Investor presentation
SPAREBANKEN VEST / SPAREBANKEN VEST BOLIGKREDITT AS FEB 2020 Sparebanken Vest
2 Sparebanken Vest and the home market
The third largest Norwegian savings bank
• Established in 1823 and listed on Oslo Stock Exchange since 1995
• Head office in Bergen. 33 branches. 732 FTEs
• Diversified product offering. Main shareholder in Frende (insurance) and Brage (leasing) Market areas 1 • Several new digital initiatives, such as the first mobile-only bank in Norway, Bulder Bank Market shares
• More than NOK 197 billion in total assets, and approximately 282,000 retail and 13,000 corporate customers • 74% share of lending to retail customers Sogn og Fjordane • Long-term ROE target of 12% 19.6%
Home market Hordaland
• Approximately 1.1 million people, or 21% of Norway’s population, accounting for 19% of 29.7% Norwegian GDP
• Bergen and Stavanger are the 2nd and 3rd largest urban regions in Norway Rogaland 6.7% • Main business areas: Aquaculture & fishery, oil & gas, public services and other industry
• Expanding retail lending to a national level with Bulder Bank
3 SPAREBANKEN VEST Notes: 1) Market share in the retail market Sources: Statistics Norway (SSB) and EarlyWarning A bank with low complexity
Corporate Market Retail Market • 26% of total loan book • 74% of total loan book • Loan book NOK 43.7bn • Loan book NOK 126.1bn • 13,100 customers • 282,360 customers • Diversified portfolio • Including Bulder Bank
• 39.7% ownership • 49.99% ownership • Mainly P&C insurance • Leasing and financing • Market share 3.5% • Total balance NOK 12.5bn • 23,2% ROE year to date
• 100% ownership • Real estate broker • 124 FTEs • Important for lending
4 SPAREBANKEN VEST Strong development in ROE
SPAREBANKEN VEST 5 Low losses over several years
SPAREBANKEN VEST 6 • Strong Q4-result • Strong market position • Important strategic initiatives
SPAREBANKEN VEST 7 Strong Q4-result
ROE as percentage* Profit per equity certificate
CET1 as percentage Book value per equity certificate
SPAREBANKEN VEST * A one-off gain of NOK 141 mill. relating to the acquisition of Jonsvollskvartalet AS was taken to income in Q2 2019. ROE corrected for one-off effects was 14.1% and the profit per equity certificate, corrected for one-off effects, was NOK 1.89. 8 Change in profit YTD compared with YTD last year
SPAREBANKEN VEST * A one-off gain of NOK 141 mill. relating to the acquisition of Jonsvollskvartalet AS was taken to income in Q2 2019, while in Q2 2018, the merger between Vipps, BankAxept and BankID had an effect on profits of NOK 94 mill. Shown in separate columns. 9 Good growth in net interest income - repricing effects affect relative net interest income
Nominal net interest income Net interest income as % of assets under management
SPAREBANKEN VEST 10 Lower costs and shift in cost structure – flat costs a precondition for digital development
Cost development, past seven years* Cost development 2019, excl. Bulder Bank**
16 %
Cost ex IT
IT*
-6 % 1,305 1,270 1,273 1,270 MNOK MNOK MNOK MNOK
2012 2019 2018 2019
SPAREBANKEN VEST * IT costs are the total costs of the IT department in the parent bank, including payroll expenses, external fees, ICT costs and other operating costs in the department. 11 ** Cost development for the parent bank, corrected for direct costs for Bulder Bank, MNOK 35 in 2019 and MNOK 3.3 in 2018 Good margin to regulatory requirements - taking into account the requirement of core capital increasing to 15,7% at year-end 2020
CET1 ratio* Leverage ratio
17,9 % 17,4 % 17,0 % 17,0 % 17,0 %
Requirement 15,7 %
Requirement 14,2 %
Requirement 5 %
Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
SPAREBANKEN VEST * The banks requirement for CET 1 ratio is 14,2% at year-end 2019. The systemic risk buffer requirement increases by 1,5 % from year- end 2020, totalling requirements at 15,7%. Historic figures for CET 1 shows CET 1 ratio estimated under CRR / CRD IV, taking into account 12 calculation following the bank’s IRB-models and small and medium size corporations discount part one. The figures are therefore different from the regulatory capital coverage which until end of third quarter was subject to Basel 1-requirements. • Strong Q4-result • Strong market position • Important strategic initiatives
SPAREBANKEN VEST 13 Strong position in the retail market - well-diversified in the corporate market
Loan portfolio NOK 168.8 bill. Breakdown by sector in the corporate market, NOK 44.9 bill.
