Investor Presentation

Sparebanken Sør Boligkreditt AS
Investor Presentation
March 2016
Executive summary
Sparebanken Sør
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The fifth largest savings bank in Norway with a strong market position in Southern Norway
High capitalization; Capital ratio of 15.5 % - Core Tier 1 ratio of 12.7 % at December 31th 2015
Rated A1 (stable outlook) by Moody’s
Strong asset quality – 65 per cent of loan book to retail customers
New rights issue of NOK 600 million in progress will strengthen capital ratio even further
Sparebanken Sør
Boligkreditt
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100 % owned and dedicated covered bond subsidiary of Sparebanken Sør
Cover pool consisting of 100 % prime Norwegian residential mortgages
High quality cover pool reflected by the weighted average LTV of 55.3 %
Covered bonds rated Aaa by Moody’s with 5 notches of “leeway”
Strong legal framework for covered bonds in Norway with LTV limit of 75 % for residential mortgages

Low interest rates, weak NOK and fiscal stimulus are counterbalancing economic slowdown
stemming from the lower oil investments
Unemployment is expected to increase gradually but from a very low level and the unemployment
rate remains well below the European levels
The Norwegian government has a strong financial position with large budget surplus. The
government pension fund, which accounts over 200% of the GDP, provides the government with
substantial economic leeway
Norwegian
economy
Southern region
economy
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The Southern region is clearly less exposed to oil production than Western Norway
Registered unemployment in the Southern region remains below 4 % and has moved up only
slightly, at a similar pace than the national average
House price development over the past years has been more moderate than average in Norway
2
Table of content
I
Sparebanken Sør
II
Financial key figures
III
Sparebanken Sør Boligkreditt
IV
Norwegian economy
V
Contact details
3
Historical milestones
190 years of development and renewal
Arendal Sparebank
was founded in 1825
as one of the first
savings banks in
Norway.
1973
The bank merged with 4
other savings banks in
Aust-Agder, and formed
Aust-Agder Sparebank.
Sparebanken Sør was
established in 1984 after a
merger between AustAgder Sparebank, 2 other
savings banks in AustAgder and 9 from VestAgder.
1985 The bank entered
for the first time
Telemark, through a
merger with Nissedal
Sparebank and totals
today 7 branches in the
county, where the latest
was the opening of an
office in Skien in the fall
of 2012.
2014 Merger between
Sparebanken Pluss and
Sparebanken Sør and the
new bank is named
Sparebanken Sør.
The bank´s history
dates back to 1824
when Christianssand
Sparebank was
established as one
of the first savings
banks in Norway.
The banks more recent
history starts in 1984 when
Sparebanken Agder was
established through a
merger between
Christianssands Sparebank,
Halse and Harkmark
Sparebank,
Iveland Sparebank,
Oddernes Sparebank,
Vennesla Sparebank
and Øvrebø and Hægeland
Sparebank.
Four savings banks in
Telemark and
Sparebanken Agder
joined forces in 1987.
Through the merger the
bank was named
Sparebanken Agder and
Telemark. In 1988 the
name was changed to
Sparebanken Pluss
In January 1997 Sparebanken
Pluss and Sparebanken NOR
agreed that Sparebanken
NOR was to take over
Sparebanken Pluss’ branches
in Telemark while
Sparebanken Pluss was to take
over Sparebanken Nor`s office
in Kristiansand. Through this
deal the banks business again
was concentrated in the Agder
counties.
4
Sparebanken Sør
Proven operational platform | Established customer base| Stable outlook
1
Sparebanken Sør is an independent financial group with a history dating back to 1824
Sparebanken Sør is an independent savings bank offering its products and services to the retail
banking market, corporate market and to the public sector.
2
3
4
The 5th largest Norwegian-owned bank with assets above NOK 100 billions in 2015
5
Some 450 employees in 36 locations in the Southern part of Norway.
6
7
8
Note(*): based on the share price per 03.02.16
Geographical presence mainly in Aust-Agder, Vest-Agder and Telemark
General banking services- and products, in addition to real-estate agency, life- and non-life
insurance, security trade services and leasing through wholly- and partially owned subsidiaries
and companies.
4,768,674 equity certificates listed on Oslo Stock Exchange with a market capitalization of NOK
711m *
With a strong and powerful ambition, Sparebanken Sør is committed to create further growth and
development in its region.
