Profit of NOK 18 million before tax, loss of NOK 34 million after tax

Negative impact on the bottom line from the development in the securities markets, which affects the result for the SpareBank 1 group and own securities

Profit from underlying banking operations is NOK 672 million (NOK 632 million) before losses

Finance Credit affects the accounts with a loss of NOK 135 million (90% of the commitment)

Growth in deposits of NOK 3.6 billion (15 percent) in the group

Growth in lending of NOK 1.7 billion (4 percent) in the group

Deposit coverage improved from 55 percent to 61 percent

Stabile interest margin of 2.13 percent

Continued cost-effective operations; cost percentage reduced to 1.65 percent (1.71 percent)

Steady default rate

Rate of loss at 0.75 percent (0.36 percent), ex Finance Credit 0.45 percent

Minus 1.3 percent return on equity capital after tax

Solidity still good. Capital adequacy ratio at 10.81 percent and core capital at 7.24 percent

The Board proposes to pay NOK 10 in dividends

 

 

The underlying banking operations show a positive development with a result before losses of NOK 672 million, which is NOK 40 million better than 2001.

 

The negative development in the securities markets has continued throughout 2002 and to a large extent affected the group's profit. The result is strongly influenced negative by the ownership interest in SpareBank 1 Gruppen AS, losses in Finance Credit and losses on own securities. The profit before tax was NOK 18 million with a loss of NOK 34 million after tax.

 

The cost-effectiveness remains good and the operating costs improved to 1.65 percent of the average total assets compared with 1.71 percent in 2001.

 

The group has improved the deposit coverage from 55 percent to 61 percent. The growth in deposits was 15 percent while the growth in lending constituted 4 percent.

 

The group is still very strong with a core capital of 7.24 percent and a capital adequacy ratio of 10.81 percent.

 

The interest margin is on level with last year's at 2.13 percent. The lending margin has increased, while the deposit margin has been reduced correspondingly. Net interest and commission income amounted to NOK 1 050 million; NOK 71 million more than in 2001.

 

 

The group's net commission income increased by 3 percent in 2002 from NOK 282 million to NOK 289 million. There is a good and steady increase of 23 percent in commission income from insurance in 2002. The private market accounts for most of the sales, but business insurance also shows a healthy increase. Due to a weak securities market, income related to sale of mutual funds/unit trusts and structured products fell compared with 2001. The decline is the result of a combination of reduced portfolio commission and commission on new sales.

 

Dividend income is down NOK 121 million compared with last year. This is mainly due to the negative contribution from SpareBank 1 Gruppen AS. The bank's share of the deficit in SpareBank 1 Gruppen AS amounted to NOK 168 million (NOK 58 million). The deficit is mainly due to a weak securities market, extraordinary write-downs of goodwill and added value related to the acquisition of Vår as well as losses in Bank 1 Oslo AS in connection with loans to Finance Credit. The return on SpareBank 1 SR-Bank's investment in Odin money market funds in 2002 was NOK 10 million less than in 2001. This investment also resulted in a capital loss of NOK 25 million in 2002 due to significant write-downs on bonds.

 

The return on the bank's portfolio of shares and primary capital certificates (circulation) was minus 28 percent, which amounted to minus NOK 93 million. The bank's holdings of shares and primary capital certificates constituted NOK 204 million at year-end. Currency transactions contributed with NOK 28 million in 2002 compared with NOK 36 million in 2001.

 

 

The group's total operating expenses was NOK 812 million in 2002 compared with NOK 785 million in 2001; an increase of 3 percent.

 

The personnel costs constitute the largest nominal increase of 6 percent, and is due to increased staffing in EiendomsMegler 1 Rogaland AS because of commitments in new market areas, the business market area as well as high wage increases in the financial sector. The parent bank's personnel was reduced by 15 man-years (including temporary personnel).  The IT costs showed the highest relative growth in 2002. The increase was due to new applications and communications costs. The real growth in IT costs amounted to 12 percent.  The introduction of value-added tax on services as of 1 July 2001 had full effect in 2002.

 

Operating costs constituted 1.65 percent of average total assets (1.71 percent).

 

 

Defaults in the group have remained steady throughout 2002 and was NOK 9 million higher than one year ago. The group's gross default as a percentage of gross lending amounted to 0.70 percent as of 31 December 2002, the same as in 2001.

 

Total net losses on lending amounted to NOK 341 million (NOK 159 million). The business market accounts for NOK 323 million, while losses in the private market was NOK 18 million.  Ordinary losses on lending constituted 0.75 percent of gross lending compared with 0.36 percent in 2001.

 

Losses in the business market were heavily affected by the loss allocation for Finance Credit in the amount of NOK 135 million. So far only minor assets have been found in the companies, but work is in progress in cooperation with Økokrim (National Authority for Investigation and Prosecution of Economic and Environmental Crime in Norway) in the hope of locating additional assets. The basis for compensation and liability action is currently being assessed. An insurance claim has been submitted to the bank's insurance company.

 

NOK 19 million has been reserved for increased unspecified loss allocations. Total unspecified loss allocations amounted to NOK 375 million at the end of last year, or 0.8 percent of total lending. Specified loss allocations constituted NOK 396 million as of 31 December 2002.

 

 

EiendomsMegler 1 Rogaland AS has further strengthened its position in 2002. The company brokered 3 600 properties at a total value of NOK 4.7 billion.  The company is the market leader in Rogaland within residential, industry and project brokering. The development in the Agder counties has been in accordance with the company's objectives. Real estate brokering in Spain has also shown fine development. Total income amounted to NOK 101 million and the company had a profit before tax of NOK 12 million in 2002.

 

Westbroker Finans AS had total assets of NOK 1.5 billion at year-end and a profit before tax of NOK 13.5 million. The company has focused its activities on leasing as the core product and has had a growth of 26 percent in the leasing portfolio.

 

SR-Forvaltning ASA, the bank's company for active investment management, has continued a positive development in a rocky market. At year-end the company managed NOK 1.6 billion in assets. SR-Forvaltning ASA manages portfolios for SpareBank 1 SR-Bank and SpareBank 1 SR-Bank's pension fund as well as for external customers. The profit before tax amounted to NOK 3.9 million.

 

 

The Board is concerned with measures that can ensure good and stabile profit for the group.

The Board has implemented the following improvement measures:

 

implementing already initiated measures related to cost and income enhancement programs with a target of a cost percentage of 50 percent in the parent bank

realizing the effect of recent divisioning in which business market expertise has been gathered in a larger group

establishing a special division for monitoring of portfolios and follow-up of commitments

strengthening of controller schemes and control systems within credit, currency, finance and the operational risk area

increasing management focus on implementation of measures to improve the profit of SpareBank 1 Gruppen AS

further development of the savings and insurance area within the private and business markets

 

Norway still has a high interest rate compared with the rest of Europe, and the Norwegian currency is still strong. Last year's wage settlement and the underlying growth in wages also contribute to erosion of business competitiveness.

 

Thus, the economic development appears to be somewhat uncertain as regards 2003, even though there will differences between the various sectors. The growth in lending is expected to remain at a low level in 2003 as well. However, the Board expects a satisfactory development for the group in 2003 and refers to the measures intended to contribute to improved profit for both SpareBank 1 SR-Bank and SpareBank 1 Gruppen AS.

 

 

 

Stavanger, 4 February 2003

 

 

The Board of Directors of Sparebanken Rogaland.

 

***

 

The full report including financial tables, can be downloaded from the following link: