Sparebanken Sør Boligkreditt AS
Investor Presentation March 2016 Executive summary
. The fifth largest savings bank in Norway with a strong market position in Southern Norway . High capitalization; Capital ratio of 15.5 % - Core Tier 1 ratio of 12.7 % at December 31th 2015 Sparebanken Sør . Rated A1 (stable outlook) by Moody’s . Strong asset quality – 65 per cent of loan book to retail customers . New rights issue of NOK 600 million in progress will strengthen capital ratio even further . 100 % owned and dedicated covered bond subsidiary of Sparebanken Sør . Cover pool consisting of 100 % prime Norwegian residential mortgages Sparebanken Sør . High quality cover pool reflected by the weighted average LTV of 55.3 % Boligkreditt . Covered bonds rated Aaa by Moody’s with 5 notches of “leeway” . Strong legal framework for covered bonds in Norway with LTV limit of 75 % for residential mortgages . Low interest rates, weak NOK and fiscal stimulus are counterbalancing economic slowdown stemming from the lower oil investments . Unemployment is expected to increase gradually but from a very low level and the unemployment Norwegian rate remains well below the European levels economy . The Norwegian government has a strong financial position with large budget surplus. The government pension fund, which accounts over 200% of the GDP, provides the government with substantial economic leeway . The Southern region is clearly less exposed to oil production than Western Norway Southern region . Registered unemployment in the Southern region remains below 4 % and has moved up only economy slightly, at a similar pace than the national average . House price development over the past years has been more moderate than average in Norway
2 Table of content
I Sparebanken Sør
II Financial key figures
III Sparebanken Sør Boligkreditt
IV Norwegian economy
V Contact details
3 Historical milestones 190 years of development and renewal
1985 The bank entered for the first time Telemark, through a Sparebanken Sør was merger with Nissedal established in 1984 after a Sparebank and totals Arendal Sparebank 1973 merger between Aust- today 7 branches in the was founded in 1825 The bank merged with 4 Agder Sparebank, 2 other county, where the latest as one of the first other savings banks in savings banks in Aust- was the opening of an savings banks in Aust-Agder, and formed Agder and 9 from Vest- office in Skien in the fall Norway. Aust-Agder Sparebank. Agder. of 2012. 2014 Merger between Sparebanken Pluss and Sparebanken Sør and the new bank is named Sparebanken Sør.
The bank´s history The banks more recent Four savings banks in In January 1997 Sparebanken dates back to 1824 history starts in 1984 when Telemark and Pluss and Sparebanken NOR when Christianssand Sparebanken Agder was Sparebanken Agder agreed that Sparebanken Sparebank was established through a joined forces in 1987. NOR was to take over established as one merger between Through the merger the Sparebanken Pluss’ branches of the first savings Christianssands Sparebank, bank was named in Telemark while banks in Norway. Halse and Harkmark Sparebanken Agder and Sparebanken Pluss was to take Sparebank, Telemark. In 1988 the over Sparebanken Nor`s office Iveland Sparebank, name was changed to in Kristiansand. Through this Oddernes Sparebank, Sparebanken Pluss deal the banks business again Vennesla Sparebank was concentrated in the Agder and Øvrebø and Hægeland counties. Sparebank.
4 Sparebanken Sør Proven operational platform | Established customer base| Stable outlook
1 Sparebanken Sør is an independent financial group with a history dating back to 1824
Sparebanken Sør is an independent savings bank offering its products and services to the retail 2 banking market, corporate market and to the public sector.
3 Geographical presence mainly in Aust-Agder, Vest-Agder and Telemark
4 The 5th largest Norwegian-owned bank with assets above NOK 100 billions in 2015
5 Some 450 employees in 36 locations in the Southern part of Norway.
General banking services- and products, in addition to real-estate agency, life- and non-life 6 insurance, security trade services and leasing through wholly- and partially owned subsidiaries and companies.
4,768,674 equity certificates listed on Oslo Stock Exchange with a market capitalization of NOK 7 711m *
With a strong and powerful ambition, Sparebanken Sør is committed to create further growth and 8 development in its region.