SPAREBANKEN VEST 14 Increase in retail and corporate customers
Retail customers Corporate customers Growth 1.8% in past year Growth 5.7% in past year
SPAREBANKEN VEST 15 Good lending growth in the retail market
Retail market Breakdown retail market Growth 4.6% in past year New loans
21% 35%
44%
New customers
Existing customers, first mortage loan
Existing customers, increased mortage loan
SPAREBANKEN VEST 16 Low risk in the retail market portfolio - 99% of the lending portfolio secured by residential mortgage
Lending broken down by LTV ratio Lending broken down by region
SPAREBANKEN VEST 17 • Strong Q4-result • Strong market position • Important strategic initiatives: • Digital leadership • Sustainability • Sale of equity certificates • Customer dividends
SPAREBANKEN VEST 18 Norway’s leading mobile bank is continuously developing
SPAREBANKEN VEST We are redefining banking – and beginning with mortgages
Fra Sparebanken Vest
Upscale nationally to an attractive Potential for significant value Significant development synergies mobile phone platform creation Mortgage offer in two minutes
Mortgage Yes application Maybe
No Folkeregisteret Gjeldsregisteret
No enclosures No valuation Minimal case processing
Retrieves automatically Automatically Immediate decision on applications updated secure data from estimates the value (in most cases) many sources of the property Result: You can check eligibility for mortgage in two minutes, without being a customer in Bulder Bank Sparebanken Vest ESG Ratings
Rating agencies
Sustainalytics
✓ ESG rating: 74, Outperformer ✓ ESG risk rating: 18.6 Low risk.
MSCI ✓ ESG rating: AA
ISS ESG
✓ Prime
22 SPAREBANKEN VEST Results in Ethic Bank guide 4.0
▪ Shared third place with KLP og DnB ▪ Up from 66% in last ranking
The ethical bank guide is based on a comprehensive review of banks' policies, requirements and policy documents. “Fremtiden i Våre Hender” and the Consumer Council has controlled each bank within 14 different thematic areas, covering 271 different checkpoints. The higher the score, the better the banks have in terms of corporate social responsibility, ethics and sustainability.
