In the first half of 2006, the SpareBank 1 SR-Bank group achieved a profit before tax of NOK 514 mill., NOK 22 mill. more than in the first half of 2005. Return on equity after tax is 20.9% so far in 2006, compared to 23.3% in the first half of 2005. The profit improvement compared to last year is mainly due to net commission income and other income, as well as the profit contribution from SpareBank 1 Gruppen AS. The profit after tax was NOK 403 mill. (NOK 382 mill.) in the first half of 2006.

 

In the first half of 2006, the group's net interest received was NOK 547 mill. (NOK 557 mill.). This yields a net interest margin of 1.58% (1.83%) (measured against average total assets). Lower lending margins in both the retail and corporate markets as a result of  the development in market interest rates and competition, as well as improved portfolio quality, are the main causes of the reduced interest rate margins. The drop in interest rate margins levelled out somewhat in the last quarter, but the pressure on this key figure is expected to continue in the near future.

 

In the first half of 2006, net commission income was NOK 201 mill., an improvement of NOK 24 mill. (13.6 %) compared to the corresponding period last year. Commission income from savings/investments contributed the most to the profit improvement, with NOK 58 mill. (NOK 43 mill.) in the first half of 2006. Other operating income was NOK 132 mill. in the first half of 2006, an increase of NOK 33 mill (33.3 %) compared to the first half of 2005. Strong growth in the income from real estate brokering (NOK 111 mill. (NOK 92 mill.)) and gains from the sale of buildings (NOK 19 mill. (NOK 5 mill.)) explain this development.

 

Net return on financial investments was NOK 186 mill. in the first half of 2006. This is an increase of NOK 31 mill. (20 %) from the first half of 2005.

 

The profit contribution from SpareBank 1 Gruppen AS has increased from NOK 34 mill. in the first half of 2005 to NOK 70 mill. so far in 2006. The net change in value of the financial assets assessed at real value generated an income of NOK 106 mill. (NOK 105 mill.) in the first half of 2006. NOK 66 mill. (NOK 69 mill.) are from securities and NOK 40 mill. (NOK 36 mill.) are from currency exchange gains and gains from interest rate instruments.

 

In the first half of 2006, the group's total operating costs were NOK 559 mill. This is an increase of NOK 65 mill. (13.2%) from the corresponding period last year. The main cause of this increase can be found in increased personnel costs from new initiatives. In connection with the on-going restructuring process, agreements have been made with 44 employees, of whom most will resign from their positions during the autumn of 2006. For the group, total operating costs were 55.9 % (53.8%) of total operating income (excluding capital gains from securities) in the first half of 2006.

In the first half of 2006, the group had net reverse losses of NOK 7 mill. (net loss NOK 2 mill.).

 

Gross lending has increased by 13.7% to NOK 65.7 bill. over the last 12 months. In the retail market, lending has grown by 15.1%, while lending in the corporate market has grown by 10.9%. So far in 2006, growth in the retail and corporate markets is 7.5% and 4.0%, respectively. Excluding public sector and financial services, growth over the last 12 months and so far in 2006 was 16.5% and 7.8%, respectively.

 

The group's customer deposits have increased by 12.6% over the last 12 months, to NOK 41.4 bill. The growth is distributed with 6.4% in the retail market and 18.9% in the corporate market. As of 30 June 2006, deposit coverage was 63.0%. This is up from 60.7% at the end of 2005.

 

The group's capital adequacy ratio was 10.0% (12.5 %) at the end of the second quarter of 2006, and the core capital adequacy ratio was 7.7 % (8.7%).  The calculation of capital adequacy ratio  is based on group accounts made according to NGR and does not include the profit so far in 2006.

 

EiendomsMegler 1 SR-Eiendom AS achieved a pre-tax profit NOK 18.0 mill. (11.8 mill.) in the first half of 2006. The number of sales and the influx of new assignments is good. The number of sold properties is up 23.6 per cent compared to the first half of 2005.

 

SpareBank 1 SR-Finans AS  had a profit before tax of NOK 13.5 mill. in the first half of 2006 (NOK 8.6 mill.). Total assets were NOK 2,463 bill. at the end of the first half of 2006, up 29% from the end of the first half of 2005.

 

SR-Forvaltning ASA achieved a profit of NOK 18.2 mill. in the first half of 2006, up NOK 7.9 mill. compared to the corresponding period last year. At the end of the first half of 2006, the company managed a capital of NOK 4.9 bill., compared to NOK 4.3 bill. as of 31 December 2005.

 

SR Investering AS had a good start in its first operating year and achieved a profit before tax of NOK 22.1 mill. so far in 2006. The company has paid up investments of NOK 57 mill. and a further NOK 130 mill. committed in previous and new investments.

 

At the end of the second quarter of 2006, the bank's primary capital certificate sold at NOK 180 (NOK 186), and when including the dividend paid, the bank's primary capital certificates have yielded an effective dividend of -15.7% (35.6%) in the first half of 2006.

 

The SpareBank 1 SR-Bank group considers having the right expertise as a necessary requirement to succeed in the financial market of the future. Over the last  year, SpareBank 1 SR-Bank have worked actively to recruit employees with future-oriented competence. Competence enhancement, increased emphasis on new business areas and expansion in new geographical areas will make SpareBank 1 SR-Bank well equipped to meet the ever increasing competition in the finance market.

 

 

Stavanger, 10 August 2006

 

The Board of Directors, Sparebanken Rogaland

 

 

 

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