SpareBank 1 Ostlandet

Welcome here today to the quarterly presentation for us in Sparermakken Østlandet. My name is Clara Lise Aasen, and I have the honor of presenting Tala for the first time for me in my new job. And with me I have a very good friend, the financial director, Ger Egil Botstad. But if I have any questions, I have to send them to investor at SPN Østlandet during our transition here today, so that we can answer them afterwards we have gone through Tala. But first, it is a pleasure to stand here and talk about the business, the first part of 2024. We have great underlying results. It is solid results from our banking business, and we have a good one-capital return. So it is a bit high, because it is also hit by the fact that we have divided customer exchange to all of our customers, now on the 11th of April, and we also have good results in real value on financial positions. So that is also helping us to get a very good one-capital return. But total revenues, it is 1.6 billion in this quarter, that is 200 million up from last quarter. And we have a net result before tax of 972 million. That's 26% up from the fourth quarter and 30% up from the first quarter last year. So it's a good number we're showing today. Rent income has also gone up around 4.5%, including provisions from the housing credit company, where we transfer some of the money, and at least also due to volume growth and repricing. In terms of costs, there is approximately 6% cost growth from the same quarter last year. That is slightly higher than we would like to see, but the difference between 6 and 13 is due to fusion costs of 27 million in this quarter. In addition, we have received 44 new colleagues from Siffer, who are now counted as part of our population from 1.1.2024. So we are now 1,225 employees at the start of the first quarter. So it's an increase of 70. So I would like to mention that some of the increase is also customer-directed positions. We have to be at the place where the customers are and answer the good questions we get, help them with advice and be available in our customer channels. So that is also one of the increases we see in this quarter. The losses are moderate. Ten basis points are in this quarter. It is slightly lower than last quarter, which was 12 basis points. Underlying is a good portfolio quality. We have shared an exchange rate that I will discuss later. We also have financial goals in the bank. These are now the same as we presented in the fourth quarter, and we deliver well on the goals we have set in the first quarter. As I said, the one-capital spending is very high. Last time we saw higher than this, it was in 2019, so that's quite a long time ago. Otherwise, we have fallen by an average of around 11 percent over the last four months. In exchange, we have a flexible exchange policy. We can give 50% or more when we think it is safe. And from 2023, we gave over 900 million kroner as a share of our owners early in April. And we have a very solid bank. We are 90 basis points above the capital requirements and buffer, which is 16.1. And we are now at 17%, so we are a safe and solid bank that has room for further growth. But the bank does not take a broad social responsibility. One thing is to look at our numbers and that we are doing a profitable, strong-willed rejection of our owners. But we have a very important role in the local community, and we have had that for almost 180 years as a savings bank. We deliver gifts, we give talent scholarships, and we give various types of contributions to volunteerism, sports, children and young people. And 9 out of 10 of our sponsorship agreements are related to breadth, and young people and children. And I think that's great, because we used 34 million kroner on sponsorship activities in 2023, and then it is important that the fellowship comes in good terms. And our largest owners, Sparvagnstiftelsen Hedmark, they are over 52% of us, they contribute very well in the local community. They have shared out gifts to other useful subjects, 650 million since the start, and have contributed from entrepreneurship and nutrition to volunteerism, humanitarian subjects, culture and sports, for example. And then it was really fun for me to be allowed to be at the Jøvik branch on the 11th of April, when we shared a customer outfit. 381 million kroner ticked in to our customers. And all customers get one or the other share, depending on how long you've been in the bank and what position you have. But no matter if you are a business customer, a household customer or a municipality or a team or association, you get a share of the bank's total revenue. So we give back in several ways from Sparebanken Nøstlandet. And here are some numbers, because it is clear that we have many owners of one capital proof. There are almost 6,000 owners of our bank, and the funny thing is that there are a lot of small savers. 5,600 of our owners have under 10,000 one capital proof, and 75% of them actually live in our market area. So our exchange will also benefit those who live here, where we have our market. I have mentioned the Sparavangstiftelsen and Kundeutbytte. Here you can see how much it has accumulated, and it is again a good contribution. And at Kundeutbytte, if you got full payment in 2023, then you had an effect of 20 basis points on your loan. So there is also a competitive advantage, which is great, and contributes to increased customer satisfaction. But of course, we are talking about good numbers, but there is no doubt that our customers and the market areas we operate in are influenced by a still demanding macroeconomic background. And so it has been for a while. We see that in the inland and eastern countries we have a lower growth than something, for example, in more petroleum-oriented parts of Norway. The north has been on the plus side for a long time, and the south and west also have a more positive development. But what is good about our market is that it is a very attractive picture of the future. This is a net inflow. In the Oslo-Akershus region, there is a greater net inflow of people in the future than what we see as the country average. Many wonder how it actually works with customers. Of course, we notice that some customers are struggling. And we see that the competition has increased slightly compared to the first 18 weeks in 2023, now in 2024. But in general, we see that our customers are robust and they are doing well. And they have kept a good state despite increased interest rates and increased cost levels. So we see that our portfolio, which