Annual Report 2020 2 SPAREBANK 1 NORD-NORGE 1 SPAREBANK Table of contents SPAREBANK 1 NORD-NORGE 04 From the CEO 08 Strategic compass 10 Our history 12 Timeline 14 Important events 16 Branches 20 Organisation chart 22 Company structure 23 Annual report 24 Group profit analysis 27 Annual report of the Board 28 ANNUAL ACCOUNTS 2020 60 Income statement 62 Balance sheet 63 Changes in equity 64 Cash flow statement 66 Notes 67 Statement by the Bord og Directors and the Group CEO 160 Alternative performance measures 161 Auditor’s report 164 3 Table of contents NORD-NORGE 1 SPAREBANK OPERATIONS 170 Group Management 172 Board of Directors 174 Governing bodies 176 Corporate governance 180 Risk management and internal control 198 Ownership 204 Operations 210 SpareBank1 Nord-Norge Capital markets 218 The SpareBank 1-alliansen 221 The foundations 224 Organisation and HR 226 CORPORATE SOCIAL RESPONSIBILITIY 234 Sustainability in SpareBank 1 Nord-Norge 236 Climate risk (TCFD) 241 Annex 1: Global reporting initiative (GRI) index 256 Annex 2: Carbon exposure in the credit portfolio 262 Annex 3: Stakeholder analysis 2020 264 Annex 4: ‘Samfunnsløftet’s’ contribution to the UN sustainability goals 266 Samfunnsløftet across all Northern Norway 268 4 SPAREBANK 1 NORD-NORGE 1 SPAREBANK Sparebank 1 Nord-Norge SpareBank 1 Nord-Norge is the leading finance house in Northern Norway. The group is part of SpareBank 1-alliansen, an alliance of 14 independent savings banks across the entire country. 5 SPAREBANK 1 NORD-NORGE 1 SPAREBANK Photo: Marius Fiskum DIGITALISATION 2020 was the year that video meetings – up to then meeting between people remains at centre-stage. In regarded as unusual and unfamiliar – became part of the annual report we serve up small glimpses of the everyday life. Our entire society took, more or less digitalisation process, seen from the vantage point reluctantly, a digital ‘quantum leap’ in the year of the of both SpareBank 1 Nord-Norge’s and the group’s coronavirus pandemic. customers. Both SpareBank 1 Nord-Norge and the group’s Here’s the group’s departments for communication customers have become more digital, in virtually along with marketing and digital sales meet, with all spheres. We meet digitally, we interact digitally, most participants working from home. we sign digitally and we pay digitally. However, the 6 SPAREBANK 1 NORD-NORGE 1 SPAREBANK The anomalous year 2020 020 turned out to be the year no-one was pandemic’s relatively low impact on the region, and prepared for. Covid-19 has left its imprint on with historically low interest rates. However, the 2 us in absolutely every way, but so far Northern industry reports a below-normal order supply and, Norway appears to be hit less hard than the rest of unless vaccines have an effect in the near future, this Norway and much of the world around us. industry, like others, could be negatively impacted. There are several reasons for this. Unemployment Retail trade has managed exceptionally well in 2020. levels reflect the high proportion of public sector Given northern Norwegian largely intact purchasing employees in the region, and the public sector has power, combined with a narrower choice of items to neither laid off nor dismissed staff. Further, the region spend money on for most people, this part of the has a substantial export segment. Much of what business sector has seen a fine upturn. Time will tell we export comes from the sea, and seafood has whether a permanent change in people’s consump- remained in demand. The pandemic has also brought tion will ensue, or if the upturn came and went with a persistently low Norwegian krone. This has cheap- the pandemic. ened Norwegian exports, thereby helping to hold up demand. In addition, the government has deployed The financial performance of SpareBank 1 Nord- economic instruments to keep the wheels turning. Norge in 2020 was only minimally affected by the In sum, all the above have helped ensure that the crisis. Loss provisions are low, and actual losses economic consequences of the pandemic have been are likely to be lower than the provision for loss smaller than they would otherwise have been. suggests. Underlying operations are good, and However, some North Norwegian industries have cost control is consistently sound. felt the crisis to their very core. First and foremost the tourism industry, but also the service indus- Return on equity in 2020 was 12.6% placing Spare- tries – above all those that normally benefit from Bank 1 Nord-Norge in the top flight of comparable the presence of tourists. Restaurants, hotels and banks. A good performance also put the bank in a cafes are among those to have experienced a very position to pay out dividends, including a community demanding year. dividend, making a further contribution