0 | |
| Post-tax profit as % of average shareholders' equity ** | 5.7 | 4.7 | 3.3 | 2.0 | 10.1 | |
| Costs (core earnings) as % of total income | 60.5 | 57.8 | 59.4 | 59.8 | 58.9 | |
| Return on assets (%) | 0.4 | 0.3 | 0.2 | 0.1 | 0.8 | |
| Interest rate risk | 0.6 | 2.2 | 0.6 | 2.2 | 2.8 | |
| Foreign exchange position | 2.1 | 3.0 | 2.1 | 3.0 | 2.2 | |
| Foreign exchange risk | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Loans and advances relative to deposits * | 0.9 | 0.8 | 0.9 | 0.8 | 0.8 | |
| Loans and advances relative to shareholders' equity * | 7.1 | 6.4 | 7.1 | 6.4 | 6.5 | |
| Growth in loans and advances for the period * | 6.1 | 4.3 | 3.5 | 1.1 | 8.5 | |
| Excess cover relative to statutory liquidity requirements | 192.7 | 185.1 | 192.7 | 185.1 | 166.8 | |
| Total large exposures | 0.0 | 10.2 | 0.0 | 10.2 | 0.0 | |
| Accumulated impairment ratio | 4.2 | 4.9 | 4.2 | 4.9 | 4.7 | |
| Impairment ratio for the period ** | 0.09 | 0.24 | 0.05 | 0.11 | 0.36 | |
| Number of full-time staff at end of period | 2,032 | 2,164 | 94 | 2,032 | 2,164 | 2,044 |
- Financial ratios are calculated on the basis of loans and advances at amortised cost.
** Ratios have not been converted to a full-year basis.
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Highlights
Continued tight rein on costs and credit quality ensures satisfactory development in performance Sydbank's financial statements for 1H show a profit before tax of DKK 815m compared with DKK 693m in 1H 2015. The increase is due to a significant decline in impairment charges of 63%, improved investment portfolio earnings, one-off income of DKK 31m from an adjustment of the purchase sum concerning the sale of shares in Nets Holding in 2014 as well as falling costs (core earnings) despite the acquisition of Syd Fund Management A/S on 1 April 2015.
Profit before tax equals a return of 14.5% p.a. on average shareholders' equity.
Core income, trading income, costs (core earnings) and impairment charges are in line with the expectations announced in the interim report for Q1 2016.
Net interest etc constitutes DKK 1,173m compared with DKK 1,204m in 2015 – a decrease of DKK 31m.
Core income represents DKK 2,101m compared with DKK 2,227m in 2015 – a decline of DKK 126m.
Total income amounts to DKK 2,224m against DKK 2,379m in 2015.
Core earnings constitute DKK 797m compared with DKK 788m in 2015 – an increase of DKK 9m.
Profit for the period amounts to DKK 643m compared with DKK 530m in 2015 – an increase of DKK 113m.
Follow-up on the 3-year plan – Blue growth
The strategy for the 3-year period 2016-2018 is named "Blue growth".
- Blue growth means high-quality and profitable banking – pure and simple.
Blue growth – targets:
- Realise a return on shareholders' equity of a minimum of 12% after tax or be in the top 3 of the 6 largest banks
- Maintain top 3 ranking among the 6 largest banks in terms of customer satisfaction.
To ensure further automation of processes and utilisation of the possibilities in connection with digitisation, DKK 25m will be allocated annually in 2016 and 2017 to optimise IT systems. The amount will be recognised under "Non-recurring items".
These funds cover two projects implemented in 2016:
- Optimisation of housing loan processes
- Integration of credit processes into existing CRM solution.
Both projects will lead to savings in 2017 and onwards.
Customers and employees alike will experience considerable improvements as a result of both projects. Customers in the form of shorter response times and case processing times. Employees in the form of smoother procedures and qualitative improvements. Both projects will contribute to developing the Bank as well as make it possible to adjust costs – also in the years ahead.
1H performance
Compared with 1H 2015 core income has dropped by DKK 126m or 6% to DKK 2,101m. The decline is predominantly attributable to remortgaging and loan fees as well as commission and brokerage.
Trading income decreased to DKK 123m in 1H 2016 compared with DKK 152m in the same period in 2015.
Total income represents DKK 2,224m, a decline of 7% compared with 1H 2015.
Costs (core earnings) are a constant area of focus at Sydbank. Therefore the Bank maintained tight control of costs (core earnings) in 1H, which constituted DKK 1,346m compared with DKK 1,374m in 2015 – a reduction of DKK 28m.
The Group's impairment charges for loans and advances have declined by DKK 136m to DKK 81m compared with 1H 2015.
Core earnings constitute DKK 797m compared with DKK 788m in 1H 2015 – an increase of DKK 9m.
Together the Group's position-taking and liquidity handling recorded investment portfolio earnings of minus DKK 8m in 1H 2016 compared with minus DKK 95m a year ago.
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Profit before tax for 1H 2016 amounts to DKK 815m compared with DKK 693m in the same period in 2015.
Tax represents DKK 172m. Profit for the period amounts to DKK 643m compared with DKK 530m in 2015.
During 1H 2016 Sydbank recorded an increase in bank loans and advances of DKK 4.5bn. This is satisfactory given the highly competitive market.
Capital
The Group has implemented a share buyback programme of DKK 350m. The share buyback commenced on 29 February 2016 and will be completed by 31 December 2016. At end-June 1,213,500 shares worth DKK 220m, made up at the trade date, had been repurchased. The share buyback is part of the capital adjustment to optimise the capital structure in accordance with the capital targets and capital policy published in the 2015 Annual Report.
Status – targets
| Target | Objective | Status at 30 June 2016 | Comment |
|---|---|---|---|
| Return on shareholders' equity after tax | Over 12% * | 11.4% | Progressing as planned |
| Customer satisfaction – Corporate | Top 3 ** | 3rd – Aalund | Met in 2015 |
| Customer satisfaction – Retail | Top 3 ** | 2nd – EPSI | Met in 2015 |
| Common Equity Tier 1 capital ratio | Around 13.5% | 14.8% | Met from Q3 2013 |
| Capital ratio | Around 17.0% | 18.0% | Met from Q1 2015 |
| Dividend | 30-50% of profit for the year after tax | 50%+20% of profit for the year after tax in 2015 | Met in 2015 |
- or top 3 ranking among the 6 largest banks ** among the 6 largest banks
Outlook for 2016
Limited economic growth is projected for the Danish economy in 2016.
Core income is expected to decline slightly relative to income for 2015.
Trading income is projected to remain unchanged relative to income in 2015 but is dependent on financial market developments.
In spite of the general pay rises agreed for the financial sector of 1.80% and a payroll tax increase of 1.40%, costs (core earnings) are expected to decrease as a result of the measures implemented and the discontinuation of payments to the deposit guarantee scheme.
Lower impairment charges are forecast for 2016.
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Financial Review – Performance in 1H 2016
The Sydbank Group has recorded a profit before tax of DKK 815m (1H 2015: DKK 693m).
Profit before tax equals a return of 14.5% p.a. on average shareholders’ equity.
Profit for the period after tax amounts to DKK 643m compared with DKK 530m in 2015.
Profit after tax equals a return of 11.4% p.a. on average shareholders’ equity.
The result is in line with the expectations at the beginning of the year.
The result is characterised by:
1H
- A 6% decrease in core income
- A decline in trading income of DKK 29m
- A 2% decrease in costs (core earnings) to DKK 1,346m
- A 63% decline in impairment charges for loans and advances
- A rise in core earnings of DKK 9m to DKK 797m
- Negative investment portfolio earnings of DKK 8m
- Bank loans and advances of DKK 78.8bn (year-end 2015: DKK 74.3bn)
- Bank deposits of DKK 79.9bn (year-end 2015: DKK 79.9bn)
- A capital ratio of 18.0%, including a Common Equity Tier 1 capital ratio of 14.8%
- An individual solvency need of 10.0% (year-end 2015: 9.7%).
Q2
- Unchanged core income of DKK 1,051m compared with DKK 1,050m in Q1 2016.
| Income statement – 1H (DKKm) | 2016 | 2015 |
|---|---|---|
| Core income | 2,101 | 2,227 |
| Trading income | 123 | 152 |
| Total income | 2,224 | 2,379 |
| Costs, core earnings | 1,346 | 1,374 |
| Core earnings before impairment | 878 | 1,005 |
| Impairment of loans and advances etc | 81 | 217 |
| Core earnings | 797 | 788 |
| Investment portfolio earnings | (8) | (95) |
| Profit before non-recurring items | 789 | 693 |
| Non-recurring items, net | 26 | - |
| Profit before tax | 815 | 693 |
| Tax | 172 | 163 |
| Profit for the period | 643 | 530 |
Core income
Total core income has declined by DKK 126m to DKK 2,101m.
Net interest has decreased by DKK 31m to DKK 1,173m.
Net income from the cooperation with Totalkredit represents DKK 134m (2015: DKK 153m) after a set-off of loss of DKK 10m (2015: DKK 15m). The cooperation with DLR Kredit has generated an income of DKK 58m (2015: DKK 49m). Compared to 2015 total mortgage credit income has gone down by DKK 11m to DKK 193m – a decrease of 5%. The income of DKK 58m from the cooperation with DLR Kredit includes a positive adjustment of DKK 13m as regards the income for 2015.
Income from remortgaging and loan fees has dropped from DKK 99m to DKK 51m compared with 2015 – a decline of 48%. The decline is a result of the exceptionally high remortgaging activity in 1H 2015 as well as the price adjustments implemented due to the turmoil that arose in connection with the announced increases in administration margins on mortgage loans.
Commission and brokerage income has decreased by DKK 48m to DKK 180m compared with 2015 – a decline of 21%.
The remaining income components have risen by DKK 12m compared to 2015.
| Core income – 1H (DKKm) | 2016 | 2015 |
|---|---|---|
| Net interest etc | 1,173 | 1,204 |
| Mortgage credit | 193 | 204 |
| Payment services | 96 | 102 |
| Remortgaging and loan fees | 51 | 99 |
| Commission and brokerage | 180 | 228 |
| Commission etc investment funds and pooled pension plans | 187 | 181 |
| Asset management | 95 | 92 |
| Custody fees | 36 | 39 |
| Other operating income | 90 | 78 |
| Total | 2,101 | 2,227 |
Trading income
Trading income decreased to DKK 123m in 1H 2016 compared with DKK 152m in the same period in 2015. Trading income is at a normal level.
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Costs and depreciation
The Group's costs and depreciation totalled DKK 1,354m, equal to a decrease of DKK 23m compared to 2015.
| Costs and depreciation – 1H (DKKm) | 2016 | 2015 |
|---|---|---|
| Staff costs | 766 | 790 |
| Other administrative expenses | 530 | 479 |
| Amortisation/depreciation and impairment of intangible assets and property, plant and equipment | 49 | 48 |
| Other operating expenses | 9 | 60 |
| Total costs and depreciation | 1,354 | 1,377 |
| Distributed as follows: | ||
| Costs, core earnings | 1,346 | 1,374 |
| Costs, investment portfolio earnings | 3 | 3 |
| Non-recurring costs | 5 | - |
Costs (core earnings) represent DKK 1,346m compared with DKK 1,374m in 2015.