Note(*): based on the share price per 03.02.16 5 Complete provider of financial services Significant product range - still potential for increased product sales
Subsidiaries Affiliates Vendors
. Sparebanken Sør Boligkreditt AS is a . Sparebanken Sør bought 10% of Frende wholly owned subsidiary of Sparebanken Sør Holding in 2008, and is one of 15 independent . Sparebanken Sør Boligkreditt AS is licensed as savings banks with stakes in the company a financial enterprise with the right to issue . Frende has 175 000 customers and offers bonds where investors receive preferential insurance, both life and non-life to corporates coverage in home mortgages issued by the and private customers bank . Covered bond financing allows Sparebanken Sør Group to offer mortgages with competitive terms to its customers . Brage Finans is a leasing company owned by 10 independent savings banks, Sør owns 14% . Distribution of the company's products is done through own banks, via dealers of capital and through its own sales organization
. ABCenter and Plussmegleren have merged under the name Sørmegleren. . Sparebanken Sør owns 91% of Sørmegleren Holding AS which is the parent to the real estate company Sørmegleren AS . Sør bought 18% of Norne Sec. in 2008 . Sørmegleren is headquartered in Kristiansand . Norne a full service investment bank with as well as 9 branches in 9 other cities corporate finance - services, analysis, and stock and bond brokerage . Conveys about 2,000 homes a year and is thereby the regions largest real estate agent
6 Company structure
Sparebanken Sør (parent bank) rated A1 Moody’s Subsidiaries Affiliates Sparebanken Sør Boligkreditt Sørmegleren (covered bond company) (real estate broker) Ownership 91 % rated Aaa Moody’s Frende Brage Norne Ownership 100 % (insurance) (leasing) (brokerage) Ownership 10 % Ownership 14 % Ownership 18 %
7 A broad geographical footprint Important operator in the south: Aust-Agder, Vest-Agder and Telemark
Local relationships and market proximity is essential for good savings bank operations Supporter of local business development
INDUSTRY TRANSPORTATION
TRAVEL
COMMERCIAL REAL ESTATE
RETAIL
HEALTH
PUBLIC AGRICULTURE SECTOR
The market is totalling 450.000 people and about 9 percent of all business in Norway. FINANCIAL Sparebanken Sør is the only bank covering this area. SERVICES EDUCATION
8 Table of content
I Sparebanken Sør
II Financial key figures
III Sparebanken Sør Boligkreditt
IV Norwegian economy
V Contact Details
9 Financial key figures Solid foundation, both financially and operationally
Net interest income (NOKm) Cost ratio* Impairment ratio Net income (NOKm) *
0.7% 6.9% -66.7% 1.6%
1.511 1.521 46,2 % 0,33% 614 624 43,2 %
0,11%
2014 2015 2014 2015 2014 2015 2014 2015
Total assets (NOKm) Net lending (NOKm) Return on equity* CET 1 ratio
7.7% 9.2% -5.8% -3.2%
101.334 88.387 8,9 % 13,1 % 94.062 80.913 8,4 % 12,7 %
2014 2015 2014 2015 2014 2015 2014 2015
Note(*): 2014 is adjusted for gains from the sale of a stake in Nets with NOK 71m and recognition of negative goodwill of NOK 200m | 10 Diversified loan portfolio(I) High retail share and a broad geographic presence contribute to a balanced portfolio
Lending by region Distribution of retail banking - SME/corporate banking
Gross loans Gross loans
27 % 35 % 46 % 65 %
27 %
SME/Corporate (CM) Retail market (RM) Vest-Agder Aust-Agder Telemark & Other
. # 1 in Vest-Agder and Aust-Agder and # 3 in Telemark.
