2012 Eng.Pdf
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170th year ANNUAL REPORT 2012 CONTENTS Key figures.................................................................... Page 2 Report of the Board of Directors……………………….. Page 3-14 Corporate governance………………………………….. Page 15-27 Declaration pursuant to Section 5-5 of the Norwegian Page 28 Securities Trading Act.... Income Statement……………………………………….. Page 29 Balance Sheet………………………………………….... Page 30 Changes in equity........................................................ Page 31 Cash Flow Statement.................................................. Page 32 Notes to the accounts................................................. Page 33-119 Donation allocation for 2011 paid out in 2012............ Page 120 Auditor's Report………………………………………… Page 121-122 Report from the Control Committee........................... Page 123 Side 2 Key figures - Group 2012 2011 2010 2009 2008 Average number of outstanding equity certificates 20.731.183 20.731.183 20.731.183 15.606.370 3.778.267 Average equity (NOK mill.) 1.966,5 1.814,5 1.632,2 1.343,4 1.305,4 Average total assets (NOK mill.) 28.693,6 26.502,2 23.515,3 23.556,2 22.885,9 1. Return on equity capital (%) 13,43 8,58 18,70 21,92 -29,56 2. Result - level I (%) 0,92 0,59 1,30 1,25 -1,69 3. Result - level II (%) 1,35 0,86 1,66 1,81 -1,15 4. Net interest income (%) 1,78 1,66 1,78 2,05 1,91 5. Costs/income (before credit losses) (%) 42,84 55,95 41,82 42,04 1.033,91 Costs/income excl. yields on financial investments (%) 48,06 55,77 56,77 55,43 57,06 6. Cost effectiveness - personnel costs (%) 0,56 0,63 0,60 0,75 0,68 7. Cost effectiveness - other costs (%) 0,39 0,42 0,54 0,51 0,54 8. Cost effectiveness - total operating costs (%) 1,01 1,09 1,19 1,31 1,28 9. Equity capital ratio (%) 6,97 6,55 7,12 6,84 4,42 Asset growth during the last 12 months (%) 4,00 15,16 12,65 -12,76 14,28 Growth in lending to customers during the last 12 months (%) 1,71 13,65 17,12 -4,91 4,15 10. Losses as a ratio of net lending (%) 0,11 0,09 0,06 0,17 0,56 11. Loss provisions as a ratio of gross lending (%) 0,65 0,64 0,86 0,92 0,87 12. Overall deposit coverage (%) 51,81 40,27 39,18 43,91 43,68 Capital adequacy (%) 15,68 15,77 17,16 17,11 11,51 Core capital ratio (%) 14,85 14,23 15,39 14,15 8,39 13. Tier 1 capital ratio (%) 12,76 12,07 12,93 11,96 7,03 Number of man-years 224 252 261 267 271 Dividend (NOK) 3,00 2,00 5,00 4,00 0,00 14. Profit per equity certificate after tax, NOK 5,73 3,46 7,22 7,05 -8,05 15. Profit coverage per equity certificateafter tax, NOK 12,74 7,51 14,73 14,20 -102,13 16. Equityratio as at 01.01. (%) 44,98 46,04 49,05 49,63 33,39 17. Equity per equity certificate (NOK) 43,14 40,49 39,14 35,56 124,47 Equity certificate turnover (traded volume/total) 11,69 21,61 45,09 103,10 8,21 Definitions 1. After-tax result as a percentage of average equity capital 2. After-tax result as a percentage of average assets 3. Result before losses on loans/guarantees as a percentage of average assets 4. Net interest and commission income as a percentage of average assets 5. Total other operating costs as a percentage of net interest and commision income and total other income 6. Personnel costs as a percentage of average assets 7. Other operating costs as a percentage of average assets 8. Total other operating costs as a percentage of average assets 9. Equity capital excluding dividend as a percentage of assets 10. Credit losses on customers as a percentage of net lending at the start of the period 11. Loan loss provisions as a percentage of gross lending to customers 12. Deposits from customers as a percentage of net lending to customers 13. Net tier 1 capital less hybrid capital in tier 1 capital as a percentage of the calculation basis 14. Equity certificate owners' ratio of profit after tax, based on primary capital ratio january 1st. 15. Profit after tax distributed on average number of equity certificates 16. Equity certificate holders' capital in % of total equity capital (excl. provision for annual dividend) (Basis on 01.01, time-weighted on issu 17. Primary capital distributed on average number of equity certificates. The year's provision for dividend is excluded from the calculation Page 3 REPORT OF THE BOARD OF DIRECTORS FOR 2012 This is the annual report for the bank’s 170th year of operation. INTRODUCTION Sparebanken Øst was founded on 11 January 1843. The bank’s founding principles have remained the same for many years. The bank operates in the central, eastern area of Norway, with 21 offices. During the year a new branch was established in Kongsberg. In the national market, self-service Internet clients have access to competitive