Annual Report 2012, Ringkjøbing Landbobank A/S
1/30/2013 4:00 AM EST
Ringkjøbing Landbobank A/S
Annual report/ annual accounts
Annual Report 2012, Ringkjøbing Landbobank A/S
Please visit www.landbobanken.com to download the Annual Report 2012 in pdf.
Disclaimer:
»The following is a translation of a Danish original document. The original
Danish text shall be the governing text for all purposes and in case of any
discrepancy the Danish wording shall be applicable.«
Dear shareholder
Viewed as a whole, 2012 was a really good year for Ringkjøbing Landbobank. The
pre-tax profit improved by 18% to DKK 448 million, equivalent to a 19% return
on the bank’s equity. The bank’s core earnings were DKK 401 million, which is
above the expected range reported at the beginning of the year. This result was
achieved on the basis of growth in customer numbers, the bank’s low rate of
costs and a continuing sound credit quality. To this must be added positive
exchange rate adjustments, realised because the interest rate fell to a
historically low level.
The falling interest rate was characteristic of the lack of growth in Denmark
and through- out Europe, while the difference between northern and southern
Europe became even more marked as the debt crisis took hold. We expect that
Denmark will come out of recession in 2013, but without growth rates being high
enough to enable us to escape a period of low growth.
The price of the bank’s shares in 2012 performed better than that of any other
Danish bank, with an increase of 35% including the dividend paid, and the
market value is now DKK 3.9 billion. It is recommended to the general meeting
that the dividend be increased to DKK 14 per share, and that we continue with a
new buy-back programme for 130,000 shares.
The bank’s rate of costs was 32%, and we thus remain the most efficient bank in
Denmark in terms of costs per krone earned. We’re pleased with this situation
because it makes our results highly robust, which benefits all our
stakeholders.
Robustness, profit and solvency remain important for our customers and their
choice of bank. We have noted this during the past year, when we gained many
new customers who want their capital managed or placed. We are therefore very
satisfied with the bank’s solid capitalisation. The bank’s solvency is 22%,
which should be seen in relation to the statutory requirement of 8%. The high
solvency and the bank’s earnings mean that Ring- kjøbing Landbobank is one of
Denmark’s most robust banks. We thus have the strength we need to support our
customers and their good investments.
This result and our sound basis is also a credit to our competent employees,
who again performed fantastically in 2012. Their expertise, stability, loyalty
and fighting spirit are an unsurpassed combination.
We expect 2013 to be an interesting year, where the main task will be to do
even more business with our current customers and continue to increase our
market share with ad- ditional customers. We expect core earnings in the range
DKK 350 - 425 million, to which must be added the result for the trading
portfolio.
Finally, we would like to thank our customers and shareholders for the high
level of sup- port they give the bank.
John Bull Fisker
Main figures for the bank (million DKK)
2012 2011 2010 2009 2008
Total core income 823 767 758 753 735
Total costs and depreciations -265 -248 -240 -238 -239
Core earnings before write-downs on loans 558 519 518 515 496
Write-downs on loans -157 -129 -138 -159 -77
Core earnings 401 390 380 356 419
Result for portfolio +49 +1 +38 +56 -73
Expenses for bank packages -2 -11 -80 -107 -28
Profit before tax 448 380 338 305 318
Profit after tax 328 286 257 232 240
Shareholders’equity 2,676 2,483 2,312 2,056 1,785
Deposits 12,867 12,755 11,662 11,187 9,073
Loans 12,424 12,747 13,151 13,047 13,897
Balance sheet total 17,682 17,549 18,247 17,928 18,002
Guarantees 1,667 1,052 1,042 1,486 2,386
Key figures for the bank (per cent)
Pre-tax return on equity, beginning of year 18.5 16.9 16.5 17.1 19.6
Return on equity after tax, beginning of year 13.6 12.7 12.5 13.0 14.7
Rate of costs 32.2 32.4 31.6 31.6 32.4
Core capital ratio (Tier 1) 20.9 19.8 18.6 16.6 13.0
Solvency ratio (Tier 2) 22.4 21.4 22.4 20.2 16.3
Solvency requirement 8.0 8.0 8.0 8.0 8.0
Key figures per 5 DKK share (DKK)
Core earnings 83 79 75 71 83
Profit before tax 93 77 67 60 63
Profit after tax 68 58 51 46 48
Net asset value 553 503 459 408 354
Price, end of year 770 579 725 609 310
Dividend 14 13 12 0 0
ANNUAL REPORT - HIGHLIGHTS
• 18% increase in pre-tax profit from DKK 380 million to DKK 448 million
• The result is equivalent to a 19% return on equity after payment of
dividends
• The rate of costs improved by 1% to 32.2, still the lowest in Denmark
• Capital adequacy ratio of 22.4, equivalent to cover of 280%
• Core capital ratio 20.9
• Highly satisfactory number of new customers in both the branch network and
Private Banking
• Positive - 35% - return on the bank’s shares
• A dividend of DKK 14 per share, equivalent to DKK 70 million, is recommended
• Cancellation of 100,000 bought back shares recommended to the general
meeting
• New buy-back programme for 130,000 shares, equivalent to approximately DKK
105 million, proposed
• Expectations for core earnings for 2013 in the range DKK 350 - 425 million
Page
6 Financial review
15 Capital structure
18 Risks and risk management
30 Corporate Governance
31 Statutory statement on social responsibility
34 Statutory statement on management
36 Information on listed companies
Financial review
The bank’s pre-tax profit improved by 18% from DKK 380 million to DKK 448
million. This result is equivalent to a 19% return on equity, which is
considered highly satisfac- tory in the present economic situation.
The core earnings increased by 3% to DKK 401 million, which is above the
expected range reported at the beginning of the year.
Core income
The total core income was 7% higher, with an increase from DKK 767 million in
2011 to DKK 823 million in 2012.
Net interest income in 2012 was DKK 615 million, a 1% increase relative to the
previous year. The increasing interest income comes primarily from a slightly
higher interest mar- gin. Like the rest of the financial sector, the bank
increased the interest margin in 2012. The very low level of interest is
pulling in the opposite direction, resulting in a lower return on the bank’s
securities portfolio and its liquid resources.
Net fees and commissions and foreign exchange income were derived as follows:
Million DKK 2012 2011
Asset management 71 50
Securities trading 24 19
Guarantee commissions 41 35
Foreign exchange income 13 18
Payment handling 18 17
Loan fees 12 6
Other fees and commissions 20 7
Total 199 152
Fees, commissions and earnings on foreign currency amounted to net DKK 199
million in 2012 against net DKK 152 million in 2011, a 31% increase. The higher
sums within asset management and the pension area had a positive effect, and
there was good activity within conversion of mortgage credit loans.
Costs and depreciations
The total costs including depreciations of tangible assets were DKK 265 million
in 2012, 6% higher than in the previous year.
Half of the increase is the new fixed premium payable to the Guarantee Fund for
De- positors and Investors which, from 2012, was charged as an expense under
costs. It was decided as a part of Bank Package IV to establish an insurance
scheme with a premium determined relative to the deposits which are covered.
DKK 1,950 million is payable an- nually to the fund, of which the bank’s share
is currently 0.7%, equivalent to DKK 13.8 million a year. Contributions will be
payable to the fund until it has reached DKK 7,500 million. Future costs of the
Guarantee Fund for Depositors and Investors will be financed by the payments,
so it is not possible to determine how long this charge will continue. On the
other hand, the fluctuating costs of bank rescues will disappear in the future.
DKK 8.6 million was charged to expenses in 2012, and this will increase to DKK
13.8 million in 2013.
The rate of costs improved by 0.2 percentage points to 32.2%, which is an
improve- ment of 1%, still the lowest in Denmark. A low rate of costs is
particularly important in periods of difficult economic conditions as it gives
a high level of robustness to the bank’s results, as is also reflected in the
calculation of the bank’s individual solvency requirements of 8%.
Write-downs on loans
Write-downs on loans amounted to DKK 157 million against DKK 129 million in
2011. The level of write-downs remains acceptable and corresponds to 1.1% of
total average loans, write-downs, guarantees and provisions. The bank’s
customers appear to be cop- ing better than the average in Denmark in the weak
economic period. DKK 33 million was charged as an expense in the fourth quarter
against DKK 45 million in the third quarter and DKK 55 million in the second
quarter of 2012.
The bank’s total account for write-downs and provisions was DKK 758 million at
the end of 2012, equivalent to 5.1% of total loans and guarantees. The actual
write-downs on loans (including interest on the account for write-downs and
provisions) remain low at DKK 48 million. The account for write-downs and
provisions thus increased by net DKK
109 million net during the year.
The portfolio of loans with discontinued calculation of interest was DKK 113
million,
equivalent to 0.76% of the bank’s total loans and guarantees at the end of the
year.
The Danish economy slipped back into recession in 2012, but it is expected to
return to positive growth rates in 2013, and the bank is satisfied with the
conservative credit policy on the basis of which it has always been run. As a
natural part of the economic cycle, the bank’s losses are expected to remain at
a relatively high level in 2013, but at a lower level than in 2012. It is also
still the bank’s judgment that its credit policy, diversi- fied loans portfolio
and position in central and western Jutland will have a positive effect on the
bank relative to the general level of losses for the banking sector as a whole.
Core earnings
Million DKK 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003
Total core income 823 767 758 753 735 696 609 511 417 368
Total costs etc. -265 -248 -240 -238 -239 -234 -208 -190 -184 -163
Core earnings before
write-downs on loans 558 519 518 515 496 462 401 321 233 205
Write-downs on loans -157 -129 -138 -159 -77 +11 +69 +5 +4 -10
Core earnings 401 390 380 356 419 473 470 326 237 195
The bank’s expectations for core earnings were originally in the DKK 300 - 400
million range. This was stated more precisely at the end of October at
approximately DKK 400 million. The result was realised over the reported
interval.
Result for portfolio
The result for the portfolio for 2012 was positive at DKK 49 million including
funding costs.
The portfolio of shares etc. was DKK 230 million at the end of 2012, with DKK
29 million in listed shares and DKK 201 million in sector shares etc. The bond
portfolio amounted to DKK 3,783 million kroner, and the greater part of the
portfolio consists of AAA-rated Danish mortgage credit bonds and short-term
bank bonds with rated Nordic counterparties.
The total interest rate risk - calculated as the impact on the result of a one
percentage point change in the interest rate - was 0.6% of the bank’s core
capital less deductions at the end of the year.
The bank’s total market risk within exposures to interest rate risk, listed
shares etc. and foreign currency remains at a low level. The bank’s risk of
losses calculated on the basis of a Value at Risk model (calculated with a ten
day horizon and 99% probability) was as follows in 2012:
Value at Risk Risk relative to equity
Risk in million DKK end of year in %
Highest risk of loss: 28.4 1.06%
Lowest risk of loss: 3.5 0.13%
Average risk of loss: 14.7 0.55%
The bank’s policy remains to hold the market risk at a low level.
Profit after tax
The result after tax was DKK 328 million for the year against DKK 286 million
in the previous year.
The result after tax is equivalent to a return on equity of 14% after payment
of dividend.
The balance sheet
The bank’s balance sheet total at the end of the year was DKK 17,682 million
against last
year’s DKK 17,549 million. Deposits increased by 1% from DKK 12,755 million to
DKK
12,867 million. The bank’s loans fell by 3% to DKK 12,424 million. The bank is
continuing
to enjoy good underlying growth in new customers from its branch network and
within
the niches Private Banking and wind turbine financing. The changed patterns of
consump- tion with a higher proportion of saving and the general trend under
which many custom- ers are reducing their balance sheets are, however,
resulting in a greater rate of paying off existing loans than previously.
Liquidity
The bank’s liquidity is good, and the bank’s deposits are now DKK 443 million
greater than its loans. The excess solvency relative to the statutory
requirement is 186%. The bank’s short-term funding with a time to maturity of
less than 12 months is only DKK
639 million, corresponding to DKK 4.6 billion in short-term money market
placements primarily with the National Bank, Nordic banks and liquid
securities. The bank is thus not dependent on the short-term money market.
Apart from this, a portion of the German loans portfolio for wind turbines is
back to back, refinanced with the KfW Bank Group, so that the DKK 829 million
in question can be ignored with respect to liquidity. The bank requires no
financing in 2013 to comply with the minimum requirement of always being able
to continue for up to 12 months without access to the financial markets.
The bank’s good liquidity is evident in the figure below, showing the liquidity
buffer for
the next 36 months.
For the purpose of further diversifying the bank’s funding possibilities, an
agreement
has just been entered into with BRFkredit on joint funding of the bank’s
mortgage loans with security within 60% of the property’s value. The joint
funding will take place in BRFkredit’s AAA-rated capital centre and it enables
long-term hedging of the bank’s commitments. An agreement has also been entered
into on the provision of mortgage loans for commercial properties. The two
agreements will not result in any change to the bank’s existing mortgage credit
agreements with Totalkredit/Nykredit and DLR Kredit.
Rating
Ringkjøbing Landbobank was rated for the first time by the international credit
rating bureau Moody’s Investors Service in May 2007. Since this beginning, the
bank’s ratings have been:
Moody’s ratings:
Financial Long-term
strenght liquidity Outlook
22 May 2007 C+ A1 Stable
End 2010 C+ A1 Negative
End 2011 C A3 Stable
End 2012 C - Baa1 Stable
The bank was downgraded one notch in 2012 on long-term creditworthiness. This
was done in connection with a general reassessment of all ratings in Europe.
Moody’s have had a general fear of the quality of credit in Denmark which also
affected Ringkjøbing Landbobank. However, the effect on the bank was modest, as
we currently have the best rating among Danish banks on Moody’s books.
The supervisory diamond
The Danish Financial Supervisory Authority has prepared a set of rules with key
figures with which the bank must comply. The bank’s key figures and the FSA’s
limit values are given in the table below. There must be compliance with the
key figures as of the end of December 2012. Ringkjøbing Landbobank complies
with all these values with a good margin.
The supervisory diamond
Limmit values The bank’s key figures
Stable funding < 1 0.7
Excess liquidity > 50 185.5
Large exposures < 125 27.2
Growth in loans < 20 -2.5
Exposure to the housing market < 25 12.2
Dividend and share buy-back programme
The bank’s board of directors will recommend payment of a dividend of DKK 14
per share for the 2012 financial year to the general meeting, equivalent to DKK
70 million. A dividend of DKK 13 was paid in 2011. A hundred thousand shares
have also been bought up under the buy-back programme which was approved at
last year’s general meeting. The recommendation to the general meeting will be
that these be cancelled, thus reducing the number of shares in the bank from
4,940,000 to 4,840,000.
It will also be proposed for 2013 that a new buy-back program be established
under which up to 130,000 shares can be bought for cancellation at a subsequent
general meeting. At the current price, this authorisation will reduce the
equity by about DKK
105 million.
Capital
The equity at the beginning of 2012 was DKK 2,483 million. To this must be
added the profit for the period, less the dividend paid and the value of the
own shares bought, after which the equity at the end of the year was DKK 2,676
million, an increase of 8%.
The bank’s solvency ratio (Tier 2) was calculated at 22.4% at the end of 2012.
The
bank’s core capital percent (Tier 1) was calculated at 20.9%.
Solvency cover
2012
2011
2010
2009
2008
Core capital ratio excl. hybrid core capital (%) 19.6 18.3 17.1 15.1 11.6
Core capital ratio (%) 20.9 19.8 18.6 16.6 13.0
Solvency ratio (%) 22.4 21.4 22.4 20.2 16.3
Individual solvency requirement (%) 8.0 8.0 8.0 8.0 8.0
Solvency cover 280% 268% 280% 253% 204%
Ringkjøbing Landbobank’s calculated individual capital adequacy requirement was
cal culated at 6.7% under the bank’s robust business model and was reported at
8%.
From 2013, the method of calculation of the individual solvency will be changed
to the so-called 8+ model, where the calculation takes its starting base at
8.0%. To this is added any supplements which are calculated inter alia for
customers with financial
problems which exceed 2% of the bank’s capital base. This method of calculation
does not take account of the bank’s earnings base and robust business model.
The individual solvency under this method is expected to be calculated at 8.7%.
The bank’s shares
The bank’s share capital at the end of 2012 was DKK 24.7 million in 4,940,000
nom. DKK 5 shares.
The bank’s shares at the beginning of 2012 were listed on the NASDAQ OMX Copen-
hagen at 579. The share price rose during 2012 to 770 at the end of the year
and the price was 808 on 25 January 2013, making the current market value DKK
3.9 billion.
An investment in the bank’s shares at the beginning of 2001 has increased
tenfold including dividend. This made an investment in the bank’s shares the
best bank share investment in Denmark in this period.
Increase in customers
We intensified our efforts to gain new customers and business in 2012. This was
done on the basis that we have both the liquidity and the capital to support
growth, we felt comfortable with the bank’s credit book, and we have a cost
structure suitable for the future. The greatest challenge in a time of low
growth is thus to create growth in the bank’s top line.
The bank’s recruitment activities will continue in 2013, where initiatives will
include further investment in expanding the bank’s Private Banking platform and
the market share in the branch network.
We are currently experiencing a very positive growth in customer numbers in the
branch network within the Private Banking segment, with transfers of deposits,
pension and securi- ties customers. On the loans side, growth to date has been
swallowed by the paying down of balance sheets. However, our assessment is that
we are also currently extending the founda- tion for future earnings.
Changes to the articles of association and the board of directors
For several years, the bank’s board of directors has been evaluating the
management’s and the board of directors’ expertise and working relationship,
and there is a good basis for the chosen business model. The FSA also decided
for group I and II banks in
2012 that the board of directors must include a member who has relevant
experience managing a bank. The shareholders’ committee decided on this basis
to recommend a change in the bank’s articles of association such that the
committee can elect members directly to the board of directors.The committee
will now elect former bank manager Jørgen Lund, age 63, of Skanderborg, who has
just retired from Jyske Bank. Mr Lund will replace Keld Hansen, grocer, of
Søndervig, who is resigning at the general meeting after
11 years on the board.
Expected result in 2013
The bank’s core earnings in 2012 were DKK 401 million, which is above the range
given at the beginning of the year.