. Close and long-term cooperation with major stakeholders in the region. The agreement with KNIF* is a good example, which contributes to growth outside the region
. The lending portfolio is concentrated in the bank's market sectors, concentration risk is low, and is significantly diversified compared to other regions
. Large share of Retail lending which in itself contributes to lower risk, and combined with low average loan size (< NOK 2m) and a low average LTV, even in a case of a 30% house price drop, lead to a low overall risk level
Note(*): KNIF = Kristen-Norges interessefellesskap -> consists of more than 70 national organizations 11 Diversified loan portfolio(II) Detailed overview of the retail and commercial portfolio
SME/corporate loans grouped by industry Retail loans grouped by size (NOK m) Share of loans in the Retail portfolio
Gross loans Gross loans 54% 20%
7% 50% 56 % 44 % 11% 25%
12% 12%
4% Rental real estate Social services 2% 2% Property development Commercial services Sparebanken Sør Boligkreditt AS Sparebanken Sør Other (Trade, Manufacturing etc.) < 1 1-2 2-3 3-4 4-5 > 5
Key points for SME/corporate LTV for Sparebanken Sør Boligkreditt Key points for Retail market
. Gross loans Long term relationships and good . 44 % of the Retail portfolio is quality in the SME-portfolio 5% 12% 20% transferred to Sparebanken Sør . Clearly defined industry approach Boligkreditt ** based on local expertise and balanced . ~ 80 % of the Retail loans have a risk appetite 13% 30% principal below NOK 2m . Diversified across sectors 20% . 95 % of the mortgage portfolio in . The KNIF-agreement contributes SBK has LTV below 75% significantly in the sector ”Social . Comfortable with the Retail services” < 40 % 41 - 50 % 51 - 60 % 61 - 70 % 71 - 75 % > 75 % portfolio, even in “stormy weather” . Long contracts in the public sector
Note(*): Other includes : construction of real estate(4%), wholesale and retail(4%), industry (3%), housing associations(3%), primary(2%), public sector(2%), transportation (2%), hotel and restaurants (1%) Note(**): 100% subsidiary= important funding 12 instrument Diversified loan portfolio(III) Low exposure to oil & offshore | stable exposure to real estate
Overall real estate exposure in Norway's largest oil regions * Exposure to oil and the oil industry** SME/corporate Gross loans Stavanger region Sparebank 1 SR 8,9 % 23,5 % Oslo/Akershus 0,9 % DNB 7,0 % 1,4 % Bergens region 3,7 % Sunnhordaland Sparebank 1 SMN 4,9 % Sunnmøre Sparebanken More* 3,1 % Vestfold (expanded) region 17,5 % Arendal- og Kr.sand region Sparebank 1 Nord Norge* 1,9 % Trondheims region Sparebanken Vest 1,1 % Molde/Kristiansund
Grenland Overall real estate exposure Split Sandnes Sparebank* 0,9 % Ytre Sogn Rental real estate Property development Østfold SØR* 0,1 % Construction Cooperative housing
. Sør has virtually no exposure to oil & offshore, due to a long-term strategic choice . Although the Vest-Agder area is more exposed to oil than average, the bank as a whole is below average, due to the portfolio in Aust-Agder and Telemark
. The bank's overall property exposure constitutes ~ 68% of the corporate market portfolio -> The latter constitutes only 23.5% of total loans
. Large parts of the real estate exposures is related to commercial property (rental and condominium). Sør has considerable expertise in this area, along with its customers that operate very effectively with high level of occupancy
. Exposure towards traditional construction is low
Note(*): Industribyggerne 2015 - Rapport IRIS 2015/031 (direkte og indirekte sysselsatte knyttet til petroleumsindustrien) || Note(**): Swedbank Research, EAD Oil and Oil service, except ** - in % of total lending 13
Credit risk(I) Manageable risks across the portfolio
Deposits grouped by size Retail portfolio grouped by risk Key points