5
Complete provider of financial services
Significant product range - still potential for increased product sales
Subsidiaries
 Sparebanken Sør Boligkreditt AS is a
wholly owned subsidiary of Sparebanken Sør
 Sparebanken Sør Boligkreditt AS is licensed as
a financial enterprise with the right to issue
bonds where investors receive preferential
coverage in home mortgages issued by the
bank
 Covered bond financing allows Sparebanken
Sør Group to offer mortgages with
competitive terms to its customers
Affiliates
Vendors
 Sparebanken Sør bought 10% of Frende
Holding in 2008, and is one of 15 independent
savings banks with stakes in the company
 Frende has 175 000 customers and offers
insurance, both life and non-life to corporates
and private customers
 Brage Finans is a leasing company owned by
10 independent savings banks, Sør owns 14%
 Distribution of the company's products is done
through own banks, via dealers of capital and
through its own sales organization
 ABCenter and Plussmegleren have merged
under the name Sørmegleren.
 Sparebanken Sør owns 91% of
Sørmegleren Holding AS which is the parent to
the real estate company Sørmegleren AS
 Sørmegleren is headquartered in Kristiansand
as well as 9 branches in 9 other cities
 Conveys about 2,000 homes a year and is
thereby the regions largest real estate agent
 Sør bought 18% of Norne Sec. in 2008
 Norne a full service investment bank with
corporate finance - services, analysis, and
stock and bond brokerage
6
Company structure
Sparebanken Sør
(parent bank)
rated A1 Moody’s
Subsidiaries
Affiliates
Sørmegleren
(real estate broker)
Ownership 91 %
Sparebanken Sør Boligkreditt
(covered bond company)
rated Aaa Moody’s
Ownership 100 %
Frende
(insurance)
Brage
(leasing)
Norne
(brokerage)
Ownership 10 %
Ownership 14 %
Ownership 18 %
7
A broad geographical footprint
Important operator in the south: Aust-Agder, Vest-Agder and Telemark
Local relationships and market proximity is essential for good savings bank operations
Supporter of local business development
INDUSTRY
TRANSPORTATION
TRAVEL
COMMERCIAL
REAL ESTATE
RETAIL
HEALTH
AGRICULTURE
The market is totalling 450.000 people and about 9 percent of all business in Norway.
Sparebanken Sør is the only bank covering this area.
FINANCIAL
SERVICES
PUBLIC
SECTOR
EDUCATION
8
Table of content
I
Sparebanken Sør
II
Financial key figures
III
Sparebanken Sør Boligkreditt
IV
Norwegian economy
V
Contact Details
9
Financial key figures
Solid foundation, both financially and operationally
Net interest income (NOKm)
Cost ratio*
Impairment ratio
Net income (NOKm) *
6.9%
-66.7%
1.6%
0.7%
1.521
1.511
46,2 %
43,2 %
0,33%
614
624
2014
2015
0,11%
2014
2015
Total assets (NOKm)
2014
2014
101.334
2015
2014
2015
Net lending (NOKm)
Return on equity*
CET 1 ratio
9.2%
-5.8%
-3.2%
7.7%
94.062
2015
88.387
8,9 %
2015
2014
80.913
2014
Note(*): 2014 is adjusted for gains from the sale of a stake in Nets with NOK 71m and recognition of negative goodwill of NOK 200m |
8,4 %
2015
13,1 %
12,7 %
2014
2015
10
Diversified loan portfolio(I)
High retail share and a broad geographic presence contribute to a balanced portfolio
Lending by region
Distribution of retail banking - SME/corporate banking
Gross loans
Gross loans
27 %
35 %
46 %
65 %
27 %
SME/Corporate (CM)
Vest-Agder
Aust-Agder
Retail market (RM)
Telemark & Other
 # 1 in Vest-Agder and Aust-Agder and # 3 in Telemark.
 Close and long-term cooperation with major stakeholders in the region. The agreement with KNIF* is a good example, which contributes to
growth outside the region
 The lending portfolio is concentrated in the bank's market sectors, concentration risk is low, and is significantly diversified compared to
other regions
 Large share of Retail lending which in itself contributes to lower risk, and combined with low average loan size (< NOK 2m) and a low
average LTV, even in a case of a 30% house price drop, lead to a low overall risk level
Note(*): KNIF = Kristen-Norges interessefellesskap -> consists of more than 70 national organizations
11
Diversified loan portfolio(II)
Detailed overview of the retail and commercial portfolio
SME/corporate loans grouped by industry
Retail loans grouped by size (NOK m)
Gross loans
Share of loans in the Retail portfolio
Gross loans
54%
20%
7%
56 %
50%
44 %
25%
11%
12%
12%
4%
Rental real estate
Social services
Property development
Commercial services
Other (Trade, Manufacturing etc.)