At the end of 1H 2016 the Group's staff numbered 2,032 (full-time equivalent) compared with 2,164 at 30 June 2015.
As a consequence of the Bank's ongoing adjustment of its service concept and its efforts to reduce costs (core earnings), seven branches were closed during the first six months. This brings the number of branches to 64 in Denmark and three in Germany.
Core earnings before impairment
Core earnings before impairment charges for loans and advances represent DKK 878m – a decrease of DKK 127m compared with the same period in 2015.
Impairment of loans and advances etc
Impairment charges for loans and advances represent DKK 81m against DKK 217m in the same period in 2015 – a reduction of DKK 136m or 63%.
In 1H 2016 individual impairment charges as regards agricultural exposures totalled DKK 200m. Collective impairment charges for agricultural exposures represent DKK 150m at 30 June 2016 – a reduction of DKK 75m compared with year-end 2015. The net effect of impairment charges as regards agriculture constitutes DKK 125m in 1H 2016.
The chart below shows impairment charges for loans and advances in the last four quarters as regards agriculture etc, trade, real property, other corporate lending as well as retail clients.
Individual impairment charges - quarterly DKKm
At 30 June 2016 the impairment ratio represents 0.10% relative to bank loans and advances and 0.09% relative to bank loans and advances and guarantees. At end-June 2016 accumulated impairment and provisions amount to DKK 3,939m – a decline of DKK 243m compared with the beginning of the year.
Individually impaired bank loans and advances
Compared with 30 June 2015 impaired bank loans and advances before impairment charges have decreased by DKK 417m to DKK 6,211m, equal to a decline of 6.3%.
DKK 52m of the decrease is attributable to non-defaulted bank loans and advances and DKK 365m is attributable to defaulted bank loans and advances. During the same period individually impaired bank loans and advances after impairment charges fell by DKK 106m, equal to 3.8%. Impairment charges for individually impaired bank loans and advances represent 56.3% (end-June 2015: 57.4% and year-end 2015: 56.9%).
In 1H 2016 reported losses amounted to DKK 472m (1H 2015: DKK 446m). Of the reported losses DKK 389m has previously been written down.
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| Individually impaired bank loans and advances (DKKm) | 30 Jun 2016 | 31 Dec 2015 | 30 Jun 2015 |
|---|---|---|---|
| Non-defaulted bank loans and advances | 4,546 | 4,523 | 4,598 |
| Defaulted bank loans and advances | 1,665 | 1,750 | 2,030 |
| Impaired bank loans and advances | 6,211 | 6,273 | 6,628 |
| Impairment charges for bank loans and advances subject to individual impairment | 3,496 | 3,569 | 3,807 |
| Impaired bank loans and advances after impairment charges | 2,715 | 2,704 | 2,821 |
| Impaired bank loans and advances as % of bank loans and advances before impairment charges | 7.5 | 8.0 | 8.8 |
| Impairment charges as % of bank loans and advances before impairment charges | 4.2 | 4.6 | 5.0 |
| Impairment as % of impaired bank loans and advances | 56.3 | 56.9 | 57.4 |
| Impairment charges as % of defaulted bank loans and advances | 210.0 | 203.9 | 187.5 |
Impairment charges as a percentage of defaulted bank loans and advances at 30 June 2016 stand at 210.0.
The figure below shows the breakdown of impaired bank loans and advances in terms of defaulted bank loans and advances and non-defaulted bank loans and advances. The bulk of impaired bank loans and advances concern non-defaulted bank loans and advances.
Since 30 June 2015 defaulted bank loans and advances have decreased by DKK 365m to DKK 1,665m, equal to a decline of 18%.
Since 30 June 2015 non-defaulted bank loans and advances have dropped by DKK 52m to DKK 4,546m, equal to a decline of 1%.
Core earnings
Core earnings represent DKK 797m – an increase of DKK 9m or 1% compared with one year ago.
Investment portfolio earnings
Together the Group's position-taking and liquidity handling recorded negative earnings of DKK 8m in 1H 2016 compared with negative earnings of DKK 95m a year ago.
| Investment portfolio earnings – 1H (DKKm) | 2016 | 2015 |
|---|---|---|
| Position-taking | (31) | (138) |
| Liquidity generation and liquidity reserves | 29 | 47 |
| Strategic positions | (2) | 0 |
| Costs | (4) | (4) |
| Total | (8) | (95) |
The negative investment portfolio earnings in 1H 2016 are a consequence of widening credit spreads on mortgage bonds. The loss results from mortgage bond yields having dropped less than the interest rates of hedging transactions. The outcome of the UK referendum on EU membership had an adverse impact on investment portfolio earnings.
Margin expenses as regards the Group's senior issues are included under liquidity generation and liquidity reserves and represent DKK 16m in 1H 2016 compared with DKK 15m in 1H 2015.
Non-recurring items etc, net
Non-recurring items etc total a net income of DKK 26m (1H 2015: DKK 0m). This item includes:
- one-off income of DKK 31m concerning the adjustment of the purchase sum from the sale of shares in Nets Holding in 2014
- process optimisation costs of DKK 5m related to Blue growth.
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| Profit for the period (DKKm) | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Core income | 1,051 | 1,050 | 1,040 | 1,062 | 1,112 | 1,115 |
| Trading income | 69 | 54 | 48 | 15 | 34 | 118 |
| Total income | 1,120 | 1,104 | 1,088 | 1,077 | 1,146 | 1,233 |
| Costs, core earnings | 665 | 681 | 666 | 635 | 685 | 689 |
| Core earnings before impairment | 455 | 423 | 422 | 442 | 461 | 544 |
| Impairment of loans and advances etc | 43 | 38 | 44 | 55 | 101 | 116 |
| Core earnings | 412 | 385 | 378 | 387 | 360 | 428 |
| Investment portfolio earnings | 14 | (22) | 7 | 8 | (64) | (31) |
| Profit before non-recurring items | 426 | 363 | 385 | 395 | 296 | 397 |
| Non-recurring items, net | 26 | - | - | - | - | - |
| Profit before tax | 452 | 363 | 385 | 395 | 296 | 397 |
| Tax | 92 | 80 | 69 | 93 | 70 | 93 |
| Profit for the period | 360 | 283 | 316 | 302 | 226 | 304 |
Profit for the period
Profit before tax amounts to DKK 815m (2015: DKK 693m). Tax represents DKK 172m, equal to an effective tax rate of 21.1%. Profit for the period amounts to DKK 643m compared with DKK 530m in 2015.
Return
Profit for the period equals a return on average shareholders' equity of 11.4% p.a. after tax against 9.4% p.a. in 1H 2015. Earnings per share stands at DKK 9.1 compared with DKK 7.2 in 2015.
Subsidiaries
Ejendomsselskabet recorded a profit after tax of DKK 2m compared with DKK 2m in 1H 2015. Profit after tax in DiBa A/S and Syd Fund Management A/S represents DKK 96m (2015: DKK 1m) and DKK 3m (2015: DKK 2m), respectively.
Q2 2016
Profit before tax for the quarter represents DKK 452m.
Compared with Q1 2016 profit before tax reflects:
- unchanged net interest etc
- unchanged costs (core earnings)
- a rise in trading income of DKK 15m
- a decline in costs (core earnings) of DKK 16m
- an increase in impairment charges for bank loans and advances of DKK 5m – a slight increase compared to the low level in Q1
- a rise in core earnings of DKK 27m to DKK 412m
- investment portfolio earnings of DKK 14m (Q1 2016: minus DKK 22m).
Total assets
The Group's total assets made up DKK 148.0bn at 30 June 2016 against DKK 142.7bn at year-end 2015.
| Assets (DKKbn) | 30 | 31 |
|---|---|---|
| Jun 2016 | Dec 2015 | |
| Amounts owed by credit institutions etc | 4.9 | 5.2 |
| Loans and advances at fair value (reverse transactions) | 6.8 | 10.2 |
| Bank loans and advances (at amortised cost) | 78.8 | 74.3 |
| Securities and holdings etc | 30.1 | 28.3 |
| Assets related to pooled plans | 12.7 | 12.0 |
| Other assets etc | 14.7 | 12.7 |
| Total | 148.0 | 142.7 |
The Group's bank loans and advances made up DKK 78.8bn at end-June 2016 against DKK 74.3bn at year-end 2015 and DKK 71.4bn at end-June 2015.
| Shareholders' equity and liabilities (DKKbn) | 30 Jun 2016 | 31 Dec 2015 |
|---|---|---|
| Amounts owed to credit institutions etc | 17.1 | 17.8 |
| Deposits and other debt | 79.9 | 79.9 |
| Deposits in pooled plans | 12.7 | 12.0 |
| Bonds issued | 7.1 | 3.7 |
| Other liabilities etc | 18.0 | 15.8 |
| Subordinated capital | 2.1 | 2.1 |
| Shareholders' equity | 11.1 | 11.4 |
| Total | 148.0 | 142.7 |
The Group's deposits amount to DKK 79.9bn, equivalent to the level at the end of 2015.
As of 1 April 2016 the Group initiated the funding of mortgage loans with Totalkredit following the agreement on joint funding. The funding represents
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DKK 3.8bn at end-June 2016 and is included in "Amounts owed to credit institutions etc".
Capital
At 30 June 2016 shareholders' equity constitutes DKK 11,057m – a decline of DKK 370m since year-end 2015. The change comprises an addition from profit for the period of DKK 643m less actual distribution of DKK 803m and net purchases of own shares of DKK 210m.
The Group has implemented a share buyback programme of DKK 350m. The share buyback commenced on 29 February 2016 and will be completed by 31 December 2016. At end-June 1,213,500 shares worth DKK 220m, made up at the trade date, had been repurchased.
The share buyback is part of the capital adjustment to optimise the capital structure in accordance with the Group's capital policy published in the 2015 Annual Report.
| Risk-weighted assets (DKKbn) | 30 Jun 2016 | 31 Dec 2015 |
|---|---|---|
| Credit risk | 44.2 | 44.9 |
| Market risk | 7.4 | 8.9 |
| Operational risk | 8.2 | 8.2 |
| Other exposures incl credit valuation adjustment | 5.9 | 6.0 |
| Total | 65.7 | 68.0 |
Risk-weighted assets represent DKK 65.7bn (year-end 2015: DKK 68.0bn). The change is mainly attributable to a decrease in market risk of DKK 1.5bn.
The development in the gross exposure by rating category at 30 June 2015, 31 December 2015 and 30 June 2016 appears below.
Gross exposure by rating category
The gross exposure consists of loans and advances, undrawn credit commitments, interest receivable, guarantees and counterparty risk on derivatives. The graph comprises exposures treated according to IRB. Exposures relating to clients in default are not included in the breakdown of rating categories. Impairment charges for exposures have not been deducted from the exposures.
Compared with 30 June 2015 the gross exposure by rating category shows an overall positive development with an increasing share in the four best rating categories.
