SpareBank 1 Ostlandet

Good morning. Welcome to Sparbanken Østlandet's quarterly presentation. My name is Klara Lise Aasen, and I am the lucky leader of Sparbanken Østlandet, and today I will, together with finance director Gregel Bolstad, go through the quarterly sales. But before I start, I would like to draw your attention to the picture on the first page here. This is Therese Joaug in a well-known style, and it actually brings back memories of the time when OL was on Lillehammer for 30 years ago. And what is a little exciting is that a lot has happened in 30 years. I actually got my first mobile phone in 1994. It was a Stas. I used it to call and send SMS. And I can swear that I spent 25 kroner on buying the ringtone. No one does that anymore. But for those who had that type of phone, it was a bit of an endgame when we were writing. These numbers here might not say much for the younger generation, but for those who had a Nokia with keyboard, this is actually a thank you. that you can then write as an SMS. And I would very much like to thank our customers for the trust they have shown us, because it is actually 30 years ago we had such a good return on investment as we have for 2024. I think it is worth sending a thank you to everyone, and it is incredibly fun to stand here and present the talks for our company. If I go back to newer times, it is a content-rich quarter we put behind us. In total, the GEN-capital return looks lower than we would have liked. There are some posts that have come back here, but underlying activity is good. We see this growth, especially in the personal market. There has been a good growth in this quarter, especially in October and November, with an outflow in December. At the same time, there is a good growth in broad revenues. And in terms of provision revenues, it is pleasant to see that most of the lines in our accounts deliver double percentage growth compared to earlier. And this is both in terms of savings, in terms of funds, in terms of property management, and in terms of insurance products. Then there are the two lines in the equation that are the ones that bring the one-captain reduction down for this quarter, and that is costs and losses. And the cost is higher than we like. There are a lot of one-time effects related to the fusion with the totem, so integration costs. And there are also one-time effects related to declines in a couple of our data companies. In addition, we have become quite a few more in the group. We are over 170 more now than we were a year ago, and of course half of the trend is due to the fact that we have received a colleague from Toten Sparbank from November 1st in relation to growth related to figures in business partners and growth in the core of our business in the bank. On losses, it is a quarter with quite high losses, but about 70 million of this is due to one single customer, which is the same as we also had a decline in the third quarter, and it is the same as we also had a decline in 2023. But a net profit of 231 points. up from 215 in the previous quarter, so that's a solid number. And in total last year, it's 15.8%. As I said, 30 years ago we saw a good drop, and a lot has happened since then, and the net result is up over 50% from 2023, with over 1.1 billion net result. If we had adjusted the one-time effect on EIKA's future infusion, which hit Q3, then it would have been around 14.4% of the cash in the capital. It is also solid. And then it is very good to be able to share Tabasha with owners and customers. And we have proposed an exchange rate of 10,3 kroner and 30 euros per one capital certificate. That is approximately 60 percent. Very satisfied with that. And the customer exchange rate, which I will come back to, is the highest of the time. And if you look at the 2020-2024 summary, we deliver on all our financed goals. We made a small adjustment in our goals in August, on the reduction of GDP from 12 to 13 percent. So of course 15.8 is very good, we think. And we also deliver on the exchange rate over what was the adjusted goal, which should be over 50 percent. And we are very solid. We think we will have buffer to handle growth, structural growth, and also risk in the portfolio and other things that are hit, so 16.8 is experienced as a comfortable level. But we have to look forward. It is good to have delivered well in 2024, but in the future it is important that we work really well on several dimensions to deliver good return and in 2025. We work with, of course, to look at our costs. The quarter we put behind us now has, as I said, a lot of gain effects, but in the future we will also look at how we can work with increasing internal efficiency, work with increments, work with modernizing our bank. In the past, the customer in focus, the customer, is the one we will be here for. Working with broad income will only become even more important in the future, and we have to think about how we will earn trust in the customer every day and in the future. Good balance management. We will have a smart equity level. We will have a balance that we know will give us the room to act. We need to develop the bank in the future. And of course we need that, because we are in a challenging macroeconomic backdrop, also this quarter. In the east there is some lower optimism than we see around the border zone to Norway. We have oil, shipping, offshore and fish, so a lot of that in the east. And at the same time we see the trend with the positive development from the first half year, it has flattened and gone a little down in the second half year. So there are some more pessimists now than there were in the summer of 2024. The level of competition is a little higher than it has been in recent years, but it is on the same level as before the pandemic, and we do not see any special signs in our portfolio. In our portfolio, we have net positive migration, i.e. underlying risk, quality and credit risk is better. And there is good speed in the housing market. When Finansstyrelsen changed the statement just before Christmas, where you now do not necessarily need to pay 15% in capital, but 10%, then we see that they have done something with all new applications for proof of financing, and who are ready to buy housing. It is almost double the amount of financial certificate, and it shows an improvement, we think, in the board