is so diversified, is doing well. And in terms of employment, it is quite low. In the countryside, it is the lowest trend in Norway. There has been a slight increase over the past few years, but it is still lower than before the pandemic, and we do not think there will be any significant increase here. Our business customers report on the contrary, that they struggle to find the right and good workforce. There is a shortage in many businesses, so we need even more talented people in Østlandet and in our regions. Credit growth. If you look at the long lines on the left-hand side, there has been a decrease in credit growth for businesses in the last ten years. Now it is around 3% per year. And in the business market, it has been a little more up and down. There was a small boost after the pandemic, as you can see in the light blue curve, and it is now at about 2.7% per year. Of course, there is lower credit growth. There is greater competition in the market this year, because the growth has become lower, and we are several who want to provide customers with good services. At the same time, it is exciting to see, especially in April and after Easter, that there is an improvement in sales prices. And the turnover of utility bills has now, after a fairly flat start to the year, has now risen. For us, it also means that we notice an increase in housing searches. From March to April, the number of new housing searches increased by 42 percent. That's a lot. So we'll see which materializes in the loan, and the same with the proof of financing, which has also increased a lot. We also have a good pipeline in the business market now. Unsold housing, the bottom graph, in our market segment, there has been a stock market, an excess of unsold housing towards the end of 2023. And then we have also noticed through discussion on mid-financing, but now in 2024 we see a slight trend shift. Now it is balancing out, and at least we see that the price opens on the housing market. is more like now the price indication you had when you let the housing out for sale for quite a few months with another development at the end of 2023. So Østlandet. Market strategy. Where are we going? Østlandet strekker seg i alle retninger. Det er oppå Trøndelag i nord, og det er mot svenske grenser, og det er i hvert fall sør for, nei, vest for Toten, og det er sør for Oslo. Og vi gleder oss veldig til å nå flytte inn i nye lokaler i Drammen i andre halvår på høsten. Vi gleder oss senere til å se hvor lokaler skal være. Der pågår det nå rekrutteringsprocess for å få et skikkelig dyktig team som kan serve kundene våre der. We also have a portfolio that is very diversified, and there are big regional differences between us. We see that the growth is a lot in Oslo and Akershus, but we are working to defend our market share, also in the country. We are going to stretch in several directions, and we want sustainable growth in the future. This is of course an important goal for us. A little bit about the personal market. There is no doubt that it is a market that is characterized by strong competition in our regions, so we take a little more in Oslo-Vakershus, while abroad we work with the defense market share, where we are already very large. And we have a good access to new customers as well, but there is no doubt that it is important for us to be available for our customers, and the investment we have made, by employing more people within our customer channels, has been an important contribution to helping our customers. On the margin picture, on the right side, we have the last interest rate in Norges Bank on December 14th. Two thirds of the lag effect was taken in the first quarter, so about a third remains, which comes as an effect in the second quarter. But product mix, we see that on the investment side, the number of investments in the personal market has increased significantly. And a lot of it is fixed income investments and saving products with a slightly lower margin. And I think it's nice that people are saving. And we have another thing I would like to mention, and that is Sparekampanjen Alltid 1, which we had on the fund together with the Alliance in the first quarter. And then we can wish welcome to 2,100 new fund customers and 3,800 new savings payments. So it's really fun to see that we succeed there too. Broad sales are important. We see that the customers who have it best with us are those who have several services and can solve most of their financial services with us. We are also most loyal. And we also have good help in the Alliance, of course, and in my collaboration with LO. In the business market, there is also competition, so we notice the approaches in the areas we are in. But also there it is exciting to see that we take positions in Oslo and Akershus, and that we are able to defend good positions abroad. And also on the margin picture, we see that we are a product mix. Some big contributions are typically prices, so we have a lower margin. And on the outside, we see that there is competition, and we have to work with being competitive in price, and have worked at the same time with re-pricing in the last quarter. And there we also see that housing projects are on the way up. And one of the reasons for the fact that we have flat development from the 4th to the 1st quarter abroad is also a rebalancing when housing projects are completed. And we make a payment of loans before it goes further in the portfolio. And that means that we have a flatter development, a good pipeline, as I said, on new possible loans here. Broad sales are also important in the business market. There is a slightly lower activity on interest and currency, of course, perhaps in today's market, but we see very good broad sales on damage insurance and pension, which is also important for customers who are business customers. Before I leave the floor to Ger Egil, I want to say something about Toten's version. As I said, we are going to grow more on the upland side, on the other side of Mjøsøen, where I am speaking from today. We signed an agreement with Toten early in January, and it was approved in the General Assembly on the 21st of February. Now we are working on making good plans for integration, but we are dependent on the necessary authority approval before we can make a legal version. After that, there is work with collaboration, so that we can take the best from us and Totens into Sparbanken Østlandet, and create a really good financial group for our customers here in Østlandet. With that, I will leave the floor to Greger Egil.

