Interim Report January-June 2000

Interim Report January-June 2000 Strong earnings growth * Operating profit up 29% to EUR 1,359m (SEK 11.4bn) * Earnings per share January-June EUR 0.33, up by 14% * Total income up 16% and expenses up 4% (both excl. acquired business) * Strong growth in interest and commission income * Return on equity 18.6% * Improved ratings Strong performance in strategic growth areas * Strong Retail earnings * E-banking leadership: - e-customers more than 1.6m, up 0.6m since year-end - strong growth in customers using online equity trading * Significant growth in Asset Management: EUR 104bn under management Decisive steps for Nordic leadership * Merger process: business integration continues according to plan * Continued expansion in the Baltic Sea region * The Norwegian parliament decided to sell the state-owned shares in Christiania * Bank og Kreditkasse and MeritaNordbanken tendered a new bid at NOK 44 per share The leading financial services group in the Nordic and Baltic region: market capitalisation of EUR 24bn (SEK 200bn) Nordic Baltic Holding (NBH) AB (publ) is the leading financial services group in the Nordic and Baltic Sea Region with total assets of EUR 192bn and a world leader in Internet banking with 1.6 million e-customers. NBH owns MeritaNord- banken Plc and Unidanmark A/S, including. Merita Bank, Nordbanken, Unibank, ArosMaizels, Tryg-Baltica, Vesta, Merita Life and Livia. Six business areas serve 9 million private and 600,000 cor- porate and institutional customers through 1,100 bank branches, 125 insurance service centres, telephone and e-banking services and own operations in 18 countries outside the home region. NBH is listed in Stockholm, Helsinki and Copenhagen. www.nordicbalticholding.com Operational Income Statement Pro forma Q2 Q1 Jan - Jan - Full June June year EURm 2000 2000 2000 1999 1999* Net interest income 779 723 1,502 1,386 2,755 Net commission income 384 377 761 536 1,164 Operating income from insurance 118 203 321 255 613 Net result from financial opera- 91 145 236 140 243 tions Other income 116 97 212 204 331 Total income 1,488 1,545 3,032 2,521 5,106 Personnel expenses -464 -449 -913 -812 -1,629 Other expenses -370 -336 -706 -663 -1,375 Total expenses -834 -785-1,619-1,475 -3,004 Profit before loan losses 654 759 1,413 1,046 2,102 Loan losses, net -20 -17 -37 -55 -91 Profit from companies accounted for under the equity method 23 9 32 81 117 Operating profit before goodwill 657 752 1,408 1,072 2,128 depreciation Goodwill depreciation -27 -22 -49 -18 -39 Operating profit 630 729 1,359 1,054 2,089 Loss on disposal of real estate 0 -40 -40 - -145 holdings Refund of surplus in Pension 9 8 17 - 65 foundation Taxes -163 -197 -360 -180 -346 Minority interest 0 -2 -2 0 -2 Net profit 476 498 974 874 1,661 Ratios and key figures Earnings per share, EUR 0.17 0.33 0.29 0.55 Share price **, EUR 5.55 7.90 5.68 5.84 Shareholders' equity per share, 3.45 3.60 3.21 3.43 EUR Shares in issue** (millions) 2,961 2,979 2,987 2,987 Return on equity (%), pro forma 19.2 18.6 19.9 18.0 Return on equity before goodwill 19.8 19.2 19.9 18.0 depreciation (%) Lending**, EURbn 109 109 104 Deposits **, EURbn 66 65 65 Technical provisions (insurance) 18 19 16 **, EURbn Shareholders' equity **, EURbn 10 11 10 Total assets **, EURbn 194 192 186 Assets under management **, 102 104 89 EURbn Cost/income ratio (before loan 52 52 57 59 losses), banking (%) Combined ratio, non-life insur- 122.4 111.3 97.2 101.7 ance *** (%) Tier 1 capital ratio ** (%) 8.5 9.0 9.0 Total capital ratio ** (%) 10.6 10.8 11.1 Risk-weighted amount (banking) 111 110 105 **, EURbn * The combined pro forma figures for the full year 1999 are stated as in the merger prospectus, except for some minor reclassifications between other income, expenses and profit from companies accounted for under the equity method **End of period *** Excluding run-off from hurricane combined ratio was 96.5 in second quarter and 107.0% in the first quarter of 2000, and 101.7 for Jan-June 2000 The Group Operating profit up 29% Total operating profit increased 29% to EUR 1,359m, compared to the first half of 1999. Due to very high investment income from the equity and fixed-income markets profit was higher in the first quarter than in the second quarter of 2000. Investment income was down EUR 190m. Return on equity was 18.6%. Before goodwill depreciation, the return on equity was 19.2%. The Group's total income for the first six months was EUR 3,032m (EUR 2,521m), up 16% compared to the first half of 1999, excluding income from acquired business, mainly Vesta. Net interest income amounted to EUR 1,502m, an increase of 8% compared to the first half of 1999. The second quarter was also up 8% compared to the first quarter of 2000. The upward trend in short term market interest rates had a positive impact on deposit margins. The lending volumes are growing and the margins on these also improved slightly. Net commission income was EUR 761m representing an increase of 42% compared to the first half of 1999. Income from fund management, equity trading and card services continued to