Ringkjøbing Landbobank’s market share is about 50% in that part of West Jutland
where the bank’s old branches are located. The bank also has well-established
branches in Herning, Holstebro and Viborg which are continuing to operate
positively. The bank’s plan is to retain and develop this portion of the
customer portfolio with good and competitive products and with focus on the
employees’ expertise and work in advis-
ing customers of the options in a changing financial world. In 2013, the bank
expects
a continuing positive inflow of customers to its branches in central and
western Jutland
because of its long-term outreach sales and consolidation in the sector.
The activities in the bank’s Distance Customer Department and its niche
concepts, including the Holte branch, are expected to develop positively as a
whole in the coming year. Focus will be placed on serving the bank’s current
customers and further devel- oping the portfolio within wind turbine financing,
medical practitioners and affluent customers.
Core earnings in 2013 are expected to be in the range DKK 350 - 425 million. To
this must be added the result for the bank’s trading portfolio.
Events after the end of the financial year
There have been no events after the balance sheet date and to date which would
change the assessment of the bank’s 2012 annual report.
Capital structure
The bank’s management has specified a general objective for the bank’s capital.
The objective is that the bank must have a solidly based capital structure in
comparison with both equivalent and bigger banks.
The objective is also that the bank must have adequate capital for future
growth, and there must also be adequate capital to cover any on-going
fluctuations in the risks which the bank has assumed.
The bank’s capital ratios as of the end of December 2012 were as follows:
Capital ratios
• Core capital ratio excl. hybrid core capital 19.6%
• Core capital ratio 20.9%
• Solvency ratio 22.4%
With respect to the calculation of the bank’s Tier 1 capital, capital base and
core capital ratio excluding hybrid Tier 1 capital, core capital ratio and
capital adequacy ratio at the end of 2011, reference is made to the calculation
of solvency requirement on page 49.
The above capitalisation makes Ringkjøbing Landbobank one of Denmark’s best
capi- talised banks. The bank’s objective is to retain this ranking in 2012. In
the bank’s assess- ment, this can be done on the basis of the expected result
for 2012.
The bank’s board of directors will recommend to the general meeting that a
dividend
of DKK 14 per share, equivalent to DKK 70 million, be paid for the 2012
financial year. A dividend of DKK 13 was paid in 2011. Ninety thousand shares
to a value of DKK 66 million were also bought during 2012. A further 10,000
were also transferred in Janu- ary 2013. Cancellation of 100,000 shares will be
recommended to the general meet- ing, such that the number of shares in the
bank will be reduced from 4,940,000 to
4,840,000.
A proposal will also be made that a new buy-back programme be established for
2013 under which up to 130,000 shares can be bought for cancellation at a
future general meeting. At the current price, this authorisation will reduce
the share capital by DKK
105 million kroner.
The maturity structure of the bank’s external subordinated debt is presented in
the fol- lowing overview.
Subordinate capital – maturity structure
Subordinated loan capital
• Nom. EUR 27 million taken up on 30 June 2008, term 13 years to 30 June 2021,
option of early redemption from 30 June 2018 if approved by the Danish
Financial Supervisory Authority.
Hybrid core capital
• Nom. DKK 200 million taken up on 2 March 2005, indefinite term, option of
early
redemption from 2 March 2015 if approved by the Danish FSA.
• Of which nom. DKK 28 million bought in the fourth quarter of 2012.
The bank uses the capital adequacy rules implemented in 2007 for the
calculation and stating of weighted items with credit and counterparty risks
and market and operational risks.
Reference is made to the following summary for further information on the
methods used by the bank for the various types of risk.
Calculation of capital adequacy – methods used
The bank uses the following methods for the calculation of capital adequacy:
• Credit risk outside the trading portfolio Standardised Approach
• Counterparty risk Mark-to-Market Method
• Credit risk reducing method - financial collaterals Comprehensive Method
• Market risk Standardised Approach
• Operational risk Basic Indicator Method
As will be evident from the above, the bank uses the standard method for
calculation
of its credit risk and therewith the risk-weighted items. This method uses
fixed solvency weightings. As a result of this method, the bank has not had the
same lowering of sol- vency weighting as those banks which are using more
advanced methods. On the other hand, the bank does not experience increasing
solvency weightings in periods of reces- sion. Relative to the advanced
methods, use of the standard method means that there
is significantly greater robustness in the calculated capital percentages and a
smaller
volatility in the risk-weighted items.
The transfer to the new Basel III rules is therefore not expected to have a
significant ef- fect on the bank’s risk-weighted assets, and as the bank’s
capital base is adequate, the bank is prepared for the transfer to the new
rules on capital.
Ringkjøbing Landbobank also focuses on its internally calculated individual
solvency requirement, defined as an adequate capital base as a percentage of
the bank’s risk- weighted items. The adequate capital base is assessed on the
basis of an internal model and calculated as the amount which is appropriate to
cover the bank’s current and future risks.
The individual solvency requirement is calculated at 6.7%, which reflects the
bank’s solid earnings, low credit risk and modest market risk. The computed
adequate capital base is reassessed on a regular basis, and reports to the
Danish FSA are also made on a regular basis. The reporting of the individual
solvency requirement to the FSA is given as
8% as the individual solvency requirement calculated by the bank at less than
8% can- not be less than 8% under Section 124(4) of the act on financial
activities. The FSA most recently reviewed the bank’s calculation of its
individual solvency requirement in spring
2012. For further information on the calculation of the individual solvency
requirement of Ringkjøbing Landbobank, please see the bank’s website at:
www.landbobanken.dk.
Although there is a minimum solvency requirement of 8% which the bank must use
as its individual requirement, the bank has a considerable excess solvency as
indicated in the following summary.
Solvency cover
2012 2011 2010 2009 2008
Solvency ratio (%) 22.4 21.4 22.4 20.2 16.3
Individual solvency requirement (%) 8.0 8.0 8.0 8.0 8.0
Excess solvency (%) 14.4 13.4 14.4 12.2 8.3
Solvency cover 280% 268% 280% 253% 204%
It can be concluded that throughout 2012, Ringkjøbing Landbobank has complied
with both external and internal capital requirements, and the actual capital
base has continu- ally been considerably above the adequate level.
From 2013, the method of calculating the individual solvency will be changed to
the
so-called 8+ model, where the calculation is based on 8.0% of the bank’s
risk-weighted items. This 8% covers the most common risks, plus any weighting
for risks and cir- cumstances which are not reflected in the calculation of the
risk-weighted items, in the assessment of which the bank takes account inter
alia of the following:
• Credit risks on major customers with financial problems
• Concentration risks in the loans book
• Market risks
• Liquidity risks
• Operational risks
Unlike the method of calculation used to date, the 8+ model does not take
account of the bank’s strong earnings base and robust business model. The
changed method will therefore result in an increase in the individual solvency
requirements from 6.7% to
8.7%.
Risks and risk management
Ringkjøbing Landbobank is exposed to various types of risk in connection with
its opera- tions: credit risk, market risk, liquidity risk and operational
risk.
The credit risk is defined as the risk that payments owing to the bank are not
judged to be recoverable because of lack of either ability or willingness to
make payment at the agreed time.
The market risk is defined as the risk that the market value of the bank’s
assets and liabilities will change as a result of changes in market conditions.
The bank’s total market risk includes interest rate risks, foreign currency
risks, share risks and property risks.
The liquidity risk is defined as the risk that the bank’s obligations to make
payments
cannot be honoured under the bank’s cash flow position.
Finally, the operational risk is defined as the risk of either direct or
indirect financial loss- es as a result of faults in internal processes and
systems, human error or external events.
Policy for risk taking and management
The framework for the bank’s risk taking is specified by the board of
directors, which
has adopted a policy for each individual risk area, which inter alia defines
the bank’s risk profile in the area. Each policy is reviewed and reassessed by
the board at least once a year in connection with the board’s position on the
bank’s general business model and risk profile.
The bank’s general principle for assuming a risk is that the bank will only
assume risks
within a moderate risk profile which the bank has the expertise to manage.
The basis for the board of directors’ review of the bank’s business model and
associated policies for each individual risk area is a general risk report
prepared by the bank’s risk manager. The report covers the various risks to
which the bank is exposed, and gives the board a complete picture of the bank’s
general risk profile. In comparison with the
market possibilities, the board than assesses whether the bank’s business model
and risk profile should be adjusted. The report also acts as a basis for any
adaptation of the poli- cies in the various risk areas.
Apart from the strategic risk management, there is an on-going operational
central management and monitoring of the bank’s risks in each area. This
monitoring is re- ported to the bank’s management and board of directors. The
management and control and reporting functions are separate, and the work is
performed by several of the bank’s central staff functions. The bank’s risk
manager ensures full reporting of risks and pro- vides a meaningful picture of
the bank’s actual risk taking.
The various types of risk are subsequently described in more detail.
Credit risks - loans
Over the years, Ringkjøbing Landbobank has developed to its present status as
primarily a regional bank in central and western Jutland and a niche bank
within selected areas.
This development has been a part of the bank’s strategy, and the bank’s
management notes with satisfaction that the bank has achieved a significant
diversified portfolio of loans, including a wide geographic distribution of
branches.
In general, Ringkjøbing Landbobank assumes credit risks on the basis of a
policy, the objectives of which are to have a well-balanced relationship
between assumed risks and the return gained by the bank, that the bank’s losses
must be at an acceptable level rela- tive to the Danish financial sector, and
finally, losses suffered even in extreme situations must be able to be
accommodated within the bank’s results.
The gearing of loans relative to the bank’s subordinated capital is about 4.5,
and the bank’s objective is that the results must be achieved with a lesser or
the same credit gearing as that of the country’s major banks.
Historically, the bank has always had a healthy and conservative credit policy,
and focus will remain on ensuring an efficient management and monitoring of the
bank’s total portfolio of loans via its central credit department.
Apart from the normal following up and management of credit in the bank’s
central credit department, where there is regular reviewing of and following up
on all major commitments, the bank has developed a set of credit evaluation
models which are used to assess the quality of the exposure to credit.
Statistical models are used for private and small business customers, while an
expert model is used for major businesses. The sta- tistical model has 7-10
different factors, including information on the customer’s assets and a
quantity of behavioural data. The expert model for business customers is based
on information on the customer’s creditworthiness and earning capacity.
Using these models, the bank’s judgment is that the credit quality for those
loans which have not been written down is generally unchanged relative to 2011.
As in previ-
ous years, the bank is, however, aware of the risks which the economic
conditions are imposing on the bank’s customers. A particular problem is the
challenge posed to the bank’s private customers by a weak property market and
potentially rising interest rates. The bank’s customers are, however, judged to
be relatively less vulnerable to these chal- lenges, among other reasons
because of a relatively low home loan burden in the bank’s core area.
Actual net losses
In DKK 1,000 Loans with Write-downs
Year
Actual net losses Actual net losses after interest suspended calculation of
interest on loans and provisions for guarantees
Total loans and guarantees etc. Percentage loss before interest *) Percentage
loss after interest *)
1988 -14,205 -5,205 4,522 93,900 1,408,830 -1.01% -0.37%
1989 -18,302 -5,302 13,107 117,270 1,468,206 -1.25% -0.36%
1990 -15,867 -1,867 47,182 147,800 1,555,647 -1.02% -0.12%
1991 -11,429 3,571 47,626 170,000 1,805,506 -0.63% 0.20%
1992 -32,928 -14,928 43,325 177,900 1,933,081 -1.70% -0.77%
1993 -27,875 -6,875 30,964 208,700 1,893,098 -1.47% -0.36%
1994 -14,554 4,446 33,889 223,500 1,938,572 -0.75% 0.23%
1995 -10,806 10,194 27,292 238,800 2,058,561 -0.52% 0.50%
1996 -19,802 -1,802 18,404 233,400 2,588,028 -0.77% -0.07%
1997 -31,412 -12,412 39,846 236,600 3,261,429 -0.96% -0.38%
1998 -2,914 18,086 4,905 263,600 3,752,602 -0.08% 0.48%
1999 -442 21,558 18,595 290,450 5,148,190 -0.01% 0.42%
2000 -405 27,595 12,843 316,750 5,377,749 -0.01% 0.51%
2001 -8,038 20,962 14,222 331,950 6,113,523 -0.13% 0.34%
2002 -8,470 20,530 26,290 382,850 7,655,112 -0.11% 0.27%
2003 -22,741 2,259 23,412 394,850 8,497,124 -0.27% 0.03%
2004 -14,554 9,446 18,875 404,855 11,523,143 -0.13% 0.08%
2005 -22,908 192 35,796 357,000 15,522,264 -0.15% 0.00%
2006 -13,531 7,028 20,578 295,000 17,858,787 -0.08% 0.04%
2007 -15,264 4,888 13,190 289,097 19,227,573 -0.08% 0.03%
2008 -34,789 -10,237 22,110 356,083 16,475,975 -0.21% -0.06%
2009 -73,767 -47,658 62,649 467,025 14,890,027 -0.50% -0.32%
2010 -69,428 -40,207 66,237 565,035 14,758,234 -0.47% -0.27%
2011 -78,813 -43,073 61,419 649,856 14,448,638 -0.55% -0.30%
2012 -90,022 -48,337 113,312 758,363 14,849,702 -0.61% -0.33%
25-year average (1988 - 2012) -0.54% -0.02%
10-year average (2003 - 2012) -0.30% -0.11%
*) Actual net losses relative to total loans, guarantees, write-downs on loans
and provisions for guarantees.
Explanation: The percentage losses were computed as the actual net losses for
the year before and after interest on the written-down part of
loans as a percentage of total loans, guarantees and write-downs on loans and
provisions for guarantees. A minus sign before a percentage
loss indicates a loss, while a positive percentage loss means that the interest
on the written-down part of loans was greater than the actual net
losses for the year. All the above figures are exclusive amounts regarding the
national bank package I etc.
The above table documents the bank’s healthy credit policy. As will be evident,
the bank’s average percentage loss after interest over the last 25 years (1988
- 2012) was
-0.02%, with -0.77% (1992) the highest loss and +0.51% (2000) the most positive
figure. The average percentage loss before interest over the last 25 years is
-0.54%, with
-1.70 percent (1992) the highest loss and -0.01% (1999 and 2000) the lowest
loss. The average percentage loss after interest over the last ten years (2003
- 2012) was -0.11%; the average percentage loss before interest was -0.30%.
The regional section of the bank is run partly via branches in the bank’s
original core area in West Jutland and partly via branches in the three big
central and western Jutland cities Herning, Holstebro and Viborg.
The most important niches within the bank’s niche section are financing of
medical practitioners’ purchases of private practices, a Private Banking
department covering affluent private customers, and financing of securities and
loans for the financing of wind turbines. The financing of wind turbines is for
Danish investors’ purchases of wind turbines erected in Denmark, Germany and
France.
An important common factor in the niche areas is that the bank attempts to
obtain a first mortgage, and therewith satisfactory security in the mortgaged
assets, which is an important part of the bank’s business philosophy.
Concentration of credit
As indicated in the summary below, total large exposures amount to 27.2%. This
figure includes a good quality commitment of 10.4% with adequate security and a
commit- ment with a well-consolidated financial counterparty which will be
redeemed in 2013.
Concentration of credit
2012 2011 2010 2009 2008
Total large exposures 27.2% 11.8% 0.0% 0.0% 12.1%
Explanation: The Danish Financial Supervisory Authority key figure »Total large
exposures«.
Explanation: Distribution of the bank’s loans and guarantee portfolio before
write-downs and provisions by customer addresses.
Geographic spread of the bank’s loans and guarantee portfolio
As is evident from the figure, a significant geographic diversification of the
bank’s port- folio of loans and guarantees has been achieved via both the
regional section and the niche section.
The loans via the bank’s niche section have also helped to ensure a major
diversification in the bank’s loans portfolio, so that this portfolio is not
correlated with the economic cycle to the same extent as if the bank were run
exclusively as a regional bank.
Credit risk on financial counterparties
Exposure to financial counterparties, and therewith a credit risk, including a
settlement risk, arises in connection with the bank’s trading in securities,
foreign currency and de- rivative financial instruments, the bank’s loans to
other banks, and the bank’s possession of bonds and transfer of funds. The
settlement risk is the risk that in connection with the settlement of trades in
securities and/or currency, the bank will not receive payment or securities
corresponding to the securities and/or payments which the bank had made and
delivered.
The bank’s board of directors grants lines of credit for credit risks and the
risk of wind- ing up against financial counterparties. When granting lines of
credit, account is taken of the individual counterparty’s risk profile, rating,
size and financial circumstances, and there is constant follow-up on the lines
of credit which were granted.
The bank’s policy is to keep the credit risk on financial counterparties at a
balanced level
relative to the bank’s size, and against credit institutions with good
creditworthiness.
Claims on central banks and credit institutions
One of the two major items concerning the credit risk with financial
counterparties is credit bal- ances with central banks and credit institutions.
The bank has assumed only a moderate risk on this item, and in the total credit
balances with central banks and credit institutions, only 72% is thus due
within three months.
The bond portfolio
The second of the two major items concerning the credit risk with financial
counterparties
is the bank’s bond portfolio.
Bonds distributed by rating classes
A1/A+
10% A2/A
3%
Aaa/AAA
41%
A3/A-
22%
Baa1/BBB+
7%
Baa2/BBB
4%
Ikke rated
11%
Ba1/BB+
1%
Baa3/BBB-
1%
Explanation: The bond portfolio distributed by rating classes. Ratings from the
credit rating bureaus Moody’s Investors Service, Standard & Poor’s and Fitch
were used in the specification.
As will be evident in the figure below, the bond portfolio consists mainly of
AAA-rated Danish mortgage credit bonds and bank bonds. There is also a modest
holding of com- mercial bonds. The portfolio of bank bonds consists chiefly of
bonds with short terms issued by rated Nordic banks. These bonds have a good
credit quality, but their market value can vary over time in connection with
general changes in credit spread in the market, and company-specific
circumstances can also affect the value of these bonds. The credit spreads on
these bonds were reduced throughout 2012, resulting in a capital
gain for the bank. On the other hand, a later extension of the spreads could
trigger a loss. Given the relatively short term, the risk involved is, however,
manageable.