market. And it is an activity that is very high towards the end of the fourth quarter, which of course is there also now so far this year. And the credit growth is quite low in our market area. It is now about 1.3%, while there is a refreshment in the household market. The personal market in Øst, strong growth. We have a good volume increase in regular household loans on housing, and this development has been good in the first month and a half of the year. And of course, the growth is both. Now you see a lot of growth in these figures. This is of course due to the fact that Toten Sparbank has entered the portfolio, but we have an underlying good growth in PM. And there is also a solid development in the provision revenue, which Gregel will come back to. But there is no doubt that with a rate level that most likely will come down now, it will sharpen our focus on broad sales. We want to be an impressive partner for our customers in financial services. Either insurance, savings, funds or regular bank services. And it is very interesting for us to see that we succeed very well with our sales campaigns and activities towards the future, which is damage insurance. Compared to the other banks in the Alliance, we are best relative to our size. So we are proud of that. Then it happens at Einholdsmegling, where it has been a very good year, and we are now working on simplifying also on the Einholdsmegling side. It is the starting point for three companies, now combined into one, under one strong brand name, Einholdsmegling 1 Østlandet. We expect the fusion to take place as late as May 1st this year. And of course, I talked a little about the phone when I started. The old Nokia phone that I had then, a lot has happened in 30 years. And the last 15 years with smart phones, now we also have the bank mouse in the mobile phone, in the same way that everything else in our lives has been trained. And I am very proud that we in the Alliance have managed to develop the best mobile app for banking services for the most people. The K-ring has been made in the fall of 2024, and it shows that working together with the Alliance on important products and digitalization is very good. At the same time, we think that we are a company that will also work with differentiating and strengthening to deliver good customer experience in the future, with even more agile approach and speed, so we also work with a small development team to build it up with us, just to get Drakraft and the best of the two worlds. Both the alliance, the strength there, and to be able to work with and differentiate ourselves to the best to deliver on the customer's expectations. And together, the best of the two worlds, as I said, we will create the future of Franshus. A little bit about the business market. Credit growth has been quite flat here, and we can see that with us as well. We have worked a lot in the last quarter on going through our portfolio, getting familiar with Toten's Sparmark portfolio, and we have been working on repricing, which we can see is also giving way to our margins. but underlying good risk development in the portfolio, and the losses I mentioned earlier are linked to known single commitments and not the underlying credit weakness in the portfolio. The fusion method. On November 1st, we got 82 new colleagues. They have come in in a good way, they say so themselves. We have done a lot of research. And that is very good, because we need them to know that they are part of the team when they come in to Sparabanken Østlandet. And now we are working with integration. It is a bit demanding times with the technical, in the form that we have to work with two platforms, some of the employees, and we know that takes time, but at the same time we experience that there is good support among the colleagues and they help each other, so that there is less environmental impact on the customer. And we work with Samlokalisere, an office in Gjøvik, and we have decided to establish a powerful customer center in Gjøvik in line with the fusion agreement. We are already starting that before the summer, instead of waiting until the autumn. So here is an exciting time ahead. As I said, the second fusion is to create an even stronger bank abroad, and here it is possible to income synergies, I think, in addition to capital synergies, which G-regel will come back to. So what are we going to be in the future? But our goal is to be a very strong and good regional bank for Østlandet. And Østlandet, yes, it's growing. In October, we established an office in Drammen. That was 25 years ago. We were there last. And we have a lot of customers in the Drammen area. And one thing that is certain is that Drammen is at least in Østlandet. And we see that the opening three months ago has been very, very good. We have exceeded all expectations so far. So it is an exciting development. In addition, Østland is an area with good growth in general, and a population of almost 2 million customers within our market field. So we think this is promising. We also see that one and a half years after we opened the office in Økern, that it also gives very good results. So it's a physical place, we believe in that, but it must be combined with good digital solutions, and we have that. So I will conclude with today's, what we think is also a joy, we have proposed for the representation to share out customer exchange this year as well. 470 million is the proposal. There are approximately 25 basis points, if you take a basis on loan and income. So an average customer who then maybe has 4 million in, or family, who has 4 million in loans, for example. will be paid in excess of 10,000 kroner in April. In addition, we are investing quite a bit more in gifts this year, so in total we have spent well over 500 million kroner in customer purchases and gifts. And that comes in addition to the fact that we give exchange to two of our largest owners, which are Totens Stiftelsen, which now owns 8.6%, and Sparbank Stiftelsen Hedmark, which owns 44.5%. The two together get almost 750 million kroner in exchange from us, which they can also share with other public interest parties. So this is... I think is good for the local community and for the customer. And with that, I will hand over the floor to the financial director, Gregel Bolstad, who will go through the numbers. Here you go.