The Group's capital ratio stands at 18.0%, of which the Tier 1 capital ratio represents 16.1% compared with 17.6% and 15.9%, respectively, at year-end 2015. The Common Equity Tier 1 capital ratio stands at 14.8% (31 Dec 2015: 14.5%). At 30 June 2016 the individual solvency need represents 10.0%, equal to the level at year-end 2015.
The parent's capital ratio stands at 17.5%, of which the Tier 1 capital ratio represents 15.7% compared with 17.2% and 15.5%, respectively, at year-end 2015. The Common Equity Tier 1 capital ratio stands at 14.4% (31 Dec 2015: 14.1%).
Capital requirements
The Group's capital management is based on the Internal Capital Adequacy Assessment Process (ICAAP), a review conducted to identify risks and establish the individual solvency need.
At end-June 2016 the individual solvency need represented 10.0%. The solvency need consists of a minimum capital requirement of 8% under Pillar I and a capital add-on under Pillar II. Approximately 56% of the solvency need must be covered by Common Equity Tier 1 capital, equal to 5.6% of the total risk exposure amount.
In addition to the solvency need the Group must meet a combined buffer requirement. The combined buffer requirement for the Group constitutes 1.0% at 30 June 2016. When fully loaded the combined buffer requirement will represent 3.5% bringing the fully loaded CET1 capital ratio requirement to 9.1%.
| Capital and solvency and capital requirements (% of total risk exposure amount) | 30 Jun 2016 | Fully loaded* |
|---|---|---|
| Capital and solvency | ||
| CET1 capital ratio | 14.8 | 14.8 |
| Capital ratio | 18.0 | 17.2 |
| Capital requirements (incl buffers)** | ||
| CET1 capital requirement | 6.7 | 9.1 |
| -of which countercyclical capital buffer | 0.0 | 0.0 |
| -of which capital conservation buffer | 0.6 | 2.5 |
| -of which SIFI buffer | 0.4 | 1.0 |
| Total capital requirement | 11.0 | 13.5 |
| Excess capital | ||
| CET1 capital | 8.1 | 5.7 |
| Total capital | 7.0 | 3.7 |
- Based on fully loaded CRR/CRD IV rules and requirements.
** The capital requirements consist of an individual solvency need and a combined buffer requirement. The fully loaded countercyclical capital buffer is based on the national buffer rate published at 30 June 2016.
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Market risk
At 30 June 2016 the Group's interest rate risk represents DKK 67m. The Group's exchange rate risk continues to be very low and its equity position modest.
Liquidity
The Group's liquidity measured under the 10% statutory requirement constitutes 29.3% at 30 June 2016.
Sydbank is a systemically important financial institution (SIFI) and must therefore meet the new liquidity coverage ratio (LCR) of a minimum of 100% as of 1 October 2015. Sydbank has made adjustments to its cash resources – increased its portfolio of Level 1A assets as well as expanded the Group's deposit base as regards retail and corporate clients. The Group's LCR constituted 139% at 30 June 2016.
Moody's 12-month liquidity curve shows that the Group is able to withstand a situation in which access to capital markets is cut off for a period of 12 months.
Rating
Moody's most recent rating of Sydbank:
- Outlook: Stable
- Long-term deposit: A3
- Senior unsecured: Baa1
- Short-term deposit: P-2
Supervisory Diamond
The Supervisory Diamond sets up a number of benchmarks to indicate banking activities that initially should be regarded as involving a higher risk. Any breach of the Supervisory Diamond is subject to reactions by the Danish FSA.
Sydbank A/S complies with all the benchmarks of the Supervisory Diamond.
| Supervisory Diamond | 30 Jun 2016 | 31 Dec 2015 | 30 Jun 2015 |
|---|---|---|---|
| Sum of large exposures < 125% | 0 | 0 | 10 |
| Lending growth < 20% annually | 6 | 9 | 4 |
| Commercial property exposure < 25% | 8 | 8 | 8 |
| Funding ratio < 1 | 0.82 | 0.82 | 0.74 |
| Excess cover relative to statutory liquidity requirements > 50% | 193 | 167 | 185 |
EU Bank Recovery and Resolution Directive
The directive, including the bail-in provisions, was implemented in Danish law on 1 June 2015.
According to legislation each credit institution must meet a minimum requirement for eligible liabilities (bail-in-able liabilities). The Danish FSA has been authorised to set the requirement for Sydbank.
It remains uncertain when the minimum requirement must be met. The final minimum requirement may affect the Group's capital and funding structure.
Moreover a resolution fund is under establishment. Credit institutions must make contributions to the fund according to their relative size and risk in Denmark. The resolution fund must be established and have assets at its disposal equal to at least 1% of the covered deposits of all Danish credit institutions by 31 December 2024.
The Group's contribution to the resolution fund for 2016 represents DKK 17m.
Leverage ratio
The CRR/CRD IV rules require credit institutions to calculate, report, monitor and disclose their leverage ratio, which is defined as Tier 1 capital as a percentage of total exposure. The Group's leverage ratio was 6.9% at 30 June 2016 taking into account the transitional rules. Assuming fully loaded Tier 1 capital under CRR/CRD IV without any refinancing of non-eligible Additional Tier 1 capital, the leverage ratio would be 6.4%.
EU-wide stress test 2016
Together with the Danish FSA Sydbank has conducted a stress test equivalent to the methodology and disclosure template applied in the EU-wide stress test.
Sydbank is pleased with the Group's individual results indicating:
- great resilience to adverse economic developments in the period 2016-2018
- a robust capital structure.
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Basel IV
The Basel Committee on Banking Supervision (BCBS) is conducting a review of the requirements for calculating the total risk exposure amount. This review is also known as Basel IV. Among other things, Basel IV proposes to constrain the use of internal models and introduce a permanent floor for the total risk exposure. The new requirements are expected to be released at the end of 2016 after which the EU implementation process will begin. The Group is following developments closely but the extent of the final regulatory changes and the timeline for implementation are currently unknown.
Focus on agriculture
A breakdown by industry of bank loans and advances to the agricultural sector is shown below.
Impaired bank loans and advances to agriculture grew by DKK 319m to DKK 2,210m in 1H 2016, equal to an increase of 5.4% of loans and advances. Of total loans and advances to agriculture an impairment charge of 21.7% has been recorded at 30 June 2016 against 21.2% at year-end 2015.
| 30 Jun 2016 (DKKm) | Pig farming | Cattle farming | Crop production | Other agriculture | Total loans and advances |
|---|---|---|---|---|---|
| Bank loans and advances before impairment charges | 1,784 | 1,734 | 1,288 | 1,116 | 5,922 |
| Individual impairment charges | 369 | 602 | 64 | 101 | 1,136 |
| Previous events | 30 | 120 | - | - | 150 |
| Bank loans and advances after impairment charges | 1,385 | 1,012 | 1,224 | 1,015 | 4,636 |
| Impaired bank loans and advances | 747 | 1,037 | 207 | 219 | 2,210 |
| Impaired as % of bank loans and advances | 41.9 | 59.8 | 16.1 | 19.6 | 37.3 |
| Impairment as % of impaired bank loans and advances | 49.4 | 58.1 | 30.9 | 46.1 | 51.4 |
| Impairment as % of bank loans and advances | 22.4 | 41.6 | 5.0 | 9.1 | 21.7 |
| 31 Dec 2015 (DKKm) | Pig farming | Cattle farming | Crop production | Other agriculture | Total loans and advances |
| --- | --- | --- | --- | --- | --- |
| Bank loans and advances before impairment charges | 1,702 | 1,712 | 1,270 | 1,228 | 5,912 |
| Individual impairment charges | 281 | 599 | 50 | 97 | 1,027 |
| Previous events | 100 | 125 | - | - | 225 |
| Bank loans and advances after impairment charges | 1,321 | 988 | 1,220 | 1,131 | 4,660 |
| Impaired bank loans and advances | 592 | 996 | 103 | 200 | 1,891 |
| Impaired as % of bank loans and advances | 34.8 | 58.2 | 8.1 | 16.3 | 32.0 |
| Impairment as % of impaired bank loans and advances | 47.5 | 60.1 | 48.5 | 48.5 | 54.3 |
| Impairment as % of bank loans and advances | 22.4 | 42.3 | 3.9 | 7.9 | 21.2 |
A large supply combined with a lower demand squeezed the agricultural sector's settlement prices in 2015 and in 1H 2016.
In 2015 earnings were disappointing. Many farmers recorded losses. Milk producers in particular are expected to have realised average losses of DKK 100,000 per farm.
The unsatisfactory earnings for milk producers have deteriorated in 2016 as the negative trend in prices has continued. As a result of the absence of milk quotas a growing quantity of milk is being produced in Europe. In a market under pressure where prices are falling, production at the individual farms is increasing in an attempt to produce their way out of the crisis. As a consequence prices are dropping even further.
According to the September 2015 forecast, the settlement price of conventional milk was projected to be around DKK 2.37 per kg incl supplements and supplementary payments etc in 2016. The current settlement price is DKK 2.04 per kg. The most recent forecasts suggest an unchanged price of approximately DKK 2.03 per kg.
Such a price drop would reduce annual income per milk cow by about DKK 2,500. This means that earnings from an average size farm of 200 cows would be DKK 500,000 lower.
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There seem to be no prospects of significantly higher settlement prices for conventional milk in 2016. The sector projects that prices will not improve until 2017 at the earliest.
Organic milk producers have satisfactory earnings due to a large demand and low supply.
For pig producers developments in Q2 2016 were benign as the quotation for pork developed favourably compared to the original forecasts from SEGES. The quotation for pork stood at DKK 10.60 per kg at the beginning of July 2016 and is consequently significantly higher than SEGES's forecast for Q3 2016 which projects an average quotation for pork of DKK 9.75 per kg.
Assuming the current quotation for pork, acceptable earnings will be possible for efficient pig producers.
However earnings in all farming industries still vary greatly from farm to farm.
The low settlement prices will continue to put pressure on some farmers – predominantly milk producers – to wind up their farms.
In light of the outlook for 2016, primarily based on forecasts published by SEGES in September 2015, the Bank made an extraordinary increase in its collective impairment charges in 2015 to a total of DKK 225m to meet risks on agricultural exposures.
In 1H 2016 individual impairment charges of DKK 200m were recorded on agricultural exposures. Individual impairment charges in the quarter were as expected. The impairment charge in all material respects concerns an individualisation of DKK 200m of the collective impairment charges of DKK 225m recorded in 2015. Following the individualisation collective impairment charges represented DKK 25m. As a result of the deterioration in the agricultural sector in 1H 2016 it is necessary to increase collective impairment charges by DKK 125m.
Consequently collective impairment charges regarding agricultural exposures constitute DKK 150m at the end of June 2016.
Conversion of bank loans and advances to subordinated loan capital as regards selected farmers
During the second half of 2016 the Group will offer selected agricultural clients the option to convert part of their bank debt into subordinated loan capital
in a bid to create better prospects and encourage them to continue to work towards increasing earnings.
