SpareBank 1 SR-Bank - Very good earnings - strong growth in lending and good development in commission income
Group profit before tax: NOK 1,161 million (NOK 1,096 million).
Return on equity capital after tax: 22.5% (24.7%).
Net commission and other income: NOK 678 million (NOK 576 million).
Net return on financial investments: NOK 441 million (NOK 349 million).
Growth in lending: 25.1% (13.6%) in 2006, which breaks down into 16.6% for RM and 44.7%. for CM.
Net reverse loss: NOK 92 million (net reverse NOK 70 million).
Growth in deposits: 13.4% (13.5%) in 2006, which breaks down into 9.9% for RM and 16.4%. for CM.
Earnings per primary capital certificate: NOK 17.6 (NOK 21.0).
The Board proposes a dividend of NOK 12 (NOK 14) per primary capital certificate.
The Board proposes allocating NOK 88 million (NOK 92 million) to the endowment fund.
The Board proposes a public rights issue to finance continued growth.
(Result so far this year. Figures for corresponding period in 2005 are shown in parentheses.)
"I am very pleased with the result for 2006, a pre-tax profit of NOK 1,161 million is the highest ever achieved," says Managing Director Terje Vareberg. "We are experiencing strong growth and growing market shares within all business segments. The strong growth in lending of 25% is a reflection of the very good reception the bank has received in the Agder and Hordaland counties, as well as the fact that business and industry in the region has a very optimistic outlook for the future with a high demand for investments."
"In order to finance continued growth and explore new business opportunities, the Board proposes that the group's equity capital be strengthened by up to NOK 550 million through a public rights issue. This decision is a good indication of the very positive trend for business and industry in the region," says Managing Director Terje Vareberg.
The SpareBank 1 SR-Bank Group posted a profit before tax of NOK 1,161 million (1.096 NOK million) in 2006. The return on equity capital after tax was 22.5% in 2006 compared with 24.7% in 2005. The combination of increased net commission and other income, strong return on financial investments, competence enhancement and new commitments constitute the background for the change in earnings compared with 2005. Profit after tax amounted to NOK 914 million (NOK 856 million) in 2006.
The group's net interest income in 2006 was NOK 1,128 million (NOK 1,113 million). Measured against average total assets, this gives an interest margin of 1.52% (1.76%). The interest margin continued to decline somewhat in the fourth quarter of 2006. The growth in volume, however, compensates for this and net interest income in the fourth quarter of 2006 increased by NOK 15 million compared with the third quarter of 2006.
Net commission income in 2006 amounted to NOK 436 million, an improvement of NOK 59 million (15.6%) compared with 2005. Commission income from savings/investments contributed the most to the earnings improvement and amounted to NOK 136 million in 2006 - an increase of NOK 38 million (39.0%) from 2005. Other operating income amounted to NOK 242 million in 2006, an increase of NOK 43 million (21.6%) from 2005. Income from real estate services of NOK 220 million (NOK 190 million) and profit from sale of buildings of NOK 19 million (NOK 5 million) is the reason for this development.
Net return on financial investments was NOK 441 million (NOK 349 million) in 2006. Of this, the share of profits from SpareBank 1 Gruppen AS amounted to NOK 189 million (NOK 119 million), the net change in value of financial assets assessed at fair value NOK 240 million (NOK 192 million) and dividends NOK 12 million (NOK 38 million). The net change in value of financial assets assessed at fair value breaks down into NOK 155 million (NOK 129 million)from securities and NOK 85 million(NOK 63 million)from capital gains from currency andinterest instruments.
The group's total operating expenses amounted to NOK 1,178 million in 2006, an increase of NOK 166 million (16.4%) from 2005. The main part of this increase can be attributed to competence enhancement, new hires and expansions into new geographical areas. Personnel costs amounted to NOK 634 million (NOK 541 million) in 2006. At the end of 2006 the group had 944 man-years; a net increase in 2006 of 82 man-years. This reflects increased activity and the group's geographical and business expansion.
Other operating expenses totaling NOK 544 million so far this year have increased by NOK 73 million (15.5%) compared with 2005. The cost percentage for the parent bank (NGAAP ex. capital gain on securities) in 2006 was 51.6% (48.4%). For the group (IFRS) the cost percentage was 56.3 in 2006, compared with 53.0% last year.
