Quarterly accounts Q3 2019 Troms/Oslo 25 October 2019 Accounts YTD - PowerPoint PPT Presentation

Quarterly accounts Q3 2019 Tromsø/Oslo 25 October 2019

Accounts YTD September 2019 Pre-tax profit ROE 18.9 % 2 133 MNOK C/I-ratio CET-1 ratio Losses 15.9 % 34.7 % 13 MNOK 2

Strategic geographical location 80 % of Norwegian marine areas lies north of the Arctic Circle Annual freight traffic on the Northern Sea Route (in mill. tonnes) 3 Source: Atomflot

Strong demand for commodities from northern Norway Export value of fish from Northern Norway jan - august 2019 12.000 20 % 10.000 of the world’s salmon production 8.000 takes place in northern Norway MNOK 6.000 50 % 4.000 of the value creation from 2.000 Norwegian white fish takes 0 place in northern Norway 2013 2014 2015 2016 2017 2018 2019 M08 M08 M08 M08 M08 M08 M08 Nordland Troms Finnmark 4 Source: SSB, fastlandseksport

Northern Tourism increases its national market share Overnight stays - foreign nationals, and share of total overnight stays in Norway 2,6 mill. 1.500.000 16% 1.400.000 15% overnight stays at hotels 1.300.000 14% and Airbnb in the region 1.200.000 13% from May-August 2019 1.100.000 12% 9 % 1.000.000 11% 900.000 10% growth in overnight stays 800.000 9% from the same period in 700.000 8% 2018 Northern Norway in total Northern Norway, share of total 5 Source: Kunnskapsbanken/Capia, Utviklingen i reiselivet Source: SSB, overnattinger

How will the future housing market look like? Housing starts House prices, September 2019 Average price, NOK per m2, all units 3.250 3.000 2.750 73.455 2.500 2.250 2.000 Number of units 48.290 42.712 1.750 37.484 32.700 1.500 1.250 0,7 % -0,1 % 0,2 % 0,2 % -0,2 % 1.000 Tromsø Bodø/Fauske Nord-Norge Oslo Norge Northern Norway Average price, NOK per Price increase y/y, % Pris pr m2, snitt alle boliger Prisendring siste 12 mnd m2, all units 6 Source: Eiendom Norge, Boligprisstatistikk/byggeareal

Strong competition in the retail sector Main bank in Nothern Norway BN Bank Reatil market, 2001-2019 (%) DNB Danske Bank 44 Gjensidige 38 38 38 38 37 37 36 36 36 35 35 35 34 Handelsbanken 33 33 33 32 31 33 Nordea Sbanken SpareBank 1 16 15 15 14 14 13 13 12 12 Storebrand 10 8 7 6 5 Annen spb 5 8 4 4 6 5 4 4 4 4 3 3 3 Annen bank 3 2 2 2 1 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 7 Source: Kantar TNS, posisjonsundersøkelsen

Prefered bank with the SME Share of preference in Northern Norway SME (%) BN Bank DNB 38 36 Danske Bank 34 33 33 33 31 30 30 Handelsbanken 29 29 29 29 28 28 27 27 25 Nordea SpareBank 1 17 15 14 Annen spb. 11 11 10 9 9 9 Annen bank 8 8 7 7 7 7 6 5 5 5 5 4 4 4 4 4 4 4 4 4 Vet ikke 3 3 3 3 3 3 2 2 2 2 1 1 1 1 1 1 2001 2003 2005 2007 2009 2011 2015 2017 2019 8 Source: Kantar TNS, posisjonsundersøkelsen

The number 1 position in the north is solid Main bank SME Main bank retail market 1) SNN 1) SNN 2) DNB 2) DNB 36% 35% 3) Other sparebank 3) Other sparebank Real estate Accounting services Secured financing 1) Regnskapsuset 1) EM1 1) Santander 2) Azetz 2) DNB 2) SNN Finans 18% 37% 22% 3) Intu Nord 3) Rede 3) DNB 9 Source: Kantar TNS, Eiendomsverdi

ESG in SpareBank 1 Nord-Norge Ambition: SpareBank 1 Nord-Norge has a sustainable business behavior that will help to achieve the UN’s Sustainable Development Goals 11

ESG in SpareBank 1 Nord-Norge Social Governance Environment ESG compliante products- and Business- and Risk Strategies, services, «Samfunnsløftet» Future relevant initiatives Policies and Code of Conduct (Corporate Social Responsibility) 12

Communtiy dividend provide proximity, visibility and affiliation Samfunnsløftet skal bidra til utvikling og verdiskaping i byer og lokalsamfunn i Nord- Share of voice in media Norge Q3 2019 - 450 000 kr til Matsentralen - 100 000 kr til CARE + dugnadsinnsats og tellekorps - bærekraftige systemer for matproduksjon, gjennom gode kredittprosesser (Retningslinjer kreditt) 47% - bidra til et aktivt liv for de ansatte (SPOR) - krav til leverandørene om ikke å bruke helsefarlig materiale - Kunnskapsbanken og forventningsbarometer - Ungt Entreprenørskap i alle tre fylkene på til sammen 900 000 kr. - Grand Bodø kr 900 000 – jenteakademiet - Plastløftet – 10 MNOK til å minske plastforurensing og særlig marin forsøpling 13

