Interim Report – First Half 2017

Sydbank Group

Sydbank

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Sydbank’s Interim Report – First Half 2017

Highly satisfactory result – return of 14.2% on shareholders’ equity after tax

Sydbank has delivered a highly satisfactory performance for the first six months of 2017 and continues the positive trend. Trading income as well as investment portfolio earnings are at a very high level in 1H 2017. Impairment charges have declined by DKK 90m compared to the same period in 2016. The Bank’s loans and advances have effectively dropped by DKK 0.3bn adjusted for the effect of the funding of mortgage-like loans.

CEO Karen Frøsig comments on Sydbank’s 1H result:

It is highly satisfactory to note an increase of DKK 173m in profit after tax compared with the same period in 2016. The increase in profit is driven by improvements in trading income, impairment charges and investment portfolio earnings. Profit after tax equals a return on shareholders’ equity of 14.2% p.a.

Karen Frøsig elaborates:

The financial health of the Bank’s clients is generally good, which means that the need for impairment charges for loans and advances is limited. As a result of the current level of interest rates combined with relatively low demand for new loans and advances as well as keen competition, net interest income continues to be under pressure. But I am very pleased that the drop in net interest income has been offset by a rise in other core income, bringing total core income to the level achieved in the same period in 2016.

1H 2017 – highlights

Profit of DKK 816m, equal to a return of 14.2% p.a. on shareholders’ equity after tax.
Total income of DKK 2,232m on a par with the level in 1H 2016.
Impairment charges for loans and advances represent an income of DKK 9m and have declined by DKK 90m compared with the same period in 2016.
Bank loans and advances including funded mortgage-like loans have declined by DKK 0.3bn, equal to 0.4% compared to year-end 2016. Bank loans and advances excluding funded mortgage-like loans have declined by DKK 6.6bn, equal to 8.6% for the half year.
The Common Equity Tier 1 capital ratio has declined by 0.5 percentage points compared to year-end 2016 and constitutes 15.6% excluding profit for the period. When including 50% of profit for the period, the Common Equity Tier 1 capital ratio stands at 16.3%.
A share buyback of DKK 664m was commenced on 2 March 2017.

Outlook for 2017

Limited growth is projected for the Danish economy in 2017.
Based on the level of interest rates at the beginning of 2017, core income is expected to be on a par with the core income generated in 2016.
Trading income is anticipated to remain unchanged relative to income in 2016 but is dependent on financial market developments.
As a consequence of general pay rises for the financial sector and a payroll tax increase of 0.5%, costs (core earnings) are projected to rise slightly despite measures implemented.
Impairment charges in 2017 are forecast to be lower than the level recorded in 2016.
As a result of intensified digitization of the Bank as well as the establishment of a new mortgage platform, non-recurring costs are expected to represent around DKK 75m.

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Financial Review

Group Financial Highlights ... 4
Highlights ... 5
Financial Review – Performance in 1H 2017 ... 7
Income Statement ... 16
Statement of Comprehensive Income ... 16
Balance Sheet ... 17
Financial Highlights – Quarterly ... 18
Financial Highlights – Half-yearly ... 19
Capital ... 20
Cash Flow Statement ... 22
Segment Reporting etc ... 23
Notes ... 25
Management Statement ... 38
Supplementary Information ... 39

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Group Financial Highlights

	1H 2017	1H 2016	Index 17/16	Q2 2017	Q2 2016	Full year 2016
Income statement (DKKm)
Core income	2,093	2,101	100	1,040	1,051	4,198
Trading income	139	123	113	46	69	237
Total income	2,232	2,224	100	1,086	1,120	4,435
Costs, core earnings	1,369	1,346	102	678	665	2,590
Core earnings before impairment	863	878	98	408	445	1,845
Impairment of loans and advances etc	(9)	81	-	(20)	43	87
Core earnings	872	797	109	428	412	1,758
Investment portfolio earnings	187	(8)	-	51	14	104
Profit before non-recurring items	1,059	789	134	479	426	1,862
Non-recurring items, net	(12)	26	-	(6)	26	7
Profit before tax	1,047	815	128	473	452	1,869
Tax	231	172	134	104	92	397
Profit for the period	816	643	127	369	360	1,472
Balance sheet highlights (DKKbn)
Loans and advances at amortised cost	70.6	78.8	90	70.6	78.8	77.2
Loans and advances at fair value	7.4	6.8	109	7.4	6.8	6.1
Deposits and other debt	84.7	79.9	106	84.7	79.9	81.1
Bonds issued at amortised cost	3.7	7.1	52	3.7	7.1	3.7
Subordinated capital	1.3	2.1	62	1.3	2.1	2.1
Shareholders' equity	11.5	11.1	104	11.5	11.1	11.8
Total assets	140.1	148.0	95	140.1	148.0	146.7
Financial ratios per share (DKK per share of DKK 10)
EPS Basic	11.8	9.1		5.4	5.1	20.9
EPS Diluted	11.8	9.1		5.4	5.1	20.9
Share price at end of period	245.4	167.2		245.4	167.2	219.2
Book value	169.0	157.6		169.0	157.6	169.2
Share price/book value	1.45	1.06		1.45	1.06	1.30
Average number of shares outstanding (in millions)	69.1	71.0		68.8	70.7	70.4
Dividend per share	-	-		-	-	10.46
Other financial ratios and key figures
Common Equity Tier 1 capital ratio	15.6	14.8		15.6	14.8	16.1
Tier 1 capital ratio	16.1	16.1		16.1	16.1	17.4
Capital ratio	18.1	18.0		18.1	18.0	19.2
Pre-tax profit as % p.a. of average shareholders' equity	18.2	14.9		16.5	16.5	16.6
Post-tax profit as % p.a. of average shareholders' equity	14.2	11.7		12.8	13.2	13.1
Costs (core earnings) as % of total income	61.3	60.5		62.4	59.4	58.4
Return on assets (%)	0.6	0.4		0.3	0.2	1.0
Interest rate risk	0.7	0.6		0.7	0.6	1.6
Foreign exchange position	3.9	2.1		3.9	2.1	2.2
Foreign exchange risk	0.1	0.0		0.1	0.0	0.0
Loans and advances relative to deposits *	0.7	0.9		0.7	0.9	0.8
Loans and advances relative to shareholders' equity *	6.1	7.1		6.1	7.1	6.6
Growth in loans and advances for the period *	(8.6)	6.1		(1.8)	3.5	3.9
Excess cover relative to statutory liquidity requirements	242.0	192.7		242.0	192.7	186.5
Total large exposures	20.7	0.0		20.7	0.0	0.0
Accumulated impairment ratio	3.6	4.2		3.6	4.2	3.6
Impairment ratio for the period	(0.01)	0.09		(0.02)	0.05	0.10
Number of full-time staff at end of period	2,092	2,032	103	2,092	2,032	2,037

Financial ratios are calculated on the basis of loans and advances at amortised cost.

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Highlights

Strong trading income, high investment portfolio earnings and continued high credit quality ensure a highly satisfactory result for the first half of 2017

Sydbank's financial statements for 1H show a profit before tax of DKK 1,047m compared with DKK 815m in 1H 2016. The increase is attributable to an improvement in trading income of 13%, significantly improved investment portfolio earnings of DKK 195m as well as a decline in impairment charges of DKK 90m.

Profit before tax equals a return on average shareholders' equity of 18.2% p.a.

Core income and costs (core earnings) are in line with the expectations announced in the 2016 Annual Report. Trading income and impairment charges recorded in 1H 2017 exceeded the expectations presented in the 2016 Annual Report.

Net interest etc constitutes DKK 1,030m compared with DKK 1,173m in 2016 – a decrease of DKK 143m. DKK 52m of the decrease is attributable to the effect of the amended funding agreement concerning mortgage-like loans.

Core income represents DKK 2,093m compared with DKK 2,101m in 2016 – a decline of DKK 8m.

Total income amounts to DKK 2,232m against DKK 2,224m in 2016.

Core earnings constitute DKK 872m compared with DKK 797m in 2016 – an increase of DKK 75m.

Profit for the period amounts to DKK 816m compared with DKK 643m in 2016 – an increase of DKK 173m.

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 of a minimum of 12% on shareholders' equity 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 digitization of processes and the establishment of a new mortgage platform, DKK 75m will be allocated in 2017 to optimise IT systems. The amount will be recognised under "Non-recurring items".

These funds cover three projects:
- Optimisation of housing loan processes
- New mortgage platform
- Streamlining of credit processes.

Clients and employees alike will experience considerable improvements as a result of the projects. Clients in the form of shorter response times and case processing times. Employees in the form of smoother procedures and qualitative improvements. The projects will contribute to developing the Bank as well as make it possible to adjust costs – also in the years ahead.

Status – targets

Target	Objective	Status at 30 June 2017	Comment
Return on shareholders' equity after tax	Over 12% *	14.2%	Progressing as planned
Customer satisfaction – Corporate	Top 3 **	3rd – Aalund	Met in 2016
Customer satisfaction – Retail	Top 3 **	5th – EPSI	Not met in 2016
Common Equity Tier 1 capital ratio	Around 13.5%	15.6%	Met from Q3 2013
Capital ratio	Around 17.0%	18.1%	Met from Q1 2015
Dividend	30-50% of profit for the year after tax	50% of profit for the year after tax in 2016	Met in 2016

or top 3 ranking among the 6 largest banks ** among the 6 largest banks

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1H performance

Compared with 1H 2016 core income has dropped by DKK 8m to DKK 2,093m. The decline in core income is mainly attributable to a decrease in net interest income etc and a rise in mortgage credit income.

Trading income rose to DKK 139m in 1H 2017 compared with DKK 123m in the same period in 2016, an increase of 13%.

Total income represents DKK 2,232m, an increase of DKK 8m compared with 1H 2016.