Thank you, Clara-Lise. I will try to elaborate on what has already been described in detail. These are the usual posts. I will start with the overview, and then I will go into details later. Compared to last quarter, there is a strong improvement in the results, as Klara-Lise mentioned. There was an increase in the tax effect of customer exchange, and in addition an increase in financial contributions. But as you can see on the left, there are also contributions on several fronts, in the form of increased net and interest income, in the form of increased provision income, and also lower losses. The costs are a bit the opposite, but I will come to that and show that there is now a fairly surprisingly flat development from last quarter. Compared to the same quarter last year, there are the big drivers. There is significantly increased net income, but at the same time there is also a solid increase in the costs. To go into more detail, we start on the most important line, net and interest income. We have included the provisions from the housing loan, no time high. We see that our credit companies are now coming after the provision revenues, after a flat new home development through the quarter. Here you can see the repricing effects. And as Clara-Lise mentioned, the last housing price adjustment, or housing loan price adjustment, we only have about a third of the effects in the first quarter. So there will also be something. An increase in net interest and provisions by about 4% from last quarter. There is a small drop in that it is about 19 million that is reclassified, which previously has gone as other provisions. You will see that on the next page. All in all, a good increase. On the provisions, I almost start at the bottom. There you will see that there is a halving of other provisions from last quarter. And that is the mentioned 19 million in reclassifications. This is a permanent change, so that when you think about the future, it is good to keep in mind that this is a change in principle that has been made from the first quarter. Provision revenue, by the way, it is good to draw the attention to insurance provisions. We are big and good at that, but at the same time we see a slight change from the corresponding period last year. It is not related to news or portfolios, but it is something related to compensation provisions, related to damage development in the first quarter, and that is a situation that most people are familiar with, with some demanding cold weather and climate. We have a seasonally good start to the year on the annual average. It can be said that in April and out of April, the activity level is high. You saw the big figures that Klara Lise presented earlier today. And then it is the case that the provision revenue on our business services is significantly colored by the fact that it is now a larger business partner, which has gotten new colleagues in numbers, which contributes on the revenue side, I will show at the cost of, and which is the most important, it is also shown at the bottom line. It will come on a later page. The debt funds are now making higher contributions than last quarter, and the development of Sparbank 1 Finans Østland. There is a good growth in the payments. The losses are stable, but perhaps a little higher than we want. What we see is that the interest rate net increase well. The brokers have had a better start this year than last year, and as I said, it also looks very good at the start of 2Q. And finally, also business partners, where it is a better quarter than what we have seen before. And even when we correct for good new profitable colleagues in numbers, it is also an underlying positive contribution from the old part of the business partners. Collective companies, that was a demanding story in the fourth quarter, and especially the support and contribution from the Sparbank N-group. It is now turned into a surplus in the first quarter. It is also the case that the level we see here, this is not what we consider and expect to be the normal level and contributions from the Sparbank N-group. But at the same time, no significant declines on Kredi Nord, as we had in In the fourth quarter, Kredi Nord has had a restructuring on its owner side, with the consequence that it is consolidated as a subsidiary in Sparbank 1 Group from and with the second quarter. Sparbank 1 Group will then own 68.8% in Kredi Nord in the future. We think that's good. It gives the Sparbank EGN group better control over the company, and with the shift that has been made in both the management and the strengthening of the strategy in the company, we have good hopes that over some time it will become a much happier story. The other company I would like to mention is our little jewel, the joint venture of Sparbank 1 Bankene, Ben Bank, which delivers record results with good growth and excellent cost control. Financial liabilities and obligations. The exchange rate is linked to our post in Toten, so to speak. This with the 75 million from joint controlled business, as I mentioned on the previous page. Netto Finans, for the rest, has some positive market effects, but not all the less, there are effects that are followed by good value development in some essential positions, 27 million in Totens, and 33 million that are linked to the bank's ownership in Visa. This follows a good market, which is also an expectation of value development in the companies, so that is absolutely something we take with us. And then there is the spread development, which has been positive throughout the quarter. We also have in the liquidity portfolio a positive contribution of 42 million, including the insurances. So of course, these are positive effects, but at the same time, these are things that Previously it has been negative, so I think that collectively a lot comes at the same time, but it also reflects that previously not everything was necessarily good. Some of the bad things came at the same time. So all in all, good money to have with you. The operating costs have increased. We look at staff costs. 44 new colleagues have been mentioned in figures. This has an effect from and with the first quarter. This is compared to the staff costs in the fourth quarter last year. Compared to the first quarter in 2023, we have 45 years more in Morbanken. There is a lot of it, so-called attack ranks, customer rights, some are also defense ranks, in the form of compliance, risk management, and that kind of take care of values. Both parts are necessary in the operation of the bank. Of the other things to take into account, there is the point with the fusion costs. We will have that as our own line in the presentations in the future. It is a large amount now, but it also includes some of the largest costs we will receive during the process, linked to so-called success rewards for advisors and the like. So it is not a normally expected quarterly level we have in the future, but it is a big jump that we took at this time. If we compare the sum of costs in this quarter with last quarter, we have 26 million in fusion costs. Last quarter, we had about 20 million in formula tax. If we hold these against each other, it goes up and down, and the cost increase is not necessary. A level in itself is a discussion we always have an eye on. Do we correct for fusion costs? and new employees in Siffer, the 12-month underlying cost-effectiveness is around 6%. Here you can see changes in our different companies. You can see the increase in costs in Morbank. It is significant. It is the light blue column. It follows a significant increase in burdening and, moreover, cost inflation. And you can also see in the gray, smaller segment to the right, this with business partners, which reflects that there is greater burdening there now. In the other companies, there are fewer changes. What is nice to note is that on the right side of the figure, the cost percentage at the concern level is 37%. That is the lowest we can remember and have seen. That is nice. Loss costs. It is good to be able to stand on the second quarter in a row now and be able to say that there are more normalized levels of losses. It is a slightly different comparison to what we have seen in the previous quarters, where we see that the model-based losses are now close to zero. This is in line with the expectation for future rent development, employment development, values on Pant and the like. There have been few changes in the last few quarters. We use the monetary policy report-financed view as our external benchmarks in that context. So in this way, after having had about one and a half years with strengthening of model-based loss assessments, we do not see the same need. We feel that this is a comfortable level. Individual losses, a small increase, spread to some customers, nothing special to report in that regard. And on the net losses, it is at a level that we normally see on the quarters. So if we then look to the right and look at the loss percentage, 10 basis points, then we have to go back to the third quarter in 2022 to have loss costs at that level, or loss ratio. And a little continuation of the fact that we now have had two quarters with more than normalization. Here you can see the picture of Trinn 3 exposures, i.e. the misplaced ones. We had a strong increase in the second quarter and the third quarter last year, and then it has flattened out later. As previously informed, it is linked to a few exposures. There have not been any particular changes in the Trin 3 exposures. The exposures mentioned are restructured, with significant value, but are still included in Trin 3 as non-performing. To look at the portfolio more systematically, and not try to draw the discussion from individual engagements, As Clara-Lise mentioned, we see that there is no big systemic shift. We see that the person-customers, this with the agreed withdrawal, is sideways. We have read a lot in the media that there is a lot of cash going to the cash register. That is not a picture we recognize. And this is our own data that supports that. On the business market side, pull on frame credits, maybe something up, but still at levels that we are used to seeing from before Corona. And the answer is also LTV development in the business sector. It is sideways relatively in the last few years. And that is also with ongoing updates of property values. So we don't see any systematic danger signals in the portfolio. But that is of course no guarantee, because single engagements cannot appear, as they always do. Finally, capital coverage. We have a pure core capital coverage at 17 blank, also this quarter. Then you can ask yourself the question, why hasn't that improved with a record result? And there are a couple of close explanations there. A little more technical. Basis swap effects from housing credit. And then there are some positive elements there that go with the fact that we have had a An increase of 25% in the amount of interest in this quarter. This is a significant volume. It attracts capital, but it is also a good indicator of the activity in the real estate market. There has been some development in terms of risk values, especially on the real estate side, nothing dramatic, and it is a reflection of a lag effect on the housing price decline we had in the other half year last year. And with the development we have seen so far this half year, we expect to see a reversal of this over time. And of course, it is taken into account the 50% exchange rate in capital coverage estimates. Finally, core capital coverings and total capital coverings are strengthened by 50 basis points and 100 basis points. These are linked to the issuance of new fund obligation loans and responsible loans in the first quarter. Both at good prices and significantly over-signed. This has strengthened the capital coverings. Not least, it is part of the adaptation to the new Pillar 2 requirements. So with that, I thought I'd invite Clara-Lise up again, and then we'll start to be, I don't know, do you want to sum up a little before we possibly take questions?