Key points for SME/corporate
 Long term relationships and good
quality in the SME-portfolio
1-2
2-3
3-4
4-5
>5
LTV for Sparebanken Sør Boligkreditt
Gross loans
12%
20%
30%
 95 % of the mortgage portfolio in
SBK has LTV below 75%
20%
41 - 50 %
71 - 75 %
Key points for Retail market
 ~ 80 % of the Retail loans have a
principal below NOK 2m
13%
< 40 %
61 - 70 %
Sparebanken Sør
 44 % of the Retail portfolio is
transferred to Sparebanken Sør
Boligkreditt **
5%
 Diversified across sectors
 Long contracts in the public sector
2%
Sparebanken Sør Boligkreditt AS
<1
 Clearly defined industry approach
based on local expertise and balanced
risk appetite
 The KNIF-agreement contributes
significantly in the sector ”Social
services”
2%
51 - 60 %
> 75 %
 Comfortable with the Retail
portfolio, even in “stormy weather”
Note(*): Other includes : construction of real estate(4%), wholesale and retail(4%), industry (3%), housing associations(3%), primary(2%), public sector(2%), transportation (2%), hotel and restaurants (1%) Note(**): 100% subsidiary= important funding
instrument
12
Diversified loan portfolio(III)
Low exposure to oil & offshore | stable exposure to real estate
Norway's largest oil regions *
Exposure to oil and the oil industry**
Overall real estate exposure in
SME/corporate
Gross loans
Stavanger region
Sparebank 1 SR
8,9 %
23,5 %
Oslo/Akershus
DNB
Bergens region
1,4 %
7,0 %
0,9 %
3,7 %
Sunnhordaland
Sparebank 1 SMN
4,9 %
Sunnmøre
Sparebanken More*
Vestfold (expanded) region
Arendal- og Kr.sand region
3,1 %
17,5 %
Sparebank 1 Nord Norge*
1,9 %
Trondheims region
Molde/Kristiansund
Grenland
Sparebanken Vest
1,1 %
Sandnes Sparebank*
0,9 %
Overall real estate exposure
Split
Ytre Sogn
Østfold
SØR*
0,1 %
Rental real estate
Construction
Property development
Cooperative housing
 Sør has virtually no exposure to oil & offshore, due to a long-term strategic choice
 Although the Vest-Agder area is more exposed to oil than average, the bank as a whole is below average, due to the portfolio in Aust-Agder
and Telemark
 The bank's overall property exposure constitutes ~ 68% of the corporate market portfolio -> The latter constitutes only 23.5% of total loans
 Large parts of the real estate exposures is related to commercial property (rental and condominium). Sør has considerable expertise in this
area, along with its customers that operate very effectively with high level of occupancy
 Exposure towards traditional construction is low
Note(*): Industribyggerne 2015 - Rapport IRIS 2015/031 (direkte og indirekte sysselsatte knyttet til petroleumsindustrien) || Note(**): Swedbank Research, EAD Oil and Oil service, except ** - in % of total lending
13
Credit risk(I)
Manageable risks across the portfolio
Deposits grouped by size
Retail portfolio grouped by risk
 ~70% of the deposits is lower than
NOK 8m
94,5 %
51,3 %
 ~95% of Retail portfolio is in the low
risk category
30,2 %
 ~95% of SME/corporate deposits is
below NOK 100m (few large
individual commitments)
18,5 %
< 2m
2 - 8m
> 8m
Loans grouped by size*
Low
4,2 %
1,3 %
Medium
High
19,9 %
17,6 %
10,5 %
5,4 %
10 - 100 mill
Note(*): Individual commitments
> 100 mill
 ~90% of the SME/corporate portfolio
is in the low or medium risk category
Risk categories
SME/corporate portfolio grouped by risk
69,6 %
77,0 %
< 10 mill
Key points
Low
Medium
High
Category
Lower bound
Upper bound
A
0,00
0,10
B
0,10
0,25
C
0,25
0,50
D
0,50
0,75
E
0,75
1,25
F
1,25
2,00
G
2,00
3,00
H
3,00
5,00
I
5,00
8,00
J
8,00
99,99
K
100
14
Credit risk(II)
Solid buffer in place –no surprises expected due to strong risk management
Gross arrears > 90 days
NOKm
608
NOKm
576
488
1.944
594
488
479
457
418
1.651 1.634
1.500
1.271
1.457 1.434