At Sydbank costs (core earnings) are a constant focus area and the Bank maintained tight control of costs (core earnings) in 1H, which constituted DKK 1,369m compared with DKK 1,346m in 2016 – an increase of DKK 23m.

Compared with 1H 2016 the Group's impairment charges for loans and advances have declined by DKK 90m to an income of DKK 9m.

Together the Group's position-taking and liquidity handling recorded investment portfolio earnings of DKK 187m in 1H 2017 compared with minus DKK 8m a year ago.

Profit before tax for 1H 2017 amounts to DKK 1,047m compared with DKK 815m in the same period in 2016. Tax represents DKK 231m. Profit for the period amounts to DKK 816m compared with DKK 643m in 2016.

Credit intermediation

In addition to traditional bank loans and advances the Group arranges for mortgage loans from Totalkredit and DLR Kredit. The Group's total credit intermediation comprises bank loans and advances, mortgage-like loans funded by Totalkredit as well as mortgage loans arranged through Totalkredit and DLR Kredit respectively. At 30 June 2017 credit intermediation totalled DKK 146.6bn – a drop of DKK 1.3bn since year-end 2016.

Total credit intermediation (DKKbn)	30 Jun 2017	31 Dec 2016
Bank loans and advances	70.6	77.2
Funded mortgage-like loans	6.3	-
Arranged mortgage loans – Totalkredit	57.6	58.3
Arranged mortgage loans – DLR	12.1	12.4
Total	146.6	147.9

Capital

The Group has implemented a share buyback programme of DKK 664m. The share buyback commenced on 2 March 2017 and will be completed by 31 December 2017. At end-June 1,263,600 shares worth DKK 308m, 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 2016 Annual Report.

The Bank has prepaid Additional Tier 1 capital of EUR 100m and DKK 85m. The prepayments were made on 25 April 2017 and 15 May 2017 respectively.

Outlook for 2017

Limited growth is projected for the Danish economy in 2017.

Based on the level of interest rates at the beginning of 2017, core income is expected to be on a par with the core income generated in 2016.

Trading income is anticipated to remain unchanged relative to income in 2016 but is dependent on financial market developments.

As a consequence of general pay rises for the financial sector and a payroll tax increase of 0.5%, costs (core earnings) are projected to rise slightly despite measures implemented.

Impairment charges in 2017 are forecast to be lower than the level recorded in 2016.

As a result of intensified digitization of the Bank as well as the establishment of a new mortgage platform, non-recurring costs are expected to represent around DKK 75m.

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Financial Review – Performance in 1H 2017

The Sydbank Group has recorded a profit before tax of DKK 1,047m (1H 2016: DKK 815m).

Profit before tax equals a return on average shareholders’ equity of 18.2% p.a.

Profit for the period after tax amounts to DKK 816m compared with DKK 643m in 2016.

Profit after tax equals a return on average shareholders’ equity of 14.2% p.a.

The highly satisfactory result for 1H 2017 exceeds expectations at the beginning of the year.

The result is characterised by:

1H

A decrease in core income of DKK 8m to DKK 2,093m
A rise in trading income of DKK 16m
A 2% increase in costs (core earnings) to DKK 1,369m
A decline in impairment charges for loans and advances of DKK 90m
A rise in core earnings of DKK 75m to DKK 872m
Investment portfolio earnings of DKK 187m
Bank loans and advances of DKK 70.6bn (year-end 2016: DKK 77.2bn)
Bank deposits of DKK 84.7bn (year-end 2016: DKK 81.1bn)
A capital ratio of 18.1%, including a Common Equity Tier 1 capital ratio of 15.6%
An individual solvency need of 10.4% (year-end 2016: 10.2%).

Income statement – 1H (DKKm)	2017	2016
Core income	2,093	2,101
Trading income	139	123
Total income	2,232	2,224
Costs, core earnings	1,369	1,346
Core earnings before impairment	863	878
Impairment of loans and advances etc	(9)	81
Core earnings	872	797
Investment portfolio earnings	187	(8)
Profit before non-recurring items	1,059	789
Non-recurring items, net	(12)	26
Profit before tax	1,047	815
Tax	231	172
Profit for the period	816	643

Core income

Core income has declined by DKK 8m to DKK 2,093m.

Net interest has decreased by DKK 143m to DKK 1,030m. DKK 52m of the decline is attributable to the effect of the amended funding agreement concerning mortgage-like loans. The funding agreement was changed from an offsetting model according to which the Bank covers losses as regards the entire loan to a guarantee model according to which the Bank provides a guarantee for the part of the loan in the LTV range of 60-80%. As a consequence of the amendment of the agreement, funded mortgage-like loans will not be recognised in the Bank’s balance sheet in future and income will be recognised under mortgage credit income.

Net income from the cooperation with Totalkredit represents DKK 189m (2016: DKK 134m) after a set-off of loss of DKK 15m (2016: DKK 10m).

The cooperation with DLR Kredit has generated an income of DKK 77m (2016: DKK 58m). The increase of DKK 19m is predominantly attributable to the market value adjustment of the shares in DLR. Compared to 2016 total mortgage credit income has climbed by DKK 75m to DKK 268m – an increase of 39%. DKK 42m of the DKK 75m increase is attributable to funded mortgage-like loans.

Income from remortgaging and loan fees has gone up from DKK 51m in 2016 to DKK 66m – an increase of 29%.

Compared with 2016 income from asset management has gone up by DKK 28m to DKK 123m – a rise of 29%.

The remaining income components have risen by DKK 17m compared to 2016 – an increase of 3%.

Core income – 1H (DKKm)	2017	2016
Net interest etc	1,030	1,173
Mortgage credit	268	193
Payment services	96	96
Remortgaging and loan fees	66	51
Commission and brokerage	194	180
Commission etc investment funds and pooled pension plans	199	187
Asset management	123	95
Custody account fees	35	36
Other operating income	82	90
Total	2,093	2,101

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Trading income

Trading income rose to DKK 139m in 1H 2017 compared with DKK 123m in the same period in 2016 – an increase of 13%.

In Fixed Income considerable trading activity was recorded in mortgage bonds as well as corporate bonds in 1H 2017. In Equities activity was at a satisfactory level in 1H 2017.

Trading income – 1H (DKKm)	2017	2016
Bonds	93	66
Shares	31	39
Foreign exchange, interest etc	15	18
Total	139	123

Costs and depreciation

The Group's costs and depreciation totalled DKK 1,384m, equal to an increase of DKK 30m compared with 2016. The increase is a consequence of general pay rises for the financial sector and a payroll tax increase of 0.5%.

Costs and depreciation – 1H (DKKm)	2017	2016
Staff costs	793	766
Other administrative expenses	528	530
Amortisation/depreciation and impairment of intangible assets and property, plant and equipment	48	49
Other operating expenses	15	9
Total costs and depreciation	1,384	1,354
Distributed as follows:
Costs, core earnings	1,369	1,346
Costs, investment portfolio earnings	3	3
Non-recurring costs	12	5

Costs (core earnings) represent DKK 1,369m compared with DKK 1,346m in 2016.

At the end of 1H 2017 the Group's staff numbered 2,092 (full-time equivalent) compared with 2,037 at 31 December 2016.

The number of branches is unchanged compared with year-end 2016: 64 in Denmark and 3 in Germany.

Core earnings before impairment

Core earnings before impairment charges for loans and advances represent DKK 863m – a decrease of DKK 15m or 2% compared with the same period in 2016.

Impairment of loans and advances etc
Impairment charges for loans and advances represent an income of DKK 9m compared with an expense of DKK 81m during the same period in 2016. The reduction constitutes DKK 90m.

In 1H 2017 individual impairment charges as regards agricultural exposures totalled DKK 34m. The impairment charge consists in all material respects of the impairment charge for one exposure.

Collective impairment charges for agricultural exposures represent DKK 150m at 30 June 2017 – unchanged compared with year-end 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.

Quarterly individual impairment charges

At 30 June 2017 the impairment ratio represents minus 0.01% relative to bank loans and advances and minus 0.01% relative to bank loans and advances and guarantees. At end-June 2017 accumulated impairment and provisions amount to DKK 3,108m – a decline of DKK 181m compared with the beginning of the year.

Individually impaired bank loans and advances

Compared with 30 June 2016 impaired bank loans and advances before impairment charges have decreased by DKK 1,655m to DKK 4,556m, equal to a decline of 26.6%.

DKK 1,134m of the decrease is attributable to non-defaulted bank loans and advances and DKK 521m is attributable to defaulted bank loans and advances.

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During the same period individually impaired bank loans and advances after impairment charges dropped by DKK 748m, equal to 26.9%.

Impairment charges for individually impaired bank loans and advances represent 55.5% (end-June 2016: 55.3% and year-end 2016: 56.1%).

The decline in impaired bank loans and advances is significantly impacted by the conversion of bank loans and advances – as regards agricultural exposures – to subordinated loan capital and the subsequent write-off for accounting purposes.

In 1H 2017 reported losses amounted to DKK 327m (1H 2016: DKK 472m). Of the reported losses DKK 287m has previously been written down.

Individually impaired bank loans and advances (DKKm)	30 Jun 2017	31 Dec 2016	30 Jun 2016
Non-defaulted bank loans and advances	3,412	3,637	4,546
Defaulted bank loans and advances	1,144	1,225	1,665
Impaired bank loans and advances	4,556	4,862	6,211
Impairment charges for bank loans and advances subject to individual impairment	2,528	2,726	3,435
Impaired bank loans and advances after impairment charges	2,028	2,136	2,776
Impaired bank loans and advances as % of bank loans and advances before impairment charges	6.2	6.1	7.5
Impairment charges as % of bank loans and advances before impairment charges	3.4	3.4	4.2
Impairment as % of impaired bank loans and advances	55.5	56.1	55.3
Impairment charges as % of defaulted bank loans and advances	221.0	222.5	206.3

Impairment charges as a percentage of defaulted bank loans and advances at 30 June 2017 stand at 221.0.

