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2020-02-07

SBVG: The best result ever from core business

The SpareBank 1 BV Group had a net profit from ordinary operations before losses
of NOK 667.1 million (732.6 million). Earnings after tax were NOK 538.6 million
(596.1 million), which represents 1.41% (1.67%) of average total assets. The
Group's annualised return on equity was 11.3% (13.6%).

The Group's return on equity as at 31.12.2019 was affected by gains from the
insurance merger (Fremtind) of NOK 71.9 million, while the corresponding period
last year was affected by the sale of own commercial buildings for NOK 90.7
million and a one-time effect from winding up defined-benefit pension schemes of
NOK 102.2 million. Without these items, the Group's annualised return on equity
was 9.8% (9.9%).

Earnings per equity certificate in the parent bank were NOK 4.43 (4.98).

Result Group
Net interest income amounted to NOK 656.5 million (592.9 million). Net interest
income as a percentage of average total assets was 1.72% (1.67%).

At the end of the quarter, the Bank had transferred mortgages worth NOK 12,040
million (11,740 million) to SpareBank 1 Boligkreditt AS, and NOK 843 million
(582 million) in mortgages on commercial property to SpareBank 1 Næringskreditt
AS. Earnings from these loan portfolios are shown under net commission income
and amounted to NOK 101.5 million (94.9 million). The ownership interest in
SpareBank Næringskreditt AS amounts to 11.7 % as at 31 December. A notice
regarding this stake has been submitted to the Financial Supervisory Authority
of Norway in accordance with paragraph 6.1 of the Financial Enterprises Act.

Lending rates increased by up to 0.25 percentage points in the fourth quarter.
The interest rate change took full effect from December. Compared to the second
quarter of 2019, net interest income (excluding mortgage companies) increased by
NOK 15.2 million (+0.16% of average total assets).

The improvement in 2019 margins is largely related to increased margins on
deposits.

Net commission and other income totalled NOK 427.1 million (506.7 million).

Net commission income amounted to NOK 280.2 million (266.2 million), while other
operating income amounted to NOK 146.8 million (240.5 million). Last year's
figure included gains of NOK 90.7 million from the sale of own commercial
buildings.

Net income from financial assets amounted to NOK 171.9 million (99.2 million).
The key items in 2019 are made up of dividends received totalling NOK 25.5
million (32.0 million) and net income from ownership interests of NOK 125.4
million (47.8 million). The last item includes gains from the Insurance merger
(Fremtind) of NOK 71.9 million, and approx. NOK 18 million related to our share
of extraordinary revaluation of properties in the SpareBank 1 Group's life
companies. Net income from other financial assets also amounted to NOK 20.9
million (19.4 million). The bank has made a write-down on a financial investment
of NOK 14.5 million in 2019.

Total operating costs were NOK 588.3 million (466.2 million). Operating costs as
a percentage of total operating income for the Group came to 46.9% (38.9%). The
corresponding cost ratio for the parent bank was 41.6% (33.0%).

Personnel costs amounted to NOK 344.2 million (237.4 million). The previous year
includes a one-time effect from winding up defined-benefit pension schemes of
NOK 102.2 million.Corrected for the positive one-off effect in 2018, the Group's
personnel costs have increased by NOK 4.6 million or approx. 1.4% compared with
the same period last year.

Other operating costs amounted to NOK 244.2 million (228.8 million). The
increase from last year is mainly related to development-/IT costs.

Net losses on loans and guarantees amounted to NOK 2.3 million (0.7 million) as
at 31 December. Net losses as a percentage of average gross lending amounted to
0.01% (0.00%).

Balance sheet Group

The Group's total assets amounted to NOK 38,822 million. This represents an
increase of NOK 2,242 million over the last 12 months. The group's business
capital (total assets including loans transferred to SpareBank1 Boligkreditt AS
and SpareBank 1 Næringskreditt AS) amounted to NOK 51,705 million (48,903
million).

Gross lending (including volume transferred to SpareBank 1 Boligkreditt
AS/SpareBank 1 Næringskreditt AS) amounted to NOK 44,292 million. In the last 12
months there has been an increase of NOK 2,438, equivalent to 5.8%. The growth
was made up of NOK 1,943 million, or 5.7%, in the retail market and NOK 495
million, or 6.5%, in the corporate market. The retail market share of lending
(including SpareBank 1 Boligkreditt) at the end of the quarter was 82% (82%).