The adopted agricultural package, which ensures better framework conditions for the agricultural sector, has opened up the possibility of debt conversion as regards some of the most efficient indebted farmers.
Prompted by the government's intentions to reduce the number of farms with large debts, the Danish FSA has changed its guideline on impairment charges for agricultural exposures.
The Bank will record the amount converted as finally written off in accordance with the guidelines of the Danish FSA.
The Bank will continue to have a potential claim in the form of subordinated loan capital which may be redeemed by the farmer subject to conditions at a price to be agreed after a number of years. The subordinated loan will be free of interest during this period.
The selected farms are characterised by for instance:
- negative equity
- high efficiency.
After conversion of the bank debt the assessment should be that the farm in question offers perspectives from the point of view of the farmer as well as Sydbank.
After the conversion, OEI will cease to exist for the agricultural exposures concerned. If all selected farmers accept the conversion offer the Group's impaired loans will be reduced by approximately DKK 1.0bn. Bank loans and advances amounting to around DKK 0.5bn are expected to be written off. The amount has already been written down.
The cancellation of OEI is projected to result in the reversal of impairment charges of about DKK 100m. However, given the situation in the agricultural sector, these reversals are currently expected to be used for additional impairment charges for agriculture during 2H 2016 due to the continued very low milk prices etc.
It is believed to be highly likely that the farmers will accept the offer but no one can say for sure.
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Income statement
| DKKm | Note | Sydbank Group | Sydbank A/S | ||
|---|---|---|---|---|---|
| 1H 2016 | 1H 2015 | 1H 2016 | 1H 2015 | ||
| Interest income | 2 | 1,373 | 1,456 | 1,374 | 1,457 |
| Interest expense | 3 | 148 | 182 | 243 | 183 |
| Net interest income | 1,225 | 1,274 | 1,131 | 1,274 | |
| Dividends on shares | 39 | 58 | 39 | 58 | |
| Fee and commission income | 4 | 913 | 975 | 850 | 956 |
| Fee and commission expense | 148 | 124 | 117 | 124 | |
| Net interest and fee income | 2,029 | 2,183 | 1,903 | 2,164 | |
| Market value adjustments | 5 | 209 | 84 | 209 | 84 |
| Other operating income | 14 | 16 | 13 | 16 | |
| Staff costs and administrative expenses | 6 | 1,296 | 1,269 | 1,269 | 1,255 |
| Amortisation/depreciation and impairment of intangible assets and property, plant and equipment | 49 | 48 | 48 | 46 | |
| Other operating expenses | 8 | 9 | 60 | 9 | 60 |
| Impairment of loans and advances etc | 9 | 84 | 217 | 84 | 217 |
| Profit on holdings in associates and subsidiaries | 10 | 1 | 4 | 100 | 7 |
| Profit before tax | 815 | 693 | 815 | 693 | |
| Tax | 11 | 172 | 163 | 172 | 163 |
| Profit for the period | 643 | 530 | 643 | 530 | |
| EPS Basic (DKK) * | 9.1 | 7.2 | 9.1 | 7.2 | |
| EPS Diluted (DKK) * | 9.1 | 7.2 | 9.1 | 7.2 | |
| Dividend per share (DKK) | - | - | - | - | |
| * Calculated on the basis of average number of shares outstanding, see page 17 |
Statement of Comprehensive Income
| Profit for the period | 643 | 530 | 643 | 530 |
|---|---|---|---|---|
| Other comprehensive income | ||||
| Items that may be reclassified to the income statement: | ||||
| Translation of foreign entities | (2) | 35 | (2) | 35 |
| Hedge of net investment in foreign entities | 2 | (35) | 2 | (35) |
| Property revaluation | - | - | - | - |
| Other comprehensive income after tax | 0 | 0 | 0 | 0 |
| Comprehensive income for the period | 643 | 530 | 643 | 530 |
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Balance sheet
| DKKm | Note | Sydbank Group | Sydbank A/S | ||
|---|---|---|---|---|---|
| 30 Jun 2016 | 31 Dec 2015 | 30 Jun 2016 | 31 Dec 2015 | ||
| Assets | |||||
| Cash and balances on demand at central banks | 759 | 967 | 759 | 967 | |
| Amounts owed by credit institutions and central banks | 12 | 4,173 | 4,274 | 4,168 | 4,267 |
| Loans and advances at fair value | 6,826 | 10,183 | 6,826 | 10,183 | |
| Loans and advances at amortised cost | 78,837 | 74,275 | 79,000 | 74,439 | |
| Bonds at fair value | 28,236 | 26,362 | 28,204 | 26,330 | |
| Shares etc | 1,687 | 1,736 | 1,686 | 1,735 | |
| Holdings in associates etc | 162 | 163 | 162 | 163 | |
| Holdings in subsidiaries etc | - | - | 2,378 | 2,281 | |
| Assets related to pooled plans | 12,660 | 12,000 | 12,660 | 12,000 | |
| Intangible assets | 313 | 324 | 310 | 321 | |
| Land and buildings – owner-occupied property | 1,003 | 1,012 | 822 | 831 | |
| Other property, plant and equipment | 64 | 68 | 64 | 68 | |
| Current tax assets | 230 | 185 | 230 | 185 | |
| Deferred tax assets | 83 | 83 | 14 | 14 | |
| Assets in temporary possession | 4 | 7 | 1 | 3 | |
| Other assets | 13 | 12,927 | 11,047 | 12,922 | 11,038 |
| Prepayments | 61 | 56 | 58 | 55 | |
| Total assets | 148,025 | 142,742 | 150,264 | 144,880 | |
| Shareholders’ equity and liabilities | |||||
| Amounts owed to credit institutions and central banks | 14 | 17,127 | 17,785 | 17,368 | 18,028 |
| Deposits and other debt | 15 | 79,905 | 79,900 | 81,830 | 81,823 |
| Deposits in pooled plans | 12,667 | 12,009 | 12,667 | 12,009 | |
| Bonds issued at amortised cost | 7,121 | 3,727 | 7,121 | 3,727 | |
| Other liabilities | 16 | 17,716 | 15,440 | 17,790 | 15,414 |
| Deferred income | 6 | 4 | 6 | 4 | |
| Total liabilities | 134,542 | 128,865 | 136,782 | 131,005 | |
| Provisions | 17 | 302 | 320 | 301 | 318 |
| Subordinated capital | 18 | 2,124 | 2,130 | 2,124 | 2,130 |
| Shareholders’ equity: | |||||
| Share capital | 722 | 742 | 722 | 742 | |
| Revaluation reserves | 79 | 79 | 79 | 79 | |
| Other reserves: | |||||
| Reserves according to articles of association | 425 | 425 | 425 | 425 | |
| Other reserves | 13 | 13 | 13 | 13 | |
| Retained earnings | 9,818 | 9,355 | 9,818 | 9,355 | |
| Proposed dividend etc | - | 813 | - | 813 | |
| Total shareholders’ equity | 11,057 | 11,427 | 11,057 | 11,427 | |
| Total shareholders’ equity and liabilities | 148,025 | 142,742 | 150,264 | 144,880 |
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Financial Highlights – Quarterly
| Q2 2016 | Q1 2016 | Q4 2015 | Q3 2015 | Q2 2015 | Q1 2015 | |
|---|---|---|---|---|---|---|
| Income statement (DKKm) | ||||||
| Core income | 1,051 | 1,050 | 1,040 | 1,062 | 1,112 | 1,115 |
| Trading income | 69 | 54 | 48 | 15 | 34 | 118 |
| Total income | 1,120 | 1,104 | 1,088 | 1,077 | 1,146 | 1,233 |
| Costs, core earnings | 665 | 681 | 666 | 635 | 685 | 689 |
| Core earnings before impairment | 455 | 423 | 422 | 442 | 461 | 544 |
| Impairment of loans and advances etc | 43 | 38 | 44 | 55 | 101 | 116 |
| Core earnings | 412 | 385 | 378 | 387 | 360 | 428 |
| Investment portfolio earnings | 14 | (22) | 7 | 8 | (64) | (31) |
| Profit before non-recurring items | 426 | 363 | 385 | 395 | 296 | 397 |
| Non-recurring items, net | 26 | - | - | - | - | - |
| Profit before tax | 452 | 363 | 385 | 395 | 296 | 397 |
| Tax | 92 | 80 | 69 | 93 | 70 | 93 |
| Profit for the period | 360 | 283 | 316 | 302 | 226 | 304 |
| Balance sheet highlights (DKKbn) | ||||||
| Loans and advances at amortised cost | 78.8 | 76.2 | 74.3 | 72.4 | 71.4 | 70.6 |
| Loans and advances at fair value | 6.8 | 7.9 | 10.2 | 6.6 | 9.7 | 8.0 |
| Deposits and other debt | 79.9 | 76.8 | 79.9 | 76.9 | 81.2 | 72.1 |
| Bonds issued at amortised cost | 7.1 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 |
| Subordinated capital | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| Shareholders’ equity | 11.1 | 10.9 | 11.4 | 11.2 | 11.1 | 11.1 |
| Total assets | 148.0 | 145.1 | 142.7 | 140.9 | 153.1 | 155.7 |
| Financial ratios per share (DKK per share of DKK 10) | ||||||
| EPS Basic ** | 5.1 | 4.0 | 4.4 | 4.2 | 3.1 | 4.1 |
| EPS Diluted ** | 5.1 | 4.0 | 4.4 | 4.2 | 3.1 | 4.1 |
| Share price at end of period | 167.2 | 187.7 | 221.8 | 253.9 | 255.8 | 218.1 |
| Book value | 157.6 | 152.8 | 160.2 | 156.3 | 153.1 | 151.2 |
| Share price/book value | 1.06 | 1.23 | 1.38 | 1.62 | 1.67 | 1.44 |
| Average number of shares outstanding (in millions) | 70.7 | 71.3 | 71.5 | 72.1 | 73.0 | 73.4 |
| Dividend per share | - | - | 11.12 | - | - | - |
| Other financial ratios and key figures | ||||||
| Common Equity Tier 1 capital ratio | 14.8 | 14.4 | 14.5 | 14.4 | 14.1 | 14.6 |
| Tier 1 capital ratio | 16.1 | 15.7 | 15.9 | 15.9 | 15.5 | 16.0 |
| Capital ratio | 18.0 | 17.5 | 17.6 | 17.6 | 17.2 | 17.6 |
| Pre-tax profit as % of average shareholders’ equity ** | 4.1 | 3.3 | 3.4 | 3.5 | 2.6 | 3.5 |
| Post-tax profit as % of average shareholders’ equity ** | 3.3 | 2.5 | 2.8 | 2.7 | 2.0 | 2.7 |
| Costs (core earnings) as % of total income | 59.4 | 61.7 | 61.2 | 59.0 | 59.8 | 55.9 |
| Return on assets (%) | 0.2 | 0.2 | 0.2 | 0.2 | 0.1 | 0.2 |
| Interest rate risk | 0.6 | 1.4 | 2.8 | 2.0 | 2.2 | 0.3 |
| Foreign exchange position | 2.1 | 1.7 | 2.2 | 1.3 | 3.0 | 1.5 |
| Foreign exchange risk | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Loans and advances relative to deposits * | 0.9 | 0.9 | 0.8 | 0.8 | 0.8 | 0.8 |
| Loans and advances relative to shareholders’ equity * | 7.1 | 7.0 | 6.5 | 6.5 | 6.4 | 6.4 |
| Growth in loans and advances for the period * | 3.5 | 2.6 | 2.6 | 1.4 | 1.1 | 3.2 |
| Excess cover relative to statutory liquidity requirements | 192.7 | 147.3 | 166.8 | 186.2 | 185.1 | 141.1 |
| Total large exposures | 0.0 | 10.6 | 0.0 | 10.2 | 10.2 | 10.1 |
| Accumulated impairment ratio | 4.2 | 4.5 | 4.7 | 4.9 | 4.9 | 4.9 |
| Impairment ratio for the period ** | 0.05 | 0.04 | 0.05 | 0.06 | 0.11 | 0.13 |
| Number of full-time staff at end of period | 2,032 | 2,027 | 2,044 | 2,113 | 2,164 | 2,147 |
- Financial ratios are calculated on the basis of loans and advances at amortised cost.