Yes. Very good. Good numbers, Greger. Very good. I would like to conclude by saying, why should anyone look at this? Invest in us. There is no doubt that we are a bank that is very solid. I notice that in a short time I will be in Bergen for 5-6 weeks, but it is a solid bank with very talented people. There is good craftsmanship here. We are an uncomplicated bank. We protect the credit risk. We are focused on risk management and will drive uncomplicated. This is very important. We are solid. We have gone through capital just now. We are a very solid bank, so we are also ready for growth. And also if something unexpected were to happen in the markets around us, we have a very good first-line defense through good results, and at least second-line defense through very good income. We are profitable. I think this is an area we need to look at more closely, how we can work to become even more profitable. But at the same time, there are stable exchanges, as shown earlier, and a very good return. If you have invested in a private equity account in Sparbank in Østland, you have typically received an average higher return than you would have received on index on Oslo Børs, for example. There are growth opportunities in the markets we are in, and there is great potential here. As mentioned, this with inflows, there are several inflows to the east, and Oslo is in the east, just to point that out. And we have the customer exchange, which is something that we are one of the few banks that has, which is a very attractive contribution to customer satisfaction. On sustainability, we score high on most of the surveys I have seen. We score among the highest. Whether it is sustainability indexes or different ratings on our obligations and so on. So we have very good results on that. And that is because sustainability should be included in everything we do. And it is an important part of our strategy to run a sustainable bank. Merkevaren, Sparbank 1. It is a great help to have those names, but Sparbank in Østland is a very strong brand name alone. We also score very high on these Sustainability Indexes, where Sparbank 1 is considered to be, from those around us, the bank in Norway that is considered to be the most sustainable. So I think this is a lot of good reasons to invest, in addition to the fact that there are a bunch of great people, I can say, who have been here for quite a while. That was very nice. I wanted to invest. Shall we open up for some questions, Bjørn-Erik?

