Sparebanken Vest

Good morning. It is a pleasure for me to welcome you to Bergen, Vestlandet's financial capital, to the presentation of the forecasts for Sparbanket Vest for the third quarter of 2023. Our chairman of the board, Jan Erik Kjerpeseth, is currently on study permission. Therefore, it is the signature that presents the results for the third quarter of this year. As usual, it would be possible to send in questions on this email address. And then we will try as best we can to answer the questions that have come in. And in that connection, I would like to get help from our Director for Economy and Investor Relations, Bredeborgen Kristiansen, and our Communications Manager, Hanne Dankarsen. The General Assembly in Sparbanken Vest decided yesterday to distribute an additional 811 million kroner for the results for 2022. That means 3 kroner per single-capital certificate, about 329 million kroner. At the same time, we also set aside a grant to the United Nations in the form of 402 million kroner, which means that this time we will also contribute to making life in the West even better. And why do we do that? Well, Sparmarket Vest has two goals when it comes to spending. One is that we will deliver more than 13% in capital spending over time. At the same time, we will be among the two best savings banks when it comes to results. And we have shown that for several years. This picture shows that we have delivered more than 13% in the last four to five years. And if you look at the other banks, we have been the best savings bank in Norway in the last few years. And that makes us able to pay an additional fee for 2022. The rest of the presentation will cover these three areas. We will look at the banking industry, what the results are for the third quarter and how the development is going. We will look at our logbook, the quality of the credit portfolio, which is important in these areas. And then we will look at the market position of the banks and what has happened in the last period. Sparbanket Vest delivers a net capital deduction in the third quarter at 16.1%. We are very pleased with that, and as we said earlier, it is better than the bank's deduction goal. This means that the result of the net capital deduction is 3.18 kroner in the third quarter, and if we sum up the three first quarters of the year, the result of the net capital deduction is approximately 9 kroner. When pure core capital coverage falls by about one percentage point in the quarter, it has in the main case in connection with this additional section that we were talking about initially, which makes up about 80 points of that percentage point. Booked value per capita is 80 kroner per quarter. If we look at On the underlying development in the bank, we were talking about in the second quarter that we were going to build this Bulla concept, which we will come back to in a bit, until 2026, until it will be implemented on the bank's own capital issuance. This means that in the period we are in now, A significant increase in market interest rates, where bulls are largely financed through the capital market, will have a negative effect on the banking scene. The fact that the output effect is 1.3% in the quarter is in line with what we signalized in the second quarter. And this additional unit of 811 million, given that it had been paid out earlier in the quarter, would have had an effect of about 0.7%. Which means that the underlying one-capital transfer in the Vest from the ordinary business is 18.1%. The growth in the last 12 months is good. 15.8% on the personal market, driven in a very large extent by our Bulda concept. Some growth has been reduced in the last quarter in the business market, but the pipeline into the fourth quarter is quite good, so we believe that reaching the target of 7-8% growth in outlay for the coming year is within reach. The growth is also good on the investment side. We expect the growth in the quarter to be quite predictable, even though we now see that more and more, especially in sales, are using interest rates to a greater extent than previously, i.e. using other means of income, either to pay off loans or other things. The interest rate net is significantly strengthened in the quarter, but also set up towards the third quarter last year. 1,580 versus 1,59 shows that the development of the most important intake source for the bank is good. We are very satisfied with this slide. This is the first time we can show that the accumulated cost and income goal is below 30 percent. Per 30 quarters of the year it is 29.8, and per quarter it is 27.7 percent. This also shows that compared to other Norwegian banks, we are among the most cost-effective banks at home. The results from our associated companies are something in between. Brage Finance is doing very well. Strong results in the quarter, better than what we had last year, but now weaker than it was in the second quarter, which has to do with the fact that the crisis spreads on market financing have gone up somewhat. The development in foreign insurance, as in other insurance companies, is also weaker than it has been in previous cases, which is due to both natural damage and an increase in some major damage in the quarter. Based on the forecast for the fourth quarter, it is expected that the income from investment will reach around 7-8% for the year. The fund maintenance is steady and stable in the quarter, and there is still a new figure when it comes to funds in the West Bank at about 240 million kroner in the third quarter, which is up from the decimal volume in the second quarter of the year. Sparmarket