SpareBank 1 SR-Bank - Good results - low losses and high returns on financial investments

Thu, Aug 11, 2005 12:57 CET Report this content

 

The SpareBank 1 SR-Bank Group achieved a pre-tax profit of NOK 498 mill. in the first half of 2005, a gain of NOK 131 mill. over the first half of 2004. The return on equity capital after tax was 22.5% in the first half of 2005, against 19.3% in the first half of 2004. The improvement in the profits is primarily due to a combination of low losses, high returns on financial investments and good growth in net commissions and other income.

 

Net interest income of NOK 563 mill. (NOK 555 mill.) gave an interest margin of 1.85% (2.06%) in the first half of 2005.  The decrease is due primarily to lower lending margins within both the consumer and corporate market divisions, as a result of the low interest rates, a further intensified competitive situation, as well as better portfolio quality.

 

Net commission income of NOK 177 mill. in the first half of 2005 is an increase of NOK 16 mill. This is a result of increased guarantee commission income, as well as increases within both payment transfers and sale of funds, securities and insurance products.

 

Year-to-date, net returns on financial investments total NOK 155 mill. This is an increase of NOK 51 mill. over the first half of 2004. This includes among other things an increase in real valuation of the bank's ownership interest in Energivekst AS of NOK 25 mill. as well as an increase in the profit share from the SpareBank 1 Gruppen AS of NOK 17 mill.

 

Total operating expenses were NOK 494 mill. in the first half of 2005, an increase of NOK 10 mill. (2.1%) over the same period last year. The cost percentage for the group and parent bank amounted to 53.4% (55.5%) and 49.9% (52.5%) respectively.

 

Net losses in the first half of 2005 were NOK 2 mill. (NOK 62 mill). This corresponds to a loss percentage (of gross lending, annuated) of 0.01% (0.25%).

 

In the past 12 months, gross lending has increased by 12.7%, distributed between the private and corporate markets with 10.7% and 17.2% respectively. The large growth in the corporate market reflects regional businesses' accelerating willingness to invest.

 

The growth in deposit volume (12 months) was 17.0%, distributed between the private and corporate markets with 7.3% and 28.8%, respectively. Deposit coverage as of 30 June 2005 was 63.8%. This is an increase from 60.8% as of 1 January and from 61.4% as of 30 June 2004.

 

The group capital adequacy was 12.5% at the end of the first half of 2005, and core capital adequacy was 8.7%. This year's profits are not included in the capital adequacy.

 

EiendomsMegler 1 Rogaland AS achieved a pre-tax profit of NOK 11.8 mill. (NOK 14.4 mill.) in the first half of 2005. The number of brokering transactions is at the same level as the previous year. There is now a good balance between demand and supply in the housing market, both with regards to new projects and the used housing market.

SpareBank 1 SR-Finans AS achieved a pre-tax profit of NOK 8.6 mill. (NOK 10.7 mill.)  in the first half of 2005. As of 30 June 2005 the bank has total assets of NOK 1,895 mill., an increase of 13.8% over the same time in 2004. Activity in the leasing market is good.

 

SR-Forvaltning ASA achieved a pre-tax profit of NOK 10.3 mill. in the first half of 2005, an increase of NOK 4.2 mill. over the same period in 2004. At the end of Q2/2005 the company was managing a capital of NOK 3,480 mill., compared to NOK 2,964 mill. as of 31 December 2004. In the past 12 months the total assets have increased by 34%.

 

At the end of the first half of 2005, the bank's primary capital certificates were quoted at NOK 186, against NOK 144 at the end of 2004. Including dividends of NOK 9.2 per certificate, the bank's primary capital certificates have yielded a dividend of 35.6% in the first half of 2005.  On 1 April a split of primary capital certificates was executed as well as an issue of a total of 4,522,917 new primary capital certificates (free certificates) with an issue price and face value per certificate of NOK 50. The total number of primary capital certificates after the split and bonus issue amounts to 22,614,585.

 

Based on the recently enacted pension reform, the SpareBank 1 SR-Bank took a strong initiative in the market for sale of pension plans through a significant build-up of resources and expertise. In the course of the autumn, the corporate market will altogether have upwards of 15 people working actively in pension plan sales and advisory services.

 

Our involvement in the Agder region has been further escalated through the opening of a new branch office in Grimstad in May. The establishment has been well received in the market and will contribute to further growth and development in the Agder counties. The decision with regard to expansion in Hordaland county has now materialised in the employment of a manager for each of the markets, corporate and private, based on the establishment of an office in Bergen in the course of the first half of 2006.

 

The current positive trend in Norway and the region gives our bank good conditions for continued growth within both the personal and corporate markets. The low interest rate will also contribute to continued low losses and defaults. Competition is tough, however. This is particularly seen in the persistent pressure on the interest margin.

 

SpareBank 1 SR-Bank is focused on strengthening its market shares in its primary market areas, which are Rogaland, Agder and Sunnhordland. The establishment of a Bergen office in the course of the first half of 2006 will make a new foundation for further growth in the group.