rise, as did income from corporate finance. Net commis- sion for the second quarter, showed a slight increase of 2% compared to the strong first quarter. Net operating income from insurance was EUR 321m, up 9% compared to the first half of 1999, excluding provisions for the December hurricane in Denmark, EUR 63m, and acquired business. Net operating income from insurance fell from EUR 203m in the first quarter 2000 to EUR 118m in the second quarter mainly due to developments in equity markets in the second quarter. Rising market interest rates in the second quarter also affected the valuation of bond holdings nega- tively. The net result from financial operations showed a profit of EUR 236m, mainly due to gains on equity holdings during the first quarter. Earnings from eq- uity-related transactions amounted to EUR 127m. Realised and unrealised profit on interest-rate-related securities totalled EUR 40m. Earnings from currency- related transactions were EUR 69m. Compared to the first quarter the result in the second quarter was reduced, mainly due to developments in the equity mar- kets. Other income totalled EUR 212m. In the second quarter other income amounted to EUR 116m including gains Operating profit up 29% Total operating profit increased 29% to EUR 1,359m, compared to the first half of 1999. Due to very high investment income from the equity and fixed-income markets profit was higher in the first quarter than in the second quarter of 2000. Investment income was down EUR 190m. Return on equity was 18.6%. Before goodwill depreciation, the return on equity was 19.2%. The Group's total income for the first six months was EUR 3,032m (EUR 2,521m), up 16% compared to the first half of 1999, excluding income from acquired business, mainly Vesta. Net interest income amounted to EUR 1,502m, an increase of 8% compared to the first half of 1999. The second quarter was also up 8% compared to the first quarter of 2000. The upward trend in short term market interest rates had a positive impact on deposit margins. The lending volumes are growing and the margins on these also improved slightly. Net commission income was EUR 761m representing an increase of 42% compared to the first half of 1999. Income from fund management, equity trading and card services continued to rise, as did income from corporate finance. Net commis- sion for the second quarter, showed a slight increase of 2% compared to the strong first quarter. Net operating income from insurance was EUR 321m, up 9% compared to the first half of 1999, excluding provisions for the December hurricane in Denmark, EUR 63m, and acquired business. Net operating income from insurance fell from EUR 203m in the first quarter 2000 to EUR 118m in the second quarter mainly due to developments in equity markets in the second quarter. Rising market interest rates in the second quarter also affected the valuation of bond holdings nega- tively. The net result from financial operations showed a profit of EUR 236m, mainly due to gains on equity holdings during the first quarter. Earnings from eq- uity-related transactions amounted to EUR 127m. Realised and unrealised profit on interest-rate-related securities totalled EUR 40m. Earnings from currency- related transactions were EUR 69m. Compared to the first quarter the result in the second quarter was reduced, mainly due to developments in the equity mar- kets. Other income totalled EUR 212m. In the second quarter other income amounted to EUR 116m including gains from the disposal of equity holdings in Svensk Exportkredit representing EUR 60m. Expenses Total expenses were EUR 1,619m, up 4 % compared to the first half of 1999 ex- cluding expenses from acquired business, mainly Vesta. In the second quarter total expenses rose to EUR 834m compared to EUR 785m in the first quarter. Personnel expenses amounted to EUR 913m. The Group had 34,300 employees, in- cluding 500 employees in now-consolidated insurance business. Personnel ex- penses rose to EUR 464m in the second quarter compared to EUR 449m in the first quarter. The main factor explaining this development was provisions for bonus payments and other variable salaries related to the increased earnings. The bonus shares distributed under the 1999 profit share scheme to the employ- ees in Unidanmark in April and the new salary agreement for Swedish employees as from 1 April have also affected personnel expenses in the second quarter. Other expenses amounted to EUR 706m. In the second quarter other expenses rose to EUR 370m compared to EUR 336m in the first quarter. Coordination costs re- gard-ing the merger, which are not defined as restructuring costs, and market- ing costs are the main reasons for this increase. Loan losses Loan losses were still at a low level, EUR 37m. The net volume of doubtful loans was EUR 698m at the end of June, down EUR 330m compared to 1999. The volume of doubtful loans represented 0.6% of total lending with provisions amounting to 77%. Shareholders' equity Shareholders' equity amounted to EUR 10.7bn as recognised in the accounts at the end of June. Overvalues in equity holdings, classified