You have taken a lot of good points, but I will try to go a little deeper. We need to go a little deeper. A quarter with a fusion and in addition some extraordinary posts, needs a little deep dive. And as an illustration, more than that I will use this slide, Compared to last quarter, it is significantly down, but you can see that a lot of it is linked to net finance, where the effect of last quarter was also negative. At the same time, there are more one-time effects there. If you look at the right side of the slide, you will see that compared to the corresponding quarter a year ago, there is a solid growth in net income, but still a number of one-time effects that are there. So to jump a little into the numbers, starting with the net income, it is obviously characterized by the fact that we have received a significant amount of revenue from Toten Sparebank. On the foreign side, about 23 billion, and roughly 11 billion on the investment side. Of course, this contributes a lot, and this also explains a large part of the increase we see in net and interest income, and when we include the provision income from our credit companies. 14.5% there, but if we keep that aside, we also see an increase of 1.3% on a more collectable basis. So good growth there, also beyond the reasonable contribution we have received from Toten. And then the point is reasonable. Reasonable there is also to look at the margin development, which clearly shows the effect of getting a portfolio from Toten that goes with a higher margin. There was also a point related to credit quality and the business market side, which was on one of Clara Lise's sides, which is that the work you do on the business market side has also contributed to a good increase in the margins. So we think that the development of net and interest income is very pleasant in the quarter, also in addition to the fusion effects. All-time high in the quarter. When we previously had an all-time high, it has typically been driven by strong provisions in the revenue indicators in another quarter. In the fourth quarter, we see that this is broad-based. There are several lines with all-time highs. If we start with credit cards, it is a bit untypical that we have an all-time high in a quarter in the fourth quarter. There it is typically the second quarter and the third quarter we see the high numbers. That is, we think, a very good number. Payment revenues and provisions touch almost 100 million kroner. That is going to be a milestone. There we also have the seasonal effect that we know that this typically increases throughout the year. Related to the properties of the products. Insurance provisions. That has made a point of the fact that we are best in class in the sale of insurance. Proforma has had an increase of 19% in the last two months. That is solid, and the budget and the provisions themselves are also solid. And when we look at the contributions they give from Sparbank Engruppen and Fremtiden Forsikring, we also see the quality of both our operations and the products we sell. Funds provision. We have a piece to walk there. At the same time, it is very nice to see that compared to the corresponding period in 2023, we have a 40% growth. A lot is due to good people with us. good drives, good processes, good focus on this with savings, but it is also due to what Klara-Lise was talking about, we are starting to get very good digital solutions also in the savings area. So even if in nominal numbers the provisions for fund savings are not as high as for insurance, it is clear that with 40% growth, it is possible to think for a few more years with the same focus, then it will be a nice number. We were talking about revenue-saving. By the fourth quarter, this is very good. It reflects a market with a very high level of activity. I will also talk a little more about the companies afterwards. Over the course of 12 months, we are at record levels in sales provisions. Revenue services are sideways when we compare with the fourth quarter 2023. Then we have to take into account that we received a number with new good colleagues from the beginning of 2024. If one corrects for the development of the business, then the provisions on the accounting services are more or less flat. Finally, there is also a good growth in other provisions. From and with the start of 2024, we implemented a reclassification related to sales provisions on leasing and start-up fees. The effect quarterly is about 20 million, which is now in the interest rate net. If you correct for that, you also see a nice development in the rest of the profit revenues. I mentioned the data services. Finans Østlandet has a small decline from last quarter. This results in a one-time effect of about 8 million. This is linked to refunds of cash payments to customers. This is directly linked to the fact that something as simple as interest rates have been made a requirement for pension interest rates, and therefore the requirements over time have been known as invalid, and then the interest rates must also be paid back. We are not alone in this problem, but nevertheless, now this is paid back, so both revenues, costs and losses are stable in the company. Totens Boligkredit is in its own line this quarter, where the result is 4 million. So it is the case that we have an ambition to dismantle the company through a debit and change between Totens Boligkredit and Sparbank 1 Boligkredit. It is also the case that the loans are returned to Morbank's balance, where we then transfer the qualified loan to Sparbank M