SPAREBANKEN VEST Offensive targets for climate risk and sustainability
• In 2019, Sparebanken Vest adopted a sustainability strategy that affects all areas of the bank • Cut own climate footprint in half by 2025 • Requirements for climate neutrality at all our suppliers and major sponsorship • Framework for green bonds • Measurement of the carbon footprint in the portfolio within shipping / marine, small power plants and construction / real estate. This represents almost 70% of the bank's corporate portfolio • Spend NOK 200 million in public benefits by the end of 2020 for projects that promote sustainability, new green technology and green restructuring
SPAREBANKEN VEST We start with ourselves and our suppliers
Requirements to suppliers Cut own emissions in half by 2025 • In the fall of 2019, all 100 suppliers have received the requirement to be climate neutral by the end of 2020 -147 • Keeping climate accounts tonn CO2 • Create action plan • Compensate for climate debt • As of 1.1.2020, 11 suppliers remain 2025 with whom we are now in dialogue • Similar requirements to our major sponsorships • Football clubs SK Brann and FK Haugesund have both committed to Transport Waste Energy climate neutrality by 2020. SPAREBANKEN VEST Industry specific goals for our portfolio
Corporate real estate Fish farming Share of mortgage volume to real estate that Share of loan portfolio to fish farming industry satisfy today’s criteria for Green Bonds* is to be defined as green technology** to be increased by increased from 10% to 30% from 01.01.2020 to 50% by 31.12.2025. 31.12.2022. Requirements to these customers/projects part of the bank’s policy for shipping Fishery and Fishing industry Share of loan portfolio to fishery and fishing Shipping industry defined as green maritime is to be Carbon intensity: CO2 emissions per transport unit increased from approx. 14% to 50% by to be reduced by at least 15% by 2023, and 31.12.2025. minimum 50% by 2030 (measured against 2019 figures). Small hydro power plants By 2023 a minimum of 75% of the portfolio (share Strengthen Sparebanken Vest’s position by of loans) are to be ships on par with average or financing more hydro power plants. Strengthen better in its segment. story of hydro power as green. In January all customers within shipping received a letter requiring sharing ESG related information by 31.05.2020
*Vessel that can prove considerable energy efficiency through various technology and operational measures and vessels with refit SPAREBANKEN VEST opportunity to hybrid and low emission propulsion systems **Technological solutions and operations that reduce climate and environmental footprint from the industry, focusing on reduced fuel usage and carbon emissions from fish carriers/operational vessels, and minimising risk for negative environmental impact 22 billion kroner qualified according to EU’s new taxonomy for green bonds
18 billion NOK in real estate
2 billion NOK in corporate real estate
billion NOK in hydropower Green bonds with 2 preferential rights 22 billion NOK
Green mortgages
Industry specific requirements and credit Green senior policy bonds
27 SPAREBANKEN VEST “EU taxonomy for sustainable activities”, announced July 2019 Sale of equity certificates increasing market value and valuation in line with the bank’s achievements - Strong corporate ownership through the primary fund combined with increased liquidity
Increased ECC capital1 Increased ECC ownership DIAGRAMTITTEL
22.5% 15.0 15.0 Eierandel skapital Grunnfondskap 1.2 1.2 ital 22,5 % 77.5% 3.1 Grunnfon Eierandelskapit dskapital 5.5 al 77,5 % Primary capital Equity capital certificates
10.7 Total Equity Total Equity (NOKbn) 8.3
17,517.5% %
2018 Pro forma 2018 22,522.5% % 60,060.0% % Primary capital ECC Capital Hybrid Capital GrunnfondskapitalPrimary capital EierandelskapitalEquity capital certificates EierandelskapitalECCs owned by theholdt Foundation av stiftelsen
SPAREBANKEN VEST Notes: 1) Pro forma as of 31.12.2018 after dividend and public dividend in 2019 28 Why launch a customer dividend?
✓ To differentiate ourselves from our competitors and give us a unique position in Western Norway.
✓ Will lead to a better customer experience, increased relevance and greater customer loyalty. The customers can take part in the bank’s value creation.
✓ Potential for higher growth and profitability. Will be used actively and consistently to market the bank.