51,3 % 94,5 % . ~70% of the deposits is lower than NOK 8m . ~95% of Retail portfolio is in the low 30,2 % risk category . ~95% of SME/corporate deposits is 18,5 % below NOK 100m (few large individual commitments) 4,2 % 1,3 % . ~90% of the SME/corporate portfolio is in the low or medium risk category < 2m 2 - 8m > 8m Low Medium High
Loans grouped by size* SME/corporate portfolio grouped by risk Risk categories
Category Lower bound Upper bound 77,0 % 69,6 % A 0,00 0,10 B 0,10 0,25 C 0,25 0,50 D 0,50 0,75 E 0,75 1,25 F 1,25 2,00 19,9 % 17,6 % G 2,00 3,00 10,5 % H 3,00 5,00 5,4 % I 5,00 8,00 J 8,00 99,99 < 10 mill 10 - 100 mill > 100 mill Low Medium High K 100
Note(*): Individual commitments 14 Credit risk(II) Solid buffer in place –no surprises expected due to strong risk management
Gross arrears > 90 days Non-performing and doubtful loans** Key points
NOKm NOKm 608 1.944 . Total non-performing and doubtful 576 594 1.651 1.634 loans amounted to 1.5% of the gross 488 488 457 479 1.500 1.457 1.434 418 1.271 1.320 loan portfolio for Q4-15 2,42% 0,77% . 0,71% 0,72% 2,04% Loan loss provisions, both collective 1,90% 1,98% 0,61% 1,74% 0,57% 0,57% 0,57% 1,60% 1,68% 0,48% 1,51% and individual, represented more than 50% of the total non-performing and doubtful loans in Q4-2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 . Sør is well prepared for the future 2014 2015 2014 2015 through a solid loan loss provision
Gross loans in arrears > 90 days Arrears in % of loans Non-performing and doubtful loans As % of gross loans level vs. similar banks in Norway
Loan loss provisions Loan loss expenses (collective and individual) Total provisions compared to other banks *** 112 NOKm NOKm 52,4 % % of loans 50,1 % 48,0 % 44,6 % 46,0 % 44,8 % 0,82% 41,5 % 0,77% 39,7 % 0,72% 806 714 692 694 722 0,62% 56 669 637 681 0,57% 45 0,45% 0,45% 0,37% 23 24 15 1 3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2014 2015
SOR DNB
Total deposits SVEG
MING
NONG SB1HE Loss provisions Unexpected losses Reversals MORG
Collective SRBANK % of defaulted and doubtful loans
Note(*): Annualised|| Note(**): Consists of: ”arrear >31 – 60 days”, ”arrear > 61 – 90 days”,” arrear >90 days” and ”remaining doubtful loans”, || Note(***): Sparebank 1 Markets, ukerapport 11.01.2016 15 Operational effectiveness Low interest margin offset by good cost and loss rate
Net interest margin* Cost ratio Impairment ratio*
Net interest income / average assets Operating expenses before loss / net income Losses on loans and guarantees / average net loans to customers
54,2 % 1,64% 0,97% 1,60% 1,59% 1,58% 1,57% 1,57% 1,55% 1,53% 46,8 % 45,8 % 45,7 % As a result of 44,2 % 43,9 % 42,6 % increased provisions for future losses 36,3 % after an extensive review of the bank's loan portfolio to CM
0,22% 0,14% 0,14% 0,09% 0,07% 0,09% 0,08%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 ** Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2014 2015 2014 2015
. Slightly decreasing net interest income in 2015, but strengthened nominal income growth due to volume growth
. Among the most cost-effective banks in Norway -> Influenced by a general spread widening in the bond market affecting the bond portfolio in 2015
. Impairment ratio significantly reduced in 2015, after a thorough review of the corporate market portfolio in 2014 with the associated strengthening of loss provisions
Note(*): Annualised (Figures from the income statement x4) || Note(**): Adjusted for gains from the sale of a stake in Nets with NOK 71m and recognition of negative goodwill of NOK 200m 16
Capital requirements Core capital of 12,7% in 2015 – expected core capital in 2016 of 14,5%
Sparebanken Sør - Actual coverage, requirements and objectives Key points