The bank’s bond portfolio does not involve any exposure to southern European
countries.
Market risks
The bank’s basic policy with respect to market risks is that the bank wishes to
keep such risks at a relatively low level.
The bank has determined a concrete framework for each type of market risk, and
the risk assessment includes the objective that there must be a sensible and
balanced rela- tionship between risk and return.
The bank uses derivatives to cover and manage the various market risk types to
the extent to which the bank wishes to reduce the extent of, or eliminate, the
market risks which the bank has assumed.
To supplement the more traditional measures of market risk, the bank has a
mathemati- cal/statistical model to compute market risks. The model is used to
compute Value at Risk (VaR), which is regularly reported to the bank’s
management.
VaR is a measure of risk which describes the bank’s risk under normal market
conditions. An isolated VaR is calculated for interest rate, foreign exchange
and listed share posi-
tions, and a total VaR is also calculated for all of the bank’s market risks
consisting of
interest rate, foreign exchange and listed share positions. This possibility of
calculating a total VaR for the bank’s market risks is one of the major
advantages of the VaR model compared with more traditional measures of risk.
The reader is referred to the following section “Value at Risk” for the
specific results etc. under the VaR model.
Interest rate risk
The bank’s loan and deposit business and accounts with credit institutions are
mostly entered into on a variable basis. The bank’s fixed interest financial
assets and liabilities are monitored continuously, and hedging transactions are
entered into as needed with a consequent reduction of the interest rate risk.
Ringkjøbing Landbobank’s policy is to maintain a low interest rate risk, and
the bank thus does not assume high levels of exposure to movements in interest
rates.
The bank’s interest rate risk is monitored and managed daily by the bank’s
securities department, and the bank’s service and support department controls
maintenance of the limits for assumption of interest rate risk, and reports to
the bank’s board of direc- tors and management.
Interest rate risk
6
5
4
3
2
1
0
Explanation: The interest rate risk shows the effect on the result as a
percentage of the core capital after deductions of one percentage point change
in the interest level.
As will be evident from the figure, the bank has maintained a low interest risk
over the
last five years in accordance with the bank’s policy for this type of risk
Foreign exchange risk
The bank’s principal currency is the Danish krone, but the bank has also
entered into loan and deposit arrangements in other currencies.
The bank’s policy is to maintain a minimal foreign exchange risk, and the bank
thus reduces on-going positions in foreign currencies via hedging.
The bank’s positions in foreign exchange are managed daily by the foreign
department, while the bank’s service and support department monitors
maintenance of lines of
credit and reports to the board of directors and management.
As in previous years, the bank’s foreign exchange risk in 2012 was at an
insignificant
level.
Share risk
The bank is co-owner of various industrial companies via equity interests in
DLR Kredit A/S, PRAS A/S, BankInvest Holding A/S, SparInvest Holding A/S,
EgnsInvest Holding A/S, Letpension Holding A/S, Nets Holding A/S, Swift,
Bluegarden A/S, Værdipapircentralen A/S, Bankernes Kontantservice A/S,
Landbrugets Finansieringsbank A/S and Bankdata.
These holdings are comparable with the wholly owned subsidiaries of major
banks, and the equity interests are thus not deemed to be a part of the bank’s
share risk. The bank also holds a small portfolio of listed shares.
The bank’s policy is to maintain a low share risk. The daily management of the
bank’s share portfolio is undertaken by the securities department, while
monitoring of the lines of credit and reporting to management and the board of
directors are performed by the service and support department.
The bank’s portfolio of listed shares etc. amounted to DKK 29 million at the
end of 2012 against DKK 12 million at the end of 2011. The portfolio of sector
and capital shares at the end of 2012 was DKK 201 million against DKK 237
million at the end of 2011.
As will be evident from the figure below, the bank’s exposure to shares
(excluding sector and capital shares) as a percentage of the bank’s equity has
been modest, therewith documenting the bank’s goal of maintaining a low risk on
shares.
Share exposure
8
7
6
5
4
3
2
1
0
Explanation: The share exposure is computed as the bank’s holding of shares
(excluding sector shares and other holdings) as a percentage of the
shareholders’ equity.
Property risk
The bank primarily wishes to possess only properties for use in banking
operations, and also to maintain minimal property risks.
The bank’s portfolio of both domicile and investment properties is thus quite
modest relative to the bank’s balance sheet total.
Value at Risk
The bank’s total Value at Risk at the end of 2012 was DKK 5.8 million. This sum
is an expression of the maximum loss in a statistical perspective which the
bank could risk losing with 99% probability if all market positions were
retained unchanged for a period of 10 days.
VaR summary
In DKK million
Average Min. Max. End of year
Risk VaR figure VaR figure* VaR figure* VaR figur
Interest 15.0 3.1 28.9 5.7
Foreign currency 0.3 0.1 0.2 0.1
Share 2.7 2.6 2.4 2.2
Diversification -3.3 -2.3 -3.1 -2.2
Total VaR figure 14.7 3.5 28.4 5.8
* Determined by the total VaR figure
As indicated in the table, the bank’s total VaR throughout 2012 varied from DKK
3.5 million to DKK 28.4 million. The average VaR figure has been DKK 14.7
million, a small increase relative to last year.
Reference is made to note 41 on page 74 for the VaR figures for the years 2008
- 2012.
The model in brief
The model is a parametric VaR model based on a historical analysis of the
covariation (correlations) between the prices of various financial assets etc.,
including different share indices, various official interest rates and interest
swap rates, and different exchange
rate indices. By combining the historical knowledge of the covariation for the
financial markets with the bank’s current positions, the model can calculate a
risk of losses for a forthcoming ten-day period. All of the bank’s interest
rate positions, foreign currency positions and listed share positions etc. are
included in the calculation, while positions in sector shares and unlisted
ownership interests are not included. The model does not take account of credit
spread risks on the bank’s bond portfolio. The model is unchanged relative to
last year.
Back tests and stress tests
So-called “back tests” are made to document that the VaR model provides a
sensible picture of the bank’s risk. The test compares the calculated loss
under the model with the losses which the bank would actually have suffered if
the positions in question had been retained for a ten-day period. A number of
stress tests are also carried out to indi- cate the bank’s risk of loss in
abnormal market situations. Back tests of the model were performed throughout
the year with satisfactory results.
Liquidity risk
In general with respect to the bank’s liquidity management, it is the bank’s
objective not to have uncovered net funding requirements and not to be
dependent on the short- term money market. An objective is thus that the bank
may not be affected by a total shutdown of the money market for a period of 12
months.
The bank’s loans portfolio is funded primarily via a range of sources, namely
the bank’s deposits, by taking out long-term loans with other credit
institutions, via issuing bonds, and finally via the subordinated capital taken
up by the bank, and the bank’s equity.
The bank’s deposit base consists primarily of core deposits and deposits from
customers with a long-term relationship with the bank.
Ringkjøbing Landbobank has also entered into longer-term bilateral loan
agreements with European banks. It should, however, be noted that the bank’s
funding situation is not comprised such that the bank is dependent on the
institutions in a single country or on single institutions.
The bank entered into an agreement with BRFkredit during 2012 on joint funding.
This agreement means that the bank can procure liquidity by letting BRFkredit
issue SDO bonds against security in the loans which the bank has provided to
customers with secu- rity in real estate. The bank has not yet availed itself
of this setup, but the bank expects that the option can act as a supplementary
source of funding for the bank in the longer term.
Deposits and other debts
Distribution of funding
73%
Other liabilities
1%
5%
17% 2%
Issued bonds - term to maturity over 1 year
1%
Issued bonds - term to maturity under 1 year
1%
Debt to credit institutions - term to maturity over 1 year
Total capital base
Debt to credit institutions - term to maturity under 1 year
DKK 1,000
The short-term funding (term to maturity under 1 year):
Issued bonds - term to maturity under 1 year 224,583
Debt to credit institutions and central banks - term to maturity under 1 year
414,472
Total 639,055
Is covered as follows:
Cash in hand etc. 36,776
Deposits on demand with central banks - certificates of deposit 622,414
Claims on credit institutions - term to maturity under 1 year 92,578
Listed bonds and listed shares etc. at current value 3,812,362
Total 4,564,130
Excess cover 3,925,075
As will be evident from the above, the short-term funding (time to maturity
less than one year) is supported via the bank’s portfolio of certificates of
deposit and demand de- posits with the Danish National Bank, short-term loan
arrangements with other banks, and the bank’s portfolio of liquid securities.
It should be noted that the excess liquidity cover at the end of 2012 was DKK
3.9 billion, while the corresponding figures at the end of 2011 and 2010 were
DKK 3.7 billion and DKK 3.3 billion respectively.
To ensure diversification in funding, the bank established an EMTN bond
programme of
EUR 2 billion in 2008. The programme helps to ensure alternative funding
sources for the bank. The bank has made issues under the programme in 2010 and
2011, but has not done so in 2012.
Operational risk
The capital adequacy rules require the banks to quantify and include an amount
for operational risks when computing their capital adequacy.
The bank uses the so-called basic indicator method where, on the basis of
calculation of an average of the most recent three financial years’ net
incomes, a sum is quantified and ascribed to the risk-weighted items to cover
the bank’s operational risks.
The bank regularly produces reports on the losses and events which are judged
to be attributable to operational risks. An assessment is made on the basis of
the reports of whether procedures etc. can be adjusted and improved in order to
avoid or minimise any operational risks, and the bank’s procedures are also
regularly reviewed and as- sessed by the bank’s internal and external auditors.
An important area in assessment of the bank’s operational risks is IT.
The bank’s IT organisation and management are always concerned about IT
security, including preparation of IT emergency plans, in connection with which
the bank speci- fies requirements and levels for availability and stability of
the IT systems and data used by the bank. These requirements apply to both the
bank’s internal IT organisation and its external IT supplier Bankdata, which
the bank owns together with a number of other banks.
Further information of the bank’s risks
With the implementation of the Basel II rules in Danish legislation on capital
adequacy, Danish banks were also required to publish certain information on
risks (popularly also called Column 3 information). Some of the required risk
information is given in this an- nual report, but for a full overview of the
bank’s duty to provide information, the reader is referred to the bank’s
website at www.landbobanken.dk.
Corporate governance
Corporate governance in Ringkjøbing Landbobank concerns the objectives which
gov- ern the bank's management and the general principles and structures
governing the interplay with the bank’s primary interested parties: the bank’s
shareholders and cus- tomers, the bank’s management and employees, and the
local areas in which the bank has branches.
Since 2002, the bank’s management has taken an active approach to the
recommenda- tions issued on corporate governance, and the bank’s attitude to
corporate governance has been minuted in the annual reports since that year.
When preparing the 2012 annu- al report, the bank’s board of directors and
management assessed the bank’s positions on the individual recommendations. The
bank’s management supports the efforts in the area of corporate governance, and
the bank’s management and board of directors have elected to adopt almost all
of the recommendations in this area. In individual areas, the bank’s management
has, however, elected either not to follow the recommendations or to follow
them only in part. The bank currently follows 74 of the 79 recommendations.
Please note in this respect that election periods and procedures for the
periods served
by members of the shareholders’ committee and the board of directors are
considered appropriate. The board of directors does, however, believe that the
procedure for elec- tion to the board can usefully be changed so that
candidates can be found both among and beyond the membership of the
shareholders’ committee. This point is expected to be put to the general
meeting for approval. The detailed statement concerning corpo- rate management
required in the management report under current accounting rules is published
on the bank’s website.
See www.landbobanken.dk/god-selskabsledelse. The statement in question also
indi- cates the bank’s management’s position on the supplementary
recommendations on good corporate governance etc. issued by the Danish Bankers’
Association.
For information on the board members’ other managerial activities, see pages 85
and
86.
Statutory statement on social responsibility
Throughout its long history, Ringkjøbing Landbobank has always been strongly
an- chored in the local communities in which the bank is represented, and the
bank has considered it an entirely natural part of its business basis to
support the local area’s development. Via the management’s implementation of
and position on the recommen- dations on good corporate governance, the bank is
also focused on those matters which govern the interaction with the bank’s
primary stakeholders, namely its shareholders
and customers, its management and employees, and the local areas in which the
bank’s branches are situated. The bank’s policy in the area of social
responsibility is based on a desire to run a responsible and value-creating
bank which works consciously to create the best results for shareholders,
customers, employees, the local community and the
surrounding environment and the bank as a financial institution. The bank’s
policy in the area of social responsibility is given on its website,
www.landbobanken.dk/samfundsan- svar.
Some of the bank’s activities in 2012 for its main stakeholders are described
below.
Customers
During the year, the bank continued its work on development of its advisory
service for customers. This includes:
• Further development of the bank’s concept within the area of advice on
pensions, where the bank’s advisers give the customer a general view of pension
saving schemes and cover in the event of invalidity and death. The bank has a
concept which, in a simple and clear way, gives the customer a sound
understanding in a highly complex area, and where the customer is then in a
position to make some decisions which are especially critical for his or her
financial situation. On the basis of this concept, the bank is systematically
proceeding to contact those customers who could have a need for advice in this
area.
• Implementation of the concept of all-inclusive advice where, in cooperation
with the customer, the bank prepares a review of the customer’s total financial
situation, including loans, insurances, pension etc.
• Development of means of communication between the bank and its customers,
in- cluding development of easily understandable elements on the bank’s website
which give the customer a solid insight into some of the bank’s products. The
banks Mobile Bank offer is also being extended to include iPad.
• The strength of Private Banking advice, where the bank’s asset advisers
provide spe-
cialised advice to customers with complex financial situations.
Employees
The bank initiated the following in 2012 in relation to employees:
• Signing a new collective agreement with the possibility of flexible
arrangements.
• Held employee development interviews with all employees.
• Certification of advisers in financial products to ensure their provision
of competent
advice.
• Training of all advisers in advising on pensions.
• In-service training for a large number of employees in provision of
all-round advice.
• Appointment of a total of 15 employees, including two new trainees in 2012
and seven new trainees in 2013. Apart from appointing the new trainees, the
bank held a career day to give secondary school students a basis for making a
rational career choice.
• Implementation of new routines and systems to increase the efficiency of
the bank’s administrative processes. This also includes continuation of the
campaign “Overview means profit”, which ensures employees a better overview of
their own duties. In the bank’s experience, this ensures happier employees,
less stress and better provision of advice to the bank’s customers.
• Supported social activities in the bank, including financial support for
the bank’s staff
association.
The environment
As a bank and a workplace, the bank accepts shared responsibility for the
environment. In 2012 this included:
• New loans of about DKK 400 million for wind turbine financing and major
solar cell
systems.
• Development of a concept for financing solar cell systems for private homes.
• Financing of energy-saving initiatives.
• Established a partnership with interactive web portal to help the bank’s
customers to
identify energy-saving initiatives in their homes.
As a workplace, the environmental initiatives included:
• Focus on conversion of procedures to electronic case handling. This will
reduce the
bank’s environmental impact on an on-going basis.
• Replacement of air conditioning system in the bank’s head office.
• Holding of video meetings with Bankdata to the greatest possible extent to
reduce
driving to Bankdatas headquater in Fredericia.
• Planning of training and meeting activities and coordination to reduce the
associated
travel as much as possible.
Local community
Given its position in the local area, the bank has a natural wish to support
the area’s development. Activities in 2012 included the following:
• Total payment of DKK 151 million in corporation tax and wages, of which DKK
138
million was corporation tax.
• Allocation of a total of about DKK 1 million from the following funds:
• Sdr. Lem Andelskasses Fond
• Tarm Banks Jubilæumsfond
• Bankens Resultatfond
• Sponsorship agreements with more than 700 clubs and associations in the
bank’s lo- cal area. This includes subsidies for cultural activities, general
and elite sports in order to support the goal of putting the local community on
the map. Major activities dur- ing the year included support for:
• Biopartner - Ringkøbing cinema
• Artificial grass pitch for SG-Skjern
• Generator - music venue in Ringkøbing
• New swimming facility in Ringkøbing
• and many more
The bank’s website - www.landbobanken.dk/samfundsansvar - provides a detailed
ac- count of the bank’s social responsibility.
Statutory statement on management
The board of directors and the shareholders’ committee
The bank’s shareholders’ committee has 25 members elected for four years at a
time. The bank’s board of directors has eight members - six elected by
shareholders and two elected by employees. The bank’s management does not sit
on the board, but takes
part in board meetings. The board holds 10 - 12 meetings a year. The board of
directors is elected by the bank’s shareholders’ committee and is comprised in
a manner which ensures a broad range of expertise and compliance with a special
expertise profile speci- fied by the board. Board members are elected for
four-year terms. In accordance with the recommendation of the committee on good
corporate governance, at least half the board members must be independent.
Members of the board of directors and members of the shareholders’ committee
must retire from the shareholders’ committee at the latest at the first annual
general meeting after they have reached the age of 67.
Committee of the board of directors
The bank’s board of directors has appointed an audit committee to monitor and
check accounting and auditing matters and prepare the board’s processing of
matters related to accounting and auditing. The committee consists of the
bank’s full board of directors.
The board has also appointed an independent board member (the chairman of the
au- diting committee) who possesses the requisite qualifications within
accounting, includ- ing the process of presenting the financial statements,
internal controls and risk man- agement etc. Other committees, including the
remuneration committee, also comprise the full board of directors.
Presentation of the financial statements
The board of directors, management and the audit committee regularly ensure
that the bank’s control and risk management are functioning satisfactorily in
connection with the process of presentation of the financial statements. The
object is to ensure reasonable, but not absolute, assurance that unlawful use
of assets, losses and/or material errors and omissions are avoided in
connection with the presentation of the financial statements. Management
regularly monitors compliance with relevant legislation, other regula-
tions and provisions in connection with the presentation of the financial
statements and
reports regularly to the board of directors.
Evaluation etc.
The board of directors made a comprehensive self-evaluation during 2012. As a
basis for the evaluation, the board first identified the expertise which it
should possess in order to be able to perform its activities in a competent
way. This was done on the basis of the bank’s business model and a
comprehensive analysis of the risks associated therewith.
The general expertise required includes a knowledge of the following matters:
• Credit
• Market risk
• Liquidity
• Operations
• Accounting and capital
• Statutory framework for financial activities
Each individual board member assessed his or her own qualifications on the
basis of the specified requirements. The result was discussed by the board, and
its assessment was that as a whole, it possesses all the required expertise and
qualifications.