At the end of the quarter, the Group had a deposit volume of NOK 24,443 million
(22,139 million) with deposit growth of 10.4% in the last 12 months. The growth
was made up of NOK 1,936 million, or 14.5%, in the retail market and NOK 369
million, or 4.2%, in the corporate market. The Group had deposit coverage of
77.8%, compared with 75.0% at the same time last year. Including the volume
transferred to SpareBank 1 Boligkreditt AS/ SpareBank 1 Næringskreditt AS,
deposit coverage amounts to 55.2% (52.9%). The retail market share of deposits
at the end of the quarter was 63% (60%).

Capital adequacy

SpareBank 1 BV uses the standard method for calculating credit risk and the
basic method for operational risk.

At the end of the fourth quarter, the regulatory requirement for common equity
tier 1 capital is a minimum of 12.5%. In September 2018, the Financial
Supervisory Authority of Norway set new Pillar 2 requirements for SpareBank 1 BV
of 1.9% from 31 December 2018, but at least NOK 457 million above the minimum
requirement and buffer requirements in Pillar 1. The current total requirement
for common equity tier 1 capital is thus 14.4%. The Group's target for common
equity tier 1 capital ratio is a minimum of 15.5% at the end of 2019.

At the end of the quarter, the common equity tier 1 capital ratio was 18.3%
(16.7%). Unweighted tier 1 capital coverage (the leverage ratio) amounted to
8.5% (8.2%) at the end of the quarter. The regulatory requirement for unweighted
tier 1 capital is 5.0%.

Equity certificates
The bank's policy is that a minimum 50% of the equity certificate holders' share
of each year's profit should be paid out as a cash dividend.

Based on the current dividend policy, the bank's board recommends a cash
dividend for 2019 of NOK 2.95 (67%) per equity certificate and provisions for
the risk equalization fund corresponding to NOK 1.48 (33%) per equity
certificate.

Outlook for the future
The Board is very satisfied with the profits recorded for the core business
during Q4 of 2019. The Group's return on equity amounts to 11.3% in 2019.
Excluding gains from the insurance merger (Fremtind) totalling NOK 71.9 million,
the return on equity amounts to 9.8%.

The group is very robust and has a common equity tier 1 capital ratio of 18.3%
as at 31.12.19. This means the group has a good ability to grow and issue
dividends, as well as the robustness to meet increased capital requirements. The
Group also has good liquidity.
Amended capital requirements from the Ministry of Finance involve the equal
treatment of IRBA and standard banks in terms of the level of increase in
systemic risk buffer by 1.5% percentage points - the only difference are the
introductory phases for when these increased requirements take effect. The Board
believes that tighter capital requirements for standard banks in parallel with
the removal of the Basel 1 floor for IRBA banks will cause some distortion of
competition for the lending business in favour of Norwegian and Nordic banks
with IRBA approval.

Increased market interest rates during 2019 contribute to an increase return on
equity as a result of repricing customer interest rates and improving the return
on the group's equity.

Sparebank 1 BV will seek to maintain its strong position as a relevant bank in
all channels for our retail customers. Additionally, the group will seek to
increase its market share among small and medium enterprises in Vestfold and
Buskerud.

Slightly lower rates of growth are anticipated in the Norwegian economy moving
forward. In addition, a low rate of interest is expected, as well as declining
growth in employment. House price trends are expected to remain stable and
unemployment is expected to remain relatively low.

Based on somewhat lower growth in the Norwegian economy and changes to the
capital regulations with the removal of the Basel 1 floor for major Norwegian
banks, tougher competition is expected in the lending field during 2020.

SpareBank 1 BV's long-term target return on equity remains at a minimum of 10%
for 2020.

Tønsberg, 6 February 2020
Contact persons at SpareBank 1 BV :
CEO Rune Fjeldstad, tel.:+ 47 90 07 90 17
CFO: Geir Årstein Hansen, tel.:+ 47 91 32 21 37
Head of Treasury: Per Grøtterød, tel.:+ 47 91 32 21 38

Source Url: https://newsweb.oslobors.no/message/494789

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