Sparebank 1 Sor Norge Asa

Riktig god morgen og hjertelig velkommen til presentasjon av resultatene til Sparbank 1 SR Bank for første kvartal 2024. I would like to start today by saying that we are very much looking forward to the merger. We have, as you probably know, announced that we will merge with Sparbank 1 Sør-Øst-Norge. Now the date is set for October 1st, and we received permission from the competition team last week. We have a couple of authority requests again. Financial assistance for the fusion and the finance department for a so-called tax-saving search. But we are very optimistic that we will implement and realize what we have planned on October 1st. Teknisk fusjon vil først skje i august-september 2025. Så før vi er helt ferdig, så går det faktisk nå halvandet år til. Men så langt går arbeidet som planlagt, og vi er godt i rute. Hvis vi ser på Sparbank 1, Riktig god morgen og hjertelig velkommen til presentasjon av resultatene til Sparbank 1 SR Bank for første kvartal 2024. I would like to start today by saying that we are very much looking forward to the merger. We have, as you probably know, announced that we will merge with Sparbank 1 Sør-Øst-Norge. Now the date is set for 1 October, and we received permission from the competition in the last week. We have a couple of government permits again, financial assistance for the fusion and the finance department for a so-called tax-saving search. But we are very optimistic that we will implement and realize what we have planned on the 1st of October. Teknisk fusjon vil først skje i august-september 2025, så før vi er helt ferdig så går det faktisk nå halvandet år til. Men så langt går arbeidet som planlagt, og vi er godt i rute. If we look at Sparbank 1 SA Bank in its own way, we have had a total export growth of 7.7% in the first quarter, and an annual growth of about 20 billion kroner. In recent years, we have grown stronger outside our core area, Rogaland, as a result of our focus on the expansion of the market area, but we also have good growth in our home region. If we exclude Oslo and Akershus, we have a growth of 5.7%. The distribution of the 12-month growth of 20 billion kroner, geographically and in depth, is that we have grown by about 20% in Oslo, Asus and Rogaland. We have also grown by 13-14% in Vestland and Agder. The other places we have customers, we have grown by about 17%. In the personal market, the growth has increased by 5.8% from 5.2% in the previous quarter. And it has gone over the credit growth on a 12-month basis per February by 3.2%. And I was told today that in the first quarter, the growth in the personal market in Norway was 2.3%. So it has dropped further. Where we have Oslo outside, the personal market would have grown by 1% less, 4.2%. If we look at the distribution of growth in the personal market, it is about 40% in Oslo and Kasus, and 30% in Rogaland, and the rest in the rest of the market areas. The exchange rate in SMB and land use is 15.5%, and we also have very good growth in the Rogaland area. The exchange rate in large customers on a 12-month basis was 9.9%. Sparbankens result for the first quarter of 2024 was 1,498,000,000. It's a bit annoying that we didn't have 2,000,000 in result. But regardless of that, if we look at the one-time effect we had in the fourth quarter of last year at 421,000,000, because we sold our share in Sparbank 1 Markets and consolidated it there. No, we sold SR Markets into Sparbank 1 Markets and consolidated it. So the first quarter of 2024 is the best result in the history of Sparbank 1 SR Bank. Enkapitalavkastningen i nominelle kroner. Enkapitalavkastningen var på 14,6% og gått over vårt interne mål på 13%. As I said, the yield growth among Norwegian households and companies has decreased in line with the increased interest rate in the past year. Despite this, SR Bank has still had good foreign growth, both in the personal and business markets. We have had a profitable growth and taken a larger share of a market with very strong competition. And as a result of the higher growth, increased margins and higher interest on the single capital, we have increased net interest rates by 26%, compared to the same quarter last year. In addition, we have a fine development in other revenues and results from associated companies. So I dare to say that we are well satisfied with the total revenue line. Vår økte satsing i Osloområdet, høyere aktivitet og vekst, gir økte driftskostnader, men kostnadsprosenten er på 35%, ned fra 39,5% i første kvartal i fjor, og i Morbanken, vi har litt annen sammensetning av forretningen en del andre banker, så var kostnadsprosenten på 31% mot 34% i fjor. We have low losses in the quarter of 35 million, and Inge will go a little more through the details and the composition of that a little later. Several of the companies and households in the portfolio have been able to adapt to increased costs and a higher interest rate level over the past few years. We, and it is also reflected in the Norwegian Bank's regional network report, experience that companies are now a little more positive than they have been for a good while. There is still quite a hard pressure on profitability. There is a lower level of investment in quite a few companies. And we see that there are some industries that have slightly greater challenges, where it is perhaps worth mentioning the construction and development industry in particular. And at the same time, we see that the activity now in the South and the West, where we have a lot of energy-related businesses, is doing very well. And we see that the regional differences now, again, make a difference for us. And where we now, with a good position, especially in the South and the West, have actually also enjoyed that on the customer side. We expect that the regional differences, both in the industry and in the housing market, will be present for a while. We also think that we are well positioned and diversified for further growth in Southern Norway. The requirement for pure core capital for the first quarter is 16.37%, and we have a core capital of 17.62%, which is significant above this requirement. Så med den lille opptakten så vil jeg gi Inge ordet som skal gå litt mer i detalj på resultatet. Vær så god, Inge.

