Annual Report 2019 Milestones in the past year • SpareBank 1 SR-Bank’s • SpareBank 1 SR-Bank Business Barometer shows that a enters into a strategic 1 surprisingly high number of 3 partnership with a start-up company called companies in Southern Justify regarding the provision of digital Norway expect higher legal services to retail customers. profitability in 2019. • Bergen-based Shrimp Vision wins this • Subsidiaries and startup factory, year’s Gründerhub Prize and NOK 250,000. FinStart Nordic, open in new premises in The company is developing a system for Oslo. The Minister of Finance, Siv Jensen, producing fresh, locally-produced, tropical holds the opening speech and praises the shrimp. financial services industry for its focus on innovation and restructuring. • SR-Boligkreditt issues its first green home mortgage bond. • SpareBank 1 SR-Bank chooses three UN The EUR 500 million quickly Sustainable Development Goals that the becomes fully subscribed to. group will make an extra contribution to achieving. The UN Sustainable Development Goals are the world’s first joint plan to eradicate poverty, combat inequality and • SpareBank 1 SR-Bank moves into a new stop climate change by 2030. climate-neutral head office GENDER EQUALITY DECENT WORK CLIMATE CHANGE AND ECONOMIC 4 in Stavanger named GROWTH Finansparken. Northern Europe’s largest wooden office building. • On 29 November, • SpareBank 1 Regnskapshuset SR acquires SpareBank 1 SR- Agder Økonomi thus strengthening the Bank marks its 180th 2 group’s overall focus on Southern Norway. anniversary. The bank’s oldest roots stretch back to the establishment of Egersund • SpareBank 1 SR-Bank Sparebank in 1839. establishes itself as a national bank for entrepreneurs • A massive effort is made to create a safer through Monner. society based on a major anti-money laundering project. Customer declarations • The group signs up to the Initiative for are collected from more Responsible Ship Recycling. RSRS is a than 20,000 corporate voluntary bank initiative that advocates customers and valid proof the responsible breaking up and of identification from more recycling of ships. NORGE NOREG PASS than 54,000 retail customers in order to satisfy the authorities’ demands. CONTENTS: Highlights and key figures, 4 – The CEO’s article, 6 – SpareBank 1 SR-Bank, 8 – Employees, 12 – Business areas, 15 The SR-Bank share, 17 – Sustainability, 20 – Group executive management, 32 – Board of directors, 34 – Corporate governance, 36 Report of the Board of Directors, 43 – Annual financial statements, 55 – GRI Index, 133 – Key figures last 5 years, 138 2 Value creation in corporate customers in 2019 More than The companies have around 20,000 354,000 employees corporate customers = 1,000 = 5,000 Total earnings NOK 602 billion Earnings per 13% employee (average) NOK 1.7 million 185,000 354,000 employees are employed by Total operating equals 13% of all our 326 customers profit NOK 61 billion employees in Norway in the public sector Source: ssb.no/aku The group’s Gründerhub has helped 1,300 educate around 300 entrepreneurs new companies since its inception in 2015. This has created start their limited company 325 new jobs through 200 companies. via the bank’s digital “start a In 2019, the combined earnings of these company” solution. companies were NOK 150 million. Milestones for the largest corporate customers Rødne becomes the second Felleskjøpet Rogaland Agder opens The Swiss-owned company Aven- company in Norway to order Norway’s largest concentrate feed tron Norge builds five small power an electric passenger ferry at a cost factory. This gives the company the plants in Sirdal. The company invests of NOK 110 million. capacity to increase production of NOK 125 million in the five power Rødne carries 100,000 tourists concentrate feed for the next 20-30 plants, which, thanks to their links to to Lysefjord every year. years. Importantly, the factory is also an energy cluster, provide synergy more efficient and climate friendly. effects and economies of scale. 3 Highlights (Figures in NOK millions) 2019 2018 Net interest income 3,987 3,439 Net commissions and other operating income 1,416 1,437 Net income from financial investments 1,127 569 Total operating costs 2,478 2,229 Operating profit before impairments 4,052 3,216 Impairments on loans and financial liabilities 235 324 Pre-tax profit 3,817 2,892 Key figures Profitability Return on equity % 14.0 11.3 Return on equity exclusive of the Fremtind Forsikring AS merger effects % 12.1 Cost/income ratio 37.9 40.9 Average interest margin % 1.61 1.54 Balance sheet figures Gross loans to customers 207,114 192,105 Gross loans to customers, incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt 211,357 201,399 Deposits from customers 103,106 98,814 Lending