0,71%
0,61%
Q2
0,72%
0,57%
0,57%
Q3
Q4
Q1
Q2
0,57%
Q3
Q4
Q1
Q2
Q3
Q4
Q1
1,74%
1,68%
Q2
Q3
2014
Arrears in % of loans
Q4
As % of gross loans
Loan loss provisions
(collective and individual)
112
NOKm
44,6 %
669
44,8 %
637
 Total non-performing and doubtful
loans amounted to 1.5% of the gross
loan portfolio for Q4-15
 Loan loss provisions, both collective
and individual, represented more
than 50% of the total non-performing
and doubtful loans in Q4-2015
 Sør is well prepared for the future
through a solid loan loss provision
level vs. similar banks in Norway
% of loans
48,0 %
46,0 %
806
Key points
Total provisions compared to other banks ***
52,4 %
50,1 %
56
1,51%
2015
Non-performing and doubtful loans
Loan loss expenses
NOKm
1,98%
1,60%
2015
Gross loans in arrears > 90 days
2,04%
1,90%
0,48%
2014
39,7 %
714
0,82%
41,5 %
681
692
694
0,77%
0,72%
722
0,62%
0,57%
45
0,45% 0,45%
23
15
0,37%
24
3
Loss provisions
2015
Unexpected losses
Q1
Q2
Q3
2014
Reversals
Q4
Q1
Q2
Q3
2015
Total deposits
Collective
% of defaulted and doubtful loans
Q4
Note(*): Annualised|| Note(**): Consists of: ”arrear >31 – 60 days”, ”arrear > 61 – 90 days”,” arrear >90 days” and ”remaining doubtful loans”, || Note(***): Sparebank 1 Markets, ukerapport 11.01.2016
MING
Q4
SRBANK
2014
Q3
SB1HE
Q2
NONG
Q1
MORG
Q4
SVEG
Q3
DNB
Q2
SOR
1
Q1
1.320
2,42%
0,77%
Q1
Non-performing and doubtful loans**
15
Operational effectiveness
Low interest margin offset by good cost and loss rate
Net interest margin*
Cost ratio
Net interest income / average assets
Impairment ratio*
Operating expenses before loss / net income
Losses on loans and guarantees / average net loans to customers
54,2 %
1,64%
0,97%
1,60% 1,58% 1,59% 1,57% 1,57%
1,55% 1,53%
46,8 %
45,8 %
44,2 %
42,6 %
As a result of
increased provisions
for future losses
after an extensive
review of the bank's
loan portfolio to CM
45,7 %
43,9 %
36,3 %
0,22%
0,14% 0,14%
0,09%
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
2015
Q4
Q1 **
Q2
Q3
2014
Q4
Q1
Q2
Q3
Q4
Q1
2015
Q2
Q3
2014
Q4
0,07% 0,09% 0,08%
Q1
Q2
Q3
Q4
2015
 Slightly decreasing net interest income in 2015, but strengthened nominal income growth due to volume growth
 Among the most cost-effective banks in Norway -> Influenced by a general spread widening in the bond market affecting the bond portfolio
in 2015
 Impairment ratio significantly reduced in 2015, after a thorough review of the corporate market portfolio in 2014 with the associated
strengthening of loss provisions
Note(*): Annualised (Figures from the income statement x4) || Note(**): Adjusted for gains from the sale of a stake in Nets with NOK 71m and recognition of negative goodwill of NOK 200m
16
Capital requirements
Core capital of 12,7% in 2015 – expected core capital in 2016 of 14,5%
Sparebanken Sør - Actual coverage, requirements and objectives
Leverage ratio
Requirements
Today
Key points
Expected
2,0 %
1,5 %
2,0 %
1,5 %
2,0 %
1,9 %
0,8 %
1,5 %
14,5 %
12,7 %
11,0 %
 Sør has implemented ICAAP for 2015
and the Financial Supervisory
Authority will conclude on individual
Pillar II requirements later in 2016
 Through dialogue with the Financial
Supervisory Authority ("FSA"), there
has been an expectation to bank on
CET 1 at the end of 2016 of 14.5%
(including Pillar II)
 To reach the expectation from the
FSA, Sør will continue to strengthen
profitability, making adjustments in
the balance sheet and restricting
growth in lending
11,5 %
 In addition, Sør will implement rights
issue of NOK 600m during H1-16
7,0 %
 The rights issue will strengthen core
capital per 31.12.2015 from 12.7% to
13.7%
Unweighted
core capital ratio
Requirements from the FSA
31.12.2015 (Pilar I)
CET1
Requirements from the FSA