Leverage ratio Requirements Today Expected . Sør has implemented ICAAP for 2015 and the Financial Supervisory Authority will conclude on individual 2,0 % Pillar II requirements later in 2016 . Through dialogue with the Financial 1,5 % 1,9 % Supervisory Authority ("FSA"), there 2,0 % 2,0 % has been an expectation to bank on 0,8 % CET 1 at the end of 2016 of 14.5% 1,5 % 1,5 % (including Pillar II) . To reach the expectation from the FSA, Sør will continue to strengthen profitability, making adjustments in 14,5 % the balance sheet and restricting 12,7 % growth in lending 11,0 % 11,5 % . In addition, Sør will implement rights issue of NOK 600m during H1-16 7,0 % . The rights issue will strengthen core capital per 31.12.2015 from 12.7% to 13.7% Unweighted Requirements from the FSA Requirements from the FSA Capital ratio Expected capital requirements core capital ratio 31.12.2015 (Pilar I) 31.12.2016 (Pilar I) 31.12.2015 from the FSA . Further measures are expected to 31.12.2016 (Pilar II) ensure that Sør will have CET1 of CET1 Additional tier 1 Additional Tier 2 14.5% at the end of 2016
17 Table of content
I Sparebanken Sør
II Financial key figures
III Sparebanken Sør Boligkreditt
IV Norwegian economy
V Contact Details
18 Sparebanken Sør Boligkreditt Executive summary
. Dedicated covered bond company of Sparebanken Sør . The covered bonds have full recourse to the issuer (Sparebanken Sør Boligkreditt), which is a wholly- owned subsidiary of Sparebanken Sør . Sparebanken Sør Boligkreditt has established a revolving credit facility with Sparebanken Sør which secures the refinancing risk
. The cover pool consists 100 % of prime Norwegian residential assets . Low LTV of 55.3 % (indexed) . There are no non-performing assets in the cover pool . Current OC of 16.8 %, of which 2.0 % is provided on committed basis . Main cover pool exposure is towards Southern Norway, where price developments have been relatively stable
. Aaa rating assigned by Moody’s with 5 notches of leeway, pointing to significant buffer against potential downgrades . Collateral score of 5.0 % (4.3 % excluding systemic risk)
19 Sparebanken Sør Boligkreditt Breakdown of portfolio
Sparebanken Sør total loan portfolio LTV breakdown of Sparebanken Sør Boligkreditt (cover pool)
5% 12% 20% 29 % 35 % 13% 30%
36 % 20%
< 40 % 41 - 50 % 51 - 60 % Cov.bond Other retail SME/corporate 61 - 70 % 71 - 75 % > 75 %
100% Stress test of the cover pool 75% 76,8 % 50% 67,2 % 55,3 % 59,7 % 25% 16,8 % 14,5 % 10,3 % 2,9 % 0% Status Q4 15 House price decline 10 % House price decline 20 % House price decline 30 %
Weighted average LTV Nominal OC
20 The Cover Pool(I)
Cover pool composition Indexed LTV distribution
Category 35% Type of Collateral 100 % residential Total loan balance NOK 25,673,390,250 30% Average loan balance NOK 1,017,614 25% No. of loans 25,229
WA seasoning (in months): 36 20% WA remaining term (in months): 206 NO. of borrowers 22,752 15% NO. of properties 24,755 10% WA Indexed LTV 55.30 % 5% WA LTV 58.30 %
Percentage of variable mortgages (S.Def.): 100.00 % 0% 0-≤40% >40%-≤50% >50%-≤60% >60%-≤70% >70%-≤80% >80% Loans in arrears > 90 days (e.g. 1% or 0.01): 0.00 %
Committed over collateralisation: 2.00 % Over Collateralisation: 16.76 % Total Cover Pool 25,673,390,250
. 100 % prime Norwegian residential mortgages . The weighted-average LTV is 55 % on an indexed basis. This is well below the legislative maximum of 75 % for residential . No non-performing mortgages in the cover pool mortgages . Current OC level of 16.8 % and commitment to maintain level above 2.0 %
21 The Cover Pool(II)
Cover pool geographic split Moody’s collateral scores
Avg. c-score assigned by jurisdiction and to Sparebanken Sør BK
25%
20%
Oslo (9%) 15%
10%
5%
0% CA FR FI NL SE UK Sør NO IE PT BE IT DE AT DK ES
. A low c-score points to strong credit quality of the cover pool Vest-Agder Telemark (8%) (44%) Aust-Agder . Sparebanken Sør Boligkreditt covered bond program has been (29%) assigned a c-score of 5.0% (4.3% excluding systemic risk) . This is stronger than the national average and also compares well with international peers . The cover pool is primarily exposed towards Vest-Agder and Aust-Agder, as well as Oslo and Telemark to some extent . Sparebanken Sør Boligkreditt covered bond program has been assigned a TPI of ’high’ and has ’Aaa’ rating with 5 notches of . Property price development in Vest-Agder and Aust-Agder leeway. This indicates strong resilience against potential issuer has been more modest than in the rest of the country rating downgrades