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 2016 defaulted bank loans and advances have dropped by DKK 521m to DKK 1,144m, equal to a decline of 31.3%.

Since 30 June 2016 non-defaulted bank loans and advances have dropped by DKK 1,134m to DKK 3,412m, equal to a decline of 24.9%.

Breakdown of impaired bank loans and advances

Core earnings

Core earnings represent DKK 872m – an increase of DKK 75m or 9% compared with 1H 2016.

Investment portfolio earnings

Together the Group's position-taking and liquidity handling recorded investment portfolio earnings of DKK 187m in 1H 2017 compared with minus DKK 8m a year ago.

The high investment portfolio earnings in 1H 2017 are a consequence of narrowing credit spreads on mortgage bonds as well as gains on interest rate fluctuations.

The risk continues to be composed so that the Bank will profit from an interest rate increase.

Investment portfolio earnings - 1H (DKKm)	2017	2016
Position-taking	137	(31)
Liquidity generation and liquidity reserves	45	29
Strategic positions	9	(2)
Costs	(4)	(4)
Total	187	(8)

Margin expenses as regards the Group's senior issues are included under liquidity generation and liquidity reserves and represent DKK 10m in 1H 2017 compared with DKK 16m in 1H 2016.

Non-recurring items etc, net

Non-recurring items etc total an expense of DKK 12m compared with a net income of DKK 26m in 1H 2016. The item consists of process digitization costs related to Blue growth as well as the establishment of a new mortgage platform. In 1H 2016 this item included one-off income of DKK 31m concerning the adjustment of the purchase sum from the sale of the shares in Nets Holding in 2014 as well as process optimisation costs of DKK 5m.

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Profit for the period (DKKm)	Q2 2017	Q1 2017	Q4 2016	Q3 2016	Q2 2016	Q1 2016
Core income	1,040	1,053	1,067	1,030	1,051	1,050
Trading income	46	93	49	65	69	54
Total income	1,086	1,146	1,116	1,095	1,120	1,104
Costs, core earnings	678	691	632	612	665	681
Core earnings before impairment	408	455	484	483	455	423
Impairment of loans and advances etc	(20)	11	(27)	33	43	38
Core earnings	428	444	511	450	412	385
Investment portfolio earnings	51	136	63	49	14	(22)
Profit before non-recurring items	479	580	574	499	426	363
Non-recurring items, net	(6)	(6)	(14)	(5)	26	-
Profit before tax	473	574	560	494	452	363
Tax	104	127	116	109	92	80
Profit for the period	369	447	444	385	360	283

Profit for the period

Profit before tax amounts to DKK 1,047m (1H 2016: DKK 815m). Tax represents DKK 231m, equal to an effective tax rate of 22.0%. Profit for the period amounts to DKK 816m compared with DKK 643m in 2016.

Return

Profit for the period equals a return of 14.2% p.a. on average shareholders' equity after tax against 11.7% p.a. in 1H 2016. Earnings per share stands at DKK 11.8 compared with DKK 9.1 in 2016.

Subsidiaries

Ejendomsselskabet recorded a profit after tax of DKK 2m (1H 2016: DKK 2m). Profit after tax in DiBa A/S and Syd Fund Management A/S represents DKK 0m (1H 2016: DKK 96m) and DKK 6m (1H 2016: DKK 3m) respectively.

Q2 2017 compared with Q1 2017

Profit before tax for the quarter represents DKK 473m.

Compared with Q1 2017 profit before tax reflects:
- a decline in net interest etc of DKK 9m
- a decrease in core income of DKK 13m
- a drop in trading income of DKK 47m
- a decline in costs (core earnings) of DKK 13m
- a decrease in impairment charges for bank loans and advances of DKK 31m
- a decline in core earnings of DKK 16m to DKK 428m
- investment portfolio earnings of DKK 51m (Q1 2017: DKK 136m).

Total assets

The Group's total assets made up DKK 140.1bn at 30 June 2017 against DKK 146.7bn at year-end 2016.

Assets (DKKbn)	30 Jun 2017	31 Dec 2016
Amounts owed by credit institutions etc	12.6	9.0
Loans and advances at fair value (reverse transactions)	7.4	6.1
Loans and advances at amortised cost (bank loans and advances)	70.6	77.2
Securities and holdings etc	23.6	28.3
Assets related to pooled plans	15.5	13.8
Other assets etc	10.4	12.3
Total	140.1	146.7

The Group's bank loans and advances made up DKK 70.6bn at end-June 2017 against DKK 77.2bn at year-end 2016 and DKK 78.8bn at end-June 2016.

Shareholders' equity and liabilities (DKKbn)	30 Jun 2017	31 Dec 2016
Amounts owed to credit institutions etc	7.1	17.6
Deposits and other debt	84.7	81.1
Deposits in pooled plans	15.5	13.8
Bonds issued	3.7	3.7
Other liabilities etc	16.3	16.6
Subordinated capital	1.3	2.1
Shareholders' equity	11.5	11.8
Total	140.1	146.7

The Group's deposits make up DKK 84.7bn, equal to an increase of DKK 3.6bn compared to the level at year-end 2016.

As a consequence of the amendment of the funding agreement concerning mortgage-like loans effective

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1 January 2017, funded mortgage-like loans and the corresponding funding are no longer recognised in the Group's balance sheet. Funded mortgage-like loans represent DKK 6.3bn at end-June 2017. The funding was included in "Amounts owed to credit institutions etc" at year-end 2016.

Capital

At 30 June 2017 shareholders' equity constitutes DKK 11,549m – a decline of DKK 208m since year-end 2016.

The change comprises an addition from profit for the period of DKK 816m less actual distribution of DKK 735m and net purchases of own shares etc of DKK 289m.

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 2016 Annual Report.

The Bank has prepaid Additional Tier 1 capital of EUR 100m and DKK 85m. The prepayments were made on 25 April 2017 and 15 May 2017 respectively.

REA (DKKbn)	30 Jun 2017	31 Dec 2016
Credit risk	40.6	41.7
Market risk	5.9	8.1
Operational risk	8.0	8.0
Other exposures incl CVA	5.5	5.8
Total	60.0	63.6

The risk exposure amount represents DKK 60.0bn (year-end 2016: DKK 63.6bn). The change is mainly attributable to a decrease in market risk of DKK 2.2bn and a decline in credit risk of DKK 1.1bn.

The development in the gross exposure by rating category at 30 June 2016, 31 December 2016 and 30 June 2017 appears below.

Compared with 30 June 2016 the gross exposure by rating category shows an overall positive development with an increasing share in the four best rating categories.

Gross exposure by rating category

The gross exposure consists of loans and advances, undrawn credit facilities, 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 exposure.

The Group's capital ratio stands at 18.1%, of which the Tier 1 capital ratio represents 16.1% compared with 19.2% and 17.4% respectively at year-end 2016. The Common Equity Tier 1 capital ratio stands at 15.6% (31 December 2016: 16.1%).

The development in the Group's capital ratio from 31 December 2016 to 30 June 2017 is illustrated below.

Capital ratio in 1H 2017

Profit for the period is not included in the calculation of capital ratios at 30 June 2017. If 50% of profit for the period after tax had been recognised the capital ratios would have been 0.7 percentage points higher.

At 30 June 2017 the individual solvency need represents 10.4%, equal to the level at year-end 2016.

The parent's capital ratio stands at 17.6%, of which the Tier 1 capital ratio represents 15.5% compared with 18.7% and 16.8% respectively at year-end 2016. The Common Equity Tier 1 capital ratio stands at 15.1% (31 December 2016: 15.6%).

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Capital requirements

The Group's capital management is anchored in the Internal Capital Adequacy Assessment Process (ICAAP), a review conducted to identify risks and determine the individual solvency need.

At end-June 2017 the individual solvency need represented 10.4%. 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 risk exposure amount.

In addition to the solvency need the Group must meet a combined buffer requirement of 1.9% at 30 June 2017. When fully loaded the combined buffer requirement will represent 3.5% bringing the fully loaded CET1 capital ratio requirement to 9.4%.

Capital and solvency and capital requirements (% of REA)	30 Jun 2017	Fully loaded*
Capital and solvency
Common Equity Tier 1 capital ratio	15.6	15.6
Capital ratio	18.1	18.1
Capital requirements (incl buffers)**
Total capital requirement	12.3	13.9
CET1 capital requirement	7.7	9.4
-of which countercyclical capital buffer	0.0	0.0
-of which capital conservation buffer	1.3	2.5
-of which SIFI buffer	0.6	1.0
Excess capital
Common Equity Tier 1 capital	7.9	6.2
Total capital	5.8	4.2

Based on fully loaded CRR/CRD IV rules and requirements.
** The total capital requirement consists of an individual solvency need and a combined buffer requirement. The fully loaded countercyclical capital buffer is based on the national buffer rate as at 30 June 2017.

Market risk

At 30 June 2017 the Group's interest rate risk represents DKK 68m. The Group's exchange rate risk continues to be very low and its equity position modest.

Funding and liquidity

The Group's liquidity – measured under the 10% statutory requirement – constitutes 34.2% at 30 June 2017 against 28.6% at 31 December 2016.

The guidelines for calculating the Liquidity Coverage Ratio – LCR – specify a run-off of exposures, while taking into account counterparties, funding size, hedging and duration. Consequently the most stable deposits are favoured relative to large deposits, in particular large deposits from business enterprises and financial counterparties.

As a SIFI in Denmark, Sydbank must meet the LCR in full. The Group's LCR constituted 225% at 30 June 2017 (31 December 2016: 166%).