That's what we're going to do. We have questions from Håkon Astrup in DNB. Two questions. After Klara-Lise, what do you think as the new director of administration about the bank's ambition for profitability? Furthermore, is it a good reason that you have a 1 percent point lower target than the other large savings banks? And another question that probably both of you can answer, can you tell us a little more about what you expect from the inflation costs over 2024? Geir Hegel was a little bit on it.

I can start with the first question, a good question. I think we now have a financial goal of having a loan of more than 12%, and most of the others around us have 13%. And I think there is all reason to look at that, and also look at our financial goals in total. That's something I wish we could spend some time on. Then we'll be back, maybe already in the second quarter, with some specific goals.

I can try, Håkon, to talk a little about the cost of fusion. We haven't gone out with numbers now. I think that's an ambition to have at the TOKU presentation. We are in a phase now where there is a lot of planning of technical aspects of the fusion. That will be the cost at hand. At the same time, we see that a lot of what is expected from the council is taken. And as I said, as a premise for the fusion, there is no exaggeration here, so the final package of the council will not be a cost at hand for the fusion. But to get a picture of the technical costs, we need to do more planning work together with our partners. So we have to get back to that.

That was what we had of questions. It is a busy team for analysts and investors, so we are also available later.

Definitely. So thank you very much to everyone who has watched, either now live or later. We will be happy to ask questions in the e-mail that was listed at the start of the presentation.

Thank you for today.