Annual Report Union Bank of Norway 1999 Contents Financial summary 1999 1998 1997 1996 1995 Financial summary Net interest income 4,603 2,909 2,512 2,441 2,668 1 Highlights 1999 Capital gains 221 178 166 176 215 2 A strong savings bank Other operating income, net 1,492 1,387 1,642 1,326 1,045 4 President and Deputy President Operating expenses 4,041 2,961 2,982 2,812 2,503 6 Board of Directors Operating profit before losses 2,275 1,513 1,338 1,131 1,425 Losses (gains) on loans 201 128 (46) (40) 51 12 Group Executive Board Losses (gains) on long-term financial assets (386) (255) 92 (2) (32) 16 Profit and loss account Operating profit 2,460 1,640 1,292 1,173 1,406 17 Balance sheet Net profit 1,784 1,185 916 815 1,071 18 Accounting Policy Return on equity 17.3% 15.4% 13.7% 13.8% 19.9% 21 Notes to the account Interest margin 2.6% 2.1% 2.0% 2.3% 2.7% 46 Cash flow statement Effective yield on primary capital certificates 33% (18%) 38% 31% 34% 47 Audit report Earnings per primary capital certificate 28.34 28.07 20.11 19.39 25.99 RISK amount (in NOK) as at 1 Jan Ca. 18.70 12.29 20.84 21.98 4.39 47 Statement by the Growth in lending 37.1% 10.8% 18.9% 14.0% 9.6% Control committee Growth in depsoits 31.5% 6.1% 0.4% 8.3% 5.5% 48 Key figures Total assets 196,356 147,500 132,484 114,569 101,521 49 Analysis of key figures Losses (gains) on loans 0.1% 0.1% (0.0%) (0.0%) 0.1% 50 Versatile technology Capital base (eligible) 15,958 14,554 10,973 10,775 9,615 53 Equity and ownership Capital ratio 10.8% 13.1% 11.4% 13.2% 13.3% 55 Risk management Of which Core (Tier 1) capital 7.2% 8.5% 6.9% 7.5% 7.9% 58 Corporate Customer Division Amounts in NOK million. See pp. 48-49 for further key figures and and definitions. 60 Direct Banking Division 62 Credit Card Division * Figures not adjusted to reflect changes in accounting legislation effective as from 1999. 64 Special Financing Division 66 Subsidiaries/ associated companies 70 Governing bodies 72 Key contacts Highlights 1 Highlights 1999 ONLINE BANKING SHARED PREMISES The new online bank was launched in Since the formation of the new group, April. By the end of the year close to eight pilot branches have been establis- 60,000 customers were registered users. hed bringing together banking and in- In September Union Bank of Norway surance under the same roof. Work on launched the country's first Internet bank co-locating banking and insurance is un- for small businesses. der way at a number of localities. By year- end 11 bank and insurance branches had NATIONAL INSURANCE co-located, thereby laying the basis for ADMINISTRATION A NEW CUSTOMER substantial cost savings. Four pilot regi- The National Insurance Administration ons, each with joint management, have chose Union Bank of Norway to disburse also been established. social security and pensions as from June onwards. The National Insurance A NATIONWIDE SAVINGS BANK Administration is the country's biggest In September Union Bank of Norway user of payments services, with 750,000 opened new bank branches in Steinkjer transactions per month. and Namsos. In the course of 1999 the Gjensidige NOR group acquired a nation- SUCCESSFUL START-UP ON wide distribution network for banking 22 JUNE 1999 products. Gjensidige NOR was formally established on 22 June. Union Bank of Norway took BIG IN ESTATE AGENCY over Gjensidige Bank, and thus became Gjensidige NOR Eiendom reinforced its market leader in special financing and position as one of the country's biggest credit cards. Gjensidige Bank's databases estate agency undertaking. "Trygg og were successfully transferred to Union enkel bolighandel" (House-buying made Bank of Norway's systems the previous simple and safe) combines estate agency weekend. with banking and insurance products in a single product package. HECTIC START FOR DIRECT BANKING DIVISION NOR 1-2-3 - A NEW CONCEPT IN The merger brought 75,000 customers to DAY-TO-DAY BANKING the new direct banking service, Gjensidige A new concept of day-to-day banking was NOR24. The computer systems functioned launched in October offering unlimited right from the start, but a heavy influx of use of automated services at a fixed sub- customers and telephone capacity scription price. The concept has been well problems resulted in reduced access in received in the market thanks to a purpo- the first few weeks. sive effort across the branch network. SHARE TRADING VIA THE INTERNET TRANSITION TO 2000 WITHOUT Karl Johan Fonds introduced online share A HITCH trading in August. All shares and primary After several years' preparations the cross- capital certificates quoted on the Oslo over into 2000 went off without problems Stock Exchange can be traded, and custo- for Union Bank of Norway. mers have access to portfolio tools and relevant market information. Units in Avanse can be subscribed for via the Union Bank of Norway's online facility. 2 A strong savings bank A strong savings bank looking to the future The formation of the Gjensidige NOR group has turned Union Bank of Four pilot regions and eight pilot branc- Norway into a nationwide bank and enhanced its market power. hes have been established to test various Union Bank of Norway is now even better equipped to tackle the concepts for Gjensidige NOR’s future ope- challenges in the financial market ahead. rations. The regions have already seen be- nefits from increased cross-sales and have achieved efficiency gains as a result of co- A NATIONWIDE REGIONAL BANK their own right. In September 1999 the location and collaboration. A detailed co- Union Bank of Norway has taken its place bank opened new branches in Steinkjer location plan has been drawn up which as a future-oriented savings bank with an and Namsos, thereby extending its branch will be implemented in the space of two effective distribution network and state- network to all counties in the country. to three years. Banking and insurance of-the-art technology. In the year behind were brought together under one roof in us Union Bank of Norway established new OSLO/AKERSHUS BIGGEST a number of localities in 1999. regions and new collaboration agree- Region Oslo/Akershus is by far the biggest ments with regional and local savings region. It has accumulated broad-based, Gjensidige NOR has further developed co- banks, turning it into a nationwide bank. specialised competence and intends to operation with regional and local savings Thanks to its acquisition of Gjensidige further develop its services to the corpo- banks in districts where the bank has no Bank, Union Bank of Norway now offers rate sector. It is a dominant player in the branch representation. The pilot region in the country's biggest direct banking region's retail market, with a market Hedmark County involves a collaboration service. The takeover has also made the share of 20 per cent in Oslo and 29 per between Sparebanken Hedmark and bank the market leader in credit cards and cent in Akershus. It has achieved excellent Gjensidige Hedmark. special financing. In the course of 1999 results and a customer satisfaction rating the district branches in Tromsø, Bodø, fully on a par with its main competitors. Trondheim and Bergen became regions in Gjensidige NOR Savings Insurance Union Bank of Norway Finance Deputy President & CEO Olav Hytta Administrative Staff Administration Internal auditing Communication Divisions Operations and development Regions Co-operating savings banks p.71 Corporate Customers p.58 Market/Product Oslo/Akershus p.3 Direct Banking p.60 Operations Østfold p.11 Credit Card p.62 Oppland/Hedmark p.15 Special Financing p.64 Buskerud p.51 Vestfold p.52 Telemark p.55 Vest p.57 Sør-Trøndelag p.59 Midt-Norge p.61 Nordland p.63 Troms/Finnmark p.65 Subsidiaries and associated companies, pages 66-69 A strong savings bank 3 RETAIL MARKET Alongside an extensive branch network marketing and product development A nationwide branch network gives Union we have the country's leading player in environment which designs and develops Bank of Norway considerable competitive the field of direct banking, Gjensidige cost-effective solutions tailored to custo- power despite the fact that customers are NOR24. This entity has 70,000 customers mers' needs. On the technology front the increasingly turning to automated servi- and delivers simple, standardised pro- bank's highly competent in-house staff ces. Fewer and fewer customers visit their ducts on favourable terms to the retail and extensive collaboration with external local bank for over-the-counter banking market via the Internet and by telephone. suppliers ensure that the bank's systems services and manual transactions. Cash is are geared to the future. The bank has predominately withdrawn from cash CORPORATE MARKET effective administrative and operations dispensers and at stores. Bills are increa- The regional bank has increasingly mar- units which provide rational operating singly paid by avtalegiro (automatic ked itself out as a bank for commerce and and control systems and support for the deduction service for bills paid at regular industry. It caters mainly to small and me- day-to-day running of the bank. intervals), telegiro and Internet-based dium-sized firms, but also has the compe- services. The branch network has adapted tence needed to handle bigger corporate Union Bank of Norway has already seen to this trend and further developed its customers at the national and internatio- appreciable gains on the purchasing and competence in counselling services.