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SpareBank 1 SR-Bank - Good profits on the basis of solid operations and low level of loss

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  • High return on equity capital after tax: 20.1% (17.9%).
  • Good consolidated pre-tax profit: NOK 223 million  (166 million).
  • Low level of losses (net): NOK 3 million  (NOK 35 million).
  • Reduced rate of default (gross): NOK 179 million  (NOK 329 million).
  • Reduced interest margin: 1.89% (2.00%).
  • Good growth in net commission income: NOK 87 million  (NOK 77 million).
  • Operating costs reduced by NOK 14 million: NOK 231 million  (NOK 245 million).
  • Total assets passed NOK 60 billion in the first quarter.
  • Increased growth in lending: +11.6% (+7.9%) in the last twelve months.
  • Business sector steps up its investments, growth of lending to the business market to 13.4% (-1.3%) last 12 months.
  • Good growth of deposits: +16.3% (+8.6%) in the last 12 months. (Parentheses show figures for the corresponding period in 2004.)
 
In the first quarter of 2005 the SpareBank 1 SR-Bank Group achieved a rate of return on equity capital after tax of 20.1%, as against 17.9% in 2004. Group pre-tax profit was NOK 223 million in the first quarter of 2005, an improvement of NOK 57 million in comparison with the first quarter of 2004. The profit improvement was due to reduced losses, increased interest and commission incomes and lower costs.
 
In the first quarter of 2005 gross lending increased by NOK 1,176 million to NOK 55,608 million. In the last twelve months gross lending has increased by 11.6%, divided between 10.8% in the private market and 13.4% in the business market. The growth rate is falling somewhat in the private market and still increasing in the business market, where the 12-month growth rate was -1.3% one year ago. At the end of the first quarter of 2005 the bank's lending was divided between 68.2% to the private and 31.8% to the business market.
 
The growth of deposits continues at a satisfactory level, with a 12-month growth rate of 16.3%, divided between 5.5% in the private market and 29,1% in the business market. The high growth in the business market is to a large extent due to deposits on special terms. As of 31 March 2005 the deposit-to-loan ratio was 62.0%, which is an increase from 60.7% at year-end and from 59.5% at the end of the first quarter of 2004.
 
In the first quarter the interest margin was 1.89%, as against 2.00% in the first quarter of 2004. The decline was due mainly to lower lending margins in both the private and business market divisions. In the first quarter of 2004 the guarantee fund charge was NOK 11 million, included in net interest received.
 
Net commission income, including income from payment services, insurance and saving/placement, comprised NOK 87 million, an increase of NOK 10 million in comparison with the first quarter of 2004.
 
Total operating costs comprised NOK 231 million in the first quarter of 2005, a reduction of NOK 14 million compared with the first quarter of 2004. In the first quarter of 2005 the cost percentage in the parent bank (according to NRS) was 48.5%, and 52.3% for the Group, as compared with 56,7% and 59.1% respectively in 2004.
 
Commitments in default show a considerable decline compared with the same period last year, from NOK 329 million in the first quarter of 2004 to NOK 179 million in the first quarter 2005.  Net losses in the first quarter of 2005 are NOK 3 million, as against NOK 35 million for the same period last year, a fall of NOK 32 million. The low figures for losses and defaults reflect the general economic trends, business profitability, the low level of interest rates and the better credit risk profile of the bank's lending portfolio. We see no signs of any change in these trends in the short term.
 
The subsidiaries
The companies Eiendomsmegler 1 Rogaland AS, SpareBank 1 SR-Finans AS and SR-Forvaltning ASA are still contributing well to the consolidated profits. Total profit contribution before tax was NOK 11.2 million in the first quarter 2005.
 
Transition to IFRS
From 1 January 2005, all listed groups within the EU (including the EEA countries) must file quarterly and annual accounts under the International Financial Reporting Standards (IFRS). This being so, the Sparebank 1 SR-Bank consolidated accounts for the first quarter of 2005 are being filed under IFRS. It is not yet permitted to employ IFRS in the company accounts for Sparebank 1 SR-Bank. The transition effect of IFRS on equity will be NOK -28 million.
 
Outlook
The first quarter of 2005 has given us a good start to the new year. Given the current interest rate picture and the competitive situation, the Board expects further pressure on the interest margin in 2005. However, the Board believes that the focus on other incomes, cost-efficient operations and continued low levels of losses will yield a good result for the Group in 2005.
 
More detailed information is available in the appended quarterly report and figures.

Stavanger, 28 April 2005 <!-- hugin-supplied --><br> The Board of Sparebanken Rogaland <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Any questions should be directed to Managing Director Terje Vareberg, telephone +47 51 50 95 53/+47 911 00448, Deputy Managing Director Sveinung Hestnes, telephone +47 51 50 95 58/+47 908 53165, Director Finance Tor Dahle, telephone +47 51 50 95 56/+47 915 47503 or the Director of Information and Public Relations, Thor-Christian Haugland, telephone +47 51 50 92 81 / +47 48 03 16 33. <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> Date: 22 April 2005

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