** Quarterly ratios have not been converted to a full-year basis.
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Financial Highlights – Half-yearly
| 1H 2016 | 1H 2015 | 1H 2014 | 1H 2013 | 1H 2012 | |
|---|---|---|---|---|---|
| Income statement (DKKm) | |||||
| Core income | 2,101 | 2,227 | 2,131 | 2,052 | 2,141 |
| Trading income | 123 | 152 | 152 | 161 | 168 |
| Total income | 2,224 | 2,379 | 2,283 | 2,213 | 2,309 |
| Costs, core earnings | 1,346 | 1,374 | 1,365 | 1,310 | 1,302 |
| Core earnings before impairment | 878 | 1,005 | 918 | 903 | 1,007 |
| Impairment of loans and advances etc | 81 | 217 | 430 | 674 | 975 |
| Core earnings | 797 | 788 | 488 | 229 | 32 |
| Investment portfolio earnings | (8) | (95) | 37 | 284 | 126 |
| Profit before non-recurring items | 789 | 693 | 525 | 513 | 158 |
| Non-recurring items, net | 26 | - | 107 | (11) | (5) |
| Profit before tax | 815 | 693 | 632 | 502 | 153 |
| Tax | 172 | 163 | 118 | 118 | 38 |
| Profit for the period | 643 | 530 | 514 | 384 | 115 |
| Balance sheet highlights (DKKbn) | |||||
| Loans and advances at amortised cost | 78.8 | 71.4 | 67.7 | 67.8 | 66.7 |
| Loans and advances at fair value | 6.8 | 9.7 | 5.7 | 4.5 | 5.9 |
| Deposits and other debt | 79.9 | 81.2 | 74.0 | 65.9 | 65.4 |
| Bonds issued at amortised cost | 7.1 | 3.7 | 3.7 | 3.8 | 8.8 |
| Subordinated capital | 2.1 | 2.1 | 1.4 | 1.4 | 1.4 |
| Shareholders' equity | 11.1 | 11.1 | 10.7 | 10.5 | 9.7 |
| Total assets | 148.0 | 153.1 | 147.4 | 141.4 | 158.3 |
| Financial ratios per share (DKK per share of DKK 10) | |||||
| EPS Basic ** | 9.1 | 7.2 | 7.0 | 5.2 | 1.6 |
| EPS Diluted ** | 9.1 | 7.2 | 7.0 | 5.2 | 1.6 |
| Share price at end of period | 167.2 | 255.8 | 143.7 | 114.0 | 95.0 |
| Book value | 157.6 | 153.1 | 146.7 | 142.6 | 132.6 |
| Share price/book value | 1.06 | 1.67 | 0.98 | 0.80 | 0.72 |
| Average number of shares outstanding (in millions) | 71.0 | 73.2 | 73.3 | 73.2 | 73.2 |
| Dividend per share | - | - | - | - | - |
| Other financial ratios and key figures | |||||
| Common Equity Tier 1 capital ratio | 14.8 | 14.1 | 14.1 | 14.4 | 13.0 |
| Tier 1 capital ratio | 16.1 | 15.5 | 15.7 | 16.2 | 14.6 |
| Capital ratio | 18.0 | 17.2 | 16.2 | 16.5 | 14.6 |
| Pre-tax profit as % of average shareholders' equity ** | 7.3 | 6.2 | 6.0 | 4.9 | 1.6 |
| Post-tax profit as % of average shareholders' equity ** | 5.7 | 4.7 | 4.9 | 3.7 | 1.2 |
| Costs (core earnings) as % of total income | 60.5 | 57.8 | 59.8 | 59.2 | 56.4 |
| Return on assets (%) | 0.4 | 0.3 | 0.3 | 0.3 | 0.1 |
| Interest rate risk | 0.6 | 2.2 | 0.5 | 0.2 | 0.3 |
| Foreign exchange position | 2.1 | 3.0 | 4.4 | 2.3 | 4.2 |
| Foreign exchange risk | 0.0 | 0.0 | 0.0 | 0.1 | 0.1 |
| Loans and advances relative to deposits * | 0.9 | 0.8 | 0.8 | 0.9 | 0.9 |
| Loans and advances relative to shareholders' equity * | 7.1 | 6.4 | 6.3 | 6.5 | 6.9 |
| Growth in loans and advances for the period * | 6.1 | 4.3 | 1.6 | (0.6) | (3.1) |
| Excess cover relative to statutory liquidity requirements | 192.7 | 185.1 | 188.4 | 167.4 | 151.8 |
| Total large exposures | 0.0 | 10.2 | 36.3 | 30.5 | 42.8 |
| Accumulated impairment ratio | 4.2 | 4.9 | 5.7 | 4.2 | 3.4 |
| Impairment ratio for the period ** | 0.09 | 0.24 | 0.54 | 0.85 | 1.24 |
| Number of full-time staff at end of period | 2,032 | 2,164 | 2,187 | 2,087 | 2,128 |
- Financial ratios are calculated on the basis of loans and advances at amortised cost.
** Half-yearly ratios have not been converted to a full-year basis.
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Capital
| DKKm | Share capital | Re-valuation reserves | Reserves acc to articles of association* | Reserve for net revaluation acc to equity method | Retained earnings | Proposed dividend etc | Total |
|---|---|---|---|---|---|---|---|
| Shareholders' equity at 1 Jan 2016 | 742 | 79 | 425 | 13 | 9,355 | 813 | 11,427 |
| Profit for the period | - | - | - | - | 643 | - | 643 |
| Other comprehensive income | |||||||
| Translation of foreign entities | - | - | - | - | (2) | - | (2) |
| Hedge of net investment in foreign entities | - | - | - | - | 2 | - | 2 |
| Property revaluation | - | - | - | - | - | - | - |
| Total other comprehensive income | - | - | - | - | - | - | - |
| Comprehensive income for the period | - | - | - | - | 643 | - | 643 |
| Transactions with owners | |||||||
| Purchase of own shares | - | - | - | - | (766) | - | (766) |
| Sale of own shares | - | - | - | - | 1,001 | - | 1,001 |
| Reduction of share capital | (20) | - | - | - | (425) | - | (445) |
| Dividend etc paid | - | - | - | - | - | (813) | (813) |
| Dividend, own shares | - | - | - | - | 10 | - | 10 |
| Total transactions with owners | (20) | - | - | - | (180) | (813) | (1,013) |
| Shareholders' equity at 30 Jun 2016 | 722 | 79 | 425 | 13 | 9,818 | - | 11,057 |
| Shareholders' equity at 1 Jan 2015 | 742 | 90 | 425 | 10 | 9,508 | 536 | 11,311 |
| Profit for the period | - | - | - | - | 530 | - | 530 |
| Other comprehensive income | |||||||
| Translation of foreign entities | - | - | - | - | 35 | - | 35 |
| Hedge of net investment in foreign entities | - | - | - | - | (35) | - | (35) |
| Total other comprehensive income | - | - | - | - | - | - | - |
| Comprehensive income for the period | - | - | - | - | 530 | - | 530 |
| Transactions with owners | |||||||
| Purchase of own shares | - | - | - | - | (905) | - | (905) |
| Sale of own shares | - | - | - | - | 708 | - | 708 |
| Dividend etc paid | - | - | - | - | - | (536) | (536) |
| Dividend, own shares | - | - | - | - | 7 | 7 | |
| Total transactions with owners | - | - | - | - | (190) | (536) | (726) |
| Shareholders' equity at 30 Jun 2015 | 742 | 90 | 425 | 10 | 9,848 | - | 11,115 |
- Reserves according to the Articles of Association are identical to the undistributable savings bank reserve in accordance with Article 4 of the Articles of Association.
| The Sydbank share | 30 Jun 2016 | Full year 2015 | 30 Jun 2015 |
|---|---|---|---|
| Share capital (DKK) | 722,401,990 | 742,499,990 | 742,499,990 |
| Shares issued (number) | 72,240,199 | 74,249,999 | 74,249,999 |
| Shares outstanding at end of period (number) | 70,167,425 | 71,334,716 | 72,589,784 |
| Average number of shares outstanding (number) | 70,989,867 | 72,501,307 | 73,199,590 |
The Bank has only one class of shares as all shares carry the same rights.