31.12.2016 (Pilar I)
Additional tier 1
Capital ratio
31.12.2015
Expected capital requirements
from the FSA
31.12.2016 (Pilar II)
Additional Tier 2
 Further measures are expected to
ensure that Sør will have CET1 of
14.5% at the end of 2016
17
Table of content
I
Sparebanken Sør
II
Financial key figures
III
Sparebanken Sør Boligkreditt
IV
Norwegian economy
V
Contact Details
18
Sparebanken Sør Boligkreditt
Executive summary
 Dedicated covered bond company of Sparebanken Sør
 The covered bonds have full recourse to the issuer (Sparebanken Sør Boligkreditt), which is a whollyowned subsidiary of Sparebanken Sør
 Sparebanken Sør Boligkreditt has established a revolving credit facility with Sparebanken Sør which
secures the refinancing risk
 The cover pool consists 100 % of prime Norwegian residential assets
 Low LTV of 55.3 % (indexed)
 There are no non-performing assets in the cover pool
 Current OC of 16.8 %, of which 2.0 % is provided on committed basis
 Main cover pool exposure is towards Southern Norway, where price developments have been relatively
stable
 Aaa rating assigned by Moody’s with 5 notches of leeway, pointing to significant buffer against potential
downgrades
 Collateral score of 5.0 % (4.3 % excluding systemic risk)
19
Sparebanken Sør Boligkreditt
Breakdown of portfolio
Sparebanken Sør total loan portfolio
LTV breakdown of Sparebanken Sør Boligkreditt (cover pool)
5%
12%
29 %
20%
35 %
13%
30%
20%
36 %
Cov.bond
Other retail
SME/corporate
100%
< 40 %
41 - 50 %
51 - 60 %
61 - 70 %
71 - 75 %
> 75 %
Stress test of the cover pool
75%
50%
25%
59,7 %
55,3 %
16,8 %
76,8 %
67,2 %
14,5 %
10,3 %
House price decline 10 %
House price decline 20 %
2,9 %
0%
Status Q4 15
Weighted average LTV
House price decline 30 %
Nominal OC
20
The Cover Pool(I)
Indexed LTV distribution
Cover pool composition
Category
Type of Collateral
Total loan balance
Average loan balance
No. of loans
WA seasoning (in months):
WA remaining term (in months):
35%
100 % residential
NOK 25,673,390,250
NOK 1,017,614
25,229
36
30%
25%
20%
206
NO. of borrowers
22,752
NO. of properties
24,755
WA Indexed LTV
55.30 %
WA LTV
58.30 %
15%
10%
5%
Percentage of variable mortgages (S.Def.):
100.00 %
Loans in arrears > 90 days (e.g. 1% or 0.01):
0.00 %
Committed over collateralisation:
Over Collateralisation:
Total Cover Pool
0%
0-≤40%
>40%-≤50%
>50%-≤60%
>60%-≤70%
>70%-≤80%
>80%
2.00 %
16.76 %
25,673,390,250
 100 % prime Norwegian residential mortgages
 No non-performing mortgages in the cover pool
 The weighted-average LTV is 55 % on an indexed basis. This is
well below the legislative maximum of 75 % for residential
mortgages
 Current OC level of 16.8 % and commitment to maintain level
above 2.0 %
21
The Cover Pool(II)
Cover pool geographic split
Moody’s collateral scores
Avg. c-score assigned by jurisdiction and to Sparebanken Sør BK
25%
20%
Oslo (9%)
15%
10%
5%
0%
CA
FR
FI
NL
SE
UK
Sør
NO
IE
PT
BE
IT
DE
AT
DK
ES
 A low c-score points to strong credit quality of the cover pool
Vest-Agder
(44%)
Telemark (8%)
Aust-Agder
(29%)
 The cover pool is primarily exposed towards Vest-Agder and
Aust-Agder, as well as Oslo and Telemark to some extent
 Property price development in Vest-Agder and Aust-Agder
has been more modest than in the rest of the country
Source: Moody’s deal-by-deal overview Q2 2015 and Sparebanken Sør Boligkreditt performance overview Sep 2015
 Sparebanken Sør Boligkreditt covered bond program has been
assigned a c-score of 5.0% (4.3% excluding systemic risk)
 This is stronger than the national average and also compares
well with international peers
 Sparebanken Sør Boligkreditt covered bond program has been
assigned a TPI of ’high’ and has ’Aaa’ rating with 5 notches of