LCR (DKKbn)	30 Jun 2017	31 Dec 2016	30 Jun 2016
Total liquidity buffer	31.2	28.0	24.0
Net cash outflows	13.9	16.9	17.3
LCR (%)	225	166	139

The Group met the LCR requirement – of 100% – throughout the period and as can be seen, its excess cover is significant at 30 June 2017.

Funding ratio (DKKbn)	30 Jun 2017	31 Dec 2016	30 Jun 2016
Shareholders' equity and subordinated capital	12.8	13.9	13.2
Senior loans with maturities over 1 year	-	3.7	3.7
Stable deposits	77.7	74.0	75.0
Total stable funding	90.5	91.6	91.9
Loans and advances (excl reverse and mortgage-like loans funded via external counterparties)	70.6	71.9	75.2
Funding ratio (%)	129	127	122

As shown above the Group's stable funding exceeds the Group's loans and advances by DKK 19.9bn at 30 June 2017 (31 December 2016: DKK 19.7bn).

Joint funding

The Bank's agreement on joint funding with Totalkredit was changed effective 1 January 2017. The agreement was changed from an offsetting model according to which the Bank covers losses as regards the entire loan to a guarantee model according to which the Bank provides a guarantee for the part of the loan in the LTV range of 60-80%. The Group no longer has a credit risk as regards the part of the loan in the LTV range of 0-60%.

As a consequence of the amendment of the agreement, funded mortgage-like loans are no longer recognised in the Group's balance sheet.

At 30 June 2017 funded mortgage-like loans amounted to DKK 6.3bn (31 December 2016: DKK 5.3bn). Had the agreement been effective as of 31 December 2016, bank loans and advances would have been recognised at DKK 5.3bn less at this date and instead the Bank would have registered guarantees for DKK 1.2bn as regards the guarantees in the range of 60-80%.

At 1 July 2017 funded mortgage-like loans represent DKK 8.8bn.

Rating

Moody's most recent rating of Sydbank:

Outlook: Stable
Long-term deposit: A3
Senior unsecured: Baa1
Short-term deposit: P-2

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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 2017	31 Dec 2016	30 Jun 2016
Sum of large exposures < 125%	21	0	0
Lending growth < 20% annually	(10)	4	6
Commercial property exposure < 25%	8	9	8
Funding ratio < 1	0.74	0.80	0.82
Excess cover relative to statutory liquidity requirements > 50%	242	186	193

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 (MREL). The Danish FSA has been authorised to set the requirement for Sydbank.

Uncertainty continues to surround the deadline for compliance with the minimum requirement. The final minimum requirement may affect the Group's capital and funding structure.

The general resolution principle for SIFIs is that it should be possible to restructure them and send them back to the market with adequate capitalisation to ensure market confidence. In accordance with this principle the MREL for SIFIs is expected to be set at two times the total capital requirement. It is expected that the MREL will have to be met with convertible instruments ("contractual bail-in").

Over the coming months the Danish FSA will have discussions with the industry on phase-in and the specific requirements regarding capital that can be used to comply with the MREL. The discussions will take into consideration international developments in the area.

The Danish FSA expects to approve resolution plans and set individual MRELs for SIFIs before the end of 2017.

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 2017 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 stood at 6.3% at 30 June 2017 (year-end 2016: 7.0%) 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 6.1% (year-end 2016: 6.5%).

IFRS 9
With IFRS 9, coming into force on 1 January 2018, a new impairment model will be implemented according to which impairment charges must be recognised for all loans and advances and guarantees on the basis of expected losses. Under the existing rules impairment charges are recognised only when there is objective evidence of impairment.

Under IFRS 9 exposures are divided into three groups for calculating impairment and classification into different stages (1, 2 or 3), depending on the risk of credit loss. The staging assessment and the calculation of expected loss will to a large extent be based on the Group's existing rating models and credit management.

Model development to calculate impairment charges in accordance with IFRS 9 is progressing to plan.

Based on current expectations of the Danish FSA's national guidelines concerning impairment charges in accordance with IFRS 9 it is expected that impairment charges will increase by around DKK 200-400m based on the portfolio at 30 June 2017.

However as model development is not yet fully completed the impact remains subject to some uncertainty.

In general the projected increase in the Group's impairment charges will reduce the Group's shareholders' equity and will consequently have a corresponding negative impact on capital resources. To counter an unintended impact on capital resources and hence banks' possibilities of supporting lending, a transitional arrangement is expected so that an adverse impact from the new impairment model will be phased in over a number of years. It is expected that the transitional rules will be adopted by the end of 2017 with effect from 1 January 2018.

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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 fell by DKK 137m to DKK 1,184m in 1H 2017, equal to a decline of 2.7% in loans and advances.

Of total loans and advances to agriculture, an impairment charge of 15.2% was recorded at 30 June 2017 against 15.9% at 31 December 2016.

In 2016 almost only organic milk producers and piglet producers were able to generate acceptable earnings.

According to a revised forecast for earnings in the agricultural sector in 2016-2018 published by SEGES in May 2017, an average full-time farm will post an operating profit – when finally calculated – of approximately DKK 150,000 in 2016 with an expected increase to approximately DKK 750,000 in 2017. Operating profit is before owners' wages.

Consequently, according to the SEGES report, the total operating profit after owners' wages etc of full-time farms is expected to rise from a loss of DKK 3.2bn in 2016 to a profit of DKK 3.6bn in 2017.

According to SEGES the rise in prices is attributable in particular to strong demand from China and other Asian countries as well as a decline in agricultural production in several countries. Russia's import ban on foods from the EU continues to curb prices.

As regards milk producers the average breakeven price – the settlement price necessary to obtain a balance in operations – constitutes around DKK 2.40 per kg milk according to SEGES.

In 2016 the average settlement price was DKK 2.18 per kg milk – ie somewhat lower than the average breakeven price of DKK 2.40 per kg milk. The best milk producers have a breakeven price of around DKK 2.00 per kg milk.

In 2017 the situation for the agricultural sector has improved considerably compared to 2016. This is the case in particular for milk producers but also pig producers are experiencing a positive trend.

In the first six months of the year milk producers received an average settlement price of DKK 2.70 per kg conventional milk. The current settlement price is DKK 2.76 per kg milk.

The current settlement price for pig producers is DKK 10.80 per kg before supplementary payments. In the first six months of the year the average quotation was DKK 10.77 per kg before supplementary payments. Most pig producers have a breakeven price of approximately DKK 9.50 per kg before supplementary payments.

Pig producers who have sows and sell piglets currently have very satisfactory earnings.

30 Jun 2017 (DKKm)	Pig farming	Cattle farming	Crop production	Other agriculture	Total loans and advances
Bank loans and advances before impairment charges	1,374	1,229	1,224	1,049	4,876
Individual impairment charges	157	243	82	107	589
Previous events	25	100	-	25	150
Bank loans and advances after impairment charges	1,192	886	1,142	917	4,137
Impaired bank loans and advances	329	469	200	186	1,184
Impaired as % of bank loans and advances	23.9	38.2	16.3	17.7	24.3
Impairment as % of impaired bank loans and advances	47.7	51.8	41.0	57.5	49.7
Impairment as % of bank loans and advances	13.2	27.9	6.7	12.6	15.2
31 Dec 2016 (DKKm)	Pig farming	Cattle farming	Crop production	Other agriculture	Total loans and advances
---	---	---	---	---	---
Bank loans and advances before impairment charges	1,428	1,364	1,220	1,126	5,138
Individual impairment charges	167	321	83	95	666
Previous events	25	100	-	25	150
Bank loans and advances after impairment charges	1,236	943	1,137	1,006	4,322
Impaired bank loans and advances	374	561	209	177	1,321
Impaired as % of bank loans and advances	26.2	41.1	17.1	15.7	25.7
Impairment as % of impaired bank loans and advances	44.7	57.2	39.7	53.7	50.4
Impairment as % of bank loans and advances	13.4	30.9	6.8	10.7	15.9

SYDBANK - INTERIM REPORT- FIRST 2017
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Demand from abroad for Danish piglets remains significant. Nonetheless the market price of piglets has dropped from approximately DKK 535 at the end of Q1 to currently approximately DKK 470 per piglet.

Due to the high piglet prices it remains difficult for pork producers who do not have sows themselves and purchase piglets at market prices to generate satisfactory profits although the most recent drop in the market price of piglets has improved the possibility of achieving a positive operating profit.

The profitable market conditions are forecast to continue for the remainder of 2017.

The agricultural sector is in a positive economic development but market analysts expect that it will level off in 2018, cf the forecast published by SEGES.

SEGES projects the following development in the average operating profit of full-time farms – before owners' wages:

Projected operating profit (DKK '000)	2016	2017	2018
Milk producers	(120)	696	535
Pig producers	853	1,893	713
Crop production	95	378	359

However the current positive trend still does not change the fact that the agricultural sector overall has too large debts and is consequently very vulnerable to developments in settlement prices and interest rates.

In Q1 2017 individual impairment charges of DKK 34m were recorded on agricultural exposures. Individual impairment charges during the quarter were as expected. The collective impairment charge of DKK 150m made in 2016 was unchanged at the end of 1H 2017.

Conversion of bank loans and advances to subordinated loan capital In Q2 2017 debt concerning an additional two agricultural exposures was converted to subordinated loan capital. At the end of Q2 2017 the debt of 57 agricultural clients has thus been converted.

In Q2 2017 DKK 10m was converted, bringing the total amount converted to DKK 575m at the end of 1H 2017.