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Capital
| DKKm | 30 Jun 2016 | 31 Dec 2015 | 30 Jun 2015 |
|---|---|---|---|
| Solvency | |||
| Common Equity Tier 1 capital ratio | 14.8 | 14.5 | 14.1 |
| Tier 1 capital ratio | 16.1 | 15.9 | 15.5 |
| Capital ratio | 18.0 | 17.6 | 17.2 |
| Total capital: | |||
| Shareholders' equity | 11,057 | 11,427 | 11,115 |
| Expected maximum dividend based on dividend policy | (322) | - | (265) |
| Capital deduction based on prudence concept | (68) | - | - |
| Actual or contingent obligations to purchase own shares | (135) | - | (297) |
| Proposed dividend etc | - | (813) | - |
| Intangible assets and capitalised deferred tax assets | (338) | (349) | (369) |
| Significant investments in financial sector | (439) | (413) | (379) |
| Common Equity Tier 1 capital | 9,755 | 9,852 | 9,805 |
| Additional Tier 1 capital | 831 | 973 | 972 |
| Tier 1 capital | 10,586 | 10,825 | 10,777 |
| Tier 2 capital | 961 | 908 | 907 |
| Difference between expected losses and accounting impairment charges | 252 | 251 | 262 |
| Total capital | 11,799 | 11,984 | 11,946 |
| Credit risk | 44,208 | 44,931 | 47,268 |
| Market risk | 7,447 | 8,876 | 7,455 |
| Operational risk | 8,173 | 8,173 | 8,575 |
| Other exposures incl credit valuation adjustment | 5,890 | 5,975 | 6,195 |
| Total risk exposure amount | 65,718 | 67,955 | 69,493 |
| Capital requirement under Pillar I | 5,257 | 5,436 | 5,559 |
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Cash Flow Statement
| DKKm | 1H
2016 | Full year
2015 | 1H
2015 |
| --- | --- | --- | --- |
| Operating activities | | | |
| Pre-tax profit for the period | 815 | 1,473 | 693 |
| Taxes paid | (212) | (427) | (365) |
| Adjustment for non-cash operating items | 114 | 470 | 249 |
| Cash flows from working capital | (2,311) | 998 | 9,369 |
| Cash flows from operating activities | (1,594) | 2,514 | 9,946 |
| Investing activities | | | |
| Purchase and sale of holdings in associates | 2 | 13 | 9 |
| Purchase and sale of intangible assets and property, plant and equipment | (25) | (23) | (35) |
| Cash flows from investing activities | (23) | (10) | (26) |
| Financing activities | | | |
| Purchase and sale of own holdings | (210) | (503) | (197) |
| Dividends etc | (802) | (529) | (529) |
| Raising of subordinated capital | (5) | 745 | 743 |
| Issue of bonds | 3,392 | (14) | (17) |
| Cash flows from financing activities | 2,375 | (301) | 0 |
| Cash flows for the period | 758 | 2,203 | 9,920 |
| Cash and cash equivalents at 1 Jan | 4,488 | 2,285 | 2,285 |
| Cash flows for the period | 758 | 2,203 | 9,920 |
| Cash and cash equivalents at end of period | 5,246 | 4,488 | 12,205 |
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Segment Reporting
| DKKm | Banking | Asset Management | Sydbank Markets | Treasury | Other | Total |
|---|---|---|---|---|---|---|
| Operating segments – 1H 2016 | ||||||
| Core income | 1,955 | 95 | 51 | - | - | 2,101 |
| Trading income | - | - | 123 | - | - | 123 |
| Total income | 1,955 | 95 | 174 | - | - | 2,224 |
| Costs, core earnings | 1,219 | 34 | 61 | - | 32 | 1,346 |
| Impairment of loans and advances etc | 81 | - | - | - | - | 81 |
| Core earnings | 655 | 61 | 113 | - | (32) | 797 |
| Investment portfolio earnings | (2) | - | - | (6) | - | (8) |
| Profit before non-recurring items | 653 | 61 | 113 | (6) | (32) | 789 |
| Non-recurring items, net | - | - | - | - | 26 | 26 |
| Profit before tax | 653 | 61 | 113 | (6) | (6) | 815 |
| DKKm | Banking | Asset Management | Sydbank Markets | Treasury | Other | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Operating segments – 1H 2015 | ||||||
| Core income | 2,073 | 92 | 62 | - | - | 2,227 |
| Trading income | - | - | 152 | - | - | 152 |
| Total income | 2,073 | 92 | 214 | - | - | 2,379 |
| Costs, core earnings | 1,251 | 29 | 62 | - | 32 | 1,374 |
| Impairment of loans and advances etc | 217 | - | - | - | - | 217 |
| Core earnings | 605 | 63 | 152 | - | (32) | 788 |
| Investment portfolio earnings | - | - | - | (95) | - | (95) |
| Profit before non-recurring items | 605 | 63 | 152 | (95) | (32) | 693 |
| Non-recurring items, net | - | - | - | - | - | - |
| Profit before tax | 605 | 63 | 152 | (95) | (32) | 693 |
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Notes
Note 1
Accounting policies
The Interim Report is prepared in compliance with IAS 34 “Interim Financial Reporting” as adopted by the EU and in compliance with additional Danish disclosure requirements for interim reports. As a result of the use of IAS 34, the presentation is less complete compared with the presentation of an annual report and the recognition and measurement principles are in compliance with IFRS.
The accounting policies are consistent with those adopted in the 2015 Annual Report, to which reference is made.
The 2015 Annual Report provides a comprehensive description of the accounting policies applied.
The measurement of certain assets and liabilities requires managerial estimates as to how future events will affect the value of such assets and liabilities. The significant estimates made by management in the use of the Group’s accounting policies and the inherent considerable uncertainty of such estimates used in the preparation of the condensed interim report are identical to those used in the preparation of the annual report as at 31 December 2015.
The Group’s significant risks and the external elements which may affect the Group are described in greater detail in the 2015 Annual Report.
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Notes
| DKKm | Sydbank Group | Sydbank A/S | ||
|---|---|---|---|---|
| 1H 2016 | 1H 2015 | 1H 2016 | 1H 2015 | |
| Note 2 | ||||
| Interest income | ||||
| Reverse transactions with credit institutions and central banks | (3) | (19) | (3) | (19) |
| Amounts owed by credit institutions and central banks | (7) | (1) | (7) | (1) |
| Reverse loans and advances | (12) | (10) | (12) | (10) |
| Loans and advances and other amounts owed | 1,304 | 1,369 | 1,306 | 1,370 |
| Bonds | 156 | 157 | 155 | 157 |
| Derivatives | (67) | (44) | (67) | (44) |
| comprising: | ||||
| Foreign exchange contracts | 40 | 49 | 40 | 49 |
| Interest rate contracts | (107) | (83) | (107) | (93) |
| Other contracts | 0 | 0 | 0 | 0 |
| Other interest income | 2 | 4 | 2 | 4 |
| Total | 1,373 | 1,456 | 1,374 | 1,457 |
| Note 3 | ||||
| Interest expense | ||||
| Repo transactions with credit institutions and central banks | (22) | (22) | (22) | (22) |
| Credit institutions and central banks | 18 | 12 | 18 | 12 |
| Repo deposits | (3) | 0 | (3) | 0 |
| Deposits and other debt | 105 | 145 | 200 | 146 |
| Bonds issued | 31 | 30 | 31 | 30 |
| Subordinated capital | 18 | 16 | 18 | 16 |
| Other interest expense | 1 | 1 | 1 | 1 |
| Total | 148 | 182 | 243 | 183 |
| Note 4 | ||||
| Fee and commission income | ||||
| Securities trading and custody accounts | 481 | 512 | 418 | 493 |
| Payment services | 147 | 142 | 147 | 142 |
| Loan fees | 57 | 100 | 57 | 100 |
| Guarantee commission | 64 | 53 | 64 | 53 |
| Other fees and commission | 164 | 168 | 164 | 168 |
| Total | 913 | 975 | 850 | 956 |
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Notes
| DKKm | Sydbank Group | Sydbank A/S | ||
|---|---|---|---|---|
| 1H 2016 | 1H 2015 | 1H 2016 | 1H 2015 | |
| Note 5 | ||||
| Market value adjustments | ||||
| Other loans and advances and amounts owed at fair value | 1 | 1 | 1 | 1 |
| Bonds | 296 | (203) | 296 | (203) |
| Shares etc | 87 | 52 | 87 | 52 |
| Investment property | 0 | 0 | 0 | 0 |
| Foreign exchange | 100 | 118 | 100 | 118 |
| Total derivatives | (277) | 120 | (277) | 120 |
| Assets related to pooled plans | 132 | 389 | 132 | 389 |
| Deposits in pooled plans | (130) | (391) | (130) | (391) |
| Other assets/liabilities | 0 | (2) | 0 | (2) |
| Total | 209 | 84 | 209 | 84 |
| Note 6 | ||||
| Staff costs and administrative expenses | ||||
| Salaries and remuneration: | ||||
| Group Executive Management | 8 | 7 | 8 | 7 |
| Board of Directors | 3 | 2 | 3 | 2 |
| Shareholders' Committee | 1 | 1 | 1 | 1 |
| Total | 12 | 10 | 12 | 10 |
| Staff costs: | ||||
| Wages and salaries | 611 | 638 | 604 | 633 |
| Pensions | 60 | 65 | 60 | 64 |
| Social security contributions | 8 | 8 | 8 | 8 |
| Payroll tax etc | 75 | 69 | 74 | 68 |
| Total | 754 | 780 | 746 | 773 |
| Other administrative expenses: | ||||
| IT | 284 | 272 | 277 | 254 |
| Rent etc | 56 | 54 | 60 | 65 |
| Marketing and entertainment expenses | 34 | 38 | 28 | 38 |
| Other costs | 156 | 115 | 146 | 115 |
| Total | 530 | 479 | 511 | 472 |
| Total | 1,296 | 1,269 | 1,269 | 1,255 |
Note 7
Staff
Average number of staff (full-time equivalent) 2,069 2,175 2,050 2,156
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Notes
| DKKm | Sydbank Group | Sydbank A/S | ||
|---|---|---|---|---|
| 1H 2016 | 1H 2015 | 1H 2016 | 1H 2015 | |
| Note 8 | ||||
| Other operating expenses | ||||
| Contributions to the Guarantee Fund for Depositors and Investors | - | 60 | - | 60 |
| Contributions to the Resolution Fund | 9 | - | 9 | - |
| Other expenses | 0 | 0 | 0 | 0 |
| Total | 9 | 60 | 9 | 60 |
| Note 9 | ||||
| Impairment of loans and advances recognised in the income statement | ||||
| Impairment and provisions | 54 | 196 | 54 | 196 |
| Write-offs | 83 | 53 | 83 | 53 |
| Recovered from debt previously written off | 53 | 32 | 53 | 32 |
| Impairment of loans and advances etc | 84 | 217 | 84 | 217 |
| Impairment and provisions at end of period | ||||
| Individual impairment and provisions | 3,589 | 3,918 | 3,589 | 3,918 |
| Collective impairment and provisions | 350 | 389 | 350 | 389 |
| Impairment and provisions at end of period | 3,939 | 4,307 | 3,939 | 4,307 |
| Individual impairment of loans and advances and provisions for guarantees | ||||
| Impairment and provisions at 1 Jan | 3,687 | 4,111 | 3,687 | 4,111 |