In 2006 the group has net reverse losses of NOK 92 million (net reverse NOK 70 million).
Lending and deposits
In the last 12 months gross lending increased by 25.1% to NOK 77.3 billion. There was growth of 15.7% (16.6% incl. loans transferred SpareBank 1 Boligkreditt) in the retail market and 44.7% in the corporate market. Of the total growth in volume of NOK 8.9 billion from the corporate market in 2006, more than 20% comes from the Agder and Hordaland counties.
The group's deposits from customers increased by 13.4% in 2006 to NOK 42.5 billion. The growth is 9.9% in the retail market and 16.4% in the corporate market. The deposit-to-loan ratio as of 31 December 2006 was 55.0% (60.7%).
Capital adequacy ratio
The group's capital adequacy ratio was 10.6% (11.8%) at the end of 2006, and the core capital adequacy ratio was 7.4% (9.0%). In December of 2006, the bank raised new subordinated loan capital corresponding to NOK 800 million, of which NOK 450 million is time-limited and NOK 350 million is perpetual. Calculation of the capital adequacy ratio is based on the NGAAP consolidated accounts. The group's objective for 2006 was a capital adequacy ratio of 12% and a core capital adequacy ratio of 8%. In order to finance the group's growth and explore interesting new business opportunities over the next few years, the Board proposes to the supervisory board a public rights issue of primary capital certificates of up to NOK 550 million by the end of the first quarter of 2007. There should also be a private placement of up to NOK 50 million for the group's employees.
EiendomsMegler 1 SR-Eiendom AS posted a profit before tax of NOK 30.6 million (NOK 25.4 million) in 2006. The number of sales increased in 2006 by 17% to a total value of NOK 11 billion.
The total assets in SpareBank 1 SR-Finans at year-end were NOK 2,728 million, an increase of 28.6% for the last 12 months. New sales increased by 45.0% during the same period. The result for the year was NOK 35.5 million before tax compared with NOK 20.5 million in 2005.
The profit before tax for SR-Forvaltning ASA in 2006 amounted to NOK 41.1 million (NOK 24.7 million). The companymanaged assets of NOK 5.6 billion at the end of the fourth quarter of 2006, an increase of NOK 1.3 billion from the end of 2005. The company has loyal customers, and experienced steady growth in new customers also in 2006.
SR-Investering AS was off to a good start and posted a profit in the first year of operation of NOK 28.7 million before tax. The company has paid investments ofNOK 68.3 million and has commitments for an additional NOK 152 million related to previous and new investments. At the end of 2006, SR-Investering AS had investments in 25 companies.
The Bank's primary capital certificates
At the end of the fourth quarter of 2006, the price of the bank's primary capital certificates was NOK 189.0 (NOK 230.0), and including disbursed dividends, the bank's primary capital certificates have provided an effective rate of return of -11.7% (66.1%) in 2006.
For many years SpareBank 1 SR-Bank has had a strong focus on savings and asset management with good results. This is an important part of the group's strategy to create a more robust income base less dependent upon traditional lending and deposit products. The Board has decided to coordinate these activities in a special business unit. The business unit will have the primary responsibility for consultancy activities and development of new savings and investment products as well as follow-up of activities within SpareBank 1 SR-Forvaltning ASA and SpareBank 1 SR-Investering AS.
Deputy Managing Director Sveinung Hestnes signs on as group director responsible for managing and developing the new business unit 1 February 2006. The position of deputy managing director will be phased out at the same time.
The board expects a good result also in 2007.
Stavanger, 1 February 2007
The Board of Directors of Sparebanken Rogaland
Please submit any questions to Managing Director Terje Vareberg, telephone +47 51 50 95 53/911 00 448, Group Director Finance Lisbet K Nærø, telephone +47 51 50 95 61/952 65 960 or Group Director Communications Thor-Christian Haugland, telephone +47 51 50 92 81 / 480 31 633.
The full report including tables can be downloaded from the following link:
SpareBank 1 SR-Bank is Norway’s second largest savings bank and operates in the Rogaland, Agder and Hordaland markets. We provide financial products and services, including loans and deposits, mutual funds and asset management, insurance and pension savings, payment and financing services, real estate brokerage and services related to the money and capital market. The head office is in Stavanger.