- Continued sound lending and deposit growth in the retail banking market
- Good net interest
- Moderate losses
- Continued positive trend in underlying operations
- Valuation of financial instrument has had a negative impact
Group profit adjusted for the change in value of the bank’s debt securities amounted to MNOK 87, compared with MNOK 86 in 2012. Increased net interest and fewer losses had a positive impact, whereas lower net income from other financial instruments was the most important factor that had a negative impact.
Net interest income amounted to MNOK 184, which is up MNOK 28 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 total business volume.
Net fee and commission income amounted to MNOK 34, compared with MNOK 37 in the first quarter last year. Income from the estate agency business was down slightly due to a weaker property market than anticipated. Growth and development within the other product areas is at the anticipated level.
Income from financial instruments amounts to net MNOK -35, compared with MNOK -25 in 2012, where MNOK -30 of this is value adjustment of financial liabilities. 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 site, other financial instruments generated an income of MNOK -5.
Costs in the Group totalled MNOK 124, which is equivalent to 1.12% of the average total assets. In the same period last year, the equivalent figures were MNOK 121 and 1.13% of the average total assets. Costs measures against income, excluding income from financial instruments, show a positive trend.
Losses on loans have been charged to the accounts with net MNOK 6, which is equivalent to 0.06% of gross loans. In the same period last year, the equivalent figures were MNOK 11 and 0.13% of gross loans. The reduction in losses is a result of dedicated work on the credit quality of the portfolio.
Net bad and doubtful loans amounted to MNOK 438, which is equivalent to 1.16% of the loans. Compared with year-end, this is a minor increase.
At the end of the quarter, total assets stood at BNOK 44.8, compared with BNOK 42.4 in the same period last year, which is a growth of 5.6%.
In the last twelve months, lending growth was 9.2%, with 11.0% in the retail banking market and 5.2% in the corporate market. The percentage of loans to the retail banking market is now 69.5%.
In the last twelve months, deposit growth was 5.9%, with 9.4% in the retail banking market and 1.2% in the corporate market.
The deposit-to-loan ratio is 53.5% in the Group and 73.2% in the parent bank.
The bank has a very satisfactory liquidity situation with a liquidity indicator for long-term funding of 104.9 at the end of the quarter. 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 3.3, of which MNOK 200 is perpetual hybrid tier 1 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 1st quarter, pure core capital adequacy is 12.7%. Core capital adequacy is 13.6% and capital adequacy is 13.6% based on the standard approach in the Basel II rules.
Summary and future outlook
The work of preparing the merger between Sparebanken Sør and Sparebanken Pluss will have top priority in the period ahead. The merger will create a new bank that will be a powerhouse in and for the region, where decisions are made locally. Today, the banks have very similar strategies, which is a good starting point for the new bank’s future strategy.
The new bank will be the largest bank in the region and will contribute to further growth and development. It will create a new financial centre that is better equipped to deal with changed framework conditions and regulatory requirements. The bank will have offices and operations in 40 towns and communities in the region, which will ensure customer proximity and a competitive advantage.
We are positive about future developments, despite challenges relating to costs and stricter regulatory requirements as regards equity and liquidity.
25. April 2013