SpareBank 1 SR-Bank - Very good results - net recoveries on losses and continued high return on financial investments
Results
The SpareBank 1 SR-Bank Group posted a profit before tax of NOK 812 million as of the 3rd quarter 2005, an improvement of NOK 243 million compared with the 3rd quarter 2004. The return on equity capital after tax was 23.8% for the 3rd quarter 2005, as opposed to 19.4% for the 3rd quarter 2004. The improvement in earnings is attributed primarily to a high return on financial investments and net recoveries on losses.
Net interest income of NOK 846 million (NOK 837 million) gives an interest margin of 1.81% (2.04%) for the 3rd quarter 2005. This decline is attributed to lower lending margins in both the retail and corporate market divisions due to the low interest rate level, even tougher competition and the improved quality of the portfolio.
Net commission income of NOK 274 million for the first three quarters of the year increased by NOK 28 million compared with the corresponding period last year. The commission income from saving/investment products made the greatest contribution to the improvement in earnings.
The net return on financial investments was NOK 252 million year to date. This was an increase of NOK 115 million over the corresponding period last year. This includes, for example, an increase in the fair value assessment of the bank's ownership interest in Energivekst AS of NOK 42 million year to date and an increase in the profit attributable to SpareBank 1 Gruppen AS of NOK 38 million to NOK 63 million.
Total operating costs were NOK 740 million as of 30 September 2005, an increase of NOK 34 million (4.8%) over the corresponding period last year. The cost percentage for the group and parent bank was 52.4% (54.1%) and 49.9% (51.5%), respectively.
At the end of the 3rd quarter 2005 the group had net recoveries of NOK 33 million on losses. This includes NOK 37 million in net recoveries as a result of the settlement with KPMG in the Finance Credit case. Last year the group posted losses of NOK 81 million for the corresponding period.
Lending and deposits
Gross lending increased by 12.3% over the last 12 months, which breaks down into 11.4% in the retail market and 14.1% in the corporate market. Growth in the retail market improved somewhat in the last quarter, while the volume in the corporate market stabilised.
Growth in the deposit volume (12 months) was 18.7%, which breaks down into 7.2% in the retail market and 31.9% in the corporate market. The deposit-to-loan ratio was 62.9% as of 30 September 2005. This is an increase from 60.8% at the end of last year and from 59.5% at the end of the 3rd quarter 2004.
Capital adequacy ratio
At the end of the 3rd quarter 2005 the group's capital adequacy ratio was 11,4 % and the core capital adequacy ratio was 8,4%. The profit for the year is not included in the capital adequacy ratio.
Subsidiaries
EiendomsMegler 1 Rogaland AS posted a year-to-date profit before tax of NOK 17.6 million (NOK 20.0 million). Total income was NOK 137.9 million (NOK 131.7 million). The market is marked by a high level of activity and strong competition.
SpareBank 1 SR-Finans AS posted a year-to-date profit before tax of NOK 12.5 million (NOK 16.1 million). The company had total assets of NOK 2,012 million as of 30 September 2005, an increase of 19.8% from the same point in time last year.
SR-Forvaltning ASA posted a year-to-date profit before tax of NOK 16.4 million, an increase of NOK 7.0 million over the same period in 2004. The company managed total assets of NOK 3,918 at the end of the 3rd quarter 2005, as opposed to NOK 2,964 million as of 31 December 2004. Total assets have increased by 42.2% over the last 12 months.
The bank's primary capital certificates
At the end of the 3rd quarter 2005 the price of the bank's primary capital certificates was NOK 200, as opposed to NOK 144 at the end of 2004. Including the dividend of NOK 9.2 per certificate, the bank's primary capital certificates provided an effective rate of return of 45.3% as of 30 September.
Market comments
The results of a large market survey (Tns Gallup) in August showed that SpareBank 1 has very strong brand strength, and that SpareBank 1 SR-Bank has strengthened its position compared with the survey in 2003. The survey also shows that we are well-positioned for growth in Agder and that the brand is still strong in Hordaland, in general, and Bergen, in particular, two years after Sparebanken Vest left the alliance.
Outlook
Strong economic expansion marks the bank's performance in both the retail and corporate markets. The workforce in Rogaland has most likely never been larger, and a growing number of industries are planning to increase their workforces. This looks promising for the banking operations for the rest of the year and next. The competitive situation, especially on the mortgage loan side, is expected, however, to toughen further and result in slimmer margins. A higher volume combined with a continued strong focus on cross sales and cost-effective operations are expected to give a good result for 2005.
Stavanger, 25 October 2005
The Board of Sparebanken Rogaland
Any questions should be directed to Managing Director Terje Vareberg, telephone +47 51 50 95 53 / +47 911 00 448, Deputy Managing Director Sveinung Hestnes, telephone +47 51 50 95 58 / +47 908 53 165, Director of Finance and Risk Management Tor Dahle, telephone +47 51 50 95 56 / +47 915 47 503, or Director of Information and Public Relations Thor-Christian Haugland, telephone +47 51 50 92 81 / +47 480 31 633.