| Exchange rate adjustment | 0 | 0 | 0 | 0 |
| New individual impairment charges | 877 | 768 | 877 | 768 |
| Reversed individual impairment charges | 586 | 568 | 586 | 568 |
| Impairment charges previously recorded, now finally written off | 389 | 393 | 389 | 393 |
| Impairment and provisions at end of period | 3,589 | 3,918 | 3,589 | 3,918 |
| Individual impairment of loans and advances | 3,496 | 3,807 | 3,496 | 3,807 |
| Individual provisions for guarantees | 93 | 111 | 93 | 111 |
| Impairment and provisions at end of period | 3,589 | 3,918 | 3,589 | 3,918 |
| Collective impairment of loans and advances and provisions for guarantees | ||||
| Impairment and provisions at 1 Jan | 495 | 301 | 495 | 301 |
| Impairment and provisions during the period | (145) | 88 | (145) | 88 |
| Impairment and provisions at end of period | 350 | 389 | 350 | 389 |
| Sum of loans and advances and amounts owed | ||||
| subject to collective impairment and provisions | 6,572 | 6,856 | 6,572 | 6,856 |
| Collective impairment and provisions | 350 | 389 | 350 | 389 |
| Loans and advances and amounts owed after collective impairment and provisions | 6,222 | 6,467 | 6,222 | 6,467 |
| Individual impairment of loans and advances subject to objective evidence of impairment | ||||
| Balance before impairment of individually impaired loans and advances | 6,211 | 6,628 | 6,211 | 6,628 |
| Impairment of individually impaired loans and advances | 3,496 | 3,807 | 3,496 | 3,807 |
| Balance after impairment of individually impaired loans and advances | 2,715 | 2,821 | 2,715 | 2,821 |
| Accrued interest concerning individually and collectively impaired loans and advances | 297 | 257 | 297 | 257 |
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Notes
| Industry | Loans/advances and guarantees | Impairment and provisions | Sydbank Group | |||||
|---|---|---|---|---|---|---|---|---|
| 30 Jun | 31 Dec | 30 Jun | 31 Dec | Impairment of loans and advances etc for the period | Loss for the period | |||
| 1H | 1H | 1H | 1H | |||||
| DKKm | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Note 9 – continued | ||||||||
| Loans and advances and guarantees as well as impairment charges for loans and advances etc by industry | ||||||||
| Agriculture, hunting, forestry and fisheries | 6,122 | 6,268 | 1,136 | 1,027 | 200 | 125 | 177 | 74 |
| Pig farming | 1,816 | 1,797 | 369 | 281 | 86 | 49 | 14 | 19 |
| Cattle farming | 1,786 | 1,798 | 602 | 599 | 88 | 68 | 138 | 9 |
| Crop production | 1,361 | 1,386 | 64 | 50 | 7 | 7 | 8 | 7 |
| Other agriculture | 1,159 | 1,287 | 101 | 97 | 19 | 1 | 17 | 39 |
| Manufacturing and extraction of raw materials | 8,856 | 7,835 | 251 | 183 | 3 | (6) | 16 | 28 |
| Energy supply etc | 3,609 | 3,512 | 31 | 32 | 4 | 3 | 19 | 4 |
| Building and construction | 3,810 | 3,421 | 88 | 102 | 2 | 3 | 20 | 34 |
| Trade | 13,059 | 12,828 | 312 | 434 | (2) | (10) | 60 | 29 |
| Transportation, hotels and restaurants | 3,664 | 3,397 | 130 | 64 | 48 | 3 | 2 | 2 |
| Information and communication | 375 | 312 | 21 | 20 | 1 | 0 | 1 | 1 |
| Finance and insurance | 6,441 | 6,410 | 157 | 216 | (9) | (21) | 11 | 33 |
| Real property | 7,427 | 7,467 | 437 | 422 | 16 | (4) | 80 | 6 |
| Leasing of commercial property | 3,692 | 3,585 | 227 | 201 | 11 | (10) | 10 | 56 |
| Leasing of residential property | 1,259 | 1,375 | 127 | 122 | (5) | (1) | 9 | 24 |
| Housing associations and cooperative housing associations | 1,824 | 1,789 | 0 | 0 | 0 | - | 0 | - |
| Purchase, development and sale on own account | 503 | 568 | 44 | 75 | 10 | 1 | 59 | 30 |
| Other related to real property | 149 | 150 | 39 | 24 | 0 | 6 | 2 | 16 |
| Other corporate lending | 3,924 | 3,602 | 147 | 182 | (5) | 4 | 17 | 15 |
| Total corporate lending | 57,287 | 55,052 | 2,710 | 2,682 | 258 | 97 | 403 | 34 |
| Public authorities | 751 | 999 | - | - | - | - | - | - |
| Retail clients | 35,345 | 32,786 | 786 | 887 | (29) | 32 | 69 | 0 |
| Collective impairment charges | 350 | 495 | (145) | 88 | - | - | ||
| Provisions for guarantees | 93 | 118 | ||||||
| Total | 93,383 | 88,837 | 3,939 | 4,182 | 84 | 217 | 472 | 44 |
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Notes
| DKKm | Sydbank Group | Sydbank A/S | ||
|---|---|---|---|---|
| 1H 2016 | 1H 2015 | 1H 2016 | 1H 2015 | |
| Note 10 | ||||
| Profit on holdings in associates and subsidiaries | ||||
| Profit/(Loss) on holdings in associates etc | 1 | 4 | 1 | 7 |
| Profit/(Loss) on holdings in subsidiaries etc | - | - | 99 | - |
| Total | 1 | 4 | 100 | 7 |
| Note 11 | ||||
| Effective tax rate | ||||
| Current tax rate of Sydbank | 22.0 | 23.5 | 22.0 | 23.5 |
| Permanent differences | (0.9) | - | (0.9) | - |
| Adjustment of prior year tax charges | - | - | - | - |
| Effective tax rate | 21.1 | 23.5 | 21.1 | 23.5 |
| * Permanent differences comprise a tax-free gain on shares of DKK 31m concerning adjustment of the purchase sum from the sale of shares in Nets Holding in 2014. | ||||
| DKKm | Sydbank Group | Sydbank A/S | ||
| --- | --- | --- | --- | --- |
| 30 Jun 2016 | 31 Dec 2015 | 30 Jun 2016 | 31 Dec 2015 | |
| Note 12 | ||||
| Amounts owed by credit institutions and central banks | ||||
| Amounts owed at notice by central banks | 2,109 | - | 2,109 | - |
| Amounts owed by credit institutions | 2,064 | 4,274 | 2,059 | 4,267 |
| Total | 4,173 | 4,274 | 4,168 | 4,267 |
| Of which reverse transactions | 1,113 | 1,062 | 1,113 | 1,062 |
| Note 13 | ||||
| Other assets | ||||
| Positive market value of derivatives etc | 8,960 | 8,014 | 8,960 | 8,014 |
| Sundry debtors | 436 | 351 | 431 | 343 |
| Interest and commission receivable | 183 | 196 | 183 | 195 |
| Cash collateral provided, CSA agreements | 3,347 | 2,485 | 3,347 | 2,485 |
| Other assets | 1 | 1 | 1 | 1 |
| Total | 12,927 | 11,047 | 12,922 | 11,038 |
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Notes
| Sydbank Group | Sydbank A/S | |||
|---|---|---|---|---|
| 30 Jun | 31 Dec | 30 Jun | 31 Dec | |
| DKKm | 2016 | 2015 | 2016 | 2015 |
| Note 14 | ||||
| Amounts owed to credit institutions and central banks | ||||
| Amounts owed to central banks | 278 | 16 | 278 | 16 |
| Amounts owed to credit institutions | 16,849 | 17,769 | 17,090 | 18,012 |
| Total | 17,127 | 17,785 | 17,368 | 18,028 |
| Of which repo transactions | 8,748 | 11,607 | 8,748 | 11,607 |
| Note 15 | ||||
| Deposits and other debt | ||||
| On demand | 65,955 | 61,628 | 67,880 | 63,551 |
| At notice | 5,513 | 6,192 | 5,513 | 6,192 |
| Time deposits | 2,835 | 6,564 | 2,835 | 6,564 |
| Special categories of deposits | 5,602 | 5,516 | 5,602 | 5,516 |
| Total | 79,905 | 79,900 | 81,830 | 81,823 |
| Of which repo transactions | 605 | 2,909 | 605 | 2,909 |
| Note 16 | ||||
| Other liabilities | ||||
| Negative market value of derivatives etc | 9,363 | 8,417 | 9,363 | 8,417 |
| Sundry creditors etc | 5,029 | 4,192 | 5,007 | 4,167 |
| Negative portfolio, reverse transactions | 2,078 | 2,033 | 2,078 | 2,033 |
| Interest and commission etc | 85 | 53 | 181 | 52 |
| Cash collateral received, CSA agreements | 1,161 | 745 | 1,161 | 745 |
| Total | 17,716 | 15,440 | 17,790 | 15,414 |
Note 17
Provisions
| Provisions for pensions and similar obligations | 3 | 3 | 3 | 3 |
|---|---|---|---|---|
| Provisions for deferred tax | 127 | 127 | 127 | 127 |
| Provisions for guarantees | 93 | 118 | 93 | 118 |
| Other provisions * | 79 | 72 | 78 | 70 |
| Total | 302 | 320 | 301 | 318 |
- Other provisions mainly concern provisions for onerous contracts and legal actions.
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Notes
| DKKm | Sydbank Group | Sydbank A/S | ||
|---|---|---|---|---|
| 30 Jun 2016 | 31 Dec 2015 | 30 Jun 2016 | 31 Dec 2015 |
Note 18
Subordinated capital
| Interest rate | Note | Nominal (m) | Maturity | |||||
|---|---|---|---|---|---|---|---|---|
| 2.13 (fixed) | 1) | Bond loan | EUR 100 | 11 Mar 2027 | 738 | 740 | 738 | 740 |
| Total Tier 2 capital | 738 | 740 | 738 | 740 | ||||
| 0.85 (floating) | 2) | Bond loan | EUR 100 | Perpetual | 743 | 745 | 743 | 745 |
| 0.77 (floating) | 3) | Bond loan | EUR 75 | Perpetual | 558 | 560 | 558 | 560 |
| 6.36 (fixed) | 4) | Bond loan | DKK 85 | Perpetual | 85 | 85 | 85 | 85 |
| Total Additional Tier 1 capital | 1,386 | 1,390 | 1,386 | 1,390 | ||||
| Total subordinated capital | 2,124 | 2,130 | 2,124 | 2,130 |
1) Optional redemption from 11 March 2022 after which the interest rate will be fixed at 1.72% above 5Y Mid-Swap.
2) Optional redemption from 25 April 2017 after which the interest rate will be fixed at 2.10% above 3M EURIBOR.
3) The interest rate follows the 10Y Mid-Swap plus a premium of 0.2%.
4) Optional redemption from 14 May 2017 after which the interest rate will be fixed at 1.75% above 3M CIBOR.
Costs relating to the raising and redemption of subordinated capital 0 0 0
Note 19
Contingent liabilities and other obligating agreements
| Contingent liabilities | ||||
|---|---|---|---|---|
| Financial guarantees | 3,928 | 4,011 | 3,928 | 4,011 |
| Mortgage finance guarantees | 1,754 | 1,781 | 1,754 | 1,781 |
| Registration and remortgaging guarantees | 3,221 | 3,002 | 3,221 | 3,002 |
| Other contingent liabilities | 1,797 | 1,704 | 1,797 | 1,704 |
| Total | 10,700 | 10,498 | 10,700 | 10,498 |
| Other obligating agreements | ||||
| Irrevocable credit commitments | 857 | 784 | 857 | 784 |
| Other liabilities * | 33 | 37 | 46 | 52 |
| Total | 890 | 821 | 903 | 836 |
| * Including intra-group liabilities in relation to rented premises | - | - | 13 | 15 |
Totalkredit loans arranged by Sydbank are subject to an agreed right of set-off against future current commission which Totalkredit may invoke in the event of losses on the loans arranged.
Sydbank does not expect that this set-off will have a significant impact on Sydbank's financial position.
As a result of the Bank's membership of Bankdata, the Bank will be obligated to pay an exit charge in the event of exit.
