SPAREBANKEN ØST 181th year
Quarterly report
Q2 2023
Interim financial statements - Q2 2023 | ||
Key figures - Group………………………………………………………………………………… | 3 | |
Quarterly report……………………………………………………………………………………… | 4 | |
Financial statements for the Sparebanken Øst Group | ||
Income Statement ………………………………………………….…………………………….. | 13 | |
Balance Sheet ………………………………..................................................................................................... 14 | ||
Changes in Equity | 15 | |
Cash Flow Statement ……………................................................................................................................... 16 | ||
Note K1 | Basis for preparation of the financial statements | 17 |
Note K2 | Operating segments ………………………................................................................................... 18 | |
Note K3 | Capital adequacy ……………………………… | 20 |
Note K4 | Credit risk ……………………………………………………….………………………………………… | 22 |
Note K5 | Losses on loans, unused credit and guarantees | 24 |
Note K6 | Non-performing commitments, customers | 27 |
Note K7 | Net interest income ……………………………………………………………………………………… | 28 |
Note K8 | Net changes in value and gains/losses on financial instruments ……………………..…………… 28 | |
Note K9 | Operating costs ………………………………………………………………………………………… 28 | |
Note K10 | Classification of financial instruments | 29 |
Note K11 | Financial instruments at fair value……………………………………………………………….. | 31 |
Note K12 | Securities issued, senior subordinated bonds and subordinated loan capital…………………… | 33 |
Note K13 | Equity certificates ……………………………………………………………………………………… | 34 |
Note K14 | Pledged assets and preferential rights………………………………………………………………… | 35 |
Additional Information - Sparebanken Øst Group | ||
Changes in key figures ………………………………………………………………………………………………… | 36 | |
Definition of key figures and alternative performance indicators ………………………………………………… 37 | ||
Financial performance ………...……………………………………………………………………………………… 38 | ||
Balance sheet performance ……...…………………………………………………………………………………… | 39 | |
Financial Statements for Sparebanken Øst - Parent bank | ||
Income Statement ………………………………………………….………………………………………………… 40 | ||
Balance Sheet ………………………………..................................................................................................... 41 | ||
Changes in Equity | 42 | |
Cash Flow Statement | 43 | |
Note M1 | Basis for preparation of the financial statements | 44 |
Note M2 | Capital adequacy……………………………… | 45 |
Note M3 | Losses on loans, unused credit and guarantees | 47 |
Note M4 | Financial instruments at fair value……………………………………………………………….. | 50 |
Note M5 | Securities issued, senior subordinated bonds and subordinated loan capital…………………… | 52 |
Note M6 | Transactions with group companies…………………………………………………………………… | 53 |
Statement pursuant to section 5-6 of the Securities Trading Act…................................. 54 |
2 | Sparebanken Øs |
Key figures - Group
Income Statement (Amounts in NOK millions) | Q2 2023 | Q2 2022 1.01-30.06.20231.01-30.06.2022 | Full year 2022 | ||
Net interest income | 200,2 | 158,3 | 398,8 | 320,2 | 686,2 |
Net commission income | 9,0 | 8,5 | 24,6 | 19,8 | 37,4 |
Net result from financial assets | 7,2 | -6,3 | 8,8 | -19,5 | -28,7 |
Other operating income | 0,6 | 0,8 | 1,1 | 1,5 | 3,4 |
Total net income | 216,9 | 161,3 | 433,2 | 321,9 | 698,3 |
Total operating costs | 75,1 | 66,6 | 164,2 | 147,7 | 309,7 |
Profit before losses | 141,8 | 94,7 | 269,0 | 174,3 | 388,6 |
Losses on loans, unused credit and guarantees | -0,2 | 0,8 | 1,5 | 1,0 | 6,8 |
Profit/loss before tax | 142,0 | 93,9 | 267,6 | 173,2 | 381,9 |
Income tax | 31,8 | 16,3 | 59,4 | 33,4 | 85,5 |
Profit/loss after tax | 110,2 | 77,6 | 208,2 | 139,8 | 296,4 |
