SPAREBANK 1 NORD-NORGE ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY OPERATIONS ANNUAL ACCOUNTS 2018 SPAREBANK 1 NORD-NORGE CONTENTS TABLE OF OF TABLE SPAREBANK 1 NORD-NORGE 1 SPAREBANK 06 From the CEO SpareBank 1 Nord-Norge 10 Strategic compass 12 Historical background 14 Important events in 2018 16 SpareBank 1 Nord-Norge’s branches 17 Organisational Chart and Company Structure 18 Annual report 22 Annual report from the Board ANNUAL ACCOUNTS Annual accounts 2018 48 Annual report – Income statement 49 Annual report – Balance Sheet 50 Annual report – Changes in equity 52 Annual report – Cash flow Statement 53 Annual report – Notes 146 Declaration by the Board of Directors and CEO 2018 147 Auditor’s report Operations 156 Group management 158 Board of Directors 160 Governing bodies OPERATIONS 162 Corporate governance in SpareBank 1 Nord-Norge 176 Risk management and internal control 183 Ownership 191 Operations 198 SpareBank 1 Nord-Norge Markets 200 SpareBank 1-alliance 204 The Foundations 206 Organisation and HR CORPORATE SOCIAL RESPONSIBILITY SOCIAL CORPORATE Corporate social responsibility 216 Global Reporting Intiative (GRI) 221 Sustainability 232 Samfunnsløftet Photo annual report 2018: Edvard Kristiansen, Marius Fiskum, Tom Benjaminsen and Perspektivet Museum. A STABLE REGION IN SPAREBANK 1 NORD-NORGE 1 SPAREBANK AN UNSTABLE WORLD 4 2018 was a year characterised by global instability. Climate change, trade wars, Brexit and #metoo have filled our news channels. olitical instability in normally stable coun- Our owners obviously benefit from good results. tries such as Sweden were symptoms Equity certificate holders will receive a dividend of that completed the picture. Despite this, NOK 4 per equity certificate. This is among the best Norway and Northern Norway have been in the industry. This is possible because the Group is Pa stable region in an unstable world. This has had an delivering a return on equity capital (ROE) of 12.9%. effect on SpareBank 1 Nord-Norge’s results. At the same time, the dividend results in large pay- outs for our largest owner: the society of Northern The growth Northern Norway has seen in recent Norway. That is why we launched Samfunnsløftet years continued in 2018, albeit at a somewhat slower as our Corporate Social Responsibility Strategy in pace than before. Continued high investment rates 2018» Following the 2018 financial year, a further and low interest rates are still having an effect on MNOK 265 can be provided for Samfunnsløftet both the building and construction industry as well and thus help to develop northern Norway’s soci- as the housing market. The weak exchange rate for ety further. Norwegian kroner is boosting a region known for exporting products and importing tourists. At the same time, the continued work to provide the best customer experience help us in secur- Naturally, a flourishing economy has the potential to ing returns for our owners in the future as well. have a positive impact on the results of SpareBank 1 Customer experience is our main focus. Advice and Nord-Norge, and the figures in this report confirms consultation face-to-face is and will be our com- this. Meanwhile, the Group’s high level of growth parative advantage. We are present locally with cannot be explained by macroeconomic figures local knowledge and we are among the best at dig- alone. SpareBank 1 Nord-Norge’s growth is mainly ital solutions. It is this combination that provides the due to the Group having succeeded in capturing basis for a customer experience that our competi- market share in all business areas, all segments and tors cannot emulate. all local markets. SpareBank 1 Nord-Norge operates in a stable place, But nothing comes from nothing. New competi- in an unstable world. At the same time, we are tors and stricter regulatory requirements present aware that this instability can impact us as well. Not challenges. Meeting the higher expectations of even Northern Norway is immune from trade wars, customers and the region concerning simplifica- climate change, or political instability – and the tion, accessibility and better customer experiences economic downturns that often accompany such requires the right focus. SpareBank 1 Nord-Norge things. It is during the good times that one have the has a bold ambition: we aim to be number one for opportunity to prepare for the bad ones. The best our customers, our owners and our staff. The sim- way of doing this is to build robust structures, both plicity of the Group’s strategy has an impact on with respect to capitalisation and with respect to our results. At the same time, we approach culture satisfied customers. from a long-term perspective and our vision “For Northern Norway” is an integral part of the Group’s DNA. The sum of all this has an impact on both the top and the bottom line. 5 SpareBank 1 Nord-Norge reinforced