- Sound lending and deposit growth
- Improved net interest and lending margin
- Underlying growth in commission income
- Cost improvements are showing results
Group profit adjusted for the change in value of the bank’s debt securities amounted to MNOK 174, compared with MNOK 163 in 2012. Increased net interest, an underlying increase in commission income and an almost flat nominal trend in the costs have had a positive impact. However, valuation of the bank’s fixed rate loans has had a negative impact on the result.
Net interest income amounted to MNOK 380, which is up MNOK 57 or 17.6%, compared with the same period last year. The increase is due to improved margins during the latter part of last year and also the effect of growth in the total business volume and an improvement in the lending margin.
Net fee and commission income amounted to MNOK 76, compared with MNOK 82 the previous year. Income from the estate agency business was down due to few sold units than the previous year. In the other product areas, there has been good growth of 11.2%, compared with the same period last year.
Income from financial instruments amounts to net MNOK -31, compared with MNOK 3 in 2012. MNOK -29 of this is due to the value adjustment of financial debt. It is important to note that these are temporary effects and seen over the maturity of the instruments, the changes in market value are zero. The accounting effects will therefore be reversed over time. On the asset side, other financial instruments generated a net income of MNOK -2.
Group costs totalled MNOK 250, which is equivalent to 1.10% of the average total assets year-to-date. In the same period last year, the equivalent figures were MNOK 246 and 1.15% of the average total assets. Costs relative to income also show a positive trend.
Losses on loans have been charged to the accounts with net MNOK 37, which is equivalent to 0.19% of gross loans. In the same period last year, equivalent figures were MNOK 23 and 0.13% of gross loans. The underlying portfolio is stable with and unchanged risk profile. The increase in net losses is mainly due to one single commitment.
Net bad and doubtful loans amounted to MNOK 642, which is equivalent to 1.67% of the loans. This is an increase compared with previous periods, but as mentioned is mainly due to one single commitment.
At the end of the quarter, total assets stood at BNOK 47.1, compared with BNOK 42.7 in the same period last year, which is a growth of 10.2%.
In the last twelve months, lending growth as 7.9%, with 11.2% in the retail banking market and 0.9% in the corporate market. The percentage of loans to the retail banking market is now 70.0%.
In the last twelve months, deposit growth was 8.0%, with 8.2% in the retail banking market and 7.7% in the corporate market.
Deposit-to-loan ratio is 56.9% in the Group and 76.9% in the parent bank.
The bank has a very satisfactory liquidity situation with a liquidity indicator for long-term funding of 108.7 at the end of the period. Liquid reserves are sound and the maturity structure of the loans is well-adjusted to the operations. New long-term borrowing is achieved through issuance of covered bonds and senior debt.
Total equity and related capital is BNOK 3.4, of which MNOK 200 is hybrid capital. In the 4th quarter last year, MNOK 600 of the Savings Bank Fund was converted to equity certificates. The certificates are owned by Sparebankstiftelsen Sparebanken Sør. At the end of the 2nd quarter, pure core capital adequacy wis 12.1%. Core capital adequacy is 12.9% and capital adequacy is 12.9% based on the standard approach in the Basel II rules. Profit for the year has not been included.
Moody’s has given the bank an A3 rating. On 3 July, Moody’s placed Sparebanken Sør’s A3 rating under assessment for upgrading as a result of the forthcoming merger with Sparebanken Pluss. Moody’s expects to conclude its assessment in the 1st half-year 2014 when the merger is likely to be in place.
Subsidiary Sør Boligkreditt AS has an Aaa rating from Moody’s on covered bonds.
Summary and future outlook
The work of preparing for the merger between Sparebanken Sør and Sparebanken Pluss will have top priority in the months ahead. The merger will create a new bank that will be a powerhouse in and for the region, where decisions will be made locally. The two banks have similar strategies, which is a good starting point for the new bank’s future strategy.
The new bank will have activities in 40 towns and communities, which will ensure a competitive advantage and customer proximity. It will also be the largest bank in the region.
Underlying operations in the bank are good and this trend is expected to continue in the months ahead.