prices for a narrower range of products. This applies to the Internet channels DinBank.no, Boligkreditt.no and Topprente.no. The Board of Directors understands that the bank’s strategic degree of freedom is dependent on its financial and competence development. The bank has a total effective customer spread of almost 2 million people within an hour’s drive from Drammen, which represents almost 40 per cent of Norway’s population. Sparebanken Øst wishes to be a small operator in this area, at the same time as being a major operator in the Lower Buskerud area. The Board of Directors believes that the bank’s growth can best be achieved with organic growth. VISION AND STRATEGY Vision Sparebanken Øst wishes to be a leading savings bank in southeastern Norway. Business idea Sparebanken Øst must be a freestanding, independent and locally managed provider of financial services which will enable people in general, along with small and medium sized enterprises, to exploit their financial resources in the best possible way. General financial goals Sparebanken Øst is to be a profitable bank, run according to sound business principles. Liquidity Illiquid assets must be funded in the long term. Long-term financing (running time > 12 months) shall as a minimum constitute 105 per cent of illiquid assets. Return on equity Return on equity, defined as profit after booked losses and taxes as a percentage of average equity, should amount to at least 11 per cent (Group). Capital adequacy The Group’s capital must be a minimum of 5 per cent above the statutory requirement of 8 per cent, whereby the tier 1 capital must be at least 11 per cent. Core values The core values to support the vision are: predictable, homespun and forward-leaning. Savings bank identity Sparebanken Øst must be: Socially minded and have high ethical requirements A contributor to wealth creation – not least in the municipalities of Øvre Eiker, Nedre Eiker and Drammen Development-oriented and anchored locally Solid, long-term and trustworthy Page 4 Market We define our primary market as being the central part of eastern Norway, meaning the axis Kongsberg, Drammen, Asker, Sandvika, Oslo and Jessheim, as well as the counties of Vestfold and Østfold. Another way of putting this: all areas which can be reached within approximately one hour’s drive of Drammen. We view the municipalities of Øvre Eiker, Nedre Eiker and Drammen as our local market. The central area of eastern Norway is otherwise defined as our niche market. All of Norway is regarded as a potential market for our self-service concept for the consumer market. There are 160,000 people resident in our local market, of whom 65,000 in Drammen. The business development in the municipalities is sound, and the business community is thriving. Strong population growth and an increase in commercial enterprise are expected. This means that a large market is available to us. Products We wish to cover our customers’ requirements for standard financial services products. Our main products are savings, loans and guarantees, payment services and insurance. Organisation and employee development Sparebanken Øst will have a market-oriented organisation that offers interesting challenges for responsible and qualified employees. We want to develop our employees so that they may be in a position to meet future skills and reorganisation needs. With a good working environment and competitive conditions, Sparebanken Øst shall be an attractive employer. The bank is affiliated with the authorisation scheme for financial advisors (AFR). At the beginning of the year the bank had 52 qualified authorised financial advisors. Growth Sparebanken Øst sees growth as imperative to ensuring that the bank is able to achieve its goals and maintain its independence. In our local market we want to, as a minimum, retain the portion of the market that is ours. Our office channel, with a high service level, our concepts and our self-service channels are used to work with the local market. We want to grow as quickly as is feasible in our niche market, without compromising our desire for a generally low risk profile. Our office channel - including concepts with limited service levels - and our self-service channels are used to work with the market. Through our self-service channels for private and business customers we wish to grow with a clear low-risk profile in the rest of the country. All growth must comply with the conditions established by the bank's three central financial objectives. Risk tolerance Banking activities require a certain amount of risk taking, but we wish to take an aware and as measurable as possible approach to the risks we take on.