In July 2012, the FSA issued new guidelines on the work of the board of
directors etc. An expectation was expressed to the effect that for banks in
groups I and II, there should be at least one board member with relevant
experience in managing a bank. Ringkjøbing Landbobank’s current board of
directors has extensive managerial experi-
ence and insight, but none of its members has the formal qualifications as
prescribed by
the FSA.
Proposed change to the board of directors
Although the current board of directors is fully qualified with respect to its
duties, it is very much wished that in future, the board can comply with the
expectation of at least one member with managerial experience in the financial
sector. Board member Keld Hansen has advised that he wishes to retire in
connection with the next general meeting and election of the board of
directors. The board wishes that the vacancy be filled by a member with
managerial experience in the financial sector.
The bank has accordingly had some discussions with Jørgen Lund, age 63, who,
after a long career in a number of managerial posts in Jyske Bank, elected to
retire from his permanent position with the latter bank. Mr Lund has declared
his willingness to accept a position on the board of directors of Ringkjøbing
Landbobank. Mr Lund will replace Keld Hansen, grocer, of Søndervig, who is
retiring at the next general meeting after 11 years on the bank’s board of
directors.
Proposed change to election procedure for the board of directors
The bank’s articles of association currently prescribe that members of the
board of direc- tors be elected by the shareholders’ committee from among the
committee’s members. This procedure can make it difficult to ensure that the
board has members with special expertise - e.g. members with managerial
experience from a financial company. The board of directors and the
shareholders’ committee have therefore decided to recom- mend a change in the
articles of association for approval by the general meeting in
2013 to enable the shareholders’ committee to elect board members who are not
mem- bers of the committee.
Payment policy
The remuneration policy for management and the board of directors of
Ringkjøbing Landbobank is that the bank’s management is paid remuneration which
is both in line with the market and reflects the management’s achievements for
the bank. It has also been decided that the remuneration paid to management and
the board of directors should be a fixed amount without any form of incentive
component. Neither will others involved in risk taking and employees in control
functions be paid variable salary com- ponents outside the framework of the
collective agreement which was entered into
Supplementary information on members of management, including other managerial
activities
Reference is made to pages 85 - 87 of this annual report for supplementary
information on the bank’s management, including information on their other
managerial activities.
Information on listed companies
In accordance with Section 133a of the statutory order on financial reports for
credit
institutions etc., we advise as follows:
The bank’s share capital on 31 December 2012 was DKK 24.7 million in 4,940,000
nom. DKK 5 shares.
The bank has only one share class, and the entire share capital, and thus all
shares, are listed on the NASDAQ OMX Copenhagen. There are no restrictions on
the shares’ nego- tiability.
ATP, Hillerød and Parvus Asset Management (UK) LLP have advised that they own
more
than 5% of the bank’s share capital.
The following applies to exercising the right to vote:
Each shareholding up to and including nom. DKK 500 carries one vote, and
sharehold- ings above this level carry a total of two votes, which is the
highest number of votes a shareholder can exercise when the shares are listed
in the company’s register of share- holders or when the shareholder has
reported and documented his or her right.
The members of the bank’s board of directors are elected by and from among the
mem- bers of the bank’s shareholders’ committee.
The following applies to changes to the bank’s articles of association:
A decision to change the articles of association is only valid if the proposal
is agreed upon by at least two thirds of votes cast and of the share capital
with voting rights rep- resented at the general meeting.
The board of directors has the following powers with respect to the possibility
of issuing shares (as per the articles of association):
Following consultation with the shareholders’ committee, the board of directors
is authorised to increase the share capital by nom. DKK 14,210,980 to nom. DKK
38,910,980 in one or more rounds. This authorisation is currently valid until
24 February
2017.
The board of directors has the following powers with respect to the possibility
of acquir- ing own shares:
The bank’s annual general meeting of 29 February 2012 has authorised the board
of directors, before the next annual general meeting and in accordance with
applicable
law, to permit the bank to acquire its own shares to a total nominal value of
10% of the
bank’s share capital, such that the shares can be acquired at the current
listed price +/-
10%.
At last year’s general meeting, the board was also authorised to buy 100,000
shares. This authorisation is expected to be fully used before this year’s
general meeting.
ST A TEMEN T , REPORT S AND ACCOUNT S
Page
40 Management’s statement
41 Auditors’ reports
44 Profit and loss account
44 Proposed distribution of profit
45 Core earnings
46 Balance sheet
48 Statement of shareholders’ equity
49 Capital adequacy computation
50 Cash flow statement
51 Accounting policies
55 Notes to the annual report
78 Five year main figures
80 Five year key figures
Statement by management and the board of directors
The board of directors and management have today considered and approved the
annual report of
Ringkjøbing Landbobank A/S for the financial year 1 January - 31 December 2012.
The annual financial statements was prepared in accordance with the provisions
of the Act on Financial Activities and other Danish requirements regarding
information in the annual financial statements of listed financial companies.
We consider the chosen accounting policies to be appropriate and the esti-
mates made to be responsible, so that the annual report provides a true and
fair picture of the bank’s assets, liabilities and financial position as of 31
December 2012 and the result of the bank’s activities and cash flows for the
financial year 1 January - 31 December 2012. We also believe that the manage-
ment report contains a true and fair account of the bank’s activities and
financial position as well as a description of the most important risks and
uncertainties which can affect the bank.
The annual report is recommended for approval by the general meeting.
Ringkøbing, 30 January 2013
Management:
John Bull Fisker
CEO
Ringkøbing, 30 January 2013
Board of directors:
Jens Lykke Kjeldsen Gravers Kjærgaard
Chairman Deputy Chairman
Gert Asmussen Inge Sandgrav Bak
Keld Hansen Martin Krogh Pedersen
Bo Bennedsgaard Gitte E. S. Vigsø
Employee board member Employee board member
Internal auditor’s declarations
To the shareholders of Ringkjøbing Landbobank A/S Certification of the annual
financial statements
I have audited the annual financial statements of Ringkjøbing Landbobank A/S
for the financial year
1 January - 31 December 2012, covering the profit and loss account and the
statement of total income,
core result, balance sheet, statement of changes in equity, statement of
capital adequacy, cash flow
statement and notes, including accounting policies and five years’ main and key
figures. The annual
financial statements were prepared in accordance with the Danish Act on
Financial Activities.
The audit
The audit was performed on the basis of the Danish FSA’s statutory order on the
auditing of financial
companies etc. and in accordance with international auditing standards. This
requires that the audit
be planned and performed to achieve a high degree of assurance that the
financial statements do not
contain material misstatements.
The audit was performed in accordance with the division of labour agreed with
the external auditor, and included an assessment of established procedures and
internal checks and balances, including the risk management set by management
with respect to reporting processes and material business risks. I have made a
random sampling of the basis for amounts and other information in the financial
state- ments on grounds of probability and risk. The audit also included an
assessment of whether manage- ment’s choice of accounting policies is
appropriate, whether management’s accounting estimates are reasonable, and the
total presentation of the financial statements.
I participated in the audit of all material and risk areas, and I believe that
the basis for the audit is ad- equate and appropriate for my conclusion.
Our audit did not give rise to any qualifications.
Conclusion
I believe that the established procedures and internal controls, including the
risk management chosen by management for the bank’s reporting processes and
material business risks, are functioning satisfac- torily.
I also believe that the annual financial statements provide a true and fair
picture of the bank’s assets, liabilities and financial position as of 31
December 2012 and of the result of the bank’s activities and cash flows for the
financial year 1 January - 31 December 2012 in accordance with the Danish act
on financial activities.
Statement on management report
As required under the act on financial activities, I have read management’s
report. I have not performed any further actions in addition to the audit of
the annual financial statements. On this basis, I believe that the information
in management’s report is in agreement with the annual financial statements.
Ringkøbing, 30 January 2013
Henrik Haugaard
Chief auditor
The independent auditor’s declaration
To the shareholders of Ringkjøbing Landbobank A/S Endorsement of the annual
financial statements
We have audited the annual financial statements for Ringkjøbing Landbobank A/S
for the financial year
1 January -31 December 2012, covering the profit and loss account and the
statement of total gains
and losses, the core earnings, balance sheet, statement of equity, the capital
adequacy ratio, the cash
flow statement and notes, including the accounting policy and five years’ main
and key figures. The an-
nual financial statements were prepared in accordance with the Danish act on
financial activities.
Management’s responsibility for the annual financial statements
Management is responsible for the preparation of annual financial statements
which provide a true and fair picture in accordance with the act on financial
activities. Management is also responsible for the internal controls deemed
necessary to prepare annual financial statements without material misstate-
ments, whether attributable to fraud or error.
The auditor’s responsibility
Our responsibility is to express a conclusion on the annual financial
statements on the basis of our audit. We performed the audit in accordance with
international auditing standards and additional require- ments under Danish
auditing law. These require that we observe ethical requirements and plan and
perform the audit in order to achieve a high degree of assurance that the
annual financial statements
do not contain material misstatements.
An audit covers the performance of auditing actions to gain evidence for
amounts and information in the financial statements. The chosen actions depend
on the auditor’s assessment, including an assess- ment of risks of material
misstatements in the financial statements whether attributable to fraud of
error. In the risk assessment, the auditor considers internal controls that are
relevant for the company’s
preparation of annual financial statements which provide a true and fair
picture. The object is to design audit actions which are appropriate under the
circumstances, but not to express a conclusion on the effectiveness of the
company’s internal controls. An audit also includes an assessment of whether
management’s choice of accounting policies is appropriate and whether
management’s estimates are reasonable, as well as an assessment of the total
presentation of the financial statements.
We believe that the evidence we obtained for our audit is an appropriate basis
for our conclusion.
Our audit did not give rise to any qualifications.
Conclusion
We believe that the annual financial statements provide a true and fair picture
of the company’s assets, liabilities and financial position as of 31 December
2012 and of the result of the company’s activities and cash flows for the
financial year 1 January-31 December 2012 in accordance with the act on finan-
cial activities.
Statement on the management report
In accordance with the act on financial activities, we have read the management
report. We have not performed any further actions in addition to the audit of
the annual financial statements. We believe on this basis that the information
in the management report is in accordance with the annual financial statements.
Ringkøbing, 30 January 2013
PricewaterhouseCoopers
State-authorised partnership
H. C. Krogh Alex Nyholm
State-authorised State-authorised
public accountant public accountant
Note no.
2012
DKK 1,000
2011
DKK 1,000
1 Interest receivable 834,021 858,257
2 Interest payable 200,764 245,291
Net income from interest 633,257 612,966
3 Dividend on capital shares etc. 1,463 1,111
4 Income from fees and commissions 210,516 158,303
4 Fees and commissions paid 24,029 24,312
Net income from interest and fees 821,207 748,068
5 Value adjustments +46,957 +16,386
Other operating income 3,303 4,535
6,7,8,9 Staff and administration costs 252,796 244,068
11 Amortisation, depreciation and write-downs on intangible and tangible assets
3,233
4,375
Other operating costs
Miscellaneous other operating costs 133 381
Costs Deposit Guarantee Fund 10,281 11,178
15 Write-downs on loans and other debtors -156,844 -128,799
Result of capital shares in associated companies +5 +11
Profit before tax 448,185 380,199
12 Tax 120,188 94,128
Profit after tax 327,997 286,071
Other comprehensive income 0 0
Total comprehensive income 327,997 286,071
P ROPOSED DISTRIBUTION OF PROFIT
2012
DKK 1,000 2011
DKK 1,000
Profit after tax 327,997 286,071
Total amount available for distribution 327,997 286,071
Dividend 69,160 65,520
Charitable purposes 500 500
Transferred to reserve for net revaluation under the intrinsic value method
+5
+11
Appropriation to own funds 258,332 220,040
Total distribution of the amount available 327,997 286,071
2012
DKK 1,000 2011
DKK 1,000
Net income from interest 614,617 606,576
Net income from fees and provisions excl. commission 162,371 115,200
Income from sector shares 5,939 4,437
Foreign exchange income 12,591 17,914
Other operating income etc. 3,303 4,535
Total core income excl. trade income 798,821 748,662
Trade income 24,116 18,791
Total core income 822,937 767,453
Staff and administration costs 252,796 244,068
Amortisations, depreciations and write-downs on intangible and tangible assets
3,233
4,375
Other operating costs 8,705 381
Total costs etc. 264,734 248,824
Core earnings before write-downs on loans 558,203 518,629
Write-downs on loans and other debtors -156,844 -128,799
Core earnings 401,359 389,830
Result for portfolio +48,535 +1,547
Expenses for bank packages 1,709 11,178
Profit before tax 448,185 380,199
Tax
Profit after tax 120,188
327,997 94,128
286,071
Note End Dec. 2012 End Dec. 2011
no. DKK 1,000 DKK 1,000
Assets
Cash in hand and claims at call on central banks 483,188 33,935
13 Claims on credit institutions and central banks
Claims at notice on central banks 176,002 186,989
Money market operations and bilateral loans - term to
maturity under 1 year 92,578 536,453
Bilateral loans - term to maturity over 1 year 104,720 590,876
14,15,16 Loans and other debtors at amortised cost price 12,424,139 12,746,560
Loans and other debtors at amortised cost price 11,594,880 11,938,197
Wind turbine loans with direct funding 829,259 808,363
17 Bonds at current value 3,783,258 2,755,912
18 Shares etc. 229,541 249,054
Capital shares in associated companies 543 538
19 Land and buildings total 75,830 74,722
Investment properties 8,165 6,681
Domicile properties 67,665 68,041
20 Other tangible assets 3,981 4,893
Actual tax assets 40,370 12,255
Temporary assets 1,400 1,382
21 Other assets 259,351 348,567
Periodic-defined items 6,645 6,887
Total assets 17,681,546 17,549,023
Note no. End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
Liabilities and equity
22 Debt to credit institutions and central banks
Money market operations and bilateral credits - term to maturity under 1 year
294,208
285,028
Bilateral credits - term to maturity over 1 year 74,604 148,684
Bilateral credits from the KfW Bankengruppe 829,259 808,363
23 Deposits and other debts 12,866,748 12,755,415
24 Issued bonds at amortised cost price 340,809 338,958
25 Other liabilities 190,830 301,813
Periodic-defined items 205 183
Total debt 14,596,663 14,638,444
26
Provisions for pensions and similar liabilities
0
5,146
27 Provisions for deferred tax 15,151 4,789
15 Provisions for losses on guarantees 10,958 5,038
Total provisions for liabilities 26,109 14,973
28
Subordinated loan capital
199,607
198,014
28 Hybrid core capital 183,027 214,472
Total subordinated debt 382,634 412,486
29
Share capital
24,700
25,200
Reserve for net revaluation under the intrinsic value method 192 187
Profit carried forward 2,581,588 2,391,713
Proposed dividend etc. 69,660 66,020
Total shareholders’ equity 2,676,140 2,483,120
Total liabilities and equity 17,681,546 17,549,023
30
Own capital shares
31 Contingent liabilities etc.
Reserve for net revalua- tion under the intrin-
Profit
Proposed
Total
Share sic value carried dividend shareholders’
DKK 1,000 capital method forward etc. equity
2012
Shareholders’ equity at the end of the previous financial year
25,200
187
2,391,713
66,020
2,483,120
Reduction of share capital -500 500 0
Dividend etc. paid -66,020 -66,020
Dividend received on own shares 1,326 1,326
Shareholders’ equity after allocation of dividend etc.
24,700
187
2,393,539
0
2,418,426
Purchase and sale of own shares -70,283 -70,283
Total comprehensive income 5 258,332 69,660 327,997
Shareholders’ equity on the balance sheet date
24,700
192
2,581,588
69,660
2,676,140
2011
Shareholders’ equity at the end of the previous financial year
25,200
176
2,225,988
60,980
2,312,344
Dividend etc. paid -60,980 -60,980
Dividend received on own shares 168 168
Shareholders’ equity after allocation of dividend etc.
25,200
176
2,226,156
0
2,251,532
Purchase and sale of own shares -58,391 -58,391
Other shareholders’ equity items 3,908 3,908
Total comprehensive income 11 220,040 66,020 286,071
Shareholders’ equity on the balance sheet date
25,200
187
2,391,713
66,020
2,483,120
Calculated pursuant to the Executive order on Capital Adequacy issued by the
Danish Financial Supervisory Authority.
End Dec. 2012 End Dec. 2011
DKK 1,000 DKK 1,000
Weighted items with credit and counterpart risks 10,601,717 11,041,407
Market risk 1,219,598 750,457
Operational risk 1,483,500 1,396,138
Total risk-weighted items 13,304,815 13,188,002
Share capital 24,700 25,200
Reserve for net revaluation under the intrinsic value method 192 187
Profit carried forward 2,651,248 2,457,733
Core capital 2,676,140 2,483,120
Proposed dividend etc. -69,660 -66,020
Addition to/deduction from the core capital -192 -187
Core capital after deductions 2,606,288 2,416,913
Hybrid core capital 172,000 200,000
Core capital after deductions incl. hybrid core capital 2,778,288 2,616,913
Subordinated loan capital 201,431 200,723
Addition to/deduction from the capital base 192 187
Capital base after deductions 2,979,911 2,817,823
Core capital ratio excl. hybrid core capital (%) 19,6 18.3
Core capital ratio (%) 20,9 19.8
Solvency ratio (%) 22,4 21.4
Capital base requirements under Section 124 (2,1) of the
Danish Financial Business Act 1,064,385 1,055,040
2012
DKK 1,000 2011
DKK 1,000
Operation activities
Profit for the financial year 327,997 286,071
Amortisations, depreciations and write-downs on intangible and tangible assets
3,233
4,375
Write-downs on loans and debtors etc. 198,529 164,539
Items not affecting liquidity 11,135 5,127
Adjusted result of operations 540,894 460,112
Changes in operating capital
Claims on and debt to credit institutions etc., net 909,261 -1,478,199
Loans and other debtors at amortised cost price 123,892 240,117
Securities, not liquid and pledged 234,305 100,393
Deposits and other debts 111,333 1,093,761
Issued bonds at amortised cost price 1,851 1,341
Subordinated capital -29,852 -284,513
Other assets and liabilities, net -48,862 -161,852
Cash flows from operating activities 1,842,822 -28,840
Investment activities
Intangible and tangible assets -4,207 -4,268
Cash flows from investment activities -4,207 -4,268
Financing activities
Paid dividend, net -64,694 -60,812
Own shares etc. -70,283 -58,391
Cash flows from financing activities -134,977 -119,203
Total effect on liquidity for the year
1,703,638
-152,311
Cash and cash equivalents, beginning of year 2,660,366 2,812,677
Cash and cash equivalents, end of year 4,364,004 2,660,366
Cash and cash equivalents, end of year specified thus:
Cash in hand and claims at call on central banks 483,188 33,935
Claims on credit institutions and central banks 217,146 204,899
Securities, unpledged 3,663,670 2,421.532
Total cash and cash equivalents, end of year 4,364,004 2,660,366
The cash flow statement cannot be derived from this annual report, and the
statement has also been adapted
to the special statement of accounts etc. for banks.