Boligkredit. So it can be thought that it will be a relatively short performance on our tables for Toten's Boligkredit. This is part of the integration in relation to the fund. Our debt collectors show marginally negative results. Underlying, this is better. There is a one-time effect on the decryption of Goodwill in the debt collector 1 in the country at 5 million. And there is an increase in fusion costs of about 3 million kroner in the megalomaniac in Oslo Akershus. Again, the theme in the quarter is a number of input effects, but if you keep these effects away, it is not just that it is a better quarter than the fourth quarter 2023. It is a very good fourth quarter compared to what we are used to seasonally. Finally, the numbers from business partners are not very pleasant. In this, there is a decline on Goodwill of 25 million kroner, which reflects weak development in profitability. In addition, there are also costs on end-packs of around 3 million kroner. It is quite obvious that both the board and the board of directors in that company have full focus on turning the tables. Result ratio from joint companies. There we see an improvement of about 106 million from the corresponding quarter in 2023. This result improvement is linked to the Sparbank N group. In the fourth quarter of 2023, there was a very negative result contribution from Kredi Nord. We do not have that this time. There it is reasonably flat. At the same time, we see very good development in future insurance. So a quarterly contribution from the Sparbank N-group of 63 million with our ownership ratio, we think is very good. And it is things that indicate that the insurance companies are doing so well now that this is also something we can hope to see in the future. Other companies are stable, both in relation to last quarter and the corresponding quarter the year before. So I tend to draw from BN Bank. I hope that there are some other owners who also do that. They deliver results and capital management on a level with their owners. It is an impressive bank. Then we had 106 million from what was from Joint Ventures from the previous side, so I do not comment on that. There is some exchange here at around 14 million. This is a bad exchange from Visa, so not much to add there. And then there is this that goes to the rest of the net finance. These are mainly market-to-market effects that go to zero. And then there is about 18 million kroner that is linked to the bank's own business in interest and currency. Operating costs have shown a clear increase. Clara Lise was in on it. It is largely what is on staff costs that is driven by the increase in complaints. We have had an increase As a result of new colleagues from Toten, with an effect of two out of three months, 82 employees there. Throughout the year, we have of course also had quite offensive investments related to customer centers. We mention Drammen. It is also, shall we say, the hero of quality and economic criminality. This is the number from the beginning to the end of the year. This explains a lot of what is on staff costs, and it was also mentioned that there is something in the end of the year. Ava Nedskrivinger has commented on Einholdsmegleren Innvane and Forretningspartner. In total it is Gudvild Nedskrivinger at 30 million. IKT costs, investments in the alliance are cost-effective, but they also give results in the form of very good digital solutions. In addition, what is a contribution to the cost increase from last quarter is that we are running two platforms now. We are running from the EIKA group via Totens, which also explains the IT costs and increases from last quarter. The last comment, or the next last comment, is on conversion costs. 15 million in the quarter, and in total for 2024, we categorized 47 million as conversion costs. And when it comes to this with other operating costs, then these 8 million in Finans Østdalen are on this reversing and repayment to the customers. In addition, there is an advance tax of 23 million. The loss cost of the period is not very pleasant, so you can always be arrested for correcting, but at least let me explain what is in it. On the individual, we have one down payment from a known problem customer or a recurring problem customer of 70 million. There is no further drop in that customer, to put it that way. On the model-based, there are a couple of effects. One is that we have made model changes, model improvements, and they are on, let's call it, LGD modeling and subtraction modeling, for those who are particularly interested, and at the same time we have also made a change in the scenario evaluation. This means that now we are on a completely standardized approach to that, and which we also mean reflects what the connection situation is. it is also the case that with an increased portfolio that comes on board in the course of the quarter, it is quite natural that underlying model-based deductions will also be strengthened. Finally, the net-concepted loss. There is one customer that we have previously made individual deductions on, where we have made deductions of 13 million, and furthermore, the deductions are at the level we have seen through quarters. Some comments related to the step distribution of our loans. It is quite stable between step 1, step 2, step 3, but we have had an increase in fixed interest loans through the fourth quarter. I think you have seen that in other banks as well, so those who see and try to sum up to 100 on the left side there will see that it does not quite match, and that is simply