the high and profitable growth in all of the Group’s business areas throughout 2018. The Group is soundly capitalised and has delivered world- class returns in the last few years. Another cornerstone of the strategy is collabo- ANNUAL REPORT ANNUAL ration. Products, technology and marketing are developed in a national collaboration via the SpareBank 1-alliance. More than 20 years’ expe- rience in collaboration have also been valuable in relation to new collaborative groupings, an area where the Group has been active. One of these is Vipps, which in a short space of time has become a leading payment solution in Norway and also has international ambitions. Another example is the establishment of Fremtind, an insurance merger between SpareBank 1 and DNB. This new company will play a leading role among the insur- ance companies in Norge. Competitors who find areas for collaboration has also been assigned a special term, “frenemies”. The economic situation in Northern Norway con- ur ownership model and social posi- tinues to be characterised by optimism and good tion were clarified during the year growth. The region is export-oriented and the through the award winning launch of Norwegian kroner’s continuing weak exchange Samfunnsløftet, our Corporate Social rate has stimulated strong growth in the industries O Responsibility Strategy for 2018. The that are traditionally strong in the north. Fisheries Group has a number 1 position in Northern Norway have always been very important in Northern and has an active role in the development of the Norway. The world needs food and fish from the region through financing, offering a full range of north is eaten all over the world. The flow of tour- financial services and social responsibility. ists is growing in parallel with increasing exports. Unemployment remains at a record low. The The Group has invested heavily in IT to develop challenge now is the supply of labour. Declining new sales channels and optimise existing ones. population growth is a nationwide challenge, We have also invested in improving and simpli- but it is even more visible in the north. This is fying internal processes using digital tools. Our because it is in the north that our greatest wealth motto is everything that can be automated will exists as far as natural resources are concerned: be automated. We are investing in our physical pristine nature, clean food, clean energy, the mar- presence in parallel with our digitalisation. New itime industry and untapped oil and gas potential. branches were opened in Alta, Finnsnes and Mo i Northern Norway needs skilled labour to make Rana in 2018. During 2019 there will be an open- the most of the opportunities these natural ing in Bodø, as well as moving into a new head resources offer. SpareBank 1 Nord-Norge illumi- office in Tromsø. nates and analyses such topics in its work on the Konjunkturbarometer for Nord-Norge (KB). Work The combination of physical presence and use on an expansion that will produce an even clearer of digital services is called “phygital”. This has knowledge base for the region has been ongoing resulted in SpareBank 1 Nord-Norge achieving a since autumn 2018. The ambition is to turn the dominant position in the region with 38 branches. Business Barometer into an important basis for This principle, combined with efficient opera- making decisions in or about Northern Norway. tions, is an important cornerstone of the Group’s strategy. 6 FROM THE 2018 was also the year SpareBank 1 Nord-Norge launched Samfunnsløftet. The Bank’s ownership model has always resulted in large dividends for the local com- munity. What we previously called the Donations Fund has now been systemised, which allows people in the north to submit suggestions on how the dividend could REPORT ANNUAL be used to achieve the biggest possible impact for the community of Northern Norway. Six different «samfunnsløft» – themes – were launched in the autumn, which will see an initial investment of MNOK 300. Samfunnsløftet encouraged people to get engaged, which resulted in, among other things, 10,000 submit- ted suggestions. The launch increased awareness of the Bank’s ownership model, where 53.6% is owned by the community. The ownership model and social respon- sibility are considered very valuable competitive advantages. In September, we gathered the entire Group together in Harstad. This highlighted to an even greater extent how the Group stands out. The gathering was split into two parts: “Mission Northern Norway” involved all of the Group’s staff doing vol- untary work, which we have done before at such gatherings. This time we cleared beaches, equipped sports parks and visited the city’s nursing homes with coffee, cake and live music. The project was an embodiment of our DNA and in practice we donated 1.5 man-years of voluntary work in the space of a single day.