Vest has a liquidity portfolio of about 33 billion kroner. It is quite conservatively placed, with 90% in state and state-guaranteed papers and high liquidity obligations, i.e. OMFs. Our portfolio is valued by real value, and in this way, value changes are reflected in the bank's results at all times. We meet all regulatory requirements when it comes to liquidity in the bank. As I mentioned, the pure core capital coverage falls by about 1% in the quarter, as a result of this additional allocation. But as this slide shows, we are far above the regulatory requirements for core capital coverage in Sparerbanken Vest. This also applies to the unvalued core capital share, which is at 6.1%, with a requirement of 3%. So the bank is very solid, even if we provide an additional department in the quarter. Summing up, if you look at the development from the third quarter of last year, the interest rate net worth about 315 million kroner is strengthening. The provision index is rising. Contributed companies show some worse numbers. Finance is moving quite a lot in the sense that both the crisis spreads and the spread of interest rates and currencies on their own funds go up and down, which gives a negative contribution in the quarter compared to last year. The cost is rising now, but within the estimated target for this year, and as we guided on in the second quarter, we see that the total cost growth for the year will be around 6-7% in 2023. The loss we are about to see is rising from last year, but still at a low level. This means that the result for the third quarter will increase to 886 million kroner. Let's go back to the loan book. We have shown this picture before. The picture is largely the same as it has been over time. The only difference is that the Bulda-concept grows significantly and accounts for about 17% of our personal market portfolio. This means that the relationship between personal customers and business customers in the portfolio is 77-23. The business market portfolio is quite diversified, and as a result of the fact that Bulda is a national concept, it also means that we have a greater exposure to western countries than we have had before. The risk in the personal market portfolio is still very low. About 96% of the portfolio has a loan rate of under 70%, which is very low in our opinion. And if you look at housing price development, you can see that it has been more moderate in the western regions than it has been, for example, in central parts of the east. And that also means that, according to our understanding, the risk in the portfolio is to remain low also in the future. The answer is actually within the business market and the industry portfolio, a very diversified portfolio. divided into different parts of the industry and with a fairly low reward rate also in this portfolio. One might think that with the current circumstances, the balance sheet in the bank's portfolio, especially when it comes to spending in households, will go up. In the stock market, they have actually gone down in the third quarter. Of course, I am very happy about that, and that is due to the fact that we have a good portfolio from before, and that we have a fairly large focus on ensuring that the balance sheet will remain at a low level in the future. And one might also think that this would mean that the demand for pension benefits would go up, and that the investment in pension benefits would also go up. That has not been the case either, so both the maintenance and pension benefits have been down in the third quarter. This is a development that we may not know what will change over time, when the framework that we have now with a higher interest rate level and maybe something higher, costs in different areas will manifest in our portfolio, with perhaps no higher costs and no higher losses. This picture shows the same thing. Unrequited and lost loans are on a low level, both in the personal market and the business market, and the rate of return is relatively good. In the personal market, about 60% of the portfolio, and in the business market, about 70% of the unrequited and lost portfolio. If we look at the losses in the stock market over time, we see that the individual declines have been on average 10 million each quarter in the last 15 quarters. That is at a low level. And if you also look at the model investments, we have started from the pandemic at the beginning of 2020, we have built them up throughout the period. And it's not because we think that our portfolio is weaker than that of other banks, but it's because we think we should have a robustness in our model investments to meet possibly more demanding times in the coming time. Finally, I will say a few things related to market position, which has been the case for three quarters. This is what we are very happy about. The Norwegian Customer Service Index has scored a market position in the West as second place. This shows that we are a good relationship bank with good personal advice, and that we have the most loyal customers in the country. I am very pleased with this development. Kvartalet viser også, som vi har vært inne på tidligere, at vi er i front på digitale tjenester. Både appen som vi har på personmarkedet og i bedriftsmarkedet skårer best både i App Store og Google Play i Kvartalet. Det gjelder også det konseptet vi har på Bulder. I was talking about growth in the beginning, and where the Buldar concept is largely affecting the growth of the personal market in the last 12 months. We had a target, which we adjusted in the second quarter, that we would be at 47 billion by the end of 2023. Now