Basis for preparing the annual report
General
The annual report is prepared in accordance with the provisions of the Danish
Financial Business Act
and the applicable Executive Order on Financial Reports for Credit Institutions
and Investment Compa-
nies etc. The annual report is also prepared in accordance with the disclosure
requirements of NASDAQ
OMX Copenhagen (Copenhagen Stock Exchange), to the extent to which the Danish
Financial Business
Act, the Executive Order on Financial Reports for Credit Institutions and
Investment Companies etc.
or other Executive Orders from the Danish Financial Supervisory Authority do
not specify a different
practice.
The annual report is presented in DKK rounded to the nearest 1,000 kroner. The
accounting policies are unchanged relative to last year.
Inclusion and measuring - general
Assets are included in the balance sheet when it is probable that future
financial advantages will accrue
to the bank and the value can be measured reliably. Liabilities are included in
the balance sheet, when
they are probable, and that they can be measured reliably.
Income is included in the profit and loss account in step with its earning.
Costs paid to achieve the income for the year are included in the profit and
loss account, and value adjustments made to financial assets, financial
liabilities and derivative financial instruments are also included in the
profit and loss account.
Regarding the criteria for inclusion and the basis of measurement we refer to
the following sections.
Accounting estimates
In computing the book value of certain assets and liabilities, an estimate has
been made of how future
events will affect the value of the assets and liabilities on the balance sheet
date.
The estimates made are based on assumptions which management judges to be
responsible, but which are not certain. The final actual results may thus
deviate from the estimates as the bank is subject to risks and uncertainties
which can affect the results.
The most important estimates concern write-downs on loans and debtors,
computation of current values for unlisted financial instruments, and
provisions for liabilities. The most important estimates on write-downs on
loans and debtors are associated with quantification of the risk that no future
payments will be received.
Foreign currency
Assets and liabilities in foreign currency are converted to Danish kroner at
the closing exchange rate for
the currency on balance sheet date, corresponding to the rate published by the
Central Bank of Den-
mark. Income and expenses are converted continuously at the exchange rate on
the transaction date.
Financial instruments - general
In general, the bank measures financial assets and liabilities at current value
on first inclusion. Measuring
is subsequently made at current value unless otherwise specifically emerges
from the following sections
on the individual accounts items. The bank uses the date of payment as the date
of entry for financial
instruments.
Derivative financial instruments
Forward transactions, interest rate swaps and other derivative financial
instruments are included at cur-
rent value on balance sheet date.
Hedging transactions which, under the terms of the Danish Financial Supervisory
Authority’s Executive Order on Financial Reports for Credit Institutions and
Investment Companies etc. are regarded as hedg- ing at current value for
accounting purposes are included at current value on the balance sheet date
with respect to both the hedging instrument and the hedged part of the
financial instrument.
All value adjustments concerning derivative financial instruments and items
subject to hedging for ac-
counting purposes are entered under the item »Value adjustments« in the profit
and loss account.
The profit and loss account
Interest income
Interest income is included on the basis of the effective interest method,
under which interest income
also includes the allocated portion of establishment fees etc. which are
considered to be a part of the
effective interest on the loan.
On loans which in full or in part have been written down, the interest income
relating to the written- down part is entered under the item »Write-downs on
loans and debtors etc.«.
Income from fees and commissions, net
Fees and commissions relating to loans and receivables are recognized as part
of the carrying amount
of loans and receivables and are recognized in the profit and loss account over
the term of the loans
and receivables as part of the effective interest rate on the loans as interest
income, as referred to in
the above section »Interest income«. Commissions relating to garantees are
carried to income over the
term of the garantees. Income generated upon performing a given transaction,
including securities and
custodianship fees plus payment handling fees, are recognised as income when
the transaction has been
performed.
Staff and administration costs
Staff and administration costs comprise among other things salaries, pension
costs, IT-costs, etc.
Write-downs on loans and debtors etc.
This item includes losses and write-downs on loans and other debtors and losses
and provisions on
guarantees. The item also includes losses and write-downs on claims on credit
institutions and losses
and provisions on the national bank package I.
Tax
Tax on the profit for the year is booked as a cost in the profit and loss
account.
Net deferred tax is calculated on the items which cover the temporary
differences in accounting and booking of taxable income and expenses at the tax
rate applicable on the balance sheet date.
Core earnings
The core earnings show a statement of the bank’s income and costs. In total,
the core earnings contain
the same items as the profit and loss account but with a different degree of
specification.
The statement divides the year’s result into three main elements; core
earnings, result for the portfolio, and costs of the Guarantee Fund for
Depositors and Investors. Interest and dividends are included in the result for
the portfolio and funding costs for the bank’s trading portfolio and
extraordinary adjustments to sector shares are deducted.
The balance sheet
Claims on credit institutions and central banks
The first inclusion is made at current value plus transactions costs, less
establishment fees etc., and
subsequent measurement is at amortised cost price, but reference is made to the
section »Derivative
financial instruments« with respect to hedging for accounting purposes.
Loans and other debtors
The first inclusion is made at current value plus transaction costs, less
establishment fees etc., and
subsequent measurement is at amortised cost price. Establishment fees etc.
which are comparable with
ongoing interest payments, and are thus deemed to be an integral part of the
effective interest on the
loan, are accrued over the life of the individual loan.
If an objective indication of impairment is found on an individually assessed
loan, a write-down is made to cover the bank’s loss on the basis of expected
future payments series based on an assessment of the most likely outcome.
With respect to loans and receivables which have not been written down
individually, a group-wise as- sessment is made of whether there is an
objective indication of impairment in value for the group.
This group-wise assessment is made on groups of loans and debtors with uniform
characteristics with respect to credit risk. 12 groups are used, one of public
clients, one of private clients and 10 of business clients, the latter further
grouped by sector.
The group-wise assessment is made on the basis of a segmentation model
developed by the Association of Local Banks, Savings Banks and Cooperative
Savings Banks in Denmark, which undertakes the ongoing maintenance and
development. The segmentation model sets the relationship in the individual
groups
between losses suffered and a number of significant explanatory macroeconomic
variables via a linear regression analysis. The explanatory macroeconomic
variables include unemployment, house prices, interest rates, number of
bankruptcies/forced auctions etc.
The macroeconomic segmentation model is initially calculated on the basis of
loss data for the entire banking sector. The bank has therefore made an
assessment of whether the model estimates reflect the credit risk for the
bank’s own loan portfolio.
This assessment has resulted in an adaptation of the estimates under the model
to the bank’s own circumstances, under which the adapted estimates form the
basis for calculation of the group write- downs. The adjusted estimates were
further corrected to take account of the changed economic conditions. For each
group of loans and debtors, there is an estimate which expresses the percentage
decrease in value associated with a given group of loans and debtors on the
balance sheet date. A comparison of the individual loan’s current risk of loss
with the loan’s original risk of loss and its risk of loss at the beginning of
the current accounting period provides the individual loan’s contribution to
the group write-downs. The write-down is calculated as the difference between
the book value and the discounted value of the expected future payments.
Changes in write-downs which have been made are adjusted in the profit and loss
account under the
item »Write-downs on loans and debtors etc.«.
Bonds and shares
Securities which are listed on a stock exchange are included at current value,
determined on the basis
of the closing price on balance sheet date.
Unlisted securities are also included at current value, computed on the basis
of what the price would be in a transaction between independent parties. The
management takes an active approach to the calculation of this market value.
All ongoing value adjustments to listed and unlisted securities are entered in
operations under the item
»Value adjustments«.
Capital shares in associated companies
Capital shares in associated companies are entered in the balance sheet under
the intrinsic value method.
Land and buildings
Land and buildings cover the two items »Investment properties« and »Domicile
properties«. The prop-
erties which house the bank’s branches are included under domicile properties,
while other properties
are considered to be investment properties.
Investment properties are included in the balance sheet at current value,
computed under the yield method. Ongoing changes in value concerning investment
properties are included in the profit and loss account.
Domicile properties are included in the balance sheet at reassessed value,
which is the current value computed on the basis of the yield method less
cumulative depreciation and any loss due to impairment. Depreciation is
calculated on the basis of expected useful life, which is 50 years, on the
basis of depreciation computed as cost price less scrap value. Depreciations
and losses due to impairment are included in the profit and loss account, while
increases in the reassessed value are included directly on the shareholders’
equity under the item »Provisions for revaluation« unless the increase
corresponds to a reduction in value which was previously included in the profit
and loss account.
Other tangible assets
Other tangible assets including operating equipment are included in the balance
sheet at cost price less
cumulative depreciation and write-downs for any loss due to impairment.
Depreciations are calculated
on the basis of the assets’ expected lives, which are 1-5 years, on the basis
of depreciation computed
as cost price less scrap value. Depreciations and losses due to impairment are
included in the profit and
loss account.
Temporary assets
Temporary assets comprise assets taken over as a result of the unwinding of
customer engagements, the
intention being to sell off the assets as soon as possible. Temporary assets
are included at cost price on
transfer and will subsequently be written down to a possibly lower realisation
value.
Other assets
Other assets include interest and commissions receivable as well as the
positive market value of deriva-
tive financial instruments.
Tax
Actual tax assets and actual tax liabilities are recognized in the balance
sheet as tax calculated on the
taxable income for the year, adjusted for tax paid on account.
A deferred tax liability is allocated under the item »Provisions for deferred
tax« and if a deferred tax as- set is booked under the item »Deferred tax
assets« following a cautious assessment of the asset’s value. Debt to credit
institutions and central banks / Deposits and other debts / Issued bonds at
amor- tised cost price / Subordinated debt
Measurement is at amortised cost price, but reference is made to the section
»Derivative financial in- struments« with respect to hedging for accounting
purposes.
Other liabilities
Other liabilities include interest and commissions payable and the negative
marked value of derivative
financial instruments.
Provisions for liabilities
Provisions for liabilities include mainly provisions for pensions, deferred tax
and losses on guarantees. A provision is recognized in respect of a guarantee
or an irrevocable credit commitment if it is likely that the guarantee or the
credit commitment will be exercised and the amount of the commitment can be
reliably determined. Provisions are based on Management’s best estimate of the
amount of the commitments. In measuring provisions for liabilities, discounting
to net present value is made where deemed material.
Various informations
Contingent liabilities/guarantees
The bank’s outstanding guarantees are given in the notes under the item
»Contingent liabilities«. If it is considered likely that an outstanding
guarantee will incur a loss to the bank, the liability is given under the item
»Provisions for losses on guarantees« and booked under costs in the profit and
loss account under the item »Write-downs on loans and debtors etc.«
Cash flow statement
The cash flow statement is presented in accordance with the indirect method on
the basis of the result
for the year, adjusted for non-liquid items.
The statement shows net changes in the balance sheet, and on some points it
will therefore not provide
the full picture of the actual cash flows.
The cash flows from the operating activity are computed as the result for the
year, adjusted for non- liquid items and changes in operating capital. Cash
flows from the investment activity cover purchases and sale of fixed assets
etc. Cash flows from the financing activity cover movements and allocations in
subordinated debt and in shareholders’ equity.
Liquid assets cover cash in hand, claims at call on the Central Bank of
Denmark, fully secured and liquid claims at call on banks, unpledged
certificates of deposit issued by the Central Bank of Denmark, and secure and
easily saleable listed unpledged securities, under Section 152 of the Danish
Financial Business Act. Information and key figures
»Total capital base« on page 3 under »Main figures for the bank« is computed as
the banks capital base
after deductions.
The »Pre-tax return on equity at the beginning of the year«, and the »Return on
equity after tax at
the beginning of the year« as given on page 3 under »Key figures for the bank«
were calculated after
deduction of dividend etc., net.
»Key figures per DKK 5 share« on page 3 were calculated on the basis of 2012:
4,840,000 shares, 2011:
4,940,000 shares and 2008 to 2010: 5,040,000 shares.
All calculations etc. concerning write-downs on pages 3, 8 and 20 were made
exclusive of amounts under the national bank package I etc.
With effect from 2008, the bank changed the calculation of the key figure »Rate
of costs«. The key figure is now calculated as »Total costs etc.« (including
depreciation on tangible fixed assets) divided by »Total core income«
multiplied by 100. The comparative figures on the pages 3 and 7 have been
adjusted for the change method of calculation.
The key figure “Total large exposures” have been corrected for 2011 and 2010 so
that outstanding accounts of less than one billion kroner with credit
institutions are not included under major commit- ments as per the Danish
Financial Supervisory Authority guideline on the reporting of accounts.
It is noted, that the individual solvency requirement (reported at page 12, 16
and 17) not is audited.
Note 2012 2011
no. DKK 1,000 DKK 1,000
1 Interest receivable
Claims on credit institutions and central banks 10,943 38,712
Loans and other debtors 769,656 775,891
Loans - interest concerning the written-down part of loans -41,685 -35,740
Bonds 86,941 58,993
Total derivatives financial instruments, 8,016 20,069
of which
Currency contracts 4,880 9,205
Interest-rate contracts 3,136 10,864
Other interest receivable 150 332
Total interest receivable 834,021 858,257
2 Interest payable
Credit institutions and central banks 27,163 44,311
Deposits and other debts 146,108 169,174
Issued bonds 11,496 12,887
Subordinated debt 15,828 18,605
Other interest payable 169 314
Total interest payable 200,764 245,291
3 Dividend on capital shares etc.
Shares 1,463 1,111
Total dividend on capital shares etc. 1,463 1,111
4 Fees and commissions
Gross income from fees and commissions
Securities trading 28,279 24,117
Asset management 75,271 53,997
Payment handling 20,898 19,679
Loan fees 14,578 7,817
Guarantee commissions 41,371 34,898
Other fees and commissions 30,119 17,795
Total gross income from fees and commissions 210,516 158,303
Fees and commissions paid
Securities trading 4,163 5,326
Asset management 4,289 4,110
Payment handling 2,462 2,061
Loan fees 2,514 1,765
Other fees and commissions 10,601 11,050
Total fees and commissions paid 24,029 24,312
Net income from fees and commissions
Securities trading 24,116 18,791
Asset management 70,982 49,887
Payment handling 18,436 17,618
Loan fees 12,064 6,052
Guarantee commissions 41,371 34,898
Other fees and commissions 19,518 6,745
Total net income from fees and commissions 186,487 133,991
Foreign exchange income 12,591 17,914
Total net income from fees, commissions and
foreign exchange income 199,078 151,905
Note 2012 2011
no. DKK 1,000 DKK 1,000
5 Value adjustments
Loans and other debtors at current value* 6,433 6,746
Bonds 78,318 2,619
Shares etc. -25,862 -1,276
Investment properties -415 -579
Foreign exchange income 12,591 17,914
Total derivative financial instruments, -26,497 -10,050
of which
Interest-rate contracts -26,497 -10,050
Issued bonds 1,041 -744
Other liabilities 1,348 1,756
Total value adjustments 46,957 16,386
* Cf. note 36.
6 Staff and administration costs
Payments to board of managers,
board of directors and shareholders’ committee
Board of managers*/**:
John Fisker:
Fixed payment 3,870 3,274
Bent Naur:
Fixed payment 1,317 3,963
Total payment 5,187 7,237
Board of directors***:
Jens Lykke Kjeldsen, chairman 243 242
Gravers Kjærgaard, deputy chairman 162 162
Gert Asmussen 126 125
Keld Hansen 126 125
Martin Krogh Pedersen 126 83
Inge Sandgrav Bak 126 83
Bo Bennedsgaard 126 125
Gitte E. S. Vigsø 126 104
Total payment 1,161 1,049
Shareholders committee:
Total payment 318 336
Total 6,666 8,622
Staff costs
Salaries 111,848 111,030
Pensions 11,478 11,522
Social security expenses 917 900
Costs depending on number of staff 14,978 14,719
Total 139,221 138,171
Other administration costs 106,909 97,275
Total staff and administration costs 252,796 244,068
* Management does not receive variable payment.
** The management has a company car.
*** The board of directors’ fee is fixed.
Note 2012 2011
no. DKK 1,000 DKK 1,000
7 Number of employees
Average number of employees during the financial year
converted into full-time employees 244 252
8 Payment to major risk takers and control functions
Fixed salary 4.136 -
Variable salary 150 -
Pension 454 -
Total 4.740 -
Number of full-time employees 5 -
9 Incentive programmes
The bank has no incentive programmes.
10 Fee to the auditor elected by the general meeting
Statutory audit 610 603
Other declarations with security 131 27
Advice on tax 5 19
Other services 0 13
Total fee to the auditor elected by the general meeting 746 662
It is noted, that the bank has an internal auditor.