Key figures | Q2 2023 | Q2 2022 1.01-30.06.20231.01-30.06.2022 | Full year 2022 | ||
Profitability | |||||
Return on equity* | 9,59 | 6,87 | 9,23 | 6,24 | 6,65 |
Net interest income as a % of average total assets | 1,81 | 1,38 | 1,81 | 1,38 | 1,49 |
Profit/loss after income tax as a % of average total assets | 0,99 | 0,67 | 0,95 | 0,60 | 0,65 |
Costs as a % of average total assets | 0,68 | 0,58 | 0,75 | 0,64 | 0,67 |
Costs as a % of income (before losses on loans/guarantees)* | 34,64 | 41,27 | 37,90 | 45,87 | 44,35 |
Costs as a % of income (excl. return on financial investments)* | 35,83 | 39,71 | 38,69 | 43,25 | 42,60 |
Balance sheet figures | |||||
Net lending to customers | 37.274,5 | 37.666,8 | 37.274,5 | 37.666,8 | 36.800,2 |
Lending growth (quarter/12 months) | 1,60 | -1,70 | -1,04 | -6,82 | -6,57 |
Deposits | 15.521,7 | 17.471,9 | 15.521,7 | 17.471,9 | 15.761,3 |
Deposit growth (quarter/12 months) | 2,39 | 2,18 | -11,16 | 0,89 | -10,34 |
Average equity | 4.307,4 | 4.276,8 | 4.261,3 | 4.247,7 | 4.172,9 |
Average total assets | 44.465,3 | 46.156,9 | 44.336,3 | 46.813,8 | 45.926,7 |
Loan loss provisions on impaired and non-performing commitments | |||||
Losses as a % of net lending to customers (OB)* | 0,00 | 0,01 | 0,01 | 0,01 | 0,02 |
Loan loss provisions as a % of gross lending to customers* | 0,29 | 0,34 | 0,29 | 0,34 | 0,31 |
Net payments over 90 days past due as a % of net lending* | 0,23 | 0,28 | 0,23 | 0,28 | 0,21 |
Other net non-performing commitments (Stage 3) as a % of net lending* | 0,16 | 0,12 | 0,16 | 0,12 | 0,14 |
Solvency | |||||
CET1 capital ratio, including 50% of retained earnings (%) | 20,02 | 20,04 | 20,02 | 20,04 | 20,11 |
CET1 capital ratio (%) | 19,52 | 19,71 | 19,52 | 19,71 | 20,11 |
Tier 1 capital ratio (%) | 21,31 | 21,50 | 21,31 | 21,50 | 21,94 |
Capital adequacy ratio (%) | 23,36 | 23,55 | 23,36 | 23,55 | 24,03 |
Risk-weighted volume (calculation basis) | 19.530,4 | 19.517,5 | 19.530,4 | 19.517,5 | 19.087,0 |
Tier 1 leverage ratio, including 50% of retained earnings (%) | 9,34 | 9,14 | 9,34 | 9,14 | 9,27 |
Leverage ratio (%) | 9,13 | 8,99 | 9,13 | 8,99 | 9,27 |
Liquidity | |||||
Deposit coverage ratio | 41,64 | 46,39 | 41,64 | 46,39 | 42,83 |
LCR (%) | 278,99 | 248,46 | 278,99 | 248,46 | 217,26 |
NSFR (%) | 126,07 | 137,84 | 0,00 | 137,84 | 130,08 |
Branches and full-time equivalents | |||||
No. of branches | 29 | 30 | 29 | 30 | 30 |
FTEs | 192 | 178 | 192 | 178 | 180 |
Equity certificates | |||||
Ownership fraction (parent bank) (%)** | 28,59 | 28,59 | 28,59 | 28,59 | 28,59 |
No. of equity certificates | 20.731.183 | 20.731.183 | 20.731.183 | 20.731.183 | 20.731.183 |
Book equity per equity certificate* | 60,10 | 59,48 | 60,10 | 59,48 | 61,21 |
Earnings per equity certificate* | 1,42 | 1,01 | 2,69 | 1,81 | 3,83 |
Dividend per equity certificate | 0,00 | 0,00 | 0,00 | 0,00 | 3,80 |
Turnover rate | 13,84 | 13,96 | 18,52 | 19,98 | 16,30 |
Price | 47,50 | 50,80 | 47,50 | 50,80 | 47,00 |
- Defined as alternative performance target
- For ownership fraction as at 01.01.2023, see Note K13
For definisjon av nøkkeltall og omtale av alternative resultatmål, se side 37
3 | Sparebanken Øst | Interim Report Q2 2023 |
Quarterly report
The Bank can look back on good performance in the second quarter, with positive lending growth and a return on equity higher than the long-term return target. The quarter also produced increased income and an improved result compared to the same quarter last year. With a high CET1 capital ratio and a high leverage ratio, Sparebanken Øst is among Norway's most solid banks.
Profit for the quarter amounted to NOK 110.2 million, which corresponds to a return on equity of 9.59 per cent. The bank is very happy with this performance given that it uses the standard method for calculating capital weights.