we are at 44.5, and we see that the target is well within range. The quality of the portfolio is still very good, with a cumulative reward rate of 43 percent. At the same time, we have also managed to increase the interest rate somewhat during the period. It is of course an ambition to increase it in the future, but it has at least increased somewhat in the quarter. Not least, this shows that The concept of BULLA is now at the top in EPSI. This is the first time it has happened, and it shows that we have managed to build a real mobile bank and a real concept for developing a real mobile bank in the future. We also said in the second quarter that the Buldar concept was expected to grow to over 80 billion kroner in 2026. And we are also aware that in the future, the Buldar concept will be a challenge in the back-end capital transfer, as I showed initially. The goal is that Bulder, when it is close to 2026, will be an integral part of the bank's capital transfer with about 1 percent. As far as we follow this route, we have not seen this after the second quarter presentation. As we are aware, the volume in Bulder is now 44.5 billion kroner per day. We have, of course, a clear goal that Bulla will also be filled out in a daily bank concept. And the fact that we have now got this order that makes it possible to move all contract shares with a single keystroke, shows that the possibilities for people to do this are quite large. In three quarters, we had 50% of the volume of moved contract shares in Norway in the Sparmaker Vest and Bulla concept. One of our goals is to get synergies on the development side. We have achieved that, but we have a clear ambition to develop further. Our understanding is that Buller has the most effective loan flow in Norway. And that, together with new initiatives and new activities related to digital development and improvement of the loan process, will help us to have an even better and more effective loan process in the digital world, both for Buller-conceptet, but not least also for the bank in general. As we said before, we are distributing 811 million kroner. They are divided like this, as we mentioned earlier. This shows the power of the Sparmark model, where we have about 40% of the owners from the private equity, and about 60% from the social capital. Sparmark is one of the banks that has customer exchange at the bottom. In this round, we have decided that the distribution of social capital in its entirety should be given to the general public. In our report for Q3, we have taken into account a distribution of the result of 50%. Given that the quarter will be as we see it in the pipeline now, there will also be a 50% allocation for 2023. And that will probably also mean that we will be able to spend relatively more on customer exchange than given to the general public for 2023, given that we have provided this allocation to the social capital now at 482 million kroner. In the second quarter, we introduced the campaign Jenta Vil Mer, where the goal was to raise girls football and help to ensure equal opportunities for girls who want to invest in football. This is a joint investment that we do with the clubs Brand, Arne Bjørner and Sogndal Football. The purpose is to give support to coaches, training skills and a better football everyday life for the girls. At the same time, we would also establish a schedule for five clubs in Vestlandet, up to these three big clubs. This has taken off completely. This campaign has been seen and read by many. We have had 200,000 posts on YouTube, Facebook and LinkedIn. We have had over 1,000 shares in SoMe. And there have been several relational cases on this matter. So this is a matter that has created interest, not only here at home, but also abroad. And we have doubled the number of applications for this permanent order and for other support orders in this context. And this is something that we will also work quite intensely with us in the future to ensure that we reach the target lines in the campaign. We have said earlier that we run Heart Bank-arrangements. These are concerts that we have at four different places in Vestlandet, where we have been running for several years, with top artists, free concerts, where we distribute one million in each area to different initiatives in the local community. This has been a great success. We have just completed the last The last Heart Bank concert in Strøen, we have had in Øygarden, and we have also been to a couple of other places in the Vestland. We have had 8,000 participants together at these events. And this also shows the power of the savings bank model, where we were able to distribute subsidies and give to the community out in the districts and in the Vestland. So in summary, Sparbank Invest is a bank that has customers and a high return rate, which means that we can offer benefits to the local community and our customers, based on the results we deliver. We are still at the forefront of digital development. We have low risk and low complexity. We have not been interested in sustainability and performance culture in this presentation, but we have higher ambitions in these areas, and as we have shown earlier, we are very committed to developing the organization further. Learning is central. Three of the four employees are from Eierøy Bank, and we are the leaders in capital laundering, with a target of 13%, which we have delivered in the last four to five years. That was the presentation for the third quarter, and now I would ask Brede and Hanne to come up, and then we will answer questions that have come in to our results for the quarter.