growth, incl. SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt 4.9% 7.6% Deposit growth 4.3% 3.6% Total assets 31.12 255,895 234,061 Financial strength Common equity tier 1 capital ratio 1) 17.0 14.7 Tier 1 capital ratio 1) 18.6 15.9 Capital ratio % 1) 20.4 17.6 Leverage ratio % 7.8 7.7 Tier 1 capital 22,626 20,743 Liquidity Liquidity coverage ratio (LCR) % 155% 167% Deposit-to-loan ratio 49.8% 51.4% Deposit coverage ratio including SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt 48.8% 49.1% Branches and staffing No. of FTEs, incl. temps 1,352 1,251 No. of branches 33 36 SpareBank 1 SR-Bank share Market price at year end 100.00 89.20 Earnings per share 12.22 8.98 Dividend per share 5.50 4.50 Effective yield on share % 17.2 7.4 1) Historical capital ratio figures in the group are based on the capital adequacy rules and regulations as at 31 December 2018, when the so-called Basel I floor applied. Please also refer to the complete overview of key figures and definitions on pages 19 and 138. 4 Return on equity (%) 14.0 10.8 11.0 11.3 10.0 2015 2016 2017 2018 2019 Common equity tier 1 capital ratio (%) 17.0 14.7 15.1 14.7 13.3 2015 2016 2017 2018 2019 Historical capital ratio figures are based on the capital adequacy rules and regulations up to and including 2018, when the so-called Basel I floor applied. 3,124 Consolidated profit after tax (NOK millions) 2,296 2,086 1,746 1,755 2015 2016 2017 2018 2019 1,407 Dividend (NOK millions) 1,151 1,087 575 384 2015 2016 2017 2018 2019 5 A good basis for profitable growth throughout Southern Norway The foundations on which we stand today were established one November day 180 years ago. 56 specidaler, which were worth NOK 224 at the time, was what it took to start what would become today’s SpareBank 1 SR-Bank. A solid, profitable financial group, in which the bank itself is now the second largest Norwegian bank positioned in Southern Norway. In the space of these 180 years the capital has grown ecosystem. With the acquisition of Monner in 2019, we took from a few hundred NOK into total of assets of around an important step towards becoming a national bank for NOK 256 billion. Our business model has always been based entrepreneurs. on developing the bank in a sustainable manner. We have built brick by brick over all these years. Sustainability was incorporated into the group’s overarching strategy in 2019. The group supports the 2019 was a good year for SpareBank 1 SR-Bank. It was for UN Global Compact’s 10 principles for sustainability and is a most of the companies and people in Southern Norway as member of the board of Global Compact Network Norway. well. This is confirmed by the results of a recently published Many new initiatives have been set in motion. In addition to Business Barometer, which encompasses responses from supporting all of the 17 UN Sustainable Development Goals, 800 companies. The expectations for 2020 are also good. we have chosen three goals where we believe we can have The business sector is optimistic, in spite of Brexit and other the greatest impact. These are “Gender equality,” “Decent international challenges, although, in the midst all of this work and economic growth” and “Climate action”. Specific general optimism, some companies are still having a hard time. measures have been drawn up for each of these goals. The optimism of the business sector is reflected in the low In 2019, we signed up to the UN Principles for Responsible unemployment figures throughout the country. The picture Banking, UNEP Finance Initiative. Within 4 years, we will have looked very different a few years ago. Changes are taking implemented and completed measures that support these place at an ever faster tempo. We must not forget that difficult principles. times could hit us just as quickly again. That is why we further strengthened our basis for withstanding fluctuations in 2019, The group’s pre-tax profit was NOK 3.8 billion in 2019. This without this particularly impacting profitability. represents an increase of NOK 925 million since 2018. The result was particularly affected by significant one-off We enjoy strong positions in Rogaland, Agder and Vestland, income in connection with the merger and establishment and we established a presence in Oslo a few years ago. of Fremtind Forsikring AS and write-ups of properties in This represents an important part of our geographic the life insurance company in SpareBank 1 Gruppen AS. diversification. Based on the good reception we received in These assets resulted from the considerable efforts of the Oslo and surrounding municipalities, with a considerable group’s employees over many years to provide good advice influx of new and profitable corporate and retail customers, services in which offering customers the correct insurance we have decided to strengthen our presence there.