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Income Statement

DKKm	Note	Sydbank Group		Sydbank A/S
		1H 2017	1H 2016	1H 2017	1H 2016
Interest income	2	1,129	1,373	1,130	1,374
Interest expense	3	98	148	98	243
Net interest income		1,031	1,225	1,032	1,131
Dividends on shares		27	39	27	39
Fee and commission income	4	995	913	957	850
Fee and commission expense		116	148	116	117
Net interest and fee income		1,937	2,029	1,900	1,903
Market value adjustments	5	490	209	491	209
Other operating income		10	14	10	13
Staff costs and administrative expenses	6	1,321	1,296	1,294	1,269
Amortisation/depreciation and impairment of intangible assets and property, plant and equipment		48	49	47	48
Other operating expenses	8	15	9	15	9
Impairment of loans and advances etc	9	8	84	8	84
Profit on holdings in associates and subsidiaries	10	2	1	10	100
Profit before tax		1,047	815	1,047	815
Tax	11	231	172	231	172
Profit for the period		816	643	816	643
EPS Basic (DKK) *		11.8	9.1	11.8	9.1
EPS Diluted (DKK) *		11.8	9.1	11.8	9.1
Dividend per share (DKK)		-	-	-	-

Calculated on the basis of average number of shares outstanding, see page 20.

Statement of Comprehensive Income

Profit for the period	816	643	816	643
Other comprehensive income
Items that may be reclassified to the income statement:
Translation of foreign entities	(4)	(2)	(4)	(2)
Hedge of net investment in foreign entities	4	2	4	2
Property revaluation	(3)	-	(3)	-
Other comprehensive income after tax	(3)	0	(3)	0
Comprehensive income for the period	813	643	813	643

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Balance Sheet

DKKm	Note	Sydbank Group		Sydbank A/S
		30 Jun 2017	31 Dec 2016	30 Jun 2017	31 Dec 2016
Assets
Cash and balances on demand at central banks		2,079	2,047	2,079	2,047
Amounts owed by credit institutions and central banks	12	10,505	6,981	10,501	6,977
Loans and advances at fair value		7,362	6,092	7,362	6,092
Loans and advances at amortised cost		70,573	77,191	70,733	77,358
Bonds at fair value		21,380	26,331	21,343	26,299
Shares etc		2,065	1,838	2,065	1,838
Holdings in associates etc		168	162	167	162
Holdings in subsidiaries		-	-	2,371	2,351
Assets related to pooled plans		15,517	13,817	15,517	13,817
Intangible assets		292	303	290	300
Land and buildings – owner-occupied property		1,004	986	819	816
Other property, plant and equipment		61	69	61	69
Current tax assets		13	11	15	13
Deferred tax assets		56	57	16	16
Assets in temporary possession		1	2	1	1
Other assets	13	8,932	10,742	8,925	10,737
Prepayments		63	57	61	56
Total assets		140,071	146,686	142,326	148,949
Shareholders’ equity and liabilities
Amounts owed to credit institutions and central banks	14	7,033	17,556	7,273	17,800
Deposits and other debt	15	84,654	81,109	86,678	83,138
Deposits in pooled plans		15,524	13,825	15,524	13,825
Bonds issued at amortised cost		3,716	3,714	3,716	3,714
Current tax liabilities		28	38	30	41
Other liabilities	16	15,874	16,187	15,864	16,176
Deferred income		5	3	5	3
Total liabilities		126,834	132,432	129,090	134,697
Provisions	17	391	373	390	371
Subordinated capital	18	1,297	2,124	1,297	2,124
Shareholders’ equity:
Share capital		704	722	704	722
Revaluation reserves		79	82	79	82
Other reserves:
Reserves according to articles of association		425	425	425	425
Other reserves		13	13	13	13
Retained earnings		10,328	9,769	10,328	9,769
Proposed dividend etc		-	746	-	746
Total shareholders’ equity		11,549	11,757	11,549	11,757
Total shareholders’ equity and liabilities		140,071	146,686	142,326	148,949

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Financial Highlights – Quarterly

	Sydbank Group
	Q2 2017	Q1 2017	Q4 2016	Q3 2016	Q2 2016	Q1 2016
Income statement (DKKm)
Core income	1,040	1,053	1,067	1,030	1,051	1,050
Trading income	46	93	49	65	69	54
Total income	1,086	1,146	1,116	1,095	1,120	1,104
Costs, core earnings	678	691	632	612	665	681
Core earnings before impairment	408	455	484	483	455	423
Impairment of loans and advances etc	(20)	11	(27)	33	43	38
Core earnings	428	444	511	450	412	385
Investment portfolio earnings	51	136	63	49	14	(22)
Profit before non-recurring items	479	580	574	499	426	363
Non-recurring items, net	(6)	(6)	(14)	(5)	26	-
Profit before tax	473	574	560	494	452	363
Tax	104	127	116	109	92	80
Profit for the period	369	447	444	385	360	283
Balance sheet highlights (DKKbn)
---	---	---	---	---	---	---
Loans and advances at amortised cost	70.6	71.9	77.2	78.1	78.8	76.2
Loans and advances at fair value	7.4	7.1	6.1	6.9	6.8	7.9
Deposits and other debt	84.7	80.9	81.1	78.6	79.9	76.8
Bonds issued at amortised cost	3.7	3.7	3.7	7.1	7.1	3.7
Subordinated capital	1.3	2.1	2.1	2.1	2.1	2.1
Shareholders' equity	11.5	11.4	11.8	11.4	11.1	10.9
Total assets	140.1	137.6	146.7	146.2	148.0	145.1
Financial ratios per share (DKK per share of DKK 10)
---	---	---	---	---	---	---
EPS Basic	5.4	6.4	6.4	5.5	5.1	4.0
EPS Diluted	5.4	6.4	6.4	5.5	5.1	4.0
Share price at end of period	245.4	241.7	219.2	201.4	167.2	187.7
Book value	169.0	164.7	169.2	163.0	157.6	152.8
Share price/book value	1.45	1.47	1.30	1.24	1.06	1.23
Average number of shares outstanding (in millions)	68.8	69.5	69.7	69.9	70.7	71.3
Dividend per share	-	-	10.46	-	-	-
Other financial ratios and key figures
---	---	---	---	---	---	---
Common Equity Tier 1 capital ratio	15.6	15.6	16.1	14.9	14.8	14.4
Tier 1 capital ratio	16.1	16.0	17.4	16.2	16.1	15.7
Capital ratio	18.1	18.1	19.2	18.0	18.0	17.5
Pre-tax profit as % p.a. of average shareholders' equity	16.5	19.8	19.4	17.6	16.5	13.0
Post-tax profit as % p.a. of average shareholders' equity	12.8	15.5	15.3	13.7	13.2	10.1
Costs (core earnings) as % of total income	62.4	60.3	58.4	59.0	59.4	61.7
Return on assets (%)	0.3	0.3	0.3	0.3	0.2	0.2
Interest rate risk	0.7	0.7	1.6	0.6	0.6	1.4
Foreign exchange position	3.9	4.1	2.2	1.4	2.1	1.7
Foreign exchange risk	0.1	0.1	0.0	0.0	0.0	0.0
Loans and advances relative to deposits *	0.7	0.8	0.8	0.8	0.9	0.9
Loans and advances relative to shareholders' equity *	6.1	6.3	6.6	6.9	7.1	7.0
Growth in loans and advances for the period *	(1.8)	(6.9)	3.9	(1.0)	3.5	2.6
Excess cover relative to statutory liquidity requirements	242.0	213.2	186.5	209.5	192.7	147.3
Total large exposures	20.7	10.3	0.0	35.2	0.0	10.6
Accumulated impairment ratio	3.6	3.7	3.6	4.2	4.2	4.5
Impairment ratio for the period	(0.02)	0.01	(0.03)	0.03	0.05	0.04
Number of full-time staff at end of period	2,092	2,062	2,037	2,048	2,032	2,027

Financial ratios are calculated on the basis of loans and advances at amortised cost.

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Financial Highlights – Half-yearly

	Sydbank Group
	1H 2017	1H 2016	1H 2015	1H 2014	1H 2013
Income statement (DKKm)
Core income	2,093	2,101	2,227	2,131	2,052
Trading income	139	123	152	152	161
Total income	2,232	2,224	2,379	2,283	2,213
Costs, core earnings	1,369	1,346	1,374	1,365	1,310
Core earnings before impairment	863	878	1,005	918	903
Impairment of loans and advances etc	(9)	81	217	430	674
Core earnings	872	797	788	488	229
Investment portfolio earnings	187	(8)	(95)	37	284
Profit before non-recurring items	1,059	789	693	525	513
Non-recurring items, net	(12)	26	-	107	(11)
Profit before tax	1,047	815	693	632	502
Tax	231	172	163	118	118
Profit for the period	816	643	530	514	384
Balance sheet highlights (DKKbn)
Loans and advances at amortised cost	70.6	78.8	71.4	67.7	67.8
Loans and advances at fair value	7.4	6.8	9.7	5.7	4.5
Deposits and other debt	84.7	79.9	81.2	74.0	65.9
Bonds issued at amortised cost	3.7	7.1	3.7	3.7	3.8
Subordinated capital	1.3	2.1	2.1	1.4	1.4
Shareholders' equity	11.5	11.1	11.1	10.7	10.5
Total assets	140.1	148.0	153.1	147.4	141.4
Financial ratios per share (DKK per share of DKK 10)
EPS Basic	11.8	9.1	7.2	7.0	5.2
EPS Diluted	11.8	9.1	7.2	7.0	5.2
Share price at end of period	245.4	167.2	255.8	143.7	114.0
Book value	169.0	157.6	153.1	146.7	142.6
Share price/book value	1.45	1.06	1.67	0.98	0.80
Average number of shares outstanding (in millions)	69.1	71.0	73.2	73.3	73.2
Dividend per share	-	-	-	-	-
Other financial ratios and key figures
Common Equity Tier 1 capital ratio	15.6	14.8	14.1	14.1	14.4
Tier 1 capital ratio	16.1	16.1	15.5	15.7	16.2
Capital ratio	18.1	18.0	17.2	16.2	16.5
Pre-tax profit as % p.a. of average shareholders' equity	18.2	14.9	12.5	11.9	9.7
Post-tax profit as % p.a. of average shareholders' equity	14.2	11.7	9.5	9.7	7.4
Costs (core earnings) as % of total income	61.3	60.5	57.8	59.8	59.2
Return on assets (%)	0.6	0.4	0.3	0.3	0.3
Interest rate risk	0.7	0.6	2.2	0.5	0.2
Foreign exchange position	3.9	2.1	3.0	4.4	2.3
Foreign exchange risk	0.1	0.0	0.0	0.0	0.1
Loans and advances relative to deposits *	0.7	0.9	0.8	0.8	0.9
Loans and advances relative to shareholders' equity *	6.1	7.1	6.4	6.3	6.5
Growth in loans and advances for the period *	(8.6)	6.1	4.3	1.6	(0.6)
Excess cover relative to statutory liquidity requirements	242.0	192.7	185.1	188.4	167.4
Total large exposures	20.7	0.0	10.2	36.3	30.5
Accumulated impairment ratio	3.6	4.2	4.9	5.7	4.2
Impairment ratio for the period	(0.01)	0.09	0.24	0.54	0.85
Number of full-time staff at end of period	2,092	2,032	2,164	2,187	2,087

Financial ratios are calculated on the basis of loans and advances at amortised cost.