Takk for det, Benedikte. We deliver an increase in net income of 14 million kroner per quarter. Traditionally, the first quarter is a little demanding quarter compared to the fourth quarter. We have fewer interest rates. We helped with a day off this year, but there is one less interest rate, which is 19 million kroner. At the end of the year, we capitalize on the interest rates, which means that they have to be funded when you turn to the new year in the calendar. The fact that we increase from 1715 to 1729 is a development that I am pleased with, and of course also well supports that we have a good volume growth. Bendicta has mentioned that the market growth is extremely low at the moment. We have many years left to find similar low credit growth. We are increasing with 7.7% per year, and we are also increasing our volumes from the fourth quarter to the first quarter. This is an underlying development that I am pleased with. We also increase net income from 465,000 to 480,000. If we look at the 12-month growth of other income, we are in the area of 5.5%, which is also related to the foreign exchange growth we have. The growth in net income is important, but it is also important as a premise giver to be able to deliver well on other income. At the same time, we are working very systematically with more sales to our customers. The most possible products for our customers is a good customer base, and it increases our income base. We will then deliver an own capital return of 14.6%, with a financial line of 149. That is to say a financial line that is below par. Almost all of this contribution comes from associated companies, while we have a significantly negative basis swap effect this quarter, which hits the quarter, but which will go to zero over time. This is a matter of periodicity. Under 149, it is a quarter that is probably below par. Bendicte pointed out that last quarter was unusually high with 478, much driven by the input effect with SR Markets at about 420. On the operating cost side, we are down 89% from last quarter. That was a quarter that was unrepresentatively high on costs. Due to the good results last year, we had to increase the variable repayment ratio to that, which is quite significant in the fourth quarter. We had a decline of 37 million in Rygir, which is our own company where we have invested. some so-called stranded assets, where it was necessary to take some notes in a empty area. This has not happened again this quarter. In this way, 826 is a much more representative quarter for cost development, but I am of course looking forward to the fact that we are down 89 when we look at the quarter against the quarter. They mentioned 35 on the downloads. They consist of about 125 million in individual downloads, and at the same time 90 million in reversals on IFRS 9 deposits. The latter plays both a positive underlying migration in the portfolio, and we have had some engagements that have It weighs quite heavily in the portfolio, which is restructured and out of it, which means that it has been natural to reverse 90 million in that portfolio, but without changing the likelihood of the different failures that lie at the bottom of the model. So it is model driven. If we look at our key figures, we are well ahead of Return on Equity with 14.6 versus 13. We are over 120 basis points and 125 ahead of pure core capital coverage. And then our demand rises with 100 basis points per 39. But that means that we are pre-funded with what we need to be in place in relation to the SIFI demand. There are also many reasons why we are looking forward to a fusion with Sør-Øst-Norge. One of them is the capital exemption, which it will do, with about 2.5 billion. This means that in the future we will have a very good buffer for both profitable growth and exchange capacity. The cost percentage is then well below 40% with the 35%, and that of course reflects the strong income development that we have had. For subcontractors, the cost increase is right at the top of 8% isolated. At the same time, it is important to point out that when we are satisfied with the growth rate, it will not come for free. It is about building competence and capacity in many parts of the organization. In this way, I am satisfied with the cost development when it takes into account that we have a strong underlying growth in our store. If we look at the total, we are up to the mentioned 7.7% on the loan volume. We are down on the income volume with 0.9%, but we have deliberately slowed down some of the larger public income, which has been a combination of volatile, which means low quality in relation to funding, with increased prices. With that in mind, the underlying income growth is 6.1%. So we see that we have a great growth on both sides of the balance. And we have also managed to increase The total margin with three basis points. Even if we now see that the income margin is a bit under pressure, it is both about customers who optimize their own liquidity even more towards the products that are the most profitable, while of course the competition for income means is strong. But the total picture of this is a positive margin development, and we can see that in the segments. PM is up 6 basis points in total, where we have strengthened the exit margin with 22 basis points, but reversed and get a pressure on the exit margin. But as we look at the personal market, there is a 5.8% underlying growth, and that is almost double of the market it has. And there is also an income growth on a 12-month basis of 5.9%. The growth in large customers is still high. It is now 9.9 on a 12-month basis. That's where the resources mentioned in the public sector come in on the investment side as an explanation of why it goes down. But I also see here that the total picture on margin is positive with three basis points in increase on the quarter, in an isolated way, and with increased loan margin and a little pressure on the investment margin. The