Annual Report 2017 Contents
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ANNUAL REPORT 2017 CONTENTS A word from the CEO 3 Main figure Group 4 About SpareBank 1 Østlandet 6 Sustainability report for 2017 8 Corporate governance 21 A look back at 2017 29 Report of the Board of Directors 35 Income statement 50 Balance sheet 51 Changes in equity 52 Cash flow statement 54 Notes 56 Statement from the Board of Directors and CEO 120 Auditor's report 121 Subsidiaries 128 Our history 130 Executive management team 131 Attachment 132 The cover photo is from the IPO in June 2017. The annual report also uses photos of local companies that took part in SpareBank 1 Østlandets Business Barometer in 2017. Editorial staff: Siv Stenseth, Trine Lise Østberg, Ingvild Bjørklund Wangen and Nina Høibråten Buer. Design and production: Ferskvann Reklamebyrå AS. Photos: Ricardofoto, Geir Olsen and Siv Stenseth. Front page: Thomas Railton Ikdahl. A WORD FROM THE CEO 3 Successful merger and IPO, as well as solid results for 2017 2017 was a year in which the Bank achieved a number of major strategic ambitions. The former Sparebanken Hedmark and Bank 1 Oslo Akershus AS merged in April and together we have established a future-oriented bank, taken a new name and carried out a successful IPO. The organisation has delivered its best result ever of NOK Askelab AS, an environ- 1.263 million after tax and a return on equity of 10.2 per ment for innovation cent. The Bank saw good lending growth, very low losses within mobility and and around 30 000 more customers. This is impressive in a digitalisation. The year with such major changes. development and digitalisation work In many ways, 2017 was a year of innovation. At the start of will continue the new year we became the first bank in Norway to unabated in 2018, launch customer dividends. Given the very good group while the Bank will profit, the Bank can for the first time distribute customer maintain and dividends of NOK 204 million in total. We hope and strengthen its local believe that our customers will appreciate this and at the profile. same time attract more new customers. Corporate social responsibility and sustainability are impor- The merger between Bank 1 Oslo Akershus AS and tant, not only for the long-term operation of the Bank but Sparebanken Hedmark was one of the largest bank merg- also for global considerations. In 2017, sustainability was ers ever completed in Norway. It has been a great success. elevated to one of the six main goals in the Bank's new Wide-ranging participation and good project work helped strategy. From and including the 2017 accounting year, the to ensure that the merger crossed the finished line on Bank will report in line with the Oslo Stock Exchange's schedule and with synergy effects that exceeded the NOK recommended standard, GRI. The Bank has also signed up 82 million target. Internal status surveys show high levels to the world's largest initiative for corporate social responsi- of motivation throughout the organisation and that both bility, the UN Global Compact. SpareBank 1 Østlandet managers and communication scored well during the recently launched its very first green home loan with 0 per merger process. cent interest rate on parts of the loan. Work on improving the Bank's sustainability will continue in 2018. As part of the merger process the Bank changed its name to SpareBank 1 Østlandet after thorough market surveys. The year's events are building a bank for the future and Premises and digital surfaces were gradually updated are important for both employees and customers. At the during the year. The name chosen was well received and end of the year, we are better equipped for faster reorgani- reflects the Bank's new market area, as well as the ambi- sation than before. SpareBank 1 Østlandet's Business tions set out in the Bank's new strategy for 2018-2021. Barometer indicates both private individuals and compa- nies are optimistic and believe in the future. Given the The listing of the Bank's equity certificates on the Oslo current macro situation, it appears 2018 will be a good Stock Exchange on 13 June was a major event. Local, year for the Bank. national and international investors showed a great deal of interest in the IPO. The price of the equity certificate has I would like to thank all of our employees for their great risen since the IPO. The Bank will pay a dividend of NOK effort, positive attitude and excellent cooperation during 3.96 per equity certificate, which amounts to 50 per cent of the year. We are, without doubt, stronger together! I would the owners' share