The Bank's net interest income increased by NOK 41.9 million compared to Q2 2022. With effect from both mid-May and the latter half of June, interest rate increases were applied to large parts of the Bank's loan portfolio. Further interest rate increases were decided during the quarter, taking effect from the middle of August.
In a market characterised by strong competition for customers, the Bank can point to good lending growth in the quarter, with net lending up by 1.6 per cent. There was positive growth in lending to both retail and corporate customers. Within the retail market (in the office channel), the Bank has very good lending growth of 3.1 per cent. Deposits from customer deposits were up by 2.4 per cent in the quarter.
The Bank still has a very low losses on lending and a low rate of impaired commitments. The Bank's position is very solid, with a CET1 capital ratio of 20.02 per cent (incl. 50 per cent of retained earnings).
Results for the quarter in brief
Profit in the quarter amounts to NOK 110.2 million, an increase of NOK 32.6 million from Q2 2022. The return on equity (ROE) ended at 9.59 per cent, compared to 6.87 per cent in Q2 2022. Earnings per equity certificate were NOK 1.42, up from NOK 1.01 in Q2 2022.
The CET1 ratio, including 50 per cent of unallocated
profit, is 20.02 per cent, unchanged from the second quarter of 2022. The leverage ratio, inclusive of 50 per cent of retained earnings, was 9.34 per cent, up from 9.14 per cent in Q2 2022
Net interest income amounted to NOK 200.2 million, up NOK 41.9 million from Q2 2022. Measured as a percentage of average total assets, net interest income amounts to 1.81 per cent, an increase of 0.43 percentage points from Q2 2022.
Net other operating income amounted to NOK 16.7 million, up by NOK 13.7 million compared with Q2 2022. The value of the liquidity portfolio fell by NOK 2.7 million, compared with a reduction of NOK 26.8 million in Q2 2022. Profit effects from the Bank's shareholding in Frende are positive at NOK 11.4 million net, made up of dividends received for 2022 totalling NOK 45.6 million with a negative change in value of NOK 34.2 million. This represents a quarter of the dividend income from Frende. By way of comparison, dividend income for 2021 from Frende amounted to NOK 49.1 million in
4
Q2 2022. Changes in value from other ownership interests were plus NOK 0.9 million, compared to minus NOK 24.7 million in Q2 2022. Net commission income amounted to NOK 9.0 million, up NOK 0.4 million from Q2 2022.
Operating costs totalled NOK 75.1 million, up NOK 8.6 million from Q2 2022. Measured as a percentage of income, the Bank has a cost ratio of 34.6 per cent, against 41.3 per cent in Q2 2022.
Losses amount to inome of NOK 0.2 million compared to an expense of NOK 0.8 million in Q2 2022.
Change in dividend policy
The Board of Directors decided on 13 July 2023 to change the Bank's dividend policy. The change means that, over the next few years, the Bank aims to distribute up to 100 per cent of its profits in dividends to equity certificate holders and donations for charitable purposes, although up to 50 per cent of the profits will still be retained for distribution in the longer term.
The Board of Directors of Sparebanken Øst took account of the Bank's very good capital situation and the low level of risk in the business when the new dividend policy was considered and adopted. The Bank is now a standard-method bank which uses conservative capital weights in calculating its capital adequacy. The introduction of a more risk-sensitive standard approach (Basel IV) could have a positive impact on the Bank in the form of higher capital adequacy. The Board of Directors considers that the new dividend policy will allow the Bank to maintain solid growth capacity in the future.
The Bank's new dividend policy is as follows:
- Our financial targets for our operations are to achieve results that provide a good and stable return on the Bank's equity and create value for equity certificate holders as competitive returns in the form of dividends and equity certificate appreciation. We will strive to ensure that our dividend policy results in a stable ownership fraction over time.
- The profit for the year will be divided between equity certificate holders and social capital in accordance with their respective shares of the Bank's equity.
- We will aim to ensure that up to 100 per cent of the profits allocated to equity certificate holders are paid as dividends over the next few years, while retaining up to 50 per cent of the profits allocated to equity certificate holders to be paid as dividends in the longer term.
- We also aim to distribute dividends on the Bank's primary capital in the form of gifts to charity, the donations fund and/or charitable foundations, up to 100 per cent of the profits allocated to primary capital over the next few years, while retaining up to 50 per cent of the profits allocated to primary capital to be distributed as dividends on the Bank's primary capital in the form of gifts to charity, the donations fund and/or charitable foundations in the longer term.
Sparebanken Øst | Interim Report Q2 2023
- When the dividend is set, due consideration will be taken of the Bank's financial performance, market situation, dividend stability and need for Tier 1 capital.