11 Amortisations, depreciations and write-downs on intangible and tangible
assets
Tangible assets
Domicile properties, depreciations 684 1,353
Other tangible assets, depreciations 2,549 3,022
Total amortisations, depreciations and write-downs on
intangible and tangible assets 3,233 4,375
12 Tax
Tax calculated on the years profit 109,075 93,159
Adjustment of deferred tax 10,362 860
Adjustment of tax calculated for previous years 751 109
Total tax 120,188 94,128
Effective tax rate (%):
The current tax rate of the bank 25.0 25.0
Permanent deviations 1.6 -0.2
Adjustment of tax calculated for previous years 0.2 0.0
Total effective tax rate 26.8 24.8
13 Claims on credit institutions and central banks
End Dec. 2012 End Dec. 2011
DKK 1,000 DKK 1,000
Claims at call 41,144 17,910
Up to and including 3 months 226,002 661,989
More than 3 months and up to and including 1 year 1,434 43,543
More than 1 year and up to and including 5 years 104,220 590,876
More than 5 years 500 0
Total claims on credit institutions and central banks 373,300 1,314,318
Distributed as follows:
Claims at notice on central banks 176,002 186,989
Claims on credit institutions 197,298 1,127,329
373,300 1,314,318
Note no. End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
14 Loans and other debtors at amortised cost price
At call
2,027,476
2,689,793
Up to and including 3 months 597,833 476,999
More than 3 months and up to and including 1 year 1,354,204 2,016,455
More than 1 year and up to and including 5 years 4,300,538 3,666,432
More than 5 years 4,144,088 3,896,881
Total loans and other debtors at amortised cost price 12,424,139 12,746,560
15 Write-downs on loans and other debtors and provisions for losses on
guarantees
Individual write-downs
Cumulative individual write-downs on loans and other debtors
at the end of the previous financial year
577,352
532,441
Write-downs/value adjustments during the year
Reverse entry - write-downs made in previous financial years 243,459
-124,433 205,130
-110,870
Booked losses covered by write-downs
Cumulative individual write-downs on loans and
other debtors on the balance sheet date -63,849
632,529 -49,349
577,352
Group write-downs
Cumulative group write-downs on loans and other debtors
at the end of the previous financial year
67,466
31,211
Write-downs/value adjustments during the year
Cumulative group write-downs on loans and
other debtors on the balance sheet date 47,410
114,876 36,255
67,466
Total cumulative write-downs on loans and other debtors on the balance sheet
date
747,405
644,818
Provisions for losses on guarantees
Cumulative individual provisions for losses on guarantees at
the end of the previous financial year
5,038
1,383
Provisions/value adjustments during the year
Reverse entry - provisions made in previous financial years 10,009
-3,835 4,605
-885
Booked losses covered by write-downs
Cumulative individual provisions for losses on guarantees
on the balance sheet date -254
10,958 -65
5,038
Total cumulative write-downs on loans and other debtors and provisions for
losses on guarantees on the balance sheet date
758,363
649,856
16 Suspended calculation of interest
Loans and other debtors with suspended calculation of
interest on the balance sheet date
113,312
61,419
17 Bonds at current value
Listed on the stock exchange*
3,783,258
2,755,912
Total bonds at current value 3,783,528 2,755,912
* See page 22 of the management report, where the rating is stated.
Note no. End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
18 Shares etc.
Listed on NASDAQ OMX Copenhagen 29,104 12,033
Unlisted shares at current value 1,505 1,460
Sector shares at current value 182,101 214,583
Other holdings 16,831 20,978
Total shares etc. 229,541 249,054
19 Land and buildings
Investment properties
Current value at the end of the previous financial year 6,681 7,261
Acquisitions during the year, including improvements 2,184 0
Disposals during the year -206 0
Value adjustments to current value for the year -494 -580
Current value on the balance sheet date 8,165 6,681
Domicile properties
Reassessed value at the end of the previous financial year 68,041 68,401
Acquisitions during the year, including improvements 308 993
Depreciations for the year -559 -553
Value adjustments to current value for the year -125 -800
Total reassessed value on the balance sheet date 67,665 68,041
When measuring investment and domicile properties a rate of return between 6%
and 8% is used. No external experts were involved in the valuation of
investment and domicile properties.
20
Other tangible assets
Cost price
Cost price at the end of the previous financial year
without depreciations and write-downs 28,824 28,399
Acquisitions during the year, including improvements 2,218 3,557
Disposals during the year -1,525 -3,132
Total cost price on the balance sheet date 29,517 28,824
Write-downs and depreciations
Write-downs and depreciations at the end of the previous
financial year 23,931 23,969
Depreciations for the year 2,548 3,022
Reverse entry of previous years’ write-downs during the year and
reverse entry of total depreciations and write-downs on assets
which were sold or taken out of operation during the year -943 -3,060
Total depreciations and write-downs on the balance sheet date 25,536 23,931
Total other tangible assets on the balance sheet date 3,981 4,893
21 Other assets
Interest and commissions receivable 51,425 58,383
Positive market value of derivative financial instruments 172,253 267,853
Miscellaneous receivables and other assets 35,673 22,331
Total other assets 259,351 348,567
Note no. End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
22 Debt to credit institutions and central banks
Debt payable on demand 214,603 210,686
Up to and including 3 months 30,726 26,619
More than 3 months and up to and including 1 year 169,143 150,127
More than 1 year and up to and including 5 years 516,937 583,111
More than 5 years 266,662 271,532
Total debt to credit institutions and central banks 1,198,071 1,242,075
Distributed as follows:
Debt to credit institutions 1,198,071 1,242,075
1,198,071 1,242,075
The bank has undrawn long-term committed revolving credit
facilities equivalent to:
Term to maturity under 1 year 74,604 100,000
Term to maturity over 1 year 0 74,342
Total 74,604 174,342
23 Deposits and other debts
On demand* 7,536,906 6,372,268
Deposits and other debts at notice:
Up to and including 3 months 1,487,572 2,166,283
More than 3 months and up to and including 1 year 908,664 1,175,194
More than 1 year and up to and including 5 years 1,414,739 1,561,041
More than 5 years 1,518,867 1,480,629
Total deposits and other debts 12,866,748 12,755,415
Distributed as follows:
On demand 6,557,380 5,822,693
At notice 175,268 146,889
Time deposits 2,921,952 3,740,496
Long-term deposit agreements 1,906,942 1,805,129
Special types of deposits* 1,305,206 1,240,208
12,866,748 12,755,415
* Special types of deposits are entered under the item »On demand«
pending payment, while in the specification of the different types of deposits,
the sum is instead included under »Special types of deposits«.
24 Issued bonds at amortised cost price
Up to and including 3 months 4,583 2,955
More than 3 months and up to and including 1 year 220,000 0
More than 1 year and up to and including 5 years 116,226 336,003
Total issued bonds at amortised cost price 340,809 338,958
Distributed as follows:
Issues in Danish kroner
Nom. DKK 220 million 220,000 220,000
Issues in Norwegian kroner
Nom. NOK 100 million* 101,670 95,880
Regulation at amortised cost price and adjustment to
current value of issues in Norwegian kroner 8,256 9,241
Other issues 10,883 13,837
* Cf. note 36. 340,809 338,958
Note End Dec. 2012 End Dec. 2011
no. DKK 1,000 DKK 1,000
25 Other liabilities
Interest and commissions payable 41,469 56,166
Negative market value of derivative financial instruments 55,635 159,683
Micellaneous payables and other liabilities 93,726 85,964
Total other liabilities 190,830 301,813
26 Provisions for pensions and similar liabilities*
The provisions concern conditional pension commitments to
current members of the board of managers and a pension com-
mitment to a former member of the board of managers from a
merged bank. 0 5,146
* The sum was paid in 2012.
27 Provisions for deferred tax
The calc. provisions for defer. tax relates to the balance sheet items:
Loans and other debtors -2,177 -1,446
Tangible assets -670 -644
Provisions for liabilities 0 -1,287
Other assets/liabilities 17,998 8,166
Total provisions for deferred tax 15,151 4,789
Deferred tax is calculated at (%) 25.0 25.0
28 Subordinated debt
Possible
Interest early
rate Cur- Due redemption
Type (%) rency Mill. date date
Subordinated loan capital
Bilateral agreement** Floating EUR 27 30 June 2021 30 June 2018 201,431
200,723
Total subordinated loan capital 201,431 200,723
Hybrid core capital
Bond loan***/**** 4.795 DKK 200 Indefinite 2 March 2015 200,000 200,000
Total hybrid core capital 200,000 200,000
Subordinated debt included in the calculation
of the capital base (before deduction of own holding) 401,431 400,723
Regulation at amortised cost price and adjustment to current value 9,203 11,763
Own holding of subordinated loan capital -28,000 0
Total subordinated debt 382,634 412,486
** The interest rate will change on 30 June 2018 to a quarterly variable rate
equivalent to the
EURIBOR rate for a term of three months plus 3.50% p.a.
Interest - 2012: tDKK 6,332 / 2011: tDKK 7,634
*** The interest rate will change on 2 March 2015 to a quarterly variable
coupon rate equivalent to the CIBOR rate published by the Central Bank of
Denmark for a term of three months plus 2.16% p.a. Interest - 2012: tDKK 9,496
/ 2011: tDKK 9,720
**** Admitted for listing on NASDAQ OMX Copenhagen.
Note no. End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
29 Share capital
Number of shares at DKK 5 each:
Beginning of year 5,040,000 5,040,000
Cancellation of shares during the year -100,000 0
End of year 4,940,000 5,040,000
Reserved for subsequent cancellation* 90,000 100,000
Share capital 24,700 25,200
The whole share capital has been admitted for listing on
NASDAQ OMX Copenhagen.
* A further 10,000 were also transferred in January 2013 for later
cancellation.
30 Own capital shares
Own capital shares included in the balance sheet at 0 0
The market value is 73,978 58,395
Number of own shares:
Beginning of year 100,855 9,517
Purchase of own shares during the year 335,686 263,030
Sale of own shares during the year -240,466 -171,692
Cancellation of shares during the year -100,000 -
End of year 96,075 100,855
Nominal value of holding of own shares, end of year 480 504
Own shares’ proportion of share capital end of year (%):
Beginning of year 2.0 0.2
Purchase of own shares during the year 6.8 5.2
Sale of own shares during the year -4.9 -3.4
Cancellation of shares during the year -2.0 -
End of year 1.9 2.0
Total purchase price for shares acquired during the year 245,185 226,968
Total sales price for shares sold during the year 174,902 168,577
The transactions for the year in own shares were made on the basis
of the bank’s ordinary trading with shares.
31 Contingent liabilities etc.
Contingent liabilities
Finance guarantees 693,774 653,353
Guarantees for foreign loans 5,595 5,576
Guarantees against losses on mortgage credit loans 51,951 50,138
Guarantees against losses Totalkredit 122,797 118,540
Registration and conversion guarantees 70,999 55,361
Sector guarantees 46,816 39,413
Other contingent liabilities 675,168 129,841
Total contingent liabilities 1,667,100 1,052,222
32 Assets furnished as security
First mortgage loans were provided for German wind turbine
projects. The loans are funded directly by KfW Bankengruppe,
to which security in the associated loans has been provided.
Each reduction of the first mortgage loans is deducted directly
from the funding at the KfW Bankengruppe. 829,259 808,363
As security for clearing and any debt, the bank has pledged
securities from its holding to the Central Bank of Denmark
to a total market price of 250,623 269,005
Note no.
33 Legal proceedings, etc.
The bank is not party to any legal proceedings that are estimated to result in
major losses and in
that way to a substantial change of the accounts.
34 Related parties
Related parties are among others the bank’s board of directors and board of
managers, manage-
rial employees and their relatives. Ringkjøbing Landbobank advises that it has
no related parties
with a controlling influence on the bank (defined as control of at least 20% of
the voting rights).
There were no transactions during the year with the board of directors and
board of manag- ers or managerial employees apart from the payment of salaries
and compensation etc., stock exchange business and the provision of loans and
guarantees.
It is also noted that all of the transactions performed in 2012 and 2011 with
related parties, including credit facilities, were carried out on market terms
or a cost-cover basis.
Information on the remuneration made to the board of directors and board of
managers is given in note 6.
Information on the size of loans, mortgages, sureties and guarantees provided
to members of the bank’s board of directors and board of managers and the
security received is given in this note. The information in the note covers
these parties’ personal engagements and those of their relatives.
Information on the shareholdings held by the board of directors and board of
managers is given in this note.
The amount of loans issued to and mortgages, sureties or guarantees issued for
the members
of the bank’s: Interest rates 2012
End Dec. 2012 End Dec. 2011
DKK 1,000 DKK 1,000
Board of managers (Mastercard) 250 250
Board of directors, incl. elected by the staff 1.0%-10.0% 19,012
29,510
All engagements are performed under market terms, including both interest and
guarantee commission rates.
Security pledged from members of the bank’s:
Board of managers 0 0
Board of directors, incl. elected by the staff 2,234 1,206
New loans have been granted for 1,162 -
The board of directors’ and the board of managers’ share- holdings* in
Ringkjøbing Landbobank at the end of the year The board of directors:
End Dec. 2012 End Dec. 2011
Number of shares Number of shares
Jens Lykke Kjeldsen 5,865 5,815
Gravers Kjærgaard 6,663 6,663
Gert Asmussen 4,528 4,528
Keld Hansen 16,636 16,636
Inge Sandgrav Bak 2,448 2,488
Martin Krogh Pedersen 6,501 6,501
Bo Bennedsgaard 530 530
Gitte E. S. Vigsø 30 30
The board of managers:
John Fisker 15,192 15,192
Bent Naur** - 16,944
* Stated in accordance with the rules on insiders.
** Resigned from management on 30 April 2012.
Note
Eno.
35 Current value of financial instruments
Financial instruments are measured in the balance sheet at either current value
or amortised cost
price (with consideration to risk cover that fulfil the conditions applying to
hedging).
The current value is the amount at which a financial asset can be sold or the
amount at which a financial liability can be redeemed between agreed
independent parties. The current values of financial assets and liabilities
valued on active markets are calculated on the basis of observed market prices
on the balance sheet date. The current values of financial instruments which
are not valued on active markets are calculated on the basis of generally
recognised methods of valuation.
Shares etc. and derivative financial instruments are measured in the accounts
at market value
such that included book values correspond to current values.
The write-downs on loans are assessed such that they correspond to changes in
credit quality. The difference from current value is assessed as fees and
commissions received, costs incurred in lending activities, and, for
fixed-interest loans, the value adjustment which is independent of the interest
level and which can be calculated by comparing the actual market interest rate
with the nominal rate applying to the loans.
The current value of claims on credit institutions and central banks is
determined under the same method as for loans, but the bank has not currently
made any write-downs on claims on credit institutions and central banks.
Issued bonds and subordinated debt are measured at amortised cost price. The
difference be- tween book and current values is calculated on the basis of
prices on the market for own listed issues.
For variable-interest financial liabilities in the form of deposits and debts
to credit institutions measured at amortised cost price, it is estimated that
the book value corresponds to the current value.
For fixed-interest financial liabilities in the form of deposits and debts to
credit institutions measured at amortised cost price, the difference from
current values is estimated to be the value adjustment which is independent of
interest level.
Financial assets
End Dec. 2012 End Dec. 2011
Book value Current value Book value Current value
DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000
Cash in hand + claims at call on central banks 483,188 483,188 33,935 33,935
Claims on credit institut. and central banks* 373,612 373,612 1,318,375
1,318,376
Loans and other debtors at amort. cost price* 12,452,751 12,508,615
12,777,305 12,828,656
Bonds at current value* 3,799,528 3,799,528 2,774,316 2,774,316
Shares etc. 230,084 230,084 249,592 249,592
Derivative financial instruments 172,253 172,253 267,853 267,853
Total financial assets 17,511,416 17,567,280 17,421,376 17,472,728
Financial liabilities
Debt to credit institutions and central banks* 1,198,895 1,198,472
1,243,364 1,242,551
Deposits and other debts* 12,893,489 12,934,285 12,798,121 12,835,712
Issued bonds at amortised cost price*/** 345,475 337,219 343,374 334,133
Derivative financial instruments 55,635 55,635 159,683 159,683
Subordinated debt*/** 390,660 372,857 420,519 396,256
Total financial liabilities 14,884,154 14,898,468 14,965,061 14,968,335
* The item includes calculated interest on the balance sheet date. The
calculated interest in the balance sheet is included under the items »Other
assets« and »Other liabilities«.
** Using the most recently listed transaction price before the balance sheet
date, irrespective of the liquidity in the security in question.
Note End Dec. 2012 End Dec. 2011
no. DKK 1,000 DKK 1,000
36 Hedging
The following are hedged:
Fixed interest claim on a credit institution, fixed interest loans,
fixed interest deposits, issued bonds at amortised cost price,
floating interest subordinated loan capital and fixed interest
hybrid core capital
Risk cover:
Interest rate risk and foreign exchange risk
Book values:
Claim on a credit institution 0 30,077
Loans 44,785 54,291
Deposits 0 306,726
Issued bonds at amortised cost price 109,926 105,121
Subordinated loan capital 199,607 198,014
Hybrid core capital 183,027 214,472
Cover is thus:
Interest swaps - total synthetic principal 198,542 512,368
Currency swaps - total synthetic principal 303,101 296,603
Total current value 11,113 22,355
37 Risks and risk management
As described in the section on risk »Risks and risk management« in the
management report con-
tained in the annual report, Ringkjøbing Landbobank is exposed to various types
of risk. See the
section on risks on pages 18 - 29 of the management report for a description of
financial risks
and policies and objectives for their management:
• Credit risks - page 19
• Interest rate risk - page 24
• Foreign exchange risk - page 24
• Share risk - page 25
• Liquidity risk - page 27
The following notes to the annual report contain some additional information
and a more de- tailed description of the bank’s credit and market risks.
Note no. End Dec. 2012
DKK 1,000 End Dec. 2011
DKK 1,000
38 Credit risk
Maximum credit exposure classified by balance sheet and off-balance sheet items
Balance sheet items
Cash in hand and claims at call on central banks
483,188
33,935
Claims on credit institutions and central banks 373,300 1,314,318
Loans and other debtors at amortised cost price 12,424,139 12,746,560
Bonds at current value 3,783,258 2,755,912
Shares etc. 229,541 249,054
Capital shares in associated companies 543 538
Other assets, including derivative financial instruments 299,721 360,822
17,593,690 17,461,139
Off-balance sheet items
Guarantees (contingent liabilities)
1,667,100
1,052,222
1,667,100 1,052,222
Maximum credit exposure excluding unutilsed credit facilities 19,260,790
18,513,361
Unutilised credit facilities 4,026,576 3,338,861
Total maximum credit exposure 23,287,366 21,852,222
A more detailed division of the items »Loans and other outstanding debts at
amortised cost price«,
»Guarantees« and »Unutilised credit facilities« are given below. There is also
a classification covering
only the items »Loans made and other outstandings at amortised cost price« and
»Guarantees«.