29 SPAREBANKEN VEST Sparebanken Vest Boligkreditt AS
30 Sparebanken Vest Boligkreditt AS
Market Area Brief information about Sparebanken Vest Boligkreditt
• Wholly owned subsidiary of Sparebanken Vest - and a dedicated covered bond company
• Revolving credit facility provided by Sparebanken Vest to cover payment obligations in covered bonds for a rolling 12 month period less amounts already disbursed under the facility
• Loans transferred to Boligkreditt as true sale on a non-recourse basis
• Cover pool 100 % prime Norwegian residential mortgages
• Covered bonds rated Aaa by Moody’s – three notches “leeway”
• Approval from the Norwegian FSA to report capital according to AIRB methods
31 Eligibility criteria for the cover pool
▪ Employed retail clients and independent self employed individuals
Customer criteria ▪ Resident in Norway ▪ No negative credit history
▪ Probability of default max 1.25% Not in arrears Credit criteria ▪ ▪ Not delinquent – 31 days or loss write-down
▪ Max LTV 75%
Collateral ▪ Recent valuations (less than 3 months) ▪ Quarterly valuation from independent AVM provider
▪ Primary residences Type of properties ▪ Cooperative housing loans ▪ No holiday homes
▪ Principal repayment loans ▪ Revolving credits (flexi-loans) Type of products ▪ Fixed and variable rate loans
32 SPAREBANKEN VEST Cover Pool (1/2)
Cover pool as of 31.12.2019 Distribution according to LTV (indexed) Total cover pool NOK 89.9 bn 35% Total loan balance (mortgages) NOK 85.5 bn 30,82% Average loan balance NOK 1,433,000 30% No. of loans 59,866 26,97% No of borrowers 49,762 25% WA seasoning (in months) 46 20% WA remaining terms (in months) 285 17,98% WA indexed LTV (based on limits) 56.94% 15% 12,50% WA indexed LTV (on drawn amounts) 55,67% 10,31% Variable rates 78.00% 10% Default (Basel) NOK 88 m OC level (eligible) 17.4% 5% 1,43% OC level if house prices drop 20% 10.5% 0% OC level if house prices drop 30% 2.2% 0-≤40% >40%-≤50% >50%-≤60% >60%-≤70% >70%-≤80% >80%
▪ 100% prime Norwegian residential mortgages ▪ Moody’s TPI of “High” ▪ 4.99% substitute assets in the cover pool ▪ Covered Bonds rated Aaa with “leeway” of three notches ▪ 99.9% performing loans ▪ Regulatory minimum OC-requirement: 2.0% ▪ Cover Pool Collateral Score: 5.0%
33 SPAREBANKEN VEST Cover Pool (2/2)
Geographic Distribution Development in Arrears and Indexed LTV
1,0 % 75%
70% 0,8 % 65%
60% Rest of Norway (3.6%) 0,6 % 55% 50% 0,4 % 45%
0,2 % 40% 35%
0,0 % 30% Vestland (82.0%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 15 15 15 15 16 16 16 16 17 17 17 17 18 18 18 18 19 19 19 19 Rogaland (14.4%) 30-60 60-90 90 LTV (RA)
▪ Properties mainly located in the market area of Sparebanken Vest in ▪ Low arrears Western Norway ▪ LTVs calculated based on limit of flexible credit mortgages (i.e. undrawn portion ▪ Western Norway has a very diversified industrial structure included)
34 SPAREBANKEN VEST Maturity profile
25 000
20 000
15 000
10 000 Maturity, MNOK Maturity,
5 000
0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 covered senior pref
SPAREBANKEN VEST Maturity profile - Amortisation of mortgages vs. covered bond maturities
100 bn
90 NOK 80
70
60
50 Covered Bonds Planned amortisation cover pool 40 Real amortisation cover pool (2,5% Prepayments)* 30
20
10
-
apr. 20 apr. 21 apr. 22 apr. 23 apr. 24 apr. 25 apr.
des. 19 des. 20 des. 21 des. 22 des. 23 des. 24 des. 25 des.