Source: Moody’s deal-by-deal overview Q2 2015 and Sparebanken Sør Boligkreditt performance overview Sep 2015 22 Funding Well diversified maturity profile giving great confidence during turmoil
Remaining maturity of outstanding wholesale funding Key points
11% 12% 20% 19% 27% 7% 1% 1% 3% . Total funding amounted to NOK 42bn, of which NOK 22 billion is issued as 11.131 covered bonds . International turmoil has been affecting liquidity and price volatility in Norwegian bonds 8.240 . The bank has a diversified maturity 7.780 6.444 profile and few expiring bonds in 2016 and 2017 . Funding > 12 months totalled 89% 4.521 4.542 4.904 . Liquidity indicator 1 is 106% 4.628 . LCR is 108% on a group level 1.314 2.202 . The average maturity is 3.4 years 2.860 corresponding with the average 4.687 among similar Norwegian banks 3.719 2.000 1.419 3.314 3.238 2.702 600 520 405 860 819 520 405 2016 2017 2018 2019 2020 2021 2022 2023 > 2024
Sparebanken Sør Sparebanken Sør Boligkreditt
23 Covered Bond programme
24 Table of content
I Sparebanken Sør
II Financial key figures
III Sparebanken Sør Boligkreditt
IV Norwegian economy
V Contact Details
25 Key indicators for the Norwegian economy Temporary slowdown in growth
In % 2014 2015 2016E 2017E 2018E GDP growth, mainland 2.3 1.0 1.1 1.9 2.3 Core inflation 2.4 2.7 2.9 2.5 2.0 Unemployment rate registered 2.8 3.0 3.3 3.4 3.3 Key policy rate 1.5 1.1 0.5 0.4 0.7 Current account surplus / GDP 9.7 8.0 7.1 7.9 8.2 Sovereign wealth fund / GDP 204 224 N.A N.A N.A
. Economic growth in Norway has edged down due to lower oil investments . Low interest rates, historically weak NOK and fiscal stimulus are sustaining growth in rest of the economy . Unemployment is expected to increase gradually but from a very low level and remains well contained in the European context . Excellent financial position of the Norwegian government with large budget surplus and the government pension fund accounting over 200% of GDP
Source: Estimates from Norges Bank’s December Monetary Policy report and Statistics Norway (Current account) 26
Mainland growth Weaker growth due to lower oil investments
27 NOK, oil price and competitiveness Weak NOK has reduced cost level significantly
28 Mainland exports Export sector benefits from weak NOK and is boosting growth
29 Breakdown of Norwegian exports Norwegian exports is more than oil
Exports Export of traditional goods
Other 12 % Fish 20 %
Services Traditional Food 29 % goods 2 % 32 % Raw materials Machines 4 % 28 % Chemicals 15 %
Oil and Gas Metals 39 % 19 %
REGION North South EU ex Nordic Asia America Nordics America Europe ex EU Oceania Africa SHARE OF GOODS 30 % 20 % 16 % 14 % 6 % 5 % 3 % 3 % EXPORT
Source: Statistics Norway 30 Public finances Strong fiscal power to support the economy
. The Government Pension Fund currently amounts to NOK 7,000bn (approx. EUR 737bn) which is more than twice the size of the Mainland GDP and equals to five annual national budgets . This gives the Norwegian government substantial economic leeway . The fiscal rule: 4% of the fund’s value can be used in the national budget (expected real return on the fund) . The rule is to ensure that the fund itself would not be tapped. Thus the fiscal break even oil price is zero . In response to lower oil price public spending has increased. The fiscal policy stimulus is estimated to be 0.7% of the Mainland GDP in 2016
31 Western Norway is the oil region Sparebanken Sør’s operating regions is less exposed to oil
