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Länsförsäkringar Bank Annual Report the 2016 Fiscal Year

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Länsförsäkringar Bank Annual Report the 2016 Fiscal Year Länsförsäkringar Bank Annual Report The 2016 fiscal year Significant events Business volumes in SEK billion • Operating profit increased 25% to SEK 1,467 (1,175) and the return on equity strengthened to 10.1% (8.9). • Net interest income increased 15% to SEK 3,455 M (2,994). • Loan losses amounted to SEK 37.6 M (6.1)1, net, corresponding to a loan loss level of 0.02% (0.00). Primary bank customers who are also insurance customers • Business volumes increased 13% to SEK 455.1 billion (404.3). • Deposits increased 9% to SEK 91.2 billion (83.9). • Lending increased 12% to SEK 226.7 billion (202.0). • The Common Equity Tier 1 capital ratio for the consolidated situation amounted to 21.2% on 31 December 2016. Number of customers with the bank as their primary bank • The number of customers with Länsförsäkringar as their primary bank rose 11% to 419,000 (378,000), and the number of bank cards increased 11% to 517,000 (466,000). 1 Includes the dissolution of reserves of SEK 23.3 M (60.0). Business volumes and net interest income Primary customers and market shares SEK billion SEK M Total business volumes Customers, thousands % The number of customers 500 3,500 have increased an aver- 500 10 has risen an average age of 12% per year over of 10% per year over the past five years. Net the past five years. The 400 3,000 interest income has risen 400 8 market position was con- an average of 16%. tinuously strengthened. 300 2,500 300 6 Mutual funds 200 2,000 Deposits 200 4 Customers, thousands Mortgages Market share of 100 1,500 Agricultural loans 100 2 household lending Other loans Market share of 0 1,000 Net interest income, SEK M 0 0 household deposits 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Key figures SEK M 2016 2015 2014 2013 2012 Return on equity, % 10.1 8.9 8.3 6.7 6.3 Return on total capital, % 0.54 0.48 0.42 0.31 0.30 Investment margin, % 1.28 1.22 1.15 1.06 1.11 Cost/income ratio before loan losses 0.51 0.57 0.62 0.63 0.66 Common Equity Tier 1 capital ratio, Bank Group, % 24.8 23.7 16.2 – – Tier 1 ratio, Bank Group, % 27.5 26.6 16.2 – – Total capital ratio, Bank Group, % 33.4 32.0 20.6 – – Common Equity Tier 1 capital ratio, consolidated situation, % 21.2 21.4 13.9 – – Tier 1 ratio, consolidated situation, % 23.2 23.7 13.9 – – Total capital ratio, consolidated situation, % 27.6 28.2 17.5 – – Percentage of impaired loans, gross, % 0.11 0.12 0.17 0.23 0.19 Reserve ratio in relation to loans, % 0.11 0.14 0.19 0.25 0.21 Reserve ratio in relation to loans, incl. withheld remuneration to regional insurance companies, % 0.17 0.19 0.23 – – Loan losses in relation to loans, % 0.021 0.001 0.001 0.08 0.06 1 Includes the dissolution of reserves. Länsförsäkringar Bank 2016 Länsförsäkringar Bank Contents Introduction Sweden’s fifth largest 1 The year in brief retail bank 2 Statement by the President Operations Länsförsäkringar Bank is the fifth larg- 4 Strategy and financial position est retail bank in Sweden and its strat- 5 Economic environment and market egy is to offer attractive banking ser- 7 Offering vices to the Länsförsäkringar 9 Loans and credit quality Alliance’s customers. Close customer relationships are created at personal 11 Funding and liquidity meetings at the 128 branches of the 13 Employees regional insurance companies 14 Environmental work and throughout Sweden and via digital ser- sustainability vices and telephone. The aim is to have 16 Board of Directors’ Report the most satisfied customers, main- tain healthy growth in volumes and 21 Five-year summary profitability at low risk, and to increase 22 Corporate Governance Report the share of customers who have both banking and insurance with Läns- Financial statements försäkringar. According to the 2016 Group Swedish Quality Index, Länsförsäk- ringar Bank once again has Sweden’s 29 Income statement most satisfied retail customers. 29 Statement of comprehensive income 30 Balance sheet 31 Cash-flow statement 32 Statement of changes in Länsförsäkringar in brief shareholders’ equity 33 Notes to the financial statements Local companies with customers who are owners and the only principal Länsförsäkringar comprises 23 local, customer-owned regional insurance companies and the jointly owned Financial statements Länsförsäkringar AB with subsidiaries. Customers are provided with a complete solution for banking, insurance, pension and real-estate brokerage services through the regional insurance companies. The Parent Company regional insurance companies are owned by the insurance customers – there are no external shareholders 70 Five-year summary and customers’ needs and requirements are always Länsförsäkringar’s primary task. Long-term respect for 72 Income statement customers’ money and their security is fundamental. The Länsförsäkringar Alliance jointly has slightly more 72 Statement of comprehensive income than 3.7 million customers and approximately 6,000 employees. 