* The bank has made unused credit facilities to a total of DKK 4 billion
available. Most of this sum comprises uncommitted credits in the legal sense,
and the bank will be able to terminate them with immediate effect.
Loans, guarantees and unutilised credit facilities by sector
Loans and guarantees in percent, end of year,
classified by sector/business
End Dec. 2012 End Dec. 2011
Per cent Per cent
Public authorities 0.1 0.0
Business
Agriculture, hunting and forestry
Cattle farming etc. 2.8 3.2
Pig farming etc. 2.5 2.8
Other agriculture, hunting and forestry 4.2 4.6
Fishing 1.6 1.5
Mink production 1.2 1.2
Industry and raw materials extraction 2.1 2.9
Energy supply - Demnark 6.0 6.8
Energy supply - foreign 13.0 12.6
Building and construction 1.5 1.6
Trade 4.3 4.7
Transport, hotels and restaurants 1.4 1.9
Information and communication 0.2 0.2
Financing and insurance 10.7 7.3
Real estate 10.2 10.1
Other business 9.8 8.0
Total business 71.5 69.4
Private 28.4 30.6
Total 100.0 100.0
Note no. End Dec. 2012
Per cent End Dec. 2011
Per cent
38 Credit risk - continued
Loans and guarantees by sectors
Loans and guarantees in percent, end of year,
by sector/business
Public authorities 0.0 0.0
Business
Agriculture, hunting and forestry
Cattle farming etc.
3.0
3.5
Pig farming etc. 2.6 2.9
Other agriculture, hunting and forestry 4.2 4.4
Fishing 1.8 1.7
Mink production 1.1 1.3
Industry and raw materials extraction 2.0 2.9
Energy supply - Demnark 6.8 7.6
Energy supply - foreign 14.7 14.2
Building and construction 1.3 1.5
Trade 3.6 3.9
Transport, hotels and restaurants 1.5 2.1
Information and communication 0.1 0.2
Financing and insurance 11.7 7.0
Real estate 12.2 11.4
Other business 7.8 7.3
Total business 74.4 71.9
Private 25.6 28.1
Total 100.0 100.0
The classification by business was made on the basis of Statistics Denmark’s
sector codes etc.
Comments on distribution by business
In historical terms, Ringkjøbing Landbobank has always been run on the basis of
a conservative
credit policy. In the bank’s judgment, this is reflected in the quality of the
bank’s loans, which
is generally judged to be high. Solvency among the bank’s customers is
generally good, and
in combination with the bank’s robust covering of many commitments, the result
is low credit
risks.
Private customers comprise a total of 25.6% of Ringkjøbing Landbobank’s total
loans and guarantees. Most of these customers are in the bank’s core area in
central and western Jutland, and the quality of their credit is good. This good
quality is attributable among other things to
a moderately negative trend in the prices of real estate and a lower proportion
of income spent on housing - lower than in eastern Jutland and the capital city
area. The primary security given by private customers consists of security in
real estate (private homes).
The bank has a well-diversified agricultural portfolio with 2.6% of total loans
and guarantees on
pig farmers, 3.0% on cattle and 4.2% on others.
The economic conditions for agriculture as a whole remain difficult, and
although the bank’s farming customers have relatively less debt than the
agricultural sector as a whole, it is a difficult situation. Some segments
have, however, experienced improved terms of trade in 2012 relative to the
previous years.
In general, earnings in agriculture are, however, still weak, and the bank has
set aside consider- able provisions for this sector.
Note no.
38 Credit risk - continued
The security consists primarily of mortgages in the farms (land, buildings and
the other produc- tion equipment) plus transfer of hectare support and other
payments etc.
Loans to energy supply companies total 21.5%. This is thus the sector with the
greatest propor- tion of the bank’s loans. Most of the exposure in this sector
is on the financing of wind turbines, which has been a core area in the bank
for more than 20 years. Exposure to energy supply companies abroad is mostly to
wind turbines erected in Germany.
The bank’s concept for financing wind turbines is based on senior financing.
The concept includes a legal and commercial due diligence, which provides a
high degree of security. Fixed payment prices on the German market provide
additional security that the bank can be repaid. The losses suffered by the
bank in this sector have been minimal, and the financial crisis has confirmed
that the risk in this sector is limited. Security is primarily provided by a
first preferred mortgage in the turbines and transfer of electricity payments
and any subsidies.
Real estate accounts for a total of 12.2% of the bank’s total loans and
guarantees. This is a rela- tively modest proportion compared with other
financial institutions, and this reflects the bank’s cautious approach to this
sector. The loan and the security are mainly in the following groups:
• Loans with first preferential security in the property (most of the loans)
• Loans with second preferential security in the property and strong tenant
with irrevocable
lease.
In connection with other mortgage financing, the bank places weight on the
project’s ability to
pay off the debt before termination of the lease.
Both types of loan have demonstrated their strength during the financial
crisis, and the bank is
comfortable with them.
Financing and insurance account for a total of 11.7% of the bank’s total loans
and guarantees, and cover, among other things, exposure to financially solid
counterparties and the bank’s con- cept for lending on securities. The primary
security under this concept consists of listed securi- ties. The concept has
clearly demonstrated its strength in the particularly volatile periods on the
financial markets occasioned by the financial crisis
Security
Ringkjøbing Landbobank wishes, to the greatest possible extent, to reduce the
risk in connec- tion with business transactions entered into with the bank’s
customers by taking security in the form of a mortgage in physical assets,
securities, bank balances etc. and guarantees, sureties and letters of
subordination. The most commonly used security is securities and cash, mortgage
in real estate and chattels personal.
The bank monitors the value of securities which have been received. The bank
takes a conserva- tive approach to assessing the loan value of security
received. A deduction in the value is thus always made to cover the realisation
risk, costs etc. The following table shows nominal secu-
rity values, i.e. the value of the nominal mortgage without any reduction. A
reduction can be relevant if the actual value of an asset is insufficient to
ensure the full value of a mortgage in the event of realisation.
2012
Nominal securities by sector and business for commitments which have not been
written down
Securities
and cash Real estate Movable Total
DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000
Public authorities 0
3,295 1,800 5,095
Business:
Agriculture, forestry and fishing 286,334 1,282,299
496,955 2,065,588
Industry and raw materials extraction 41,928 66,839
138,551 247,318
Energy supply 138,534
469,212 1,991,750 2,599,496
Building and construction 10,041 82,058
95,606 187,705
Trade 48,129
176,558 165,773 390,460
Transport, hotels and restaurants 7,019 64,838
183,510 255,367
Information and communication 2,595 22,144
8,700 33,439
Financing and insurance 748,291 336,507
18,026 1,102,824
Real estate 117,238
1,250,680 16,572 1,384,490
Other business 662,820
1,111,270 122,499 1,896,589
Total business 2,062,929
4,862,405 3,237,942 10,163,276
Private 939,739
2,793,760 313,079 4,046,578
Total 3,002,668
7,659,460 3,552,821 14,214,949
2011
Nominal securities by sector and business for commitments which have not been
written down
Public authorities 0
3,445 0 3,445
Business:
Agriculture, forestry and fishing 271,178 1,263,812
455,128 1,990,118
Industry and raw materials extraction 45,443 75,814
232,302 353,559
Energy supply 69,991
501,561 1,957,750 2,529,302
Building and construction 9,780 104,304
111,423 225,507
Trade 56,909
204,426 146,766 408,101
Transport, hotels and restaurants 68,165 71,053
182,959 322,177
Information and communication 2,767 11,280
5,213 19,260
Financing and insurance 751,015 390,014
19,196 1,160,225
Real estate 120,791
1,290,412 22,424 1,433,627
Other business 460,337
592,821 112,471 1,165,629
Total business 1,856,376
4,505,497 3,245,632 9,607,505
Private 745,870
2,720,083 268,890 3,734,843
Total 2,602,246
7,229,025 3,514,522 13,345,793
The nominal collateral values are not necessarily indicative of the actual
collateral value.
Note no.
38 Credit risk - continued
The credit quality of loans and guarantees which are neither in arrears nor
have been writ-
ten down
The bank has credit ratings on a large number of customers. For private and
small business customers, the rating is based on statistical models (based on
the probability of default), while there is an expert model for major
customers.
The statistical models include 7 - 10 different factors, including information
on the customer’s assets and a quantity of behavioural data. These items are
selected from a large number of pos- sible factors which best describe
previously unsatisfied commitments.
The expert model for business customers is based on information on the
customer’s creditwor- thiness and earning capacity. The model is a general
model used for business as a whole. The model has three variants which are
particularly to exposure to credit for wind turbines, agricul- ture and real
estate.
As indicated in the figure below, 62% of loans and guarantees without
write-downs or arrears have a high credit quality as against 57% in 2011. The
proportion of customers with low credit quality increased from 7% to 12% via a
reduction in the unclassified commitments, and the middle-ranking group was
reduced. The year has thus seen a certain polarisation of customers without
write-downs or arrears, but in general the bank finds the total quality stable.
Unclassified commitments amount to DKK 0.5 billion. These consist mainly of
small business
customers and they cover a wide range of sectors.
Distribution of loans and guarantees without write-downs or arrears
70
60 2012 2011
50
40
30
20
10
0
High Medium Low Not classified
Credit quality
Total loans and quarantees without write-downs or arrears (DKK 1,000)
2012 12,943
2011 11,578
Distribution by time from the due date for loans without write-downs in arrears
Under Over
90 days 90 days Total
DKK 1,000 DKK 1,000 DKK 1,000
Public authorities 47 0 47
Business:
Agriculture, forestry and fishing 14,193 1,259 15,452
Industry and raw materials extraction 1,761 108 1,869
Energy supply 3,666 11 3,677
Building and construction 1,078 656 1,734
Trade 3,756 622 4,378
Transport, hotels and restaurants 1,013 184 1,197
Information and communication 293 164 457
Financing and insurance 2,910 1,313 4,223
Real estate 2,306 4,005 6,311
Other business 10,515 1,222 11,737
Total business 41,491 9,544 51,035
Private 32,078 8,797 40,875
Total 2012 73,616 18,341 91,957
Total 2011 59,118 2,669 61,787
Note no.
38 Credit risk - continued
The value of loans where individual write-downs have been made
Major Total Individual
financial Breach Relaxation Probable credit write-
difficulties of contract of terms bankruptcy exposure downs
DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000
Credit exposure by reason for write-down
Public authorities 0 0 0 0 0 0
Business:
Agriculture, forestry and fishing 123,592 100,332 86,139 78,370 388,433
290,516
Industry and raw materials
extraction 16,475 2,157 323 2,851 21,806 15,640
Energy supply 0 2,311 0 0 2,311 1,018
Building and construction 12,221 5,447 16,790 0 34,458 21,420
Trade 8,410 8,461 1,355 2,647 20,873 14,391
Transport, hotels and restaurants 11,647 1,416 8,442 2,158 23,663 16,828
Information and communication 2 328 265 33 628 367
Financing and insurance 570 3,699 0 2,816 7,085 5,783
Real estate 24,362 32,258 31,285 2,662 90,567 45,989
Other business 25,015 15,089 8,824 8,690 57,618 47,082
Total business 222,294 171,498 153,423 100,227 647,442 459,034
Private 141,633 105,450 32,374 28,896 308,353 184,451
Total credit exposure 2012 363,927 276,948 185,797 129,123 955,795
Total credit exposure 2011 342,670 374,134 99,301 98,381 914,486
2012
Major
financial Breach Relaxation Probable-
difficulties of contract of terms bankruptcy Total
DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000 DKK 1,000
Individual write-downs 242,600 174,863 98,186 127,837 643,486
Security values for commitments
which have been written down 69,773 55,858 17,232 64,305 207,168
2011
Individual write-downs 219,842 224,671 78,541 59,336 582,390
Security values for commitments
which have been written down 63,604 71,807 25,139 24,158 184,708
The bank is particularly focused on covering the risk on commitments which have
been written down. Under the bank’s credit policy, these commitments must be
covered to the greatest possible extent
by securities. When determining the need for a write-down, the value of
securities is included at the prudently expected net realisation value. The
bank only includes the ability to make payments over and above the value of
securities to a modest extent when determining the need for a write-down.
Loans and other debtors with an objective indication of impairment included in
the balance sheet at a book value greater than zero
Individual written-down loans
Balance for loans and other debtors before write-downs 909,961 835,803
Write-downs -586,017 -503,289
Balance for loans and other debtors after write-downs 323,944 332,514
Group written-down loans
Balance for loans and other debtors before write-downs 11,908,553 12,143,747
Write-downs -114,876 -67,466
Balance for loans and other debtors after write-downs 11,793,677 12,076,281
Credit risk on derivative financial instruments
Positive market value (by counterpart risk) after netting
Counterpart riskweight 20% 140,002 203,886
Counterpart riskweight 75% 65,836 78,344
Counterpart riskweight 100% 49,812 106,426
Total counterpart riskweight 255,650 388,656
39 Foreign exchange risk
Total assets in foreign currency 5,252,363 6,473,073
Total liabilities in foreign currency 3,119,494 3,189,031
Foreign exchange indicator 1 16,838 23,602
Foreign exchange indicator 1 in %
of core capital after deductions (%) 0.6 0.9
Foreign exchange indicator 2 212 586
Foreign exchange indicator 2 in %
of core capital after deductions (%) 0.0 0.0
40 Interest rate risk
Total interest rate risk 17,102 17,530
Total interest rate risk (%) 0.6 0.7
Interest rate risk by the foreign currencies:
DKK 18,710 17,097
NOK -2,453 -3,437
EUR 996 3,941
CHF -202 -261
USD 105 193
GBP -45 0
SEK 0 8
Other currencies -9 -11
Total 17,102 17,530
Note no.
41 Value at Risk/Market risk
Ringkjøbing Landbobank uses a Value at Risk (VaR) model as a sensitivity
analysis for market risks. The model is a parametric VaR model based on a
historic analysis of the covariation (the correlations) between the prices of
various fi nancial assets etc. The model combines the histori- cal knowledge of
the covariation on the fi nancial markets with the bank’s current positions,
and on this basis calculates the risk of losses for a forthcoming ten-day
period. The calculation includes the bank’s positions with respect to interest,
foreign currencies and listed shares, while positions in sector shares and
unlisted capital shares are not included. The calculated VaR thus
indicates the bank’s sensitivity to losses on the basis of its positions. The
model is used as one of a number of tools in the bank’s management of market
risks.
Reference is made to pages 26 - 27 of this annual report for further
description of the model etc.
DKK million
Average
Minimum
Maximum
End of year
Year/Risk VaR-figure VaR-figure* VaR-figure* VaR-figure
2012
Interest
15.0
3.1
28.9
5.7
Foreign currency 0.3 0.1 0.2 0.1
Share
Diversifi cation 2.7
-3.3 2.6
-2.3 2.4
-3.1 2.2
-2.2
Total VaR-figure 14.7 3.5 28.4 5.8
* Determined by the total VaR-fi gure.
Sensitivity analysis of sector shares (DKK 1,000)
Sector shares cf. note 18 182,101
Effect of a 10% price change on the result 18,210
Development in Value at Risk
25
Interest Foreign currency
20 Share Total
15
10
5
0
42 Derivative financial instruments
By residual maturity
DKK 1,000 Over 3 month
Up to 3 month and up to 1 year
Nominal value Net market value
Nominal value Net market value
Foreign-exchange contracts
Spot, purchase
41,976
99
Spot, sale 23,902 -115
Forward transactions/futures, purchase 1,041,877 3,662 178,436 -465
Forward transactions/futures, sale 3,531,774 6,096 175,165 14,410
Swaps
Options, purchase
Options, sale 46,396 35 99,732 188
Interest-rate contracts
Spot, purchase
321,330
791
Spot, sale 110,704 -1,551
Forward transactions/futures, purchase 6,822 63 5,000 149
Forward transactions/futures, sale 2,919 -19 88,176 -672
Swaps 51,065 -277 38,056 46
Options, purchase 5,521 47
Options, sale 5,521 -47
Share contracts
Spot, purchase
46,054
-264
Spot, sale 47,816 310
Forward transactions/futures, purchase 62 31
Forward transactions/futures, sale 62 -31
Foreign-exchange contracts
Spot, purchase
Spot, sale
Forward transactions/futures, purchase
Forward transactions/futures, sale
Over 1 year
and up to 5 years Over 5 years
Net Net
Nominal market Nominal market
value value value value
Swaps 101,670 22,079 208,408 -514
Options, purchase
Options, sale
Interest-rate contracts
Spot, purchase
Spot, sale
Forward transactions/futures, purchase
Forward transactions/futures, sale
Swaps 982,454 -31,582 513,357 18,979
Options, purchase 146,001 4,400 65,093 6,865
Options, sale 146,001 -4,400 65,093 -6,865
Other derivative contracts
Credit Default Swaps 74,606 -931
42 Derivative financial instruments - continued
DKK 1,000 Total net
Total nominal value market value
Foreign-exchange contracts 2012 2011 2012 2011
Spot, purchase 41,976 48,090 99 -27
Spot, sale 23,902 41,733 -115 -12
Forward transactions/futures, purchase 1,220,313 2,856,039 3,197 56,869
Forward transactions/futures, sale 3,706,939 6,666,368 20,506 13,824
Swaps
Options, purchase
Options, sale 456,206 500,694 21,788 16,698
Interest-rate contracts
Spot, purchase
321,330
214,579
791
712
Spot, sale 110,704 63,956 -1,551 -603
Forward transactions/futures, purchase 11,822 10,763 212 219
Forward transactions/futures, sale 91,095 33,022 -691 -360
Swaps 1,584,932 2,597,399 -12,834 3,886
Options, purchase 216,615 466,077 11,312 14,711
Options, sale 216,615 466,077 -11,312 -14,711
Share contracts
Spot, purchase
46,054
13,249
-264
702
Spot, sale 47,816 12,704 310 -708
Forward transactions/futures, purchase 62 31
Forward transactions/futures, sale 32 -31
Other derivative contracts
Credit Default Swaps
74,606
-931
Net market value, total 30,517 91,200
42 Derivative financial instruments - continued
DKK 1,000
Foreign-exchange contracts
Market value Average market value
Positive Negative Positive Negative
2012 2011 2012 2011 2012 2011 2012 2011
Spot, purchase 119 63 20 90 203 323 2,932 4,329
Spot, sale 16 83 131 95 147 450 266 479
Forward transactions/
futures, purchase Forward transactions/ futures, sale 16,843
32,756 63,253
52,693 13,646
12,250 6,384
38,869 25,534
34,903 52,194
130,140 10,263
16,594 62,825
63,283
Swaps
Options, purchase
Options, sale 43,057 43,498 21,269 26,800 38,472 50,275 23,388 35,833
Interest-rate contracts
Spot, purchase
1,823
1,051
1,032
339
1,043
598
1,129
369
Spot, sale
Forward transactions/
futures, purchase 507
212 133
219 2,058 736 846
307 205
109 1,228
64 612
8
Forward transactions/
futures, sale
528
1,219
360
179
25
1,021
340
Swaps 64,339 91,293 77,173 87,407 77,363 71,042 72,198 79,150
Options, purchase
Options, sale Share contracts Spot, purchase 11,312
211 14,711
774
11,312
475
14,711
72 14,130
769 13,558
1,145
14,130
436
13,558
396
Spot, sale
Forward transactions/
futures, purchase 499
31 82 189 790 451
35 395 746
48 3,889
Forward transactions/
futures, sale
31
12
35
Other derivative contracts
Credit Default Swaps
931
348
Total 172,253 267,853 141,736 176,653 194,394 320,459 144,826 265,071
Provision of security under
CSA agreement 0 0 -86,101 -16,970
Total other shares/
other liabilities 172,253 267,853 55,635 159,683
All contracts of derivative financial instruments are non-guanteed contracts.