aug. aug. 20 aug. 21 aug. 22 aug. 23 aug. 24 aug. 25
▪ The maturity profile of Covered Bonds matches real amortisation in mortgage portfolio in the cover pool
36 SPAREBANKEN VEST Risk management - low risk level
▪ Credit risk framework is set out in separate document stating which loans can be bought ▪ Board resolution required for any change in credit risk framework Credit risk ▪ Framework requirements: maximum risk level (PD), type of property, objective documented LTV threshold and customer requirements ▪ Credit risk managed by IRB standards
▪ Currency risk – 100 % hedged by swaps, open limit of MNOK 25 ▪ Interest rate risk – hedged by swaps if any, limit of MNOK 40 (based on 1 % parallel shift in yield curves) Market risk ▪ No investments/placements in “risky” assets; Norwegian government or high quality fixed income securities (so far only rated Norwegian covered bonds investments)
▪ The law requires positive cash flow from the cover pool to cover bond holders ▪ Soft bullet structure on all covered bonds issued Liquidity risk ▪ Note Purchase Agreement with parent securing that Boligkreditt will be able to meet the next 12 months of maturities at all times
37 SPAREBANKEN VEST Norwegian Economy
38 Good development in the economy of Western Norway
House prices Labour market Western Norway Index
75
70
65
60
55
50
45
40 2012 2013 2014 2015 2016 2017 2018 2019 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
Resultatindeks Forventningsindeks
39 SPAREBANKEN VEST Economic conditions
GDP growth Oil price and fx rate
Salmon price Investments (as share of GDP-mainland)
40
40 SPAREBANKEN VEST Source: Sparebanken Vest/ Macrobond Households
Real disposable income growth Credit growth
Retail sales index Consumption growth
41
41 SPAREBANKEN VEST Source: Sparebanken Vest/ Macrobond Norwegian economy - International context
GDP Growth, 2000=100 Unemployment Index
42 SPAREBANKEN VEST Source: Sparebanken Vest/ Macrobond Investor contacts
Fredrik Skarsvåg CEO, Sparebanken Vest Boligkreditt tel: (+47) 988 57 275 [email protected]
Karoline Opstad Strand COO, Sparebanken Vest Boligkreditt tel: (+47) 481 82 463 [email protected]
John Hopp Head of treasury, Sparebanken Vest tel: (+47) 450 81 776 [email protected]
43 SPAREBANKEN VEST Disclaimer
This material does not constitute an offering circular in whole or part and you must read the actual offering circular related to the Covered Bond program and the notes which may be
issued from time to time thereunder as referred to in this material (respectively the"Program" and the “Notes”) before making an investment decision. The offering circular for the
Program is available from the Arrangers. You should consult the offering circular for more complete information about Sparebanken Vest Boligkreditt and the Program. The Notes
are not to be offered or sold in any jurisdiction in circumstances in which the distribution of this document or the Notes would be prohibited in such jurisdiction. This document must
not be acted on or relied on by persons who are not eligible to invest in the Notes. Any investment or investment activity to which this communication relates is available only to
person's eligible to invest in the Notes and will be engaged in only with such persons. By electing to receive this transmission, you represent, warrant and agree that you will not
attempt to reproduce or re-transmit the contents of this presentation by any means. By receiving this presentation, each recipient (i) acknowledges that the offering is being made
only outside the United States to non-U.S. persons in reliance upon Regulation S under the U.S. Securities Act Of 1933 and (ii) is deemed to represent that it is not a U.S. person
within the meaning of Regulation S and is not accessing the presentation from a location within the United States.
In addition, institutions mentioned in this material, affiliates, agents, directors, partners and employees may make purchases and/or sales of the Notes as principal or agent or may
act as market maker or provide investment banking or other services in respect of the Program or the Notes which may be issued from time to time thereunder. Sparebanken Vest
Boligkreditt, Sparebanken Vest, the Arrangers and the Dealers and their respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss
or damage of any kind arising out of the use of all or any part of this material. Although the statements of fact in this presentation have been obtained from and are based upon
sources that Sparebanken Vest Boligkreditt believes to be reliable, no representation or warranty, either expressed or implied, is provided in relation to the accuracy,completeness
or reliability of the information contained herein. All opinions and estimates included in this presentation constitute Sparebanken Vest Boligkreditt’s judgement, as of the date of this
presentation and are subject to change without notice and Sparebanken Vest Boligkreditt is not under any obligation to update or keep current the information contained herein. This
presentation is the property of Sparebanken Vest Boligkreditt
44 SPAREBANKEN VEST