SpareBank 1 SR-Bank ASA (srbank); A good result in a demanding year

The group achieved a pre-tax profit of NOK 2,158 million for the full year 2016 compared with NOK 2,146 million for 2015. The result was characterised by continued good costs control, higher interest income and a rise in income from financial investments. The result was also characterised by increased losses compared with 2015.

The common equity tier 1 capital ratio improved from 13.3% to 14.7% as at 31 December 2016, while the return on equity after tax was 10.0% compared with 10.8% in 2015.

The pre-tax profit for the fourth quarter in isolation was NOK 525 million (NOK 477 million), equivalent to a return on equity after tax of 9.5% (10.6%).

"We have just ended a year that was demanding for many of our customers. This has also affected the bank's operations. Nonetheless, thanks to the good efforts of all of our employees, we have produced good results throughout the group, which is very satisfying. I am particularly pleased with the effort that has been made to help customers through demanding times, in combination with various measures for improving the quality of our loan portfolio. In 2016, we also managed to improve our capital adequacy considerably, such that we meet the requirements set for us by regulatory authorities," says Arne Austreid, the chief executive of SpareBank 1 SR-Bank.

The group's net interest income, including commissions from SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt, amounted to NOK 3,020 million compared with NOK 2,851 million for 2015.

"This represents an improvement of NOK 169 million and is mainly attributable to repricing our loans for the corporate market," says Arne Austreid.

Financial performance as at 31 December 2016:

• Pre-tax profit: NOK 2,158 million (NOK 2,146 million)
• Net profit for the year: NOK 1,755 million (NOK 1,746 million)
• Return on equity after tax: 10.0% (10.8%)
• Earnings per share: NOK 6.87 (NOK 6.83)
• Net interest income: NOK 2,871 million (NOK 2,593 million)
• Net commissions and other operating income: NOK 1,443 million (NOK 1,532 million)
• Net income from financial investments: NOK 654 million (NOK 304 million)
• Operating costs: NOK 2,032 million (NOK 1,863 million)
• Impairment losses on loans: NOK 778 million (NOK 420 million)
• Total lending growth over last 12 months: -0.9% (5.4%)
• Growth in deposits over last 12 months: -3.9% (9.8%)
• Common equity tier 1 capital ratio: 14.7% (13.3%)
• Tier 1 capital ratio: 15.6% (14.2%)
• The board proposes a dividend of NOK 2.25 (NOK 1.50)
  (As at 31 December 2015 in brackets)

Costs control is good.  Costs were reduced by NOK 57 million from 2015 to 2016, taking into account the income recognition of pensions and restructuring costs in 2015, as well as other non-recurring costs.  

In 2016, the group recognised net impairment losses on loans totalling NOK 778 million (NOK 420 million). This accounted for 0.42% (0.23%) of gross loans (inclusive of loans sold to SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt).  The higher impairment losses were largely due to individual commitments within oil-related activities, and collective impairment losses that were NOK 158 million higher (NOK 140 million). 

"Continuing to monitor customers closely and preventive work are important tools for maintaining the good credit quality of the group's loan portfolio. This is important when it comes to reducing the risk of future losses," says Arne Austreid. 

The prevailing market conditions and continued low oil prices could continue to present challenges for some of our customers. However, there is greater optimism at the start of 2017 than there was at the start of 2016. The main index from our recently presented business survey of economic activity now stands at 54%, compared with 47% last year. The poll ended on a par with the poll in August, confirming that this optimism is starting to firm up. In other words, more than half of the region's company executives who were asked still have positive expectations for the future," says Arne Austreid. 

At year-end 2016, SpareBank 1 SR-Bank's minimum common equity tier 1 capital ratio target was 14.0%. The target for the end of 2017 is 15.0%.

"In the last few years, we have built brick by brick when it comes to strengthening the bank's capital adequacy ratio. We have primarily achieved this through balanced and profitable growth, in combination with a moderate dividend rate. We are now in a position to play a more aggressive role in the market, at the same time as we can normalise the dividend rate going forward," concludes Arne Austreid.  

The full interim report is available for download from www.sr-bank.no.

Stavanger, 8 February 2017

Contact people:
Arne Austreid, CEO, Tel. +47 900 77 334
Inge Reinertsen, CFO, Tel. +47 909 95 033
Stian Helgøy, Vice President Investor Relations, Tel. +47 906 52 173
Thor-Christian Haugland, Executive Vice President Communications, Tel. +47 480 31 633