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Capital

DKKm	Share capital	Revaluation reserves	Reserves acc to articles of association*	Reserve for net revaluation acc to equity method	Retained earnings	Sydbank Group
						Proposed dividend etc	Total
Shareholders' equity at 1 Jan 2017	722	82	425	13	9,769	746	11,757
Profit for the period	-	-	-	-	816	-	816
Other comprehensive income
Translation of foreign entities	-	-	-	-	(4)	-	(4)
Hedge of net investment in foreign entities	-	-	-	-	4	-	4
Property revaluation	-	(3)	-	-	-	-	(3)
Total other comprehensive income	-	(3)	-	-	-	-	-
Comprehensive income for the period	-	(3)	-	-	816	-	813
Transactions with owners
Purchase of own shares	-	-	-	-	(826)	-	(826)
Sale of own shares	-	-	-	-	952	-	952
Reduction of share capital	(18)	-	-	-	(394)	-	(412)
Dividend etc paid	-	-	-	-	-	(746)	(746)
Dividend, own shares	-	-	-	-	11	-	11
Total transactions with owners	(18)	-	-	-	(257)	(746)	(1,021)
Shareholders' equity at 30 Jun 2017	704	79	425	13	10,328	-	11,549
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
Dividend etc paid	(20)	-	-	-	(425)	-	(445)
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

Reserves according to the articles of association equal the undistributable savings bank reserve in accordance with Article 4 of the Articles of Association.

The Sydbank share	30 Jun	Full year	30 Jun
	2017	2016	2016
Share capital (DKK)	703,611,740	722,401,990	722,401,990
Shares issued (number)	70,361,174	72,240,199	72,240,199
Shares outstanding at end of period (number)	68,325,986	69,501,452	70,167,425
Average number of shares outstanding (number)	69,118,652	70,392,671	70,989,867

The Bank has only one class of shares as all shares carry the same rights.

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Capital

DKKm	30 Jun 2017	Sydbank Group
		31 Dec 2016	30 Jun 2016
Solvency
Common Equity Tier 1 capital ratio	15.6	16.1	14.8
Tier 1 capital ratio	16.1	17.4	16.1
Capital ratio	18.1	19.2	18.0
Total capital
Shareholders' equity	11,549	11,757	11,057
Expected maximum dividend based on dividend policy	(816)	-	(322)
Prudent valuation	(53)	(65)	(68)
Actual or contingent obligations to purchase own shares	(363)	-	(135)
Proposed dividend	-	(746)	-
Intangible assets and capitalised deferred tax assets	(289)	(299)	(338)
Significant investments in financial sector	(663)	(434)	(439)
Common Equity Tier 1 capital	9,365	10,213	9,755
Additional Tier 1 capital	279	831	831
Tier 1 capital	9,644	11,044	10,586
Tier 2 capital	1,018	961	961
Difference between expected losses and accounting impairment charges	229	237	252
Total capital	10,891	12,242	11,799
Credit risk*	40,640	41,683	44,208
Market risk	5,878	8,075	7,447
Operational risk	8,025	8,025	8,173
Other exposures incl CVA	5,485	5,824	5,890
Risk exposure amount	60,028	63,607	65,718
Pillar I capital requirement	4,802	5,089	5,257
* Credit risk
Corporate clients, IRB	29,449	30,306	32,243
Retail clients, IRB	8,692	9,200	9,690
Corporate clients, STD	551	605	649
Retail clients, STD	689	648	601
Credit institutions etc	1,259	924	1,025
Total	40,640	41,683	44,208

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Cash Flow Statement

	Sydbank Group
DKKm	1H
2017	Full year
2016	1H
2016
Operating activities
Pre-tax profit for the period	1,047	1,869	815
Taxes paid	(246)	(245)	(212)
Adjustment for non-cash operating items	77	291	114
Cash flows from working capital	5,264	2,390	(2,311)
Cash flows from operating activities	6,142	4,305	(1,594)
Investing activities
Purchase and sale of holdings in associates	(7)	1	2
Purchase and sale of intangible assets and property, plant and equipment	(48)	(69)	(25)
Cash flows from investing activities	(55)	(68)	(23)
Financing activities
Purchase and sale of own holdings	(286)	(342)	(210)
Dividends etc	(735)	(803)	(802)
Raising of subordinated capital	(827)	(6)	(5)
Issue of bonds	2	(13)	3,392
Cash flows from financing activities	(1,846)	(1,164)	2,375
Cash flows for the period	4,241	3,073	758
Cash and cash equivalents at 1 Jan	7,561	4,488	4,488
Cash flows for the period	4,241	3,073	758
Cash and cash equivalents at end of period	11,802	7,561	5,246

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Segment Reporting etc

DKKm	Banking	Asset Management	Sydbank Markets	Treasury	Sydbank Group
					Other	Total
Operating segments – 1H 2017
Core income	1,918	124	51	-	-	2,093
Trading income	-	-	139	-	-	139
Total income	1,918	124	190	-	-	2,232
Costs, core earnings	1,246	42	48	-	33	1,369
Impairment of loans and advances etc	(9)	-	-	-	-	(9)
Core earnings	681	82	142	-	(33)	872
Investment portfolio earnings	9	-	-	178	-	187
Profit before non-recurring items	690	82	142	178	(33)	1,059
Non-recurring items, net	(12)	-	-	-	-	(12)
Profit before tax	678	82	142	178	(33)	1,047
DKKm	Banking	Asset Management	Sydbank Markets	Treasury	Sydbank Group
---	---	---	---	---	---	---
					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	1,223	37	54	-	32	1,346
Impairment of loans and advances etc	81	-	-	-	-	81
Core earnings	651	58	120	-	(32)	797
Investment portfolio earnings	(2)	-	-	(6)	-	(8)
Profit before non-recurring items	649	58	120	(6)	(32)	789
Non-recurring items, net	(5)	-	-	-	31	26
Profit before tax	644	58	120	(6)	(1)	815

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Segment Reporting etc

DKKm	Core income	Trading income	Costs (core earnings)	Impairment charges for loans and advances etc	Core earnings	Investment portfolio earnings	Non-recurring items, net	Profit before tax
Correlation between performance measures and the income statement according to IFRS
2017
Net interest and fee income	1,902	25			1,927	10		1,937
Market value adjustments	178	114		17	309	181		490
Other operating income	10				10			10
Income	2,090	139	-	17	2,246	191	-	2,437
Staff costs and administrative expenses			(1,305)		(1,305)	(4)	(12)	(1,321)
Amortisation/depreciation and impairment of intangible assets and property, plant and equipment			(48)		(48)			(48)
Other operating expenses			(15)		(15)			(15)
Impairment of loans and advances etc				(8)	(8)			(8)
Profit on holdings in associates and subsidiaries	2				2			2
Profit before tax	2,093	139	(1,369)	9	872	187	(12)	1,047
2016
Income	2,100	123		3	2,226	(4)	30	2,252
Staff costs and administrative expenses			(1,288)		(1,288)	(4)	(4)	(1,296)
Amortisation/depreciation and impairment of intangible assets and property, plant and equipment			(49)		(49)			(49)
Other operating expenses			(9)		(9)			(9)
Impairment of loans and advances etc				(84)	(84)			(84)
Profit on holdings in associates and subsidiaries	1				1			1
Profit before tax	2,101	123	(1,346)	(81)	797	(8)	26	815

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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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 2016 Annual Report, to which reference is made.

The 2016 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 2016.

The Group’s significant risks and the external elements which may affect the Group are described in greater detail in the 2016 Annual Report.