the OCI effect of fixed interest loans. When that is said, we follow step 3, That is important. The volume development there is such that when we get a large credit volume on board, in this case Toten's version, then it is clear that as an IRB bank with our credit environment, there will be a deep transition of that portfolio. There are some deductions made, or there is some volume there, it follows deductions, but there it is categorized as about 650 million as an increase in Trinn 3, which is linked to the Toten portfolio. This also means for those who have a fast headcount, that there are reductions in Trinn 3 in the remaining portfolio. This is a bit like the solid loan portfolio. On a systematic level, we see that it is stable with withdrawals on the bond loan side. Very stable. We see a pull on business market customers on cash loans. It is developing sideways. And then there is something we think is partly due to some so-called totem effects. There is a positive on PM, where we see that the proportion of PM-sakes to the cash register is down, but we also see that the decline is so great that it is also explained by the rest of the portfolio. In addition, there is an increase, as far as it is, on the average in LTV in the portfolio. without that being a very dramatic increase and not much higher than what we have seen a few quarters ago. Then I am about to go a little before landing, I will talk a little about the capital coverage, a little about the assumed effects of changes in the capital coverage regulation, and then I will get into the surplus disposition. The pure core capital coverage is at 16.8. at the beginning of the year. We believe there is a good balance between business space and capital discipline. It is a stable development from before, and it also gives us an opportunity for an output that we think is pleasant. The rest of the capital collection is good in relation to both external requirements and internal goals. And we also see this with unvalued core capital, that is, the slightly rougher risk concept there, has had an increase in the last year. We can say that it gives us the room to act as we wish. And then it is important to note what is on the top right here, estimates. We have made calculations of effects on CRR 3. We don't know exactly when it will happen, but Lichtenstein and Island have to make some preparations for the EU-US agreement to get into Norwegian law. But we have some plans for it, and we are ready to report on it. I think we might get better out of it in sum than a few other banks, and it's not necessarily too much to worry about, because it has something to do with the starting point of the average risk value on real estate already. What we know is a negative effect is when you increase the floor for the average minimum risk effect on the IRB housing portfolio. That effect is estimated between minus 0.4 and 0.5. It in a way zeroes out the other CRR3 effects that are expected to be positive, including the scaling factor on the IRB RVA. We also have an effect in addition, and that is the effect of CRR3 on the standard real estate portfolio, especially from Totens. This means that in total, we expect a weak positive effect of these changes. What we have not included here is the effects of getting the totem portfolio over to IRB. It is a longer run, and it is also something that requires a lot of calculations. So we can simply say that we are coming back to that, and we know that these processes often take some time. But all in all, with the effects and expectations on the capital coverage regulations, it supports the fact that where we are on the capital coverage is a correct level, which again is the basis for many of the defensive considerations around the exchange and surplus dispositions. So, Klara Lise has taken part of the numbers. It is a record high customer exchange and gift allocation of over 500 million kroner. the proposed exchange rate from the government is 10.30 kroner per capita. It is worth noting that a newly established TOTEN foundation will receive a gift muscle of 120 million kroner. And when you know that the deductions from the previous Totenbank have been around 15 million kroner a year, it illustrates the effect of establishing foundations through this. And it also illustrates, together with the deductions to Hedmark, over 620 million kroner. There is a powerful gift capacity from Sparbank in Østedalen, in addition to the fact that we share customer exchange. If you sum up customer exchange and gift from the bank with the exchange to our founding owners, we come to well over 1.2 billion kroner for the fiscal year 2024. And when you end the presentation on that level, it is clear that it makes it pretty cool to go to work when you know that the values created are shared with customers and with society in that way. So to sum up, I'm not going to take all the points for granted. We are moving out of 2024 with a net capital reduction and profitability that we have not seen in 30 years. We see that there is good growth on the outside. We see that there is broad-based growth in other revenues. And then we see that there are conditions to deal with both on the cost side and partly a little bit on individual losses. But there it is, which has been the story all the time, actually the last two years. We can count on a small hand the number of problem investments we have had. So I assume that there will be some questions either from the room or from the big internet. So if the boss joins me, we will answer as well as we can.

