SpareBank 1 SMN: Good result and low losses

SpareBank 1 SMN recorded a profit of NOK 441m in the first quarter 2015 compared with NOK 500m in the same period last year. Ordinary banking operations show profit growth.

The quarterly accounts reflect strengthened core business with increased net interest income and limited cost growth, low loan losses and defaults, high deposit and lending growth and a strengthened financial position. Compared with the first quarter last year profit is reduced, mainly due to an extraordinary sale gain of NOK 148m in the same quarter last year.

"We are well satisfied with developments so far this year. Results and activity levels are in keeping with our plans. It is especially satisfying to note continued very low defaults and low losses," says CEO Finn Haugan at SpareBank 1 SMN.

Increased capital adequacy
The bank's capital plan targets a CET1 ratio of at least 13.5% by 30 June 2016. The level at the end of the first quarter 2015 was 12.3%, an increase of 1.2 percentage points from the same point last year.

The increase is mainly due to the net effect of increase residential mortgage weights and implementation of an advanced IRB approach. The latter provides a new calculation of regulatory capital charges against credit risk in the corporate market. The bank's capital plan to achieve the above target without launching an ordinary stock issue stands firm.

First quarter accounts 2015 - key figures:

• Pre-tax profit: NOK 567m (597m in Q1 2014)
• Post-tax profit: NOK 441m (500m)
• Return on equity: 14.1% (17.7%)
• Growth in lending: 10.0% (4.4%)
• Growth in deposits: 10.9% (5.4%)
• Loan losses: NOK 22m (17m)
• CET1 capital: 12.3% (11.1%)
• Earnings per equity certificate: NOK 2.18 (2.48)

Strengthened net interest income
Net interest income totalled NOK 467m in the first quarter 2015, an increase of NOK 55m over the same period last year. The increase is due mainly to increased volume of both lending and deposits and increased deposit margins. Lending margins were reduced as a result of increased competition. Commission income and other operating income totalled NOK 377m, down NOK 8m compared with the same period last year. The change is ascribable to lower margins on residential loans sold to SpareBank 1 Boligkreditt, while other commission income has risen.

Taking market shares
SpareBank 1 SMN increased its lending to retail borrowers by 8.0% to NOK 75.2bn. This growth is higher than the general market growth, and the bank further strengthened its market position in the year's first three months.

Lending to corporates rose by 13.2% to NOK 47.8bn. This growth is somewhat higher than the bank's adopted capital plan allows for. Forecasts none the less show that we will be in line with the capital plan for the year as a whole.

Zero growth in costs
The parent bank's costs increased by 0.7% in the first three months of the year. The directors adopted in autumn 2014 new cost trend targets for the bank, entailing zero growth in the bank's nominal costs in 2015 and 2016.

There is a major potential for efficiency enhancements. The bank has a substantial focus on digitalisation of a number of customer processes which are successively followed by digitalisation of, and hence more efficient and effective, production processes. The bank is considering changes to its distribution strategy to enable this to better reflect changed customer behaviour. 

Low losses
The bank has low losses and low defaults. Net losses measure a mere 0.07% of total outstanding loans. The very low loss and default figures reflect both the macroeconomic picture in Trøndelag and Møre and Romsdal and the bank's close attention to quality in its lending process and customer follow up.

SpareBank 1 SMN expects a slight weakening of the economic climate in 2015, mainly driven by the oil price fall and weak international growth impulses. Our market area appears to be less vulnerable than is the case for Norway as a whole.

The bank has only limited credit exposure to oil service related activity, totalling about 4% of aggregate lending. After a thorough review of this portfolio, no basis has been found for individually assessed impairment write-downs on exposures to this sector or for changes in collectively assessed impairment write-downs.

Trondheim, 8 May 2015.

Contact persons at SpareBank 1 SMN:
Group CEO Finn Haugan on +47 900 41 002
Executive Vice President, Finance, Kjell Fordal on +47 905 41 672
Executive Vice President, Corporate Communications, Hans Tronstad on +47 941 78 322

http://quarterlyreport.smn.no/2015/

About SpareBank 1 SMN
SpareBank 1 SMN is the region's leading financial services group. It is the market leader in the retail and corporate segments, with a total of 49 offices located at 42 sites across the region's municipalities.

We aim to be the recommended bank for customers in Trøndelag and in Møre and Romsdal. Being a local, independent savings bank we feel a special responsibility for stimulating growth and prosperity in the region. We base our business on closeness to our customers, good accessibility, a full product range and comprehensive financial advisory services.

Our head office is located in Trondheim. The Group employs about 1,200 full-time equivalents and includes the following subsidiaries: SpareBank 1 SMN Finans Midt-Norge, EiendomsMegler 1 Midt-Norge, Allegro Finans and SpareBank 1 Regnskapshuset SMN. SpareBank 1 SMN is the largest shareholder in BN Bank with a 33% stake.

SpareBank 1 SMN is one of six owners of SpareBank 1 Gruppen. For further information, visit our website at www.smn.no.