leeway. This indicates strong resilience against potential issuer
rating downgrades
22
Funding
Well diversified maturity profile giving great confidence during turmoil
Remaining maturity of outstanding wholesale funding
11%
12%
20%
19%
27%
7%
1%
Key points
1%
3%
11.131
 Total funding amounted to NOK 42bn,
of which NOK 22 billion is issued as
covered bonds
 International turmoil has been
affecting liquidity and price volatility
in Norwegian bonds
 The bank has a diversified maturity
profile and few expiring bonds in
2016 and 2017
8.240
7.780
6.444
 Funding > 12 months totalled 89%
4.521
4.628
1.314
 Liquidity indicator 1 is 106%
4.542
4.904
 LCR is 108% on a group level
2.202
 The average maturity is 3.4 years
corresponding with the average
among similar Norwegian banks
2.860
4.687
3.314
3.719
2.702
2.000
3.238
860
2016
2017
2018
2019
Sparebanken Sør
2020
2021
1.419
520
405
520
405
2022
2023
600
819
> 2024
Sparebanken Sør Boligkreditt
23
Covered Bond programme
24
Table of content
I
Sparebanken Sør
II
Financial key figures
III
Sparebanken Sør Boligkreditt
IV
Norwegian economy
V
Contact Details
25
Key indicators for the Norwegian economy
Temporary slowdown in growth
In %
GDP growth, mainland
Core inflation
Unemployment rate registered
Key policy rate
Current account surplus / GDP
Sovereign wealth fund / GDP
2014
2.3
2.4
2.8
1.5
9.7
204
2015
1.0
2.7
3.0
1.1
8.0
224
2016E
1.1
2.9
3.3
0.5
7.1
N.A
2017E
1.9
2.5
3.4
0.4
7.9
N.A
2018E
2.3
2.0
3.3
0.7
8.2
N.A
 Economic growth in Norway has edged down due to lower oil investments
 Low interest rates, historically weak NOK and fiscal stimulus are sustaining growth in rest of the
economy
 Unemployment is expected to increase gradually but from a very low level and remains well
contained in the European context
 Excellent financial position of the Norwegian government with large budget surplus and the
government pension fund accounting over 200% of GDP
Source: Estimates from Norges Bank’s December Monetary Policy report and Statistics Norway (Current account)
26
Mainland growth
Weaker growth due to lower oil investments
27
NOK, oil price and competitiveness
Weak NOK has reduced cost level significantly
28
Mainland exports
Export sector benefits from weak NOK and is boosting growth
29
Breakdown of Norwegian exports
Norwegian exports is more than oil
Exports
Export of traditional goods
Other
12 %
Services
29 %
Fish
20 %
Food
2%
Traditional
goods
32 %
Raw materials
4%
Machines
28 %
Chemicals
15 %
Oil and Gas
39 %
REGION
SHARE OF
GOODS
EXPORT
Source: Statistics Norway
Metals
19 %
EU ex Nordic
Asia
North
America
30 %
20 %
16 %
Nordics
South
America
Europe ex EU
Oceania
Africa
14 %
6%
5%
3%
3%
30
Public finances
Strong fiscal power to support the economy
 The Government Pension Fund currently amounts
to NOK 7,000bn (approx. EUR 737bn) which is more
than twice the size of the Mainland GDP and equals
to five annual national budgets
 This gives the Norwegian government substantial
economic leeway
 The fiscal rule: 4% of the fund’s value can be used in
the national budget (expected real return on the
fund)
 The rule is to ensure that the fund itself would not
be tapped. Thus the fiscal break even oil price is
zero
 In response to lower oil price public spending has
increased. The fiscal policy stimulus is estimated to
be 0.7% of the Mainland GDP in 2016
31
Western Norway is the oil region
Sparebanken Sør’s operating regions is less exposed to oil
Direct and indirect employment in the oil sector
Employed in oil sector in absolute numbers and % of employment Indirect employment
Supply industry export
Supply industry home market
Employed onshore
Employed offshore
Indirect employment