The deposit guarantee scheme has been changed and the EU's recovery and resolution directive has been implemented in Danish law effective 1 June 2015. The new guarantee fund will cover losses on covered deposits with distressed credit institutions. The fund must account for at least 0.8% of the covered deposits. From 2016 any contributions to the fund will be calculated on the basis of the credit institution's covered deposits and risk relative to other credit institutions in Denmark.
SYDBANK - INTERIM REPORT - FIRST HALF 2016
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Notes
| DKKm | Sydbank Group | Sydbank A/S | ||
|---|---|---|---|---|
| 30 Jun 2016 | 31 Dec 2015 | 30 Jun 2016 | 31 Dec 2015 |
Note 19 – continued
Moreover a Danish resolution fund has been established. Each credit institution will contribute to the fund on the basis of its size and risk relative to other credit institutions in Denmark. The resolution fund must be established and have assets at its disposal equal to at least 1% of the covered deposits of all Danish credit institutions by 31 December 2024. The intention is that losses will be covered by the annual contributions from the participating credit institutions. If one of the funds suffers a loss the annual contribution may be increased.
The Group is party to a number of legal actions. These actions are under continuous review and the necessary provisions made are based on an assessment of the risk of loss. Pending legal actions are not expected to have any significant impact on the financial position of the Group.
Note 20
Repo and reverse transactions
In connection with repo transactions, which involve selling securities to be repurchased at a later date, the securities remain on the balance sheet and consideration received is recognised as a debt. Repo transaction securities are treated as assets provided as collateral for liabilities.
In connection with reverse transactions, which involve purchasing securities to be resold at a later date, the Group is entitled to sell or deposit them as collateral for other loans. The securities are not recognised in the balance sheet and consideration paid is recognised as a receivable.
Assets received as collateral in connection with reverse transactions may be sold to a third party. In such cases a negative portfolio may arise as a result of the accounting rules. This is recognised under "Other liabilities".
| Assets sold as part of repo transactions | ||||
|---|---|---|---|---|
| Bonds at fair value | 9,485 | 14,712 | 9,485 | 14,712 |
| Assets purchased as part of reverse transactions | ||||
| Bonds at fair value | 7,901 | 11,140 | 7,901 | 11,140 |
| Shares etc | - | 1 | - | 1 |
Note 21
Collateral
At 30 June 2016 the Group had deposited as collateral securities at a market value of DKK 201m with Danish and foreign exchanges and clearing centres etc in connection with margin calls and securities settlements etc.
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Notes
| DKKm | 1H
2016 | 1H
2015 | Index
16/15 | Full year
2015 |
| --- | --- | --- | --- | --- |
Note 22
Related parties
Sydbank is the bank of a number of related parties. Transactions with related parties are settled on an arm’s length basis.
No unusual transactions took place with related parties in 1H 2016. Reference is made to the Group’s 2015 Annual Report for a detailed description of related party transactions.
Note 23
Reporting events occurring after the balance sheet date
After the expiry of 1H, no matters of significant impact on the financial position of the Sydbank Group have occurred.
Note 24
Large shareholders
Silchester International Investors LLP owns more than 5% of Sydbank’s share capital.
Note 25
Core income
| Net interest etc | 1,173 | 1,204 | 97 | 2,404 |
|---|---|---|---|---|
| Mortgage credit * | 193 | 204 | 95 | 376 |
| Payment services | 96 | 102 | 94 | 207 |
| Remortgaging and loan fees | 51 | 99 | 52 | 159 |
| Commission and brokerage | 180 | 228 | 79 | 407 |
| Commission etc investment funds and pooled pension plans | 187 | 181 | 103 | 341 |
| Asset management | 95 | 92 | 103 | 183 |
| Custody fees | 36 | 39 | 92 | 75 |
| Other income | 90 | 78 | 115 | 177 |
| Total | 2,101 | 2,227 | 94 | 4,329 |
* Mortgage credit
| Totalkredit cooperation | 144 | 168 | 86 | 326 |
|---|---|---|---|---|
| Totalkredit, set-off of loss | 10 | 15 | 67 | 32 |
| Totalkredit cooperation, net | 134 | 153 | 88 | 294 |
| DLR Kredit | 58 | 49 | 118 | 79 |
| Other mortgage credit income | 1 | 2 | - | 3 |
| Total | 193 | 204 | 95 | 376 |
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Notes
| DKKm |
|---|
Note 26
Financial instruments recognised at fair value
Measurement of financial instruments is based on quoted prices from an active market, on generally accepted valuation models with observable market data or on available data that only to a limited extent are observable market data.
Measurement of financial instruments for which prices are quoted in an active market or which are based on generally accepted valuation models with observable market data is not subject to significant estimates.
As regards financial instruments where measurement is based on available data that only to a limited extent are observable market data, measurement is subject to estimates. Such financial instruments appear from the column unobservable inputs below and include primarily unlisted shares, including shares in DLR Kredit A/S.
The fair value of unlisted shares and other holdings is calculated on the basis of available information on trades etc – including to a very significant extent on shareholders agreements based on book value. To an insignificant extent fair value is calculated on the basis of expected cash flows.
A 10% change in the calculated market value of financial assets measured on the basis of unobservable inputs will affect profit before tax by DKK 151m.
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Notes
| 30 Jun 2016 | |||||
|---|---|---|---|---|---|
| DKKm | Quoted prices | Observable inputs | Unobservable inputs | Total fair value | Carrying amount |
| Note 26 – continued | |||||
| Financial assets | |||||
| Amounts owed by credit institutions and central banks | - | 1,113 | - | 1,113 | 1,113 |
| Loans and advances at fair value | - | 6,826 | - | 6,826 | 6,826 |
| Bonds at fair value | - | 28,236 | - | 28,236 | 28,236 |
| Shares etc | 159 | 15 | 1,513 | 1,687 | 1,687 |
| Assets related to pooled plans | 4,500 | 8,160 | - | 12,660 | 12,660 |
| Other assets | 151 | 8,916 | - | 9,067 | 9,067 |
| Total | 4,810 | 53,266 | 1,513 | 59,589 | 59,589 |
| Financial liabilities | |||||
| Amounts owed to credit institutions and central banks | - | 8,748 | - | 8,748 | 8,748 |
| Deposits and other debt | - | 605 | - | 605 | 605 |
| Deposits in pooled plans | - | 12,667 | - | 12,667 | 12,667 |
| Other liabilities | 55 | 11,386 | - | 11,441 | 11,441 |
| Total | 55 | 33,406 | - | 33,461 | 33,461 |
| DKKm | 30 Jun 2016 | 30 Jun 2015 | |||
| --- | --- | --- | |||
| Assets measured on the basis of unobservable inputs | |||||
| Carrying amount at 1 Jan | 1,493 | 1,392 | |||
| Additions | 9 | 24 | |||
| Disposals | 25 | 6 | |||
| Market value adjustment | 36 | 39 | |||
| Carrying amount at end of period | 1,513 | 1,449 | |||
| Recognised in profit for the period | |||||
| Interest income | - | - | |||
| Dividend | 38 | 10 | |||
| Market value adjustment | 36 | 39 | |||
| Total | 74 | 49 |
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Notes
| Sydbank Group | Sydbank A/S | |
|---|---|---|
| 30 Jun | 30 Jun | |
| DKKm | 2016 | 2016 |
Note 28
Leverage ratio
Exposure for computation of leverage:
| Total assets | 148,025 | 150,264 |
|---|---|---|
| Pooled assets are excluded | (12,660) | (12,660) |
| Impairment charges deducted from loans and advances | 3,846 | 3,846 |
| Correction derivatives etc | (9,010) | (9,010) |
| Guarantees etc | 10,700 | 10,700 |
| Undrawn credit commitments etc | 12,459 | 12,473 |
| Other adjustments | (251) | (231) |
| Total | 153,109 | 155,382 |
| Tier 1 capital – current | 10,586 | 10,646 |
| Tier 1 capital – fully loaded | 9,755 | 9,815 |
| Leverage ratio, % – current | 6.9 | 6.9 |
| Leverage ratio, % – fully loaded | 6.4 | 6.3 |
| 30 Jun 2016 | ||
| --- | --- | --- |
| DKKm | Activity | Share capital (m) |
Note 29
Group holdings and enterprises
| Sydbank A/S | DKK | 722 | ||||
|---|---|---|---|---|---|---|
| Consolidated subsidiaries | ||||||
| DiBa A/S, Aabenraa | Investment | DKK | 66 | 1,957 | (4) | 100 |
| Ejendomsselskabet af 1. juni 1986 A/S, | ||||||
| Aabenraa | Real property | DKK | 10 | 10 | (13) | 100 |
| Syd Fund Management A/S, Aabenraa | Administration | DKK | 40 | 40 | 3 | 100 |
| Sydbank (Schweiz) AG, in Liquidation, | ||||||
| St. Gallen, Switzerland | - | CHF | 40 | 248 | (1) | 100 |
| Holdings in associates | ||||||
| Foreningen Bankdata, Fredericia | IT | DKK | 544 | 544 | (54) | 31 |
| Core Property Management A/S, | ||||||
| Copenhagen | Real property | DKK | 10 | 27 | 12 | 20 |
Financial information according to the companies' most recently published annual reports.
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Management Statement
We have reviewed and approved the Interim Report – First Half 2016 of Sydbank A/S.
The consolidated interim financial statements are prepared in accordance with IAS 34 “Interim Financial Reporting” as approved by the EU. Furthermore the interim financial statements (of the parent company) are prepared in compliance with Danish disclosure requirements for interim reports of listed financial companies.
The Interim Report has not been audited or reviewed.
In our opinion the interim financial statements give a true and fair view of the Group’s and the parent company’s assets, shareholders’ equity and liabilities and financial position at 30 June 2016 and of the results of the Group’s and the parent company’s operations and consolidated cash flows for the period 1 January – 30 June 2016. Moreover it is our opinion that the management’s review includes a fair review of the developments in the Group’s and the parent company’s operations and financial position as well as a description of the most significant risks and elements of uncertainty which may affect the Group and the parent company.
Aabenraa, 25 August 2016
Group Executive Management
| Karen Frøsig | Bjarne Larsen | Jan Svarre |
|---|---|---|
| CEO |
Board of Directors
| Torben H. Nielsen | Peder Damgaard | Svend Erik Busk |
|---|---|---|
| Chairman | Vice-Chairman | |
| Alex Slot Hansen | Lars Mikkelgaard-Jensen | Janne Moltke-Leth |
| Frank Møller Nielsen | Jacob Chr. Nielsen | Bo Normann Rasmussen |
| Jarl Oxlund | Margrethe Weber |
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Supplementary Information
Financial calendar
In 2016 the Group's preliminary announcement of financial statements will be released as follows:
- Interim Report – Q1-Q3 2016
2 November 2016
Sydbank contacts
Karen Frøsig, CEO
tel +45 74 37 20 00
Jørn Adam Møller, CFO
tel +45 74 37 24 00
Address
Sydbank A/S
Peberlyk 4
6200 Aabenraa, Denmark
Tel +45 74 37 37 37
CVR No DK 12626509
Relevant links
sydbank.dk
sydbank.com
For further information reference is made to Sydbank's 2015 Annual Report at sydbank.com.