Yes, there have been some questions today. Are you ready?

We are ready. Yes, that's good.

We start with a question about the competition in the banking market. How do you experience the competition in the banking market, and how does it affect growth?

We see the competition in the banking market as very strong. There are more than a hundred banks in Norway, and there are many banks in our market area, and it is clear that in a time when the banks are well capitalized, the growth goes down and so on, then the intensity of competition in the market increases. This is also reflected partly in the growth we have, especially in the personal market, but also in the business market. This bulldog concept shows that we have hit a nerve in the market that makes us take significant volume from other banks. Our experience is that the competitive intensity in the market is quite high.

I would like to talk a little about the media image, because the banks get a lot of criticism from time to time. There is a focus on the banks' income during a time when many people are struggling with the economy. And then you talk about the banks not setting up interest rates as much as foreign interest rates. What do you think about that?

We have several terms, but it is clear that we are loyal to the changes that the Norwegian Bank makes in the tax rate. That is part of our social mission. If we had not raised the foreign interest rates in the same way that the Norwegian Bank raises the tax rate, we would probably have had a crisis at a later point, where the Norwegian Bank would have had to raise the interest rates further. And it would also help to reduce the income in our bank. So in today's market with the costs of financing, of the marginal financing with us, the magic is on the outside relatively limited. And then you have to compensate for something. And then you compensate, among other things, through the investment side. And as we were talking about in our presentation, we believe that there will be something more rustic in the future. And building results and capital to meet larger losses is important.

We have just received an additional allocation of 811 million kroner for the year 2022. Will that mean that the allocation rate for 2023 results will be lower?

As we mentioned, in the calculation per quarter, we have based an allocation rate of 50% of the bank's results after tax. We are guiding that we will deliver on the bank's release target for 2023. And we are guiding that the degree of extension will also be an opportunity when we raise the status for the whole year. So answering your question is no, actually. The extension for 2023 will be based on the results for 2023.

The additional part goes to the owners and the society. What is the assessment of the customer exchange in this regard?

As Frank was saying, customer service is part of the work we've been doing for the last four years. It's something the customers get if the bank does a good job, and we don't want to miss out on that. will be a little higher than it was a couple of years ago. Of course, there is a lot of work to be done to handle this type of thing, so we see it as more sensible to do the evaluation after 2023.

It will be a bit of a random sequence of topics since questions have come in. About customer exchange. What does customer exchange mean, quantified as a competitive moment?

We believe that customer exchange has a value. Customer exchange gives a reason why customers should choose Sparbank. It is important to say that customer exchange is a result disposition. It depends on the bank delivering good numbers and results in the future. So what happens is that the customers get to take part in the bank's results in a different way than what we do elsewhere. So in that sense, we believe that it also has an added value for the customers, that we have customer exchange as an institution in relation to the choice of Sparmarken Vest as a bank.

So we know that it is a government-appointed selection that will look at, among other things, customer exchange. Do you have any comments on that?

Yes, there are many comments on that. It is a choice that should look at the position of equity proof and look at the quality and composition of equity in the savings banks and how the equity proof works. Our assessment is that customer exchange has no relevance in the evaluation that the finance department has put forward. Customer exchange is well anchored legally, and there have also been other assessments that go up under the structure that is based on customer exchange. So our assessment is that in the evaluation work that the finance department has now laid the foundation for, then I do not hear about customer exchange at home. But we still believe that customer exchange will exist as an institution, even if it is to be done as a training in this context.

But otherwise it would seem strange. New topic, foreign growth in the business market. We see that the foreign growth is decreasing. How do you assess this, and what is expected growth in the business market in 2023?