Supply industry export
Supply industry home market
Employed onshore
Employed offshore
Source: IRIS
32
Bank specific exposure to oil related industries
Norway’s largest petroleum regions*
Banks exposure towards oil- and oil service**
Stavanger region
8,9 %
Oslo/Akershus
Bergens region
7,0 %
Sunnhordaland
Sunnmøre
Vestfold region +,+
4,9 %
Arendal- og Kr.sand region
Trondheims region
3,1 %
Molde/Kristiansund
1,9 %
Grenland
Ytre Sogn
0,1 %
0,9 %
Østfold
SØR*
SADG*
1,1 %
SVEG
NONG* MORG*
MING
DNB
SRBANK
Sparebanken Sør has practically no exposure to oil or oil service industry
* Source: Industribyggerne 2015 – Rapport IRIS 2015/031 (direct and indirect employment petroleum)
** Source: Swedbank Research, EAD Oil and Oil service, except * - in % of total lending
33
Unemployment
Only moderate increase in unemployment in Sparebanken Sør’s regions
34
Household economy
Low interest rate burden and solid financial buffers
Estimates from Norges Bank’s December Monetary Policy report
35
Norwegian housing market(I)
House prices have increased alongside income growth
City
2009
2010
2011
2012
2013
2014
2015
Sum
Oslo
1%
8%
10 %
10 %
5%
1%
10 %
+ 45 %
Kr.sand
2%
7%
6%
1%
-2%
-1%
6%
+ 19 %
Stavanger
2%
12 %
13 %
8%
4%
-2%
1%
+ 38 %
Norway
2%
8%
9%
7%
5%
2%
7%
+ 40 %
36
Norwegian housing market(II)
Key characteristics
High home
ownership
 Around 80 % of Norwegian households own their home which is among the highest home
ownership ratios in the world. Hence, buy-to-let market is limited in Norway
 Residential mortgage loans are predominantly granted by banks and mortgage credit
institutions (97 % as of January 2015)
Key features of
residential
mortgage loans
in Norway
 Lenders have access to wide range of information about borrowers before granting the
mortgage (e.g. tax records for the last three years, any debt collection outstanding, any
bankruptcies)
 Properties are registered in a central register to which banks have direct access
 Typical maturity of a new loan is 25 to 30 years
 The majority of residential mortgage loans have a floating interest rate meaning that banks are
allowed to increase the interest rate with a six weeks’ notice
 Borrowers are personally liable for their debt also after foreclosure or forced sale
 Borrowing costs on mortgages are tax deductible (the tax rate applied is 25 %)
Good tax
incentives and
supportive social
security system
 Tax valuation of dwellings is favourably treated in the wealth tax system
 If a dwelling is occupied by the owner for a minimum of one year, capital gain is tax free when
the dwelling is sold
 Unemployment benefit equals approximately 62 % of the previous calendar year’s gross
income and is paid for up to 104 weeks
Source: Finance Norway, Norwegian Labour and Welfare Administration
37
Financial key figures for 2015 and expectations for 2016
Operational measures are implemented to ensure the bank's continued growth
Return on equity
Satisfying level given the banks solid
equity ratio
8,4 %
9,0 %
Common equity (The group)
Lending growth
Equity emission
added
13.7%
1,0 %
12,7 %
Potential buffer /
Effect of initiatives
14,5 %
9,2 %
4.0%
2,0 %
2,0 %
2015
2016
2015
Cost development (The bank)
2016
2015
2016
Dividend ratio
2015 was impacted by the spread widening in
the liquidity portfolio
46,2 %
42%
2015
2016
50%
50%
2015
2016
38
Contact details
and website
Marianne Lofthus – Managing director/CEO Sparebanken Sør Boligkreditt AS
Phone, direct line
+ 47 38 17 35 38
Phone, mobile
+ 47 90 51 41 83
E mail
[email protected]
Bjørn Erik Kittelsen – Head of Treasury, Sparebanken Sør
Phone, mobile
E mail
+ 47 90 92 86 63
[email protected]
www.sor.no
39
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