Jan Marke Skarulisen from Sparbank 1 Markets. Is there a question about the fusion costs? Do you expect that there will be any additional fusion or integration costs in 2025, or possibly 2026, and possibly how much? Yes, fusion costs in 2025, yes, there will be.

I think... Microphone. Then I can start. Yes, it will. And maybe also out in 2026. It depends on the time for technical fusion. So there is a fusion planning going on there. So there has been a lot of technical, organisational, advisory and so on. But since the plan is not completely in line with both the time and the way to carry out technical fusion, we don't have precise estimates. So we'll come back to that.

Yes, and that plan we have as an ambition to set before the beginning of April, together with our suppliers and partners. So we hope we can say something more after Q1.

But not now?

Not now.

What about timing? Is it in connection with the legal version, or with the technical version, that Mestpartner Kostnader wants to apply?

That is also part of the plan for the beginning of April. One more thing about losses.

You said there was one problem with the engagement that has led to a significant part of the losses in this quarter and the previous quarter. Can you tell us which industry the engagement comes from?

No, I don't think we're going into that, but as I said, it's a very small handful of customers in the last two years, and it's the same this quarter and in Q3. I'm not saying the industry.

Okay, that's all. Thank you.

Now we understand that there have been no questions from the Internet, so I guess we've been crystal clear.

Very good. It is so nice that you go through the details after I have just started, so it will be great in the end. But then I would like to thank you for your attention, and you are allowed to send in questions later, so we will answer to the best of the best, otherwise I just wish you all a very good day.