• Group profit before tax: NOK 769 million (NOK 803 million)
• Return on equity capital after tax: 20,2 % (24,6 %)
• Net commission and other income: NOK 494 million (NOK 421 million)
• Income from ownership interests: NOK 113 million (NOK 63 million)
• Net recoveries on losses: NOK 42 million (net recoveries NOK 33 million)
• Growth in lending: 19.1% (12.4%) over last 12 months, 15.3% for RM and 27.5 % for CM
• Growth in deposits: 12.6% (18.7%) over last 12 months, 6.2% for RM and 18.9 % for CM
• Earnings per primary capital certificate: NOK 13.3 (NOK 14.8)

I am very satisfied with the results, says CEO Terje Vareberg. The group has been very successful with its geographic and new business area initiatives. Good lending growth and very good introductory sales for mandatory company pensions have both shown that the customers in established and new markets appreciate our products and services. The group's various skills development measures and the recruitment of a total of 90 new employees give us a good foundation for meeting our customers' expectations in a market marked by even sharper competition, says Vareberg.

 

The SpareBank 1 SR-Bank Group reports a profit before tax of NOK 769 million as of 30 September 2006, compared with NOK 803 million for the same period last year. The year-to-date return on equity capital after tax was 20.2%, compared with 24.6% as of 30 September 2005. The combination of higher net commission and other income, a lower net interest margin, skills development and new initiatives accounts for the change in earnings compared with last year. Profit after tax amounted to NOK 596 million (NOK 627 million) as of 30 September 2006.

 

The group's year-to-date net interest income totalled NOK 830 million (NOK 837 million) as of 30 September 2006. This gives a net interest margin of 1.54% (1.79%) measured against the average total assets. The reduction in the net interest margin continues as expected due to continuous pressure on the lending margin. The growth in volume compensates, however, for some of the margin effect, and the net interest income has increased during the last two quarters.

 

Net commission income as of the third quarter of 2006 amounted to NOK 306 million, an improvement of NOK 32 million (11.7%) compared with the corresponding period last year. Commission income from the savings/investment business area contributed the most to the earnings improvement and amounted to NOK 86 million (NOK 68 million) year to date. Other operating income totalled NOK 188 million year to date. Continued high growth in income from real estate brokering, NOK 166 million (NOK 138 million), accounts for most of this development.

 

The net return on financial investments was NOK 250 million (NOK 252 million) as of the third quarter of 2006. The profit attributable to SpareBank 1 Gruppen AS accounts for NOK 113 million (NOK 63 million), the net change in the value of financial assets assessed at fair value accounts for NOK 126 million (NOK 155 million), and dividends account for NOK 11 million (NOK 34 million). Of the net change in the value of financial assets assessed at fair value, NOK 66 million (NOK 105 million) refers to securities and NOK 60 million (NOK 50 million) refers to capital gains from currency and interest instruments. Lower dividends compared with last year is attributed primarily to the high dividends from Energivekst AS last year.

 

The group's operating expenses as of 30 September 2006 totalled NOK 847 million. This is an increase of NOK 107 million (14.5%) over the corresponding period last year. Personnel costs amounted to NOK 457 million (NOK 393 million) as of 30 September 2006. At the end of the third quarter 2006, the group employed 924 man-years, a net increase of 89 man-years from the third quarter of 2005. This reflects the increased level of activity and the group's geographic and business area expansion. In addition, retirement agreements have been entered into with 50 employees. The total operating expenses represented 56.2% of the total operating income (excl. capital gains on securities) for the group as a whole as of 30 September 2006 (52.7%).

 

The group reports net recoveries on losses of NOK 42 million year to date (net recoveries of NOK 33 million).

 

Gross lending during the last 12 months increased by 19.1% to NOK 70.1 billion. There was growth of 15.3% in the retail market and 27.5% in the corporate market. Year to date there was growth of 11.4% and 17.7% in the retail and corporate markets, respectively.

 

The group's deposits from customers increased by 12.6% over the last 12 months to NOK 41.6 billion. Growth in the retail and corporate markets is relatively stable and stands at 6.2% and 18.7%, respectively. The deposit-to-loan ratio was 59.4% as of 30 September 2006. The deposit-to-loan ratio was 60.7% at the end of 2005.

 

The group's capital adequacy ratio was 9.4% (11.4%) at the end of the third quarter of 2006, and the core capital adequacy ratio was 7.4% (8.4%). Calculation of capital adequacy is based on the NGAAP consolidated accounts and does not include the year-to-date profit.

 

EiendomsMegler 1 SR-Eiendom AS reports a year-to-date profit before tax of NOK 24.2 million (NOK 17.6 million). The number of sales and access to new assignments is still very good. The number of properties sold increased by 22.4% compared with the corresponding period last year.

 

SpareBank 1 SR-Finans AS reports a year-to-date profit before tax of NOK 22.4 million (NOK 12,5 million). The company had total assets of NOK 2,601 million at the end of the third quarter, a significant increase of 29.2% over the last 12 months.

 

SR-Forvaltning ASA reports a year-to-date profit before tax of NOK 28.4 million, compared with NOK 16.3 million for the corresponding period last year. The company managed total assets of NOK 5.1 billion at the end of the third quarter of 2006, compared with NOK 4.3 billion as of 31 December 2005.

 

SR-Investering AS has had a good start in its first operating year and reports a year-to-date profit before tax of NOK 31.9. The company has paid-up investments of NOK 67.6 million and a further NOK 133.4 million committed in previous and new investments. The company has investments in 22 companies as of 30 September.

 

At the end of the third quarter of 2006, the price for the bank's primary capital certificates was NOK 185 (NOK 200), and they have provided an effective rate of return, including the dividends paid, of -13.5% (45.3%).

 

Economic expansion continues and the market outlook in the region is still optimistic in all the sectors. Investments are expected to increase, employment is increasing and the labour market is tightening further. There has been a significant reduction in unemployment during the last year. In Rogaland the full-time unemployment rate was 1.8% at the end of September, and in the counties of Hordaland and Agder the rate was between 2.4 and 2.5%.

 

The Board expects a good financial result for 2006.

 

Stavanger, 26 October 2006

 

The Board of Directors of Sparebanken Rogaland

 

 

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