73 Balance sheet 3.7 million customers 74 Cash-flow statement 75 Statement of changes in shareholders’ equity 23 local regional insurance companies 76 Notes to the financial statements Länsförsäkringar AB 93 Auditor’s report Länsförsäkringar Sak Länsförsäkringar Länsförsäkringar Liv Other information Länsförsäkringar Bank AB Försäkrings AB Fondliv Försäkrings AB Försäkrings AB* 96 Board of Directors and auditor * The company is operated Länsförsäkringar Hypotek AB according to mutual princi- 98 Executive management ples and is not consolidated in Länsförsäkringar AB. 99 Definitions Wasa Kredit AB 99 Financial calendar Länsförsäkringar Fondförvaltning AB 100 Addresses Länsförsäkringar Bank 2016 Contents 1 Statement by the President Earnings for 2016 were our best ever and growth is continuing across our entire banking operations. We have the most satisfied retail customers in the Swedish bank market, and are continuing to deliver based on our strong local presence that combines personal customer meetings with market-leading digital services. Continued strong growth in all business segments 2016 – yet another strong year already negative key interest rate further at Digital solutions and local presence Länsförsäkringar Bank turned 20 in 2016 the start of the year to –0.50%, while still continue to generate success and we are very pleased to state that the pursing its expansive monetary policies With its 23 customer-owned regional bank continued its strong performance. We based on its bond-buying stimulus pro- insurance companies, Länsförsäkringar once again posted our best ever earnings gramme. Historically low interest rates also offers unique, local presence throughout and are continuing to deliver based on our contributed to housing price increases Sweden that allows us to prioritise personal strong local presence combined with mar- during the year, which led to a greater mac- customer meetings and establish a closer keting-leading digital solutions. Growth roeconomic risk for Sweden. The intensified relationship with our customers, while also remains healthy and business volumes con- enabling us to make tinue to develop well. Net interest income more accurate risk trended positively and credit quality Our aim is to always be assessments in our remains high with very low loan losses. Our lending. The develop- market shares are continuing to grow in all the leader in the digital ment of our digital segments and we consolidated our position offering is driven by as the fifth largest retail bank in Sweden. field of the bank market. customer demand for Customer satisfaction is very high and easy to use and highly Länsförsäkringar Bank once again has the functional solutions. most satisfied retail bank customers in the Our aim is to be the Swedish bank market according to the debate surrounding housing prices resulted leader in the digital field of the bank market Swedish Quality Index. in discussions on additional measures, such and continuously remain at the forefront of as the introduction of a debt ratio ceiling or developments of new services. Länsförsäk- Eventful year in the world abolishing interest deductions. However, it ringar was named “Best Mobile Bank” at the 2016 was an eventful year dominated by an is vital that the core problems related to Mobilgalan in January 2016 and we were uncertain economic environment and polit- many years of low new housing construc- also very proud to win “Sweden’s Best App ical unrest. The Swedish economy remained tion and a poorly functioning housing mar- and Mobile Site” for the second consecutive strong, although its strength abated slightly ket are first addressed to cover the imbal- year at the Web Service Award in January as the year progressed. Inflation remains ances in the supply of housing. 2017. The two key reasons that we continue very low and the Riksbank lowered the to have the most satisfied retail customers 2 Statement by the President Länsförsäkringar Bank 2016 Our unique, local presence through- out Sweden allows us to prioritise personal customer meetings and establish a closer relationship with our customers. in 2016 were our ability to meet the contin- ient, which supports our growth. We are ued demand for personal meetings through convinced that the Länsförsäkringar Alli- our strong local presence and our leading ance’s broad customer base and strong digital services. Customer satisfaction is a market position, combined with a nation- high priority for us and a basic prerequisite wide distribution network and leading digi- for continuing on our journey of success. tal services, provide us with a solid platform for continuing to strengthen the bank’s Changing regulations market position. A number of bank-related regulations are currently under review. These include capi- tal adequacy requirements, new accounting regulations under the framework of IFRS 9 and the new requirements of the Crisis Stockholm, February 2017 Management Directive.
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