Accounts YTD Q3 2019 2 133 mill. kr (1 447 mill. kr) PRE-TAX PROFIT 18,9 % (13,3 %) | 14,1 % adjusted for insurance merger gain RETURN ON EQUITY 34,7 % (42,4 %) | 40,3 % adjusted for insurance merger gain C/I-RATIO 13 mill. kr (28 mill. kr) LOANS LOSSES 15,9 % (14,7 %) CET-1 RATIO 14

Positive key financial figures CET 1 incl floor Return on equity capital Cost/income Group 42,9 % 18,9 % 41,2 % 43,1 % 40,3 % 15,9 % Target 15,0 % 14,9 % < 40 % 13,0 % 12,9 % 12,0 % 14,5 % 14,1 % 34,7 % Target Target 14,5 % > 12 % 2016 2017 2018 3Q19 2016 2017 2018 30.09.19 2016 2017 2018 3Q19 Return on equity capital Cost/income Group ex. gain Sp1 Gruppen Return on equity capital ex. gain Sp1 Gruppen Cost/income Group 15

Last quarter changes in profit and loss 16

Cost development Group 45,3 % 43,0 % 43,4 % 36,5 % 27,5 % 389 387 387 373 362 3Q18 4Q18 1Q19 2Q19 3Q19 Group operating costs Cost/income Group 17

Low losses on loans and guarantees 0,02 % 0,01 % 0,02 % 28 22 13 -17 -2 0,00 % -0,01 % 30.09.18 31.12.18 31.03.19 30.06.19 30.09.19 Net losses Net losses in % of gross lending incl. intermediary loans 18

Lending margin, parent bank 3,0 % 2,68 % 2,57 % 2,51 % 2,51 % 2,48 % 2,45 % 2,40 % 2,35 % 2,35 % 2,5 % 1,84 % 2,0 % 1,78 % 1,64 % 1,52 % 1,48 % 1,44 % 1,44 % 1,36 % 1,35 % 1,5 % 1,0 % 0,5 % 0,0 % 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Lending margin corporate Lending margin retail The interest margin is defined as the difference between the customer lending interest rate and average 3 month NIBOR 19

Customer desposit, parent bank 1,0 % 0,84 % 0,8 % 0,70 % 0,53 % 0,52 % 0,6 % 0,48 % 0,64 % 0,46 % 0,30 % 0,52 % 0,4 % 0,21 % 0,45 % 0,25 % 0,38 % 0,36 % 0,29 % 0,2 % 0,24 % 0,36 % 0,30 % 0,0 % 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 -0,2 % -0,27 % -0,28 % -0,28 % -0,29 % -0,4 % -0,31 % -0,31 % -0,34 % -0,37 % -0,37 % -0,6 % Deposit margin corporate Deposit margin retail Deposit margin public The interest margin is defined as the difference between average 3 month NIBOR and the customer deposit interest rate 20

Well diversified segment distribution Power- , water supply and construction 3 % A high share of retail- and Real Industries Estate primary industry lending 2 % 10 % Commision loans represent a risk mitigating factor. 29 % Agriculture and The Group has a well diversified fisheries 6 % corporate market lending Other 19 % portfolio. Transport and No specific concerns related to service industries Retail banking the bank's loans to commercial 4 % market property due to low interest rates 42 % and good occupancy rates in the Other bank's market area. 4 % 21

Solid 12M growth in lending volume Retail market incl. commission loans Retail incl. commission 29 % 85 592 loans 81 052 Corporate incl. 5,6 % 71 % 8,6 % commission 74 636 loans 30.09.17 30.09.18 30.09.19 Corporate incl. commission loans Retail excl. 40 % commission 60 % loans 20,1 % 5,1 % 34 787 33 113 27 208 30.09.17 30.09.18 30.09.19 22

Increased deposit volume in all sectors Corporate market Retail banking market 36 348 7,7 % 20 297 18 841 16,1 % 34 188 16 234 6,3 % 32 207 6,2 % 30.09.17 30.09.18 30.09.19 30.09.17 30.09.18 30.09.19 Public market Public 13 % Retail Corporate 56 % 31 % 8 722 2,0 % -3,2 % 8 612 8 445 30.09.17 30.09.18 30.09.19 23

Financial targets ROE Tier 1 Capital > 12 % 14,5 % Dividend Payout ratio Cost/Income ratio > 50 % < 40 % 24

Financial outlook Strong mortage competition and a rising NIBOR puts preassure on the NRI lending margin. Rising central bank interest rates have provided a basis for repricing of deposits and loans, with an increased emphasis on risk pricing. ROE targeted: Top-level profitability among comparable banks, ROE > 12 % currently > 12 %. Common tier 1 Capital target one percentage point above regulatory minimum requirements, currently 14.5 %. SNN see no challenges in CET-1 RATIO 14,5 % satisfying the coming capital regulatory changes. Status Q3 2019: 40,3 %. Total cost increase due to increased expenses regarding automation and digitalization, and due to growth in Groups C/I-RATIO< 40 % companies. The goal is to facilitate cost savings and increase future revenues. Profitability project is underway. Cash dividend for 2018 is considered very high. Extraordinary dividend from SpareBank 1 Group may provide basis for a high dividend payout ratio at CASH DIVIDEND > 50 % year end, but this must be considered against new regulatory requirements and profitable growth opportunities. 25