to the region’s development. And precisely this aspect The construction industry appears to have managed may be more important than ever. Throughout the well for the time being. This has to do with the crisis the community dividend has lent the voluntary 7 SPAREBANK 1 NORD-NORGE 1 SPAREBANK Throughout the crisis the community dividend has lent the voluntary sector an indispensable helping hand. Without this support it would have been difficult for the voluntary sector to keep the wheels turning. In 2021 too, these funds will be both decisive and much needed. sector an indispensable helping hand. Without this This imposes an obligation on The Group in many support it would have been difficult for the voluntary areas – in its day-to-day business as a bank, as sector to keep the wheels turning. In 2021 too, these an active partner in a period of restructuring of funds will be both decisive and much needed. a business sector in partial crisis, and as a driver for sustainable development in a vulnerable Arctic At the end of 2020, SpareBank 1 Nord-Norge area. SpareBank 1 Nord-Norge maintains a strong launched its new business strategy. At centre-stage presence, a thorough knowledge of people and stands The Group’s mission: businesses, and an ownership model that creates «Better than anyone we shall understand and tangible value for Northern Norway. This is a solid achieve what is important for people and businesses basis on which to continue to create value for our in Northern Norway». owners, and to fulfil both our mission and our vision – For Northern Norway. 8 SPAREBANK 1 NORD-NORGE 1 SPAREBANK From the CEO 020 was a year of change for SpareBank It was accompanied by a nationwide lockdown of 1 Nord-Norge. Many of the changes were Norway. The run-up to the summer was a challenging 2 planned; others were a consequence of the period for northern Norwegian business sector. pandemic that has impacted the world like a night- However, thanks to government policy instruments, mare. In sum, the year behind us truly tested The along with active dialogue with our customers, the Group’s flexibility and endurance. The test was negative economic consequences have so far not passed on both counts, and SpareBank 1 Nord- proven overly serious. Norge’s position in the region remains strong. The lockdown faced us with a number of challenges The Group Management was restructured in as a bank. We were for instance compelled to rely to February. The Group switched from a regional a greater extent on digital interfaces and extended organisation structure to a divisionalised structure, working from home. Norway is said to have taken with one division for the retail market and one for giant digital strides over the year. This is also the corporate market. A new CEO was concurrently eminently true of our Group. appointed. The restructuring signalled the start of In September we announced to the market our an internal reorganisation process that was brought intention to close 16 of our smallest branches as to completion over the course of from the turn of the year. The decision was based on the year. a comprehensive analysis taking into account recent years’ drastic fall in the number of customer visits In March we broke the news of a banking collabora- to our branches. We also noted that customers are tion in the Helgeland region. Helgeland Sparebank both able, and prefer, to engage digitally. More than was to take over parts of SpareBank 1 Nord-Norge’s 48 million logins annually to the mobile bank under- client portfolio in Helgeland, while SpareBank 1 score this. The announcement was largely met with Nord-Norge was to acquire a 19.99% stake in Helge- understanding. An exception was Svalbard where land Sparebank. Helgeland Sparebank will buy into fervent opposition to the decision was mobilised. SpareBank 1 Nord-Norge’s subsidiaries, and join Mitigating measures have however been identified SpareBank 1-alliansen as part of Samspar. Overall this and put in place. is expected to provide a basis for increased profit- ability and more efficient use of the banks’ capital. This leaves us with 15 strong financial centres at SpareBank 1 Nord-Norge has over the years sought which our focus ahead will be on establishing a new collaboration and consolidation within Northern and strengthened range of products and services. Norway’s banking sector, and the above transaction All of these offices will feature a full-scale offering was a step in that direction. comprising estate agency, asset finance and accounting services, in addition to traditional banking services. 9 SPAREBANK 1 NORD-NORGE 1 SPAREBANK The closures were also part of a staff cutback. There is a growing focus on sustainability and The Group has a strong focus on holding down the green transition.