ESG
In 2022, Sparebanken Øst adopted an overall target of net zero emissions by 2050. In order to achieve this goal, the Bank adopted interim targets in the second quarter to be achieved by 2030. These provide for a 25 per cent reduction in CO2 emissions in the customer portfolio, a 50 per cent reduction in internal CO2 emissions and a 50 per cent increase in the share of green lending in the customer portfolio.
Moving forward, the Bank will define what these targets entail and establish concrete measures to achieve them by 2030. The Bank will give priority to measures that have the greatest impact and will make a real difference in reducing emissions.
The Bank's ambition is to follow industry standards and to comply with the policies that guide the industry and the market. Sparebanken Øst's objective is for the Bank's stakeholders to be confident that the Bank is always working to reduce emissions and contribute to a green transition.
More about the results for the quarter
NET INTEREST INCOME
Net interest income amounted to NOK 200.2 million, up NOK
- million from Q2 2022. Net interest income as a percentage of average total assets is 1.81 per cent, an increase of 0.43 percentage points compared to the same quarter in 2022. Interest rates are considerably higher than in the same quarter last year. In this period, the key policy rate has been raised by
- percentage point from 1.25 per cent to 3.75 per cent. The increase in net interest income is mainly explained by increased deposit margins. In relation to the its wholesale financing costs, the Bank's lending margin has been reduced. This is because most loans to customers are repriced with notice periods after Norges Bank decided to change interest rates, while wholesale financing is repriced continuously and in line with rising interest rates.
Net interest income | ||||
Amounts in NOK million | Q2 23 | Q1 23 | Q2 22 | |
Loans to & receivables from financial | ||||
institutions | 3,6 | 3,5 | 1,0 | |
Lending to customers | 449,7 | 424,1 | 264,5 | |
Certificates and bonds | 59,0 | 58,1 | 30,5 | |
Total interest income | 512,3 | 485,7 | 296,0 |
Liabilities to financial institutions | 2,5 | 2,7 | 1,7 |
Customer deposits | 66,0 | 59,6 | 25,8 |
Securities issued | 222,0 | 205,7 | 100,5 |
Senior subordinated bonds | 12,0 | 9,7 | 3,5 |
Subordinated loan capital | 5,6 | 5,4 | 2,7 |
Norwegian Banks Guarantee Fund levy | 4,1 | 4,1 | 3,6 |
Total interest costs | 312,2 | 287,1 | 137,7 |
Net interest income | 200,2 | 198,6 | 158,3 |
Net interest income as a percentage of | |||
average total assets | 1,81 | 1,82 | 1,38 |
NET OTHER OPERATING INCOME
Net other operating income comprises commission income and costs, dividends, net value changes and gains/losses on financial instruments and other income. Net other operating income amounted to NOK 16.7 million, up by NOK 13.7 million compared with Q2 2022.
Net commission income amounted to NOK 9.0 million, up NOK 0.4 million from Q2 2022.
Dividends received amounted to NOK 45.7 million, of which NOK 45.6 million related to dividends received from Frende. In the second quarter of 2022, dividends received amounted to NOK 50.1 million, of which dividends from Frende accounted for NOK 49.1 million.
Net value changes and gains/losses on financial instruments amounted to NOK -38.5 million, down NOK 18.0 million from Q2 2022. The value of the liquidity portfolio fell by NOK 2.6 million, compared with a reduction of NOK 26.8 million in Q2 2022. Negative changes in the value of the Bank's shareholding in Frende came to NOK 34.2 million in connection with dividends received. No change in the value of the shareholding in Frende was applied in Q2 2022. The fall in the value of the Bank's shares in Norwegian Block Exchange AS (NBX) amounted to NOK 5.6 million, against a fall of NOK 21.2 million in Q2 2022. The value of the Bank's shares in Kraft Bank rose by NOK 1.7 million, against a fall of NOK 3.0 million in Q2 2022. Positive value adjustments related to shares and equity rights in Visa Inc. totalled NOK 4.8 million, compared with a value increase of NOK 0.5 million in Q2 2022. The negative profit effects from foreign exchange, derivatives and fixed rate loans at fair value amounted to NOK 2.4 million. The corresponding profit effects were negative at NOK -4.8 million in Q2 2022. The cost of buying back the bank's own issued debt amounted to NOK 0.2 million,, compared with NOK 1.0 million in Q2 2022.
5 | Sparebanken Øst | Interim Report Q2 2023 |
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Sparebanken Øst published this content on 31 July 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 August 2023 14:45:06 UTC.
