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2011 Annual Report

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2011 Annual Report 2011 Annual Report 2011 Annual Report 1 Contents Financial Review Group Financial Highlights 4 Summary 5 Performance in 2011 7 Capital Management 16 Mission Statement and Business Goals 19 Clients and Business Areas 20 Organisation, Distribution and Staff 22 Corporate Governance and Corporate Social Responsibility 24 Financial Statements 27 Income Statement 28 Statement of Comprehensive Income 28 Balance Sheet 29 Statement of Changes in Equity 30 Cash Flow Statement 32 Notes 34 Statement and Reports Management Statement 88 Auditors’ Reports 89 Management, Organisation etc Company Announcements and Financial Calendar 92 Shareholders’ Meetings 2012 93 Notice Convening the Annual General Meeting 94 Board of Directors and Group Executive Management 96 Regions 98 Organisation 100 2011 Annual Report 3 Group Financial Highlights Index 2011 2010 11/10 2009 2008 2007 Income statement (DKKm) Core income excl trading income 3,320 3,304 100 3,320 3,066 2,539 Trading income 927 1,290 72 1,266 1,159 1,488 Total core income 4,247 4,594 92 4,586 4,225 4,027 Costs, core earnings 2,463 2,479 99 2,466 2,484 2,200 Core earnings before impairment 1,784 2,115 84 2,120 1,741 1,827 Impairment of loans and advances etc 1,195 1,400 85 1,195 544 -568 Core earnings 589 715 82 925 1,197 2,395 Profit/(Loss) on investment portfolios (15) 227 - 430 (385) (193) Profit before non-recurring items 574 942 61 1,355 812 2,202 Non-recurring items, net (171) - - 86 162 55 Profit before contributions to the Deposit Guarantee Fund and PCA 403 942 43 1,441 974 2,257 Contributions to the Deposit Guarantee Fund and the Private Contingency Association (PCA) 102 384 27 443 163 - Profit before tax 301 558 54 998 811 2,257 Tax 113 147 77 217 205 547 Profit for the year 188 411 46 781 606 1,710 Balance sheet highlights (DKKbn) Loans and advances at amortised cost 68.8 73.0 94 74.5 82.5 74.5 Loans and advances at fair value 7.7 10.7 72 12.9 13.3 8.6 Deposits and other debt 66.7 64.2 104 68.8 75.0 66.0 Bonds issued at amortised cost 7.5 11.2 67 8.6 10.1 10.1 Subordinated capital 2.1 2.3 92 3.1 4.2 3.8 Shareholders’ equity 9.6 9.6 100 9.1 7.1 6.7 Total assets 153.4 150.8 102 157.8 156.0 132.3 Financial ratios per share (DKK per share of DKK 10) EPS Basic 2.6 5.6 11.7 9.5 25.6 EPS Diluted 2.6 5.6 11.7 9.5 25.6 Share price at year-end 90.1 151.3 133.8 64.3 219.3 Book value 131.1 129.8 124.1 112.5 104.6 Share price/book value 0.69 1.17 1.08 0.57 2.10 Average number of shares outstanding (in millions) 73.2 73.5 66.9 63.4 66.7 Proposed dividend - 1.0 - - 3.0 Other financial ratios and key figures Solvency ratio 16.1 15.4 15.2 14.7 11.9 Core capital ratio 15.2 14.3 13.1 10.8 8.9 Pre-tax profit as % of average shareholders’ equity 3.1 6.0 12.3 11.8 34.6 Post-tax profit as % of average shareholders’ equity 2.0 4.4 9.6 8.8 26.2 Costs (core earnings) as % of core income 58.0 54.0 53.8 58.8 54.6 Interest rate risk 0.9 1.5 1.0 1.4 2.6 Foreign exchange position 1.6 1.2 1.1 11.4 1.7 Foreign exchange risk 0.1 0.0 0.0 0.0 0.0 Loans and advances relative to deposits 0.9 1.0 1.0 1.0 1.0 Loans and advances relative to shareholders’ equity 7.2 7.6 8.2 11.6 11.1 Growth in loans and advances for the year (5.7) (2.0) (9.6) 10.7 13.7 Excess cover relative to statutory liquidity requirements 148.7 106.3 94.4 89.4 103.1 Total large exposures 26.3 54.4 17.2 23.8 46.4 Accumulated impairment ratio excl PCA 2.3 2.0 1.7 1.0 1.0 Impairment ratio for the year excl PCA 1.5 1.7 1.3 0.6 (0.7) Number of full-time staff at year-end 2,152 2,284 94 2,369 2,479 2,276 Financial ratio definitions on page 73. As from 2008 solvency and core capital ratios calculated in accordance with the new capital adequacy requirements. 