At BM we have a guide in 2023 on 8% outlay growth. We are on about half of that by the end of the third quarter. We know that the outlay growth in the business market is a bit more chunky than in the personal market. because of the commitment and the unhappiness of it. So despite the fact that the market growth is on the way down, we experience good demand from our business customers and have not found a reason to revise the goals for foreign growth for 2023 as a whole at 8%.

We are talking about growth, and we are talking about Bulldar. We have set an ambition for Bulldar at 47 billion kroner, already at 44.5. If you want to grow with 2.5 billion in a month, are you going to adjust the ambition here?

Yes, we have discussed that. Of course, based on the growth we have now, we should perhaps do that. But we know that it is not necessarily the case that the curve only goes one way all the time. This can flatten out at some point. So we choose to stick to the goal we have set. But of course, with the speed we have now, you should of course not look away. At the end of 2023, the volume may be even higher than the 47 billion US dollars. But the goal is set.

But we're starting to grow on low margins. Are we winning too much?

We do not mean that, because we are building this in the long term. Over time, Bulldor will be the invaders in the bank's capital transfer. As I said in the presentation, Bulldor is growing and the results from Bulldor are in line with what we have previously announced. But over a long period of time, we may have an area within the bank that does not contribute to the results in a positive way. But so far, and based on where we are today, we are on track.

That's right. It's actually a bit of a fore-and-track as to what we communicated at Q2. Bulder is a concept that, in the current stage with the rising interest rate market and the decline in effectuation towards the customer, both new and existing, in Bulder's case, It is clear that Q3 was a demanding quarter on the bulls. There is no doubt about that. And Q4 will also potentially be demanding. But then we see a stabilization in Nibor recently. We will get the effect of the the interest rate increase we have made, which actually from the end of the year will actually raise the pace well in concepts, and in 2024 we see a completely different pace as we were in the capital market on the capital market day in August. So it is clear that, as Frank says, we will take this concept from something that is out of the water to in the water on the bank's own capital transfer over time, and have a clear plan to do so. Some are about scaling, which we are showing here today. We are ahead of the curve on that. And some are about input coverage, to get it up. Some are about input mix, that we get a better mix between the consumer and the savings account. The contract schedule that was shown here today is a good step on the way in terms of driving it. We have the concept of tax cuts at 18% at the beginning of the year, and 17% now, in a period where we have doubled the portfolio almost, and grown 20 billion. Everyone who runs the bank knows that the growth of housing loans usually comes with a low marginal tax financing. So that we have managed to maintain that tax cut at that level, I am really satisfied with, and I have something to build on.

The next question is about costs. How do you see the cost growth coming together for 2023?

You think it's the best in terms of cost, Brede?

My favorite topic. I'm in the flow of costs every day. We said on the day of the capital market that we were aiming for a cost growth of 2023 at between 6 and 7 percent. I think with the general price growth that was then. per exit of Q3, we are at 8% compared to the year to date compared to the year to date last year. So we have to break down in Q4 as well, but we really have good faith that we will make it happen. We have a broken approach in the pipeline. I got a question here related to external consultants, and that is obviously one of the approaches we have taken. We have replaced a significant number of consultants with permanent employees. It is both about costs, but also about building a team over time, which is there, and having that competence in there. Summing up the costs, we are optimistic about delivering on what we promised at Q2, that we will reach between 6 and 7 percent.

Well, then I think we are approaching the end of the session.

But unless you have something on your mind that you would very much like to say today? No, what would that be? In summary, Sparbank Invest is doing very well. We deliver very good numbers. Of course, we have the ambition to deliver in the future as well. We have a strong ambition to develop the bank further. be among the leading banks here at home. So the ambition is there, and we are also working quite a lot further. We haven't talked so much about sustainability and performance culture today. We will probably get back to that. We are also looking at our concert strategy. We are going to make some changes to that. We will also get back to that after the fourth quarter. So I think that's pretty much it.

Thank you so much, Breda Frank, and thank you to everyone who sent in questions today, and who followed us here from Media City, Bergen. Have a wonderful Thursday, everyone. Thank you.