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Notes

DKKm	Sydbank Group		Sydbank A/S
	1H 2017	1H 2016	1H 2017	1H 2016
Note 2
Interest income
Reverse transactions with credit institutions and central banks	(5)	(3)	(5)	(3)
Amounts owed by credit institutions and central banks	(12)	(7)	(12)	(7)
Reverse loans and advances	(15)	(12)	(15)	(12)
Loans and advances and other amounts owed	1,128	1,304	1,129	1,306
Bonds	90	156	90	155
Derivatives	(58)	(67)	(58)	(67)
comprising:
Foreign exchange contracts	36	40	36	40
Interest rate contracts	(94)	(107)	(94)	(107)
Other contracts	0	0	0	0
Other interest income	1	2	1	2
Total	1,129	1,373	1,130	1,374
Note 3
Interest expense
Repo transactions with credit institutions and central banks	8	(22)	8	(22)
Credit institutions and central banks	(2)	18	(2)	18
Repo deposits	7	(3)	7	(3)
Deposits and other debt	63	105	63	200
Bonds issued	5	31	5	31
Subordinated capital	15	18	15	18
Other interest expense	2	1	2	1
Total	98	148	98	243
Note 4
Fee and commission income
Securities trading and custody accounts	514	481	476	418
Payment services	147	147	147	147
Loan fees	68	57	68	57
Guarantee commission	69	64	69	64
Other fees and commission	197	164	197	164
Total	995	913	957	850

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Notes

DKKm	Sydbank Group		Sydbank A/S
	1H 2017	1H 2016	1H 2017	1H 2016
Note 5
Market value adjustments
Other loans and advances and amounts owed at fair value	0	1	0	1
Bonds	111	296	112	296
Shares etc	98	87	98	87
Investment property	-	0	-	0
Foreign exchange	86	100	86	100
Derivatives	196	(277)	196	(277)
Assets related to pooled plans	232	132	232	132
Deposits in pooled plans	(233)	(130)	(233)	(130)
Other assets/liabilities	0	0	0	0
Total	490	209	491	209
Note 6
Staff costs and administrative expenses
Salaries and remuneration:
Group Executive Management	8	8	8	8
Board of Directors	3	3	3	3
Shareholders' Committee	1	1	1	1
Total	12	12	12	12
Staff costs:
Wages and salaries	629	611	622	604
Pensions	62	60	61	60
Social security contributions	8	8	7	8
Payroll tax	82	75	81	74
Total	781	754	771	746
Other administrative expenses:
IT	289	284	281	277
Rent etc	55	56	59	60
Marketing and entertainment expenses	39	34	35	28
Other costs	145	156	136	146
Total	528	530	511	511
Total	1,321	1,296	1,294	1,269
Note 7
Staff
Average number of staff (full-time equivalent)	2,106	2,069	2,086	2,050

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Notes

DKKm	Sydbank Group		Sydbank A/S
	1H 2017	1H 2016	1H 2017	1H 2016
Note 8
Other operating expenses
Contribution to the Resolution Fund	9	9	9	9
Other expenses	6	0	6	0
Total	15	9	15	9
Note 9
Impairment of loans and advances recognised in the income statement
Impairment and provisions	25	54	25	54
Write-offs	40	83	40	83
Recovered from debt previously written off	57	53	57	53
Impairment of loans and advances etc	8	84	8	84
Impairment and provisions at end of period (allowance account)
Individual impairment and provisions	2,727	3,589	2,727	3,589
Collective impairment and provisions	381	350	381	350
Impairment and provisions at end of period	3,108	3,939	3,108	3,939
Individual impairment of loans and advances and provisions for guarantees
Impairment and provisions at 1 Jan	2,904	3,687	2,904	3,687
Exchange rate adjustment	0	0	0	0
New individual impairment charges	700	877	700	877
Reversal of individual impairment charges	590	586	590	586
Impairment charges previously recorded, now finally written off	287	389	287	389
Impairment and provisions at end of period	2,727	3,589	2,727	3,589
Individual impairment of loans and advances	2,528	3,435	2,528	3,435
Individual provisions for unused credit facilities	49	61	49	61
Individual provisions for guarantees	150	93	150	93
Impairment and provisions at end of period	2,727	3,589	2,727	3,589
Collective impairment of loans and advances and provisions for guarantees
Impairment and provisions at 1 Jan	385	495	385	495
Impairment and provisions during the period	(4)	(145)	(4)	(145)
Impairment and provisions at end of period	381	350	381	350
Sum of loans and advances and amounts owed
subject to collective impairment and provisions	6,601	6,572	6,601	6,572
Collective impairment and provisions	381	350	381	350
Loans and advances and amounts owed after collective impairment and provisions	6,220	6,222	6,220	6,222
Individual impairment of loans and advances subject to objective evidence of impairment
Balance before impairment of individually impaired loans and advances	4,556	6,211	4,556	6,211
Impairment of individually impaired loans and advances	2,528	3,496	2,528	3,496
Balance after impairment of individually impaired loans and advances	2,028	2,715	2,028	2,715
Interest recognised as income concerning individually and collectively impaired loans and advances	175	297	175	297

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Notes

Industry	Loans/advances and guarantees		Impairment charges and provisions		Impairment of loans and advances etc for the period		Sydbank Group Loss for the period
	30 Jun	31 Dec	30 Jun	31 Dec	1H	1H	1H	1H
DKKm	2017	2016	2017	2016	2017	2016	2017	2016
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	5,224	5,737	642	704	34	200	128	177
Pig farming	1,442	1,571	164	177	8	86	29	14
Cattle farming	1,363	1,566	277	345	3	88	77	138
Crop production	1,312	1,356	92	86	7	7	7	8
Other agriculture	1,107	1,244	109	96	16	19	15	17
Manufacturing and extraction of raw materials	9,019	8,249	254	225	23	3	18	16
Energy supply etc	2,585	2,765	8	10	(1)	4	0	19
Building and construction	4,671	3,831	116	79	28	2	16	20
Trade	12,916	12,516	265	316	11	(2)	72	60
Transportation, hotels and restaurants	3,627	3,659	129	137	(8)	48	6	2
Information and communication	515	396	12	15	(4)	1	1	1
Finance and insurance	5,073	5,740	121	134	(10)	(9)	3	11
Real property	6,416	6,981	321	342	(16)	16	26	80
Leasing of commercial property	2,994	3,623	192	189	4	11	5	10
Leasing of residential property	1,102	1,025	90	97	(7)	(5)	14	9
Housing associations and cooperative housing associations	1,291	1,591	0	0	0	0	0	0
Purchase, development and sale on own account	524	599	31	37	(8)	10	1	59
Other related to real property	505	143	8	19	(5)	0	6	2
Other corporate lending	3,924	4,080	151	165	4	(5)	21	17
Total corporate lending	53,970	53,954	2,019	2,127	61	258	291	403
Public authorities	529	785	-	-	-	-	-	-
Retail clients	30,714	37,000	708	777	(49)	(29)	36	69
Collective impairment charges	-	-	381	385	(4)	(145)	-	-
Total	85,213	91,739	3,108	3,289	8	84	327	472

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Notes

DKKm	Sydbank Group		Sydbank A/S
	1H 2017	1H 2016	1H 2017	1H 2016
Note 10
Profit on holdings in associates and subsidiaries
Profit on holdings in associates etc	2	1	2	1
Profit on holdings in subsidiaries etc	-	-	8	99
Total	2	1	10	100
Note 11
Effective tax rate
Current tax rate of Sydbank	22.0	22.0	22.0	22.0
Permanent differences *	0.0	(0.9)	0.0	(0.9)
Effective tax rate	22.0	21.1	22.0	21.1
* Permanent differences predominantly consist of a capital gain of DKK 31m concerning the adjustment of the purchase sum from the sale of the shares in Nets Holding in 2014.
DKKm	Sydbank Group		Sydbank A/S
---	---	---	---	---
	30 Jun 2017	31 Dec 2016	30 Jun 2017	31 Dec 2016
Note 12
Amounts owed by credit institutions and central banks
Amounts owed at notice by central banks	7,384	4,316	7,384	4,316
Amounts owed by credit institutions	3,121	2,665	3,117	2,661
Total	10,505	6,981	10,501	6,977
Of which reverse transactions	971	1,652	971	1,652
Note 13
Other assets
Positive market value of derivatives etc	5,948	7,289	5,948	7,289
Sundry debtors	456	440	449	434
Interest and commission receivable	122	178	122	178
Cash collateral provided, CSA agreements etc	2,406	2,834	2,406	2,834
Other assets	0	1	0	2
Total	8,932	10,742	8,925	10,737

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Notes

DKKm	Sydbank Group		Sydbank A/S
	30 Jun 2017	31 Dec 2016	30 Jun 2017	31 Dec 2016
Note 14
Amounts owed to credit institutions and central banks
Amounts owed to central banks	137	36	137	36
Amounts owed to credit institutions	6,896	17,520	7,136	17,764
Total	7,033	17,556	7,273	17,800
Of which repo transactions	2,106	8,019	2,106	8,019
Note 15
Deposits and other debt
On demand	70,727	65,717	72,751	67,746
At notice	4,842	5,237	4,842	5,237
Time deposits	3,937	4,945	3,937	4,945
Special categories of deposits	5,148	5,210	5,148	5,210
Total	84,654	81,109	86,678	83,138
Of which repo transactions	2,560	2,288	2,560	2,288
Note 16
Other liabilities
Negative market value of derivatives etc	6,204	7,589	6,204	7,589
Sundry creditors	4,592	4,236	4,582	4,225
Negative portfolio, reverse transactions	4,044	3,355	4,044	3,355
Interest and commission etc	26	34	26	34
Cash collateral received, CSA agreements	1,008	973	1,008	973
Total	15,874	16,187	15,864	16,176
Note 17
Provisions
Provisions for pensions and similar obligations	3	3	3	3
Provisions for deferred tax	164	165	163	163
Provisions for guarantees	150	126	150	126
Provisions for unused credit facilities	49	52	49	52
Other provisions *	25	27	25	27
Total	391	373	390	371

Other provisions mainly concern provisions for onerous contracts and legal actions.