4 2011 Annual Report Summary The Sydbank Group has recorded a profit before tax for 2011 Core earnings before impairment represent DKK 1,784m of DKK 301m equalling a return of 3.1% on average sharehold- against DKK 2,115m in 2010. The reduction of DKK 331m is ers’ equity. The result is below the expectations at the begin- ascribable to a decline in trading income. Core income excl ning of the year. Intensified financial turbulence led to overall trading income grew by DKK 16m and costs (core earnings) worsened business conditions. The result is unsatisfactory dropped by DKK 16m. whereas the development of core income excl trading income is satisfactory. Core earnings before impairment are in line with our announce- ment in the Interim Report – Q1-Q3 2011. • Slight rise in core income excl trading income. • Market-related decrease in trading income. Impairment charges for loans and advances etc represent DKK • Slight reduction of costs (core earnings). 1,195m (2010: DKK 1,400m). • 14.6% decline in impairment charges for loans and advances. In Q4 2011 the Group decided to record additional impairment • Loss on investment portfolios of DKK 15m. charges of approximately DKK 200m on the portfolio of cattle • Non-recurring items, net of minus DKK 171m. farming, pig farming and crop production. The hectare prices • Contribution to the Deposit Guarantee Fund etc of DKK applied by the Group since 2009 in connection with the 102m. assessment of the exposures in this portfolio correspond to the • Q4 2011: profit before tax of DKK 95m. hectare prices announced by the Danish FSA in December • 5.7% reduction in bank loans and advances to DKK 68.8bn. 2011. The reason for the additional impairment charges is the • 3.9% rise in deposits to DKK 66.7bn. Group’s tightened measurement principles as regards agricul- • Increase in core capital ratio to 15.2%. tural buildings and plant. • Good liquidity. • Substantial influx of clients. The accumulated impairment charges for this portfolio consti- • Dividend to shareholders for 2011 will not be recommended. tute DKK 419m, equal to 7.6% of the portfolio’s bank loans and advances and guarantees of DKK 5.5bn. Summary income statement Investment portfolio earnings represent minus DKK 15m com- Group (DKKm) 2011 2010 pared with DKK 227m in 2010. Core income excl trading income 3,320 3,304 Trading income 927 1,290 Profit before non-recurring items represents DKK 574m (2010: Total core income 4,247 4,594 Costs, core earnings 2,463 2,479 DKK 942m), equal to a return of 6.0% on average sharehold- Core earnings before impairment 1,784 2,115 ers’ equity (2010: 10.1%). Impairment of loans and advances etc 1,195 1,400 Core earnings 589 715 Profit/(Loss) on investment portfolios (15) 227 Non-recurring items, net total minus DKK 171m. Profit before non-recurring items 574 942 Non-recurring items, net (171) - Contributions to the Deposit Guarantee Fund and the Private Profit before contributions to the Deposit Guarantee Fund and PCA 403 942 Contingency Association amount to DKK 102m (2010: DKK Contributions to the Deposit Guarantee Fund and 384m). the Private Contingency Association (PCA) 102 384 Profit before tax 301 558 Tax 113 147 Profit before tax represents DKK 301m (2010: DKK 558m). Profit for the year 188 411 Less a calculated tax charge of DKK 113m (2010: DKK 147m), the Group’s profit stands at DKK 188m compared with DKK 411m in 2010. 2011 Annual Report 5 Summary Return on shareholders’ equity before and after tax constitutes The Group’s liquidity measured under the 10% statutory 3.1% and 2.0%, respectively, against 6.0% and 4.4% in 2010. requirement constitutes 24.9% at year-end 2011. The Group’s Earnings per share has declined from DKK 5.6 to DKK 2.6. liquidity is good. Moody’s 12-month liquidity curve shows that the Group is able to withstand a situation in which access to During the year, shareholders’ equity grew by DKK 41m to DKK capital markets is cut off for a period exceeding 12 months. 9,595m. Dividend to shareholders for 2011 will not be recommended. At year-end 2011 the solvency ratio stands at 16.1%, including a core capital ratio of 15.2 percentage points compared with In 2011 Sydbank saw a substantial influx of retail clients as well 15.4% and 14.3%, respectively, at the end of 2010. The core as corporate clients. Consequently the foundation for future capital ratio excluding hybrid core capital has increased from earnings has been enhanced. 12.7% to 13.4%. The Group’s expectations as regards core earnings before Risk-weighted assets went down from DKK 73.7bn at year-end impairment charges for 2012 compared with 2011: 2010 to DKK 70.7bn at year-end 2011.
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