Direct and indirect employment in the oil sector Employed in oil sector in absolute numbers and % of employment Indirect employment Supply industry export Supply industry home market Employed onshore Indirect employment Supply industry export Employed offshore Supply industry home market Employed onshore Employed offshore
Source: IRIS 32 Bank specific exposure to oil related industries
Norway’s largest petroleum regions* Banks exposure towards oil- and oil service**
Stavanger region 8,9 % Oslo/Akershus Bergens region 7,0 % Sunnhordaland Sunnmøre Vestfold region +,+ 4,9 % Arendal- og Kr.sand region
Trondheims region 3,1 % Molde/Kristiansund 1,9 % Grenland 1,1 % Ytre Sogn 0,1 % 0,9 % Østfold SØR* SADG* SVEG NONG* MORG* MING DNB SRBANK
Sparebanken Sør has practically no exposure to oil or oil service industry
* Source: Industribyggerne 2015 – Rapport IRIS 2015/031 (direct and indirect employment petroleum) 33 ** Source: Swedbank Research, EAD Oil and Oil service, except * - in % of total lending Unemployment Only moderate increase in unemployment in Sparebanken Sør’s regions
34 Household economy Low interest rate burden and solid financial buffers
Estimates from Norges Bank’s December Monetary Policy report 35 Norwegian housing market(I) House prices have increased alongside income growth
City 2009 2010 2011 2012 2013 2014 2015 Sum Oslo 1 % 8 % 10 % 10 % 5 % 1 % 10 % + 45 % Kr.sand 2 % 7 % 6 % 1 % - 2 % - 1 % 6 % + 19 % Stavanger 2 % 12 % 13 % 8 % 4 % - 2 % 1 % + 38 % Norway 2 % 8 % 9 % 7 % 5 % 2 % 7 % + 40 %
36 Norwegian housing market(II) Key characteristics
High home . Around 80 % of Norwegian households own their home which is among the highest home ownership ownership ratios in the world. Hence, buy-to-let market is limited in Norway . Residential mortgage loans are predominantly granted by banks and mortgage credit institutions (97 % as of January 2015) . Lenders have access to wide range of information about borrowers before granting the Key features of mortgage (e.g. tax records for the last three years, any debt collection outstanding, any residential bankruptcies) mortgage loans . Properties are registered in a central register to which banks have direct access in Norway . Typical maturity of a new loan is 25 to 30 years
. The majority of residential mortgage loans have a floating interest rate meaning that banks are allowed to increase the interest rate with a six weeks’ notice . Borrowers are personally liable for their debt also after foreclosure or forced sale . Borrowing costs on mortgages are tax deductible (the tax rate applied is 25 %) Good tax . Tax valuation of dwellings is favourably treated in the wealth tax system incentives and . If a dwelling is occupied by the owner for a minimum of one year, capital gain is tax free when supportive social the dwelling is sold security system . Unemployment benefit equals approximately 62 % of the previous calendar year’s gross income and is paid for up to 104 weeks
Source: Finance Norway, Norwegian Labour and Welfare Administration 37 Financial key figures for 2015 and expectations for 2016 Operational measures are implemented to ensure the bank's continued growth
Return on equity Common equity (The group) Lending growth
Equity emission Satisfying level given the banks solid added equity ratio 13.7% 1,0 % Potential buffer / Effect of initiatives 14,5 % 9,2 % 4.0% 8,4 % 9,0 % 12,7 % 2,0 % 2,0 %
2015 2016 2015 2016 2015 2016
Cost development (The bank) Dividend ratio
2015 was impacted by the spread widening in the liquidity portfolio
50% 50% 46,2 % 42%
2015 2016 2015 2016
38 Contact details and website
Marianne Lofthus – Managing director/CEO Sparebanken Sør Boligkreditt AS Phone, direct line + 47 38 17 35 38 Phone, mobile + 47 90 51 41 83 E mail [email protected]
Bjørn Erik Kittelsen – Head of Treasury, Sparebanken Sør Phone, mobile + 47 90 92 86 63 E mail [email protected] www.sor.no
39 Disclaimer
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