of the Group's profit. also like to thank our customers for their good teamwork in the past year. SpareBank 1 Østlandet increased its focus on innovation and business development in 2017 and established a dedicated corporate unit for this area. The Bank also confirmed its ability to develop customer-friendly solu- tions, for example customer dividends, voice-activated login for the mobile bank, and the establishment of Richard Heiberg CEO 4 MAIN FIGURES GROUP Main figures Group Group 2017 2016 Result summary (NOK mill and per cent of average toal assets) Amount Per cent 1) Amount Per cent Net interest income 1 956 1.86 % 1 490 1.79 % Net commissions and other (non-interest) income 1 263 1.20 % 939 1.13 % Net income from financial investments 277 0.26 % 220 0.26 % Total net income 3 496 3.32 % 2 649 3.19 % Total operating expenses 1 898 1.81 % 1 203 1.45 % Operating profit before losses on loans and guarantees 1 598 1.52 % 1 446 1.74 % Losses on loans and guarantees -20 -0.02 % 75 0.09 % Pre-tax operating profit 1 618 1.54 % 1 371 1.65 % Tax expence 356 0.34 % 271 0.33 % Profit after tax 1 263 1.20 % 1 100 1.32 % Profitability Return on equity capital 2) 10.2 % 10.5 % Cost-income-ratio 2) 54.3 % 45.4 % From the balance sheet Gross loans to customers 90 460 82 945 Gross loans to customers including loans transferred to covered bond companies 2) 129 535 119 450 Growth in loans during the last 12 months 2) 9.1 % 89.5 % Growth in loans including loans transferred to covered bond companies in the last 12 months 2) 8.4 % 95.4 % Deposits from customers 65 985 63 070 Deposit-to-loan-ratio 2) 72.9 % 76.0 % Growth in deposits in the last 12 months 2) 4.6 % 88.5 % Average total assets 105 157 83 074 Total assets 108 321 101 242 Total assets including loans transferred to covered bond companies 2) 147 396 137 747 Losses and commitments in default Losses on loans as a percentage of gross loans 2) 0.0 % 0.1 % 2) Commitments in default, percentage of gross loans 0.3 % 0.3 % 2) Other doubtful commitments, percentage of gross loans 0.3 % 0.3 % Net commitments in default and other doubtful commitments, 2) percentage of gross loans 0.4 % 0.4 % Financial strength Common equity Tier 1 capital ratio 16.8 % 16.9 % Tier 1 capital ratio 17.7 % 17.9 % Capital adequacy ratio 20.5 % 20.3 % Total eligible capital 14 138 12 656 Equity ratio 2) 12.3 % 12.0 % Leverage Ratio 7.1 % 7.4 % LCR 3) 114.0 % 116.6 % Branches and staff Number of branches 38 38 Number of fulltime equivalents 1 109 1 140 Equit capital certificates Market price (NOK) 90.50 Market capitalisation (NOK million) 9 700 Book equity per EC 2) 81.14 Earnings per EC, NOK 4) 7.92 6.95 Price/Earnings per EC 2) 11.43 Price/book equity 2) 1.12 1) Calculated as a percentage of average total assets. 2) See attachment regarding Alternative performance measures. 3) Liquidity Coverage Ratio: Measures the size of banks' liquid assets relative to net liquidity output 30 days ahead of time given a stress situation. 4) Profit after tax for controlling interests. * Equity capital certificate ratio as at 31.12.17 / number of EC's as at 31.12.2017. 5 Major event. SpareBank 1 Østlandet and the bank’s equity certificates were listed on the stock exchange on 13 June 2017. There was much prior interest in the equity certificates amongst all kinds of investors. After the listing, the bank gained a broad ownership base consisting of more than 200 professional investors, more than 3,000 small investors and around 630 employees. 6 ABOUT SPAREBANK 1 ØSTLANDET About SpareBank 1 Østlandet – Digital and local bank SpareBank 1 Østlandet is one of Norway's most robust regional financial groups with an almost 175-year, tradition-rich history in central Eastern Norway. The Bank became the only listed company in Hedmark and Norway's fourth largest savings bank after Sparebanken Hedmark merged with Bank 1 Oslo Akershus AS in 2017. SpareBank 1 Østlandet can trace its roots back to 1845 1.100 proficient employees work on development, and has a unique competitive advantage thanks to its dissemination and advice within products and services almost 175-year history and local knowledge. Funds from for its customers every day. Strong local roots mean that local granaries, forest commons, local authorities and both people and companies are close to where decisi- private individuals were pooled to found the very first ons are taken. The Bank is experiencing good customer savings banks. The Bank came about through mergers growth after other competitors have withdrawn from with former independent savings banks in Hedmark, Oslo parts of its market area.