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Notes

DKKm	Sydbank Group		Sydbank A/S
	30 Jun	31 Dec	30 Jun	31 Dec
	2017	2016	2017	2016

Note 18

Subordinated capital

Interest rate	Note		Nominal (m)	Maturity
2.13 (fixed)	1	Bond loan	EUR 100	11 Mar 2027	739	738	739	738
Total Tier 2 capital					739	738	739	738
Redeemed loans					-	828	-	828
1.01 (floating)	2	Bond loan	EUR 75	Perpetual	558	558	558	558
Total Additional Tier 1 capital					558	1,386	558	1,386
Total subordinated capital					1,297	2,124	1,297	2,124
1) Optional redemption from 11 March 2022 after which the interest rate will be fixed at 1.72% above 5Y Mid-Swap.
2) The interest rate follows the 10Y Mid-Swap plus a premium of 0.2%.
Costs relating to the raising and redemption of subordinated capital					0	0	0	0

Note 19

Contingent liabilities and other obligating agreements

Contingent liabilities
Financial guarantees	3,996	3,880	3,996	3,880
Mortgage finance guarantees	3,626	2,550	3,626	2,550
Registration and remortgaging guarantees	2,452	3,237	2,452	3,237
Other contingent liabilities	1,657	1,718	1,657	1,718
Total	11,731	11,385	11,731	11,385
Other obligating agreements
Irrevocable credit commitments	879	895	879	895
Other liabilities*	25	30	37	43
Total	904	925	916	938
* Including intra-group liabilities in relation to rented premises	-	-	12	13

Totalkredit loans arranged by Sydbank are comprised by an agreed right of set-off against future current commission which Totalkredit may invoke in the event of losses on these loans.

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.

As a result of the statutory participation in the deposit guarantee scheme, the industry has paid an annual contribution of 2.5% of covered net deposits until the Banking Department's capital exceeds 1% of total covered net deposits, which was reached at year-end 2015. The Banking Department will cover the direct losses in connection with the winding-up of distressed financial institutions under Bank Package III and Bank Package IV which are attributable to covered net deposits. Any losses as a result of the final winding-up will be covered by the Guarantee Fund via the Winding-up and Restructuring Department as regards which Sydbank is currently liable for 5.61% of any losses.

SYDBANK - INTERIM REPORT - FIRST HALF 2017
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Notes

	Sydbank Group		Sydbank A/S
	30 Jun	31 Dec	30 Jun	31 Dec
DKKm	2017	2016	2017	2016

Note 19 – continued

As a result of the statutory participation in the resolution financing arrangement (the Resolution Fund), credit institutions will pay an annual contribution over a 10-year period to reach a target funding level totalling 1% of covered deposits. Credit institutions must make contributions to the fund according to their relative size and risk in Denmark. Sydbank expects that contributions will total approximately DKK 200m over a 10-year period.

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 the securities 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	4,637	10,435	4,637	10,435
Shares etc	1	-	1	-

Assets purchased as part of reverse transactions

Bonds at fair value	8,261	7,763	8,261	7,763
Shares etc	6	-	6	-

Note 21

Collateral

As of 30 June 2017 the Group had deposited as collateral securities at a market value of DKK 93m with Danish and foreign exchanges and clearing centres etc in connection with margin calls and securities settlements etc. In addition the Group has provided cash collateral of DKK 2,406m in connection with CSA agreements.

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Notes

| DKKm | 1H
2017 | 1H
2016 | Sydbank Group | |
| --- | --- | --- | --- | --- |
| | | | Index
17/16 | Full year
2016 |

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 2017. Reference is made to the Group’s 2016 Annual Report for a detailed description of related party transactions.

Note 23

Reporting events occurring after the balance sheet date

No matters of significant impact on the financial position of the Sydbank Group have occurred after the end of the first half year.

Note 24

Large shareholders

On 21 July 2017 Silchester International Investors LLP announced that the company has reduced its holding of shares in Sydbank A/S to below 5%. Subsequently Sydbank has no large shareholders.

Note 25

Core income
Net interest etc	1,030	1,173	88	2,323
Mortgage credit *	267	193	138	400
Payment services	96	96	100	199
Remortgaging and loan fees	66	51	129	70
Commission and brokerage	194	180	108	354
Commission etc investment funds and pooled pension plans	199	187	106	381
Asset management	124	95	131	220
Custody account fees	35	36	97	71
Other income	82	90	91	180
Total	2,093	2,101	100	4,198
* Mortgage credit
Totalkredit cooperation	204	144	142	314
Totalkredit, set-off of loss	15	10	150	23
Totalkredit cooperation, net	189	134	141	291
DLR Kredit	77	58	133	107
Other mortgage credit income	1	1	100	2
Total	267	193	138	400

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Notes

DKKm				Sydbank Group

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 is 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 172m.

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Notes

30 Jun 2017
DKKm	Quoted prices	Observ- able inputs	Unobserv- able inputs	Sydbank Group
				Total fair value	Carrying amount
Note 26 – continued
Financial assets
Amounts owed by credit institutions and central banks	-	971	-	971	971
Loans and advances at fair value	-	7,362	-	7,362	7,362
Bonds at fair value	-	21,380	-	21,380	21,380
Shares etc	293	52	1,720	2,065	2,065
Assets related to pooled plans	5,533	9,984	-	15,517	15,517
Other assets	304	5,704	-	6,008	6,008
Total	6,130	45,453	1,720	53,303	53,303
Financial liabilities
Amounts owed to credit institutions and central banks	-	2,106	-	2,106	2,106
Deposits and other debt	-	2,560	-	2,560	2,560
Deposits in pooled plans	-	15,524	-	15,524	15,524
Other liabilities	313	9,935	-	10,248	10,248
Total	313	30,125	-	53,303	53,303
DKKm	Sydbank Group
---	---	---
	30 Jun 2017	30 Jun 2016
Assets measured on the basis of unobservable inputs
Carrying amount at 1 Jan	1,557	1,493
Additions	130	9
Disposals	34	25
Market value adjustment	67	36
Carrying amount at end of period	1,720	1,513
Recognised in profit for the period
Dividend	28	38
Market value adjustment	67	36
Total	95	74

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Notes

DKKm	Sydbank Group		Sydbank A/S
	30 Jun 2017	31 Dec 2016	30 Jun 2017	31 Dec 2016
Note 27
Leverage ratio
Exposure for computation of leverage ratio
Total assets	140,071	146,686	142,326	148,949
Pooled assets excluded	(15,517)	(13,817)	(15,517)	(13,817)
Correction derivatives etc	6,570	2,801	6,570	2,801
Guarantees etc	11,731	11,385	11,731	11,385
Unused credit facilities etc	11,111	11,338	11,120	11,351
Other adjustments	(1,043)	(482)	(1,011)	(456)
Total	152,923	157,911	155,219	160,213
Tier 1 capital – current (transitional rules)	9,644	11,044	9,668	11,068
Tier 1 capital – fully loaded	9,365	10,213	9,389	10,237
Leverage ratio (%) – current (transitional rules)	6.3	7.0	6.2	6.9
Leverage ratio (%) – fully loaded	6.1	6.5	6.0	6.4
30 Jun 2017				Sydbank Group
---	---	---	---	---
	Activity	Share capital (m)	Share-holders' equity (DKKm)	Profit/(Loss) (DKKm)

Note 28

Group holdings and enterprises

Sydbank A/S		DKK	722
Consolidated subsidiaries
DiBa A/S, Aabenraa	Investment	DKK	300	2,036	79	100
Ejendomsselskabet af 1. juni 1986 A/S,
Aabenraa	Real property	DKK	10	4	(8)	100
Syd Fund Management A/S, Aabenraa	Administration	DKK	40	46	6	100
Sydbank (Schweiz) AG, in Liquidation,
St. Gallen, Switzerland	-	CHF	40	248	(1)	100
Holdings in associates
Foreningen Bankdata, Fredericia	IT	DKK	510	510	(34)	32
Komplementarselskabet Core Property
Management A/S, Copenhagen	Real property	DKK	10	29	15	20
Core Property Management P/S,
Copenhagen	Real property	DKK	10	10	-	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 2017 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 2017 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 2017. 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, 29 August 2017

Group Executive Management

Karen Frøsig
CEO

Bjarne Larsen

Jan Svarre

Board of Directors

Torben Nielsen
Chairman

Peder Damgaard
Vice-Chairman

Alex Slot Hansen

John Lesbo

Lars Mikkelgaard-Jensen

Janne Moltke-Leth

Frank Møller Nielsen

Jacob Christian Nielsen

Jarl Oxlund

Margrethe Weber

SYDBANK – INTERIM REPORT – FIRST HALF 2017
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Supplementary Information

Financial calendar

In 2017 the Group’s preliminary announcement of financial statements will be released as follows:

Interim Report – Q1-Q3 2017
31 October 2017

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 2016 Annual Report at sydbank.com.

AI assistant

Sydbank — Interim / Quarterly Report 2017

3387_rns_2017-08-29_55cca821-f2d2-4fab-8225-24919b51f62c.pdf

Sydbank’s Interim Report – First Half 2017

Highly satisfactory result – return of 14.2% on shareholders’ equity after tax

1H 2017 – highlights

Outlook for 2017

Contents

Financial Review

Group Financial Highlights

Highlights

1H performance

Credit intermediation

Capital

Outlook for 2017

Financial Review – Performance in 1H 2017

1H

Core income

Core earnings

Investment portfolio earnings

Non-recurring items etc, net

Capital

Capital requirements

Market risk

Funding and liquidity

Joint funding

Rating

Income Statement

Statement of Comprehensive Income

Balance Sheet

Financial Highlights – Quarterly

Financial Highlights – Half-yearly

Capital

Cash Flow Statement

Segment Reporting etc

Segment Reporting etc

Notes

Note 1

Accounting policies

Notes

Notes

Note 18

Note 19

Notes

Note 19 – continued

Note 20

Repo and reverse transactions

Assets sold as part of repo transactions

Assets purchased as part of reverse transactions

Note 21

Collateral

Notes

Note 22

Related parties

Note 23

Note 24

Large shareholders

Note 25

Notes

Note 26

Notes

Notes

Note 28

Management Statement

Supplementary Information

More from Sydbank

Sydbank Interim / Quarterly Report 2017