Summary DKK 1,000 2012 2011 2010 2009 2008
Profit and loss account
Interest receivable 834,021 858,257 836,339 993,756 1,221,165
Interest payable 200,764 245,291 241,954 377,728 669,149
Net income from interest 633,257 612,966 594,385 616,028 552,016
Dividend on capital shares etc. 1,463 1,111 1,219 3,243 1,491
Income from fees and commissions 210,516 158,303 170,389 149,628 176,118
Fees and commissions paid 24,029 24,312 25,996 23,823 28,464
Net income from interest and fees 821,207 748,068 739,997 745,076 701,161
Value adjustments +46,957 +16,386 +52,159 +58,130 -43,577
Other operating income 3,303 4,535 3,893 5,351 4,863
Staff and administration costs 252,796 244,068 236,374 235,604 236,056
Amortisations, depreciations and write-downs on intangible and
tangible assets 3,233 4,375 3,219 2,424 2,420
Other operating costs 133 381 195 56 86
Costs bank packages and
Deposit Guarantee Fund 10,281 11,178 46,590 55,785 16,148
Write-downs on loans an other debtors -156,844 -128,799 -138,217 -158,600
-77,223
Write-downs on national
bank package I etc. 0 0 -33,152 -51,173 -12,016
Result of capital shares in associated
companies +5 +11 +14 -59 -5
Profit before tax 448,185 380,199 338,316 304,856 318,493
Tax 120,188 94,128 81,443 72,775 78,495
Profit after tax 327,997 286,071 256,873 232,081 239,998
Summary DKK 1,000 End 20012 End 2011 End 2010 End 2009 End 2008
Balance sheet
Assets
Cash in hand and claims on credit
institutions and central banks 856,488 1,348,253 2,714,304 2,534,722 2,087,959
Loans and other debtors at
amortised cost price 12,424,139 12,746,560 13,151,216 13,047,212 13,897,101
Securities 4,013,342 3,005,504 1,804,062 1,936,663 1,553,741
Tangible assets 79,811 79,615 80,092 79,644 77,730
Other assets 307,766 369,091 497,530 329,715 385,222
Total assets 17,681,546 17,549,023 18,247,204 17,927,956 18,001,753
Liabilities and equity
Debt to credit institutions and central banks
Term to maturity under 1 year 294,208 285,028 636,326 699,732 2,077,112
Term to maturity over 1 year 903,863 957,047 1,995,864 2,294,991 3,224,050
Deposits and other debts 12,866,748 12,755,415 11,661,654 11,187,470
9,072,875
Issued bonds 340,809 338,958 337,617 557,337 478,341
Other liabilities 191,035 301,996 593,153 365,021 652,505
Provisions for liabilities 26,109 14,973 13,247 72,238 21,096
Subordinated debt 382,634 412,486 696,999 695,394 690,984
Share capital 24,700 25,200 25,200 25,200 25,200
Reserves 2,651,440 2,457,920 2,287,144 2,030,573 1,759,590
Total shareholders’ equity 2,276,140 2,483,120 2,312,344 2,055,773 1,784,790
Total liabilities and equity 17,681,546 17,549,023 18,247,204 17,927,956
18,001,753
Contingent liabilities etc.
Contingent liabilities 1,667,100 1,052,222 1,041,983 1,485,676 2,386,213
Total contingent liabilities etc. 1,667,100 1,052,222 1,041,983 1,485,676
2,386,213
Solvency:
2012 2011 2010 2009 2008
Solvency ratio % 22.4 21.4 22.4 20.2 16.3
Core capital ratio % 20.9 19.8 18.6 16.6 13.0
Solvency requirement % 8.0 8.0 8.0 8.0 8.0
Earnings:
Pre-tax return on equity % 17.4 15.9 15.5 15.9 17.9
Return on equity after tax % 12.7 11.9 11.8 12.1 13.5
Income/cost ratio DKK 2.06 1.98 1.74 1.61 1.93
Market risk:
Interest rate risk % 0.6 0.7 0.1 0.6 1.2
Foreign exchange position % 0.6 0.9 0.5 3.4 5.6
Foreign exchange risk % 0.0 0.0 0.0 0.1 0.0
Liquidity risk:
Excess cover relative to statutory
liquidity requirements % 185.5 140.5 231.8 205.6 139.1
Loans and write-downs thereon
relative to deposits % 102.4 105.0 117.6 120.8 157.1
Credit risk:
Loans relative to shareholders’ equity 4.6 5.1 5.7 6.3 7.8
Growth in loans for the year % -2.5 -3.1 0.8 -6.1 -1.7
Total large exposures % 27.2 11.8 0.0 0.0 12.1
Cumulative write-down percentage % 5.1 4.5 3.8 3.1 2.1
Write-down percentage for the year % 1.06 0.89 0.94 1.16 0.48
Proportion of debtors at reduced interest % 0.8 0.4 0.4 0.4 0.1
Share return:
Profit for the year after tax per share*/*** DKK 1,340.1 1,146.6 1,019.3
921.0 933.8
Book value per share*/** DKK 11,049 10,055 9,193 8,172 7,382
Dividend per share* DKK 280 260 240 0 0
Share price relative to profit for
the year per share*/*** 11.5 10.1 14.2 13.2 6.6
Share price relative to book value per share*/** 1.39 1.15 1.58 1.49 0.84
* Calculated on the basis of a denomination of DKK 100 per share.
** Calculated on the basis of number of shares outstanding at the end of the
year.
*** Calculated on the basis of the average number of shares. The average
number of shares is calcu-
lated as a simple average of the shares at the beginning of the year and at the
end of the year.
Definitions of the official key figures/ratios from the Danish Financial
Supervisory Authority
Solvency ratio
Capital base after deductions in per cent of total risk weighted assets.
Core capital ratio
Core capital after deductions (incl. hybrid core capital) in per cent of total
risk weighted assets.
Pre-tax return on equity
Profit before tax in per cent of average shareholders’ equity. The average
shareholders’ equity is calculated as a
simple average of the shareholders’ equity at the beginning of the year and at
the end of the year.
Return on equity after tax
Profit after tax in per cent of average shareholders’ equity. The average
shareholders’ equity is calculated as a
simple average of the shareholders’ equity at the beginning of the year and at
the end of the year.
Income/cost ratio
Net income from interest and fees, value adjustments, other operating income
and result of capital shares in
associated companies in per cent of staff and administration costs,
amortisation, depreciation and write-downs
on intangible and tangible assets, other operating costs and write-downs on
loans and debtors etc.
Interest rate risk
Interest rate risk in per cent of core capital after deductions (incl. hybrid
core capital).
Foreign exchange position
Foreign exchange indicator 1 in per cent of core capital after deductions
(incl. hybrid core capital).
Foreign exchange risk
Foreign exchange indicator 2 in per cent of core capital after deductions
(incl. hybrid core capital).
Excess coverage relative to statutory liquidity requirements
Cash in hand, demand deposits with the Danish National Bank, fully secured and
liquid on-demand credit
balance in credit institutions and insurance companies, unencumbered
certificates of deposit issued by the
Danish National Bank, secure readily negotiable listed unencumbered securities,
loan framework in the Danish
National Bank against security in sector shares valid for the time being with
30 days notice of termination. The
total of all elements measured in percent relative to 10% of the reduced debt
and guarantee liabilities.
Loans and write-downs thereon relative to deposits
Loans + write-downs thereon in per cent of deposits.
Loans relative to shareholders’ equity
Loans/shareholders’ equity.
Growth in loans for the year
Growth in loans from the beginning of the year to the end of the year, in per
cent.
Total large exposures
The total sum of large exposures in per cent of the capital base after
deductions.
Cumulative write-down percentage
Write-downs on loans and provisions for losses on guarantees in per cent of
loans + write-downs on loans +
guarantees + provisions for losses for guarantees.
Write-down percentage for the year
Write-downs etc. for the year in per cent of loans + write-downs on loans +
guarantees + provision for losses
on guarantees.
Proportion of debtors at reduced interest
Proportion of debtors at reduced interest before write-downs etc. in per cent
of loans + write-downs on loans
+ guarantees + provision for losses on guarantees.
Profit for the year after tax per share*/***
Profit for the year after tax/average number of shares.
Book valve per share*/**
Shareholders’ equity/share capital excl. own shares.
Dividend per share*
Proposed dividend/share capital.
Share price relative to profit for the year per share*/***
Share price/profit for the year per share.
Share price relative to book value per share*/**
Share price/book value per share.
*/**/***: See page 80.
OTHER INFORMA TION
Page
84 Shareholders’ committee
85 Board of directors
87 Board of managers
88 Company information
89 Stock exchange announcements
89 Financial calendar
90 The bank’s branches etc.
Shareholders’ committee
Jens Møller Nielsen, manager, Ringkøbing, - born 1956 chairman of the
shareholders’ committee
Else Kirkegaard Hansen, senior master, Ringkøbing, - born 1954 deputy chairman
of the shareholders’ committee
Hejne F. Andersen, industrialist, Ringkøbing - born 1954
Jens Arnth-Jensen, manager, Holte - born 1948
Gert Asmussen, printer, Tarm - born 1950*
Inge Sandgrav Bak, financial manager, Ringkøbing - born 1960* Claus H.
Christensen, farmer, Lem - born 1961
Claus Dalgaard, manager, Ringkøbing - born 1962
Per Dam, accountant, Ulfborg - born 1952
Ole K. Erlandsen, butcher, Herning - born 1962
Keld Hansen, grocer, Søndervig - born 1948*
Niels Ole Hansen, manager, Ringkøbing - born 1951
Tonny Hansen, college principal, Ringkøbing - born 1958
Leif Haubjerg, farmer, No - born 1959
Erik Jensen, manager, Skjern - born 1965
Niels Esper Kamp, farmer, Stadil - born 1957
Jens Lykke Kjeldsen, timber merchant, Ringkøbing - born 1950* Gravers
Kjærgaard, farmer, Grønbjerg - born 1952*
Lars Møller, municipal chief executive, Holstebro - born 1957
Martin Krogh Pedersen, manager, Ringkøbing - born 1967* Ole Christian Pedersen,
manager, Vostrup - born 1950
Kristian Skannerup, industrialist, Tim - born 1959
Jørgen Kolle Sørensen, car dealer, Hvide Sande - born 1970
Johan Chr. Øllgaard, industrialist, Stauning - born 1947
Anne-Marie Sannerum, operations manager, Billund - born 1968
* Member of the board of directors
Board of directors
Jens Lykke Kjeldsen, timber merchant, Ringkøbing, chairman of the board of
directors - born 1950
Member of the board of directors since 1995
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2016
Other managerial activities - member of the board of management of:
A/S Henry Kjeldsen
A/S Miljøpark Vest
Aktieselskabet af 1. august 1989
Asta og Henry Kjeldsens Familiefond
Danbuy A.m.b.A.
Henry Kjeldsen, Ringkøbing Tømmerhandel A/S
VT Hallen A/S
Gravers Kjærgaard, farmer, Grønbjerg, deputy chairman of the board of directors
- born 1952
Member of the board of directors since 2002
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2013
No other managerial activities
Gert Asmussen, printer, Tarm - born 1950
Member of the board of directors since 2002
Chairman of the bank’s auditing committee
End of current term of election to the board of directors: 2014
Other managerial activities - member of the board of management of:
A. Rasmussens Bogtrykkeri ApS
Gert Asmussen Holding A/S
Gullanders Bogtrykkeri A/S
Tarm Bogtryk A/S
Tarm Elværk Net A/S
Tarm Ugeblad ApS
TB Anlæg ApS
Keld Hansen, grocer, Søndervig - born 1948
Member of the board of directors since 2002
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2014
Other managerial activities - member of the board of management of:
A/S Miljøpark Vest
Beach Bowl A/S
Investeringsselskabet Søndervig ApS
Norddan-Søndervig ApS
Søndervig Ejendomsselskab ApS
Søndervig Holding ApS
Søndervig Supermarked ApS
Board of directors - continued
Inge Sandgrav Bak, financial manager, Ringkøbing - born 1960
Member of the board of directors since 2011
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2015
Other managerial activities - member of the board of management of:
International A/S
Rindum ApS
JSB Composite (Zhuozhou) Co., Ltd.
Martin Krogh Pedersen, manager, Ringkøing - born 1967
Member of the board of directors since 2011
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2015
Other managerial activities - member of the board of management of:
K. P. Holding A/S and one 100% owned subsidiary
Mhkp Holding ApS and three 100% owned subsidiary
PF Management Holding ApS and two 100% owned subsidiary
Techo A/S
Vestjysk Udvikling A/S
Bo Bennedsgaard, IT consultant, Holstebro, elected by the employees - born 1972
Member of the board of directors since 2007
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2015
No other managerial activities
Gitte Elisa Sigersmunda Høgholm Vigsø, Sagsbehandler, Holstebro, elected by the
employees -
born 1976
Member of the board of directors since 2011
Member of the bank’s auditing committee
End of current term of election to the board of directors: 2015
No other managerial activities
Board of managers
John Bull Fisker, CEO - born 1964
Member of the board of managers since 1999
On the board of directors of the following companies: Deputy chairman of
Bankdata, Fredericia
Deputy chairman of BI Holding A/S, Copenhagen
Deputy chairman of BI Asset Management Fondsmæglerselskab A/S, Copenhagen
Member of the boards of directors of BankInvest Private Equity A/S, Copenhagen
Deputy chairman of Letpension A/S, Copenhagen
Member of the boards of directors of PRAS A/S, Copenhagen
Member of the customer board of: PFA Pension A/S, Copenhagen
Ringkjøbing Landbobank Aktieselskab
Torvet 1
DK-6950 Ringkøbing
Denmark
Founded: 1886
Phone: +45 9732 1166
Telefax: +45 9732 1800
E-mail:
Website: www.landbobanken.com
CVR-no.: 37 53 68 14
Bank registration number in Denmark: 7670
SWIFT/BIC: RINGDK22
Share capital
Ringkjøbing Landbobank’s share capital is DKK 24.7 million in 4,940,000 shares
of DKK 5.
Ownership
Ringkjøbing Landbobank is owned by approx. 17.156 shareholders.
Major shareholders
Two shareholders have advised their holding of at least 5% of Ringkjøbing
Landbobank’s
share capital:
ATP, Hellerup
Parvus Asset Management (UK) LLP
Stock exchange announcements 2012
Review of Ringkjøbing Landbobank’s announcements to NASDAQ OMX Copenhagen and
others in 2012 in compliance with Section 27b of the Danish Securities Trading
Act:
01 February 2012 Announcement of the anual accounts 2011
01 February 2012 Annual report 2011
01 February 2012 Annual general meeting
01 March 2012 Minutes of the annual generel meeting the 29 February 2012
25 April 2012 Quarterly report 1st quarter 2012
31 May 2012 Implementation of capital reduction
31 May 2012 Updated regulations
31 May 2012 Voting rights
08 August 2012 Interim report for the 1st half 2012
19 September 2012 Financial calender
24 October 2012 Quarterly report 1st-3rd quarter 2012
Announcements regarding insiders’ transactions with the Ringkjøbing Landbobank
share from executive employees and their closely related do not emerge from the
above review.
All the announcements from the bank to NASDAQ OMX Copenhagen and others can be
seen on the website: www.landbobanken.com.
FINANCIAL CALENDAR
Financial calendar 2013
The financial calendar for the upcoming publications is as follows:
30 January 2013 Announcement of the annual accounts for 2012
27 February 2013 General meeting
24 April 2013 Quarterly report, 1st quarter 2013
07 August 2013 Interim report 2013
23 October 2013 Quarterly report, 1st-3rd quarters 2013
Head office:
Ringkøbing
Branches:
Herning
Investcenter Herning Holstebro Investcenter Holte Hvide Sande
Lem Spjald Tarm Ulfborg Viborg Vildbjerg
John Bull Fisker
CEO
Jørn Nielsen
Assistant general manager
Sten Erlandsen
Head of treasury
Ole Bjerregaard Pedersen
Financial manager
Jørgen Højgaard
Foreign manager
Ringkjøbing Landbobank A/S Torvet 1
DK-6950 Ringkøbing
Denmark
Telephone
+45 9732 1166
Telefax
+45 9732 1800
E-mail
Web www.landbobanken.com
SWIFT RINGDK22
CVR-no.
37 53 68 14