as financial cur- rent assets and carried at the lower of cost or market amounted at the same time to EUR 0.1bn before tax. Furthermore, the fair value of the assets of the Group's pension foundations and pension fund exceeded pension commitments by EUR 0.5bn whereas the book value of interest-bearing securities classified as financial fixed assets matched the corresponding market value. At the end of June, the Tier 1 capital ratio amounted to 9.0% and the total capital ratio to 10.8%. Net profit for the period less estimated dividend is included in the calculation of these ratios. Merger process according to plan When the mandatory offer of Nordic Baltic Holding to the shareholders of Uni- danmark ended on 30 May 2000, shareholders representing 99.1% of the total number of shares in Unidanmark had accepted the share exchange offer. Pursuant to the Danish Companies Act, the boards of Nordic Baltic Holding and Unidanmark made a joint decision regarding compulsory acquisition of the Uni- danmark shares which had not been transferred to Nordic Baltic Holding. These shares are acquired at a price of DKK 640 per share. The Unidanmark share was delisted from the Copenhagen Stock Exchange on 28 June 2000. The merger integration process is progressing according to plan and the previ- ously announced synergies are verified. Synergies were calculated to be EUR 200m annually before tax, with full effect within a three-year period. A fur- ther EUR 50m of annual pre-tax synergies are estimated from retail operations, and further synergies are expected in the longer term from more full integra- tion of the business. The overall structure of the business organisation is in place and, globally, the integration of the foreign units is in progress. Foreign exchange and fixed-income trading activities take place from common trading floors. Product and service concept integration work is going on in all business areas and control principles regarding credit risk, market risk and financial control have been implemented. The Group plans to adopt a new name that it will use in the legal structure, in wholesale banking and in support of retail banking and insurance brands. Brand values and branding principles have been decided and work preparing the launching of a new name is progressing. Rating Merita Bank Plc, Nordbanken AB and Unibank A/S were upgraded on 5 June by Moody´s Investor Service. The upgrading to Aa3 concerns long-term deposits and debt ratings and upgrading to B concerns the financial strength rating of the three banks. Moody´s confirmed the Aa3 long-term rating of Nordbanken Hypotek AB and up- graded the rating for the mortgage bonds by Unikredit Realkreditaktieselskab to Aa2 from Aa3. Fitch IBCA raised the individual rating of Merita Bank from C to B and as- signed a positive outlook on the long-term A+ rating of Merita Bank, Nord- banken and Unibank. Share development During the period 1 January - 30 June, the Nordic Baltic Holding share price increased from SEK 50.00 to SEK 66.50. The market capitalisation of the Nordic Baltic Holding at 30 June was EUR 23.5bn. The number of shares outstanding rose from 2,091,067,728 on 1 January 2000 to 2,979,192,717 as of 30 June 2000 due to new share issues on 25 April and 9 June. Nordic Baltic Holding was listed on the Helsinki Stock Exchange in January and on the Copenhagen Stock Exchange in April and is now listed on three Nordic exchanges. The number of shareholders is currently approximately 550,000. The Merita share was delisted from the Helsinki Stock Exchange on 12 April 2000. NOK 24.3bn cash offer to shareholders of Christiania Bank MeritaNordbanken Plc has made a new offer to acquire all the shares of Chris- tiania Bank og Kreditkasse ASA. The offer price has been increased to NOK 44 per share. The offer period ends on 31 August 2000. The price of the new offer reflects the potential for integration of Christi- ania Bank with the new Group comprising MeritaNordbanken and Unidanmark. The completion of the offer is subject to the acceptance of shareholders rep- resenting 90% of the shares, necessary approval by Norwegian and other authorities, a due diligence process and ordinary course of business. The of- fer is subject to the full terms and conditions set out in the offer document. The Norwegian parliament has made a decision to sell all shares in Christiania Bank og Kreditkasse owned by the state. New Swedish giro payment system In June the Group, in consortium with the three other major Swedish banks, entered into an agreement to acquire the Swedish Postal Giro System for a total consideration of approximately SEK 4bn. The intention is to form a new Swedish giro payment system by merging the postal giro with the banking and the private giro systems. The restructuring of the Swedish giro systems is subject to approval by the competition-monitoring authorities, which is expected at the end of this year. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/08/23/20000823BIT00210/bit0001.doc The full report http://www.bit.se/bitonline/2000/08/23/20000823BIT00210/bit0002.pdf The full report