same picture on SMB and land use. There, the income growth is a little weaker, but you can also see that this is a segment that is very well funded on its own, with 22 billion in loans and 21 billion in income, and with a margin picture there that is quite flat. Small movements on the foreign portfolio. We are about 60-40% between the personal market and the business market. This is an area where I am very happy for the fusion with Sør-Øst-Norge, because it moves the gap to about 65% versus 35%, and gives us, in addition to good pure capital, a great freeway for people to grow further in the business market area. So this combination of the organic and structural growth is really to fulfill the strategy that we have worked purposefully with for many years to achieve. We are concerned about early indicators. We have been in the whole period with interest increases especially, and as you can see, it is very flat. We see very few signs in the portfolio that this is demanding. Of course, there are single customers who have it challenging, and it is not that we are done with downloads, we are done with maintenance. But in sum, this is going very well when we look at the portfolio, both with the use of draw facilities, payment notes, and so on. We have to be able to say that with the increase in interest rates we have had, we see both on the portfolio and in sum macro, that the society has been able to absorb it in a very good way. And the employment is low, and that is of course also very positive in relation to the level of employment. Other revenues, down on the payment media, there were 17 million in one-time revenues in the fourth quarter, so that explains a lot of the decline there, in addition to the fact that we are literally less in the store in the first quarter than we were in the fourth quarter, where all Christmas presents are to be sold. That gives a certain season variation. Otherwise, the picture is very stable in all revenue areas. I am very happy about the development we have in retail, There is a lot driven by the large B&M segment, both what we do on our own against larger B&M customers and the collaboration we have with Sparbank Einmarkets. that really bears fruit when it comes to taking a position. Our strategy is really to be a bank that stands strong both in the personal market and the business market, and the strategic approaches we have taken, both in cooperation with Swedbank, increasing distribution forces with the localization of Oslo, all of this has been part of building very good exit growth in the business market, and that also gives increased opportunities for other income. The combination of what we have done at Egenkjøl, together with Swedbank and now Fusion, makes us really lift the platform to be able to drive effectively and profitably in the bank in all areas and create good other income. In a market where These revenues are not so easy to copy just for competitors. It is about portfolio building and it is about both financial capacity and competence. And here we take a position where we play more on the side of the big Norwegian and Nordic banks in relation to getting a broadly integrated revenue base. Net income from financial investments, as you can see, 149, and 143 of that 149 comes from associated companies, the group BNB, and so on. Or you can see that the sum of the other financial lines is 6 million together, and that means a... This is a relatively weak quarter on the financial line. But I prefer to deliver 14.6% of my own capital on the financial line than the opposite. So this is also completely past what we call natural volatility on the financial line. We have been talking about operating costs. An annual growth of just over 8%. We notice the inflation. It was a good wage increase last year. It will be a good wage increase this year, and that means that the scale of efficiency Only the measures are important. We have done what we need in relation to things that are under the headline compliance with anti-whitewash and so on. And that drives fixed costs. But now we also have the underlying place that makes it possible to scale on a low cost contribution in the future. And of course, we will also work very hard in connection with the fusion and take out We have set a target of at least 150 million on synergies, and we are of course working to improve that further. And at the same time prepare as well as we can with the fusion, and that means that Benedicte and I are very careful with approving new year's resolutions here and now, as part of the preparation for a fusion, where we of course should be able to take out synergies as easily as possible. when we become one organization from October 1st. IT costs are on the rise. It is demanding all the time to be up to speed in relation to what is required for technological solutions, but we also have a great benefit from the collaboration we have in the Alliance. We are looking forward to the increase in the sum and volume of the Alliance, both with new members For example, Sogne og Fjordane and Toten, which will go together with Østlandet. All this increases the volume and makes the unit costs lower, so that it gets a larger volume and reduces costs. So alliance cooperation is still very important for us on the cost side. We have been talking about the downloads. It looks very good. On the right, you can see that the Trin3 volume is constantly going down and shows a good quality in the portfolio. This shows why it has been possible to take some revenue from the revenues that were quite significant in 2020. As you can see now, we have from 2021, 2022, 2023 and now, in reality, net zero. We have been working hard to regain the revenues we have. The capital recovery is solid. We are well in place compared to what is expected of SIFI. As I said, the fusion will give further benefits. which will materialize in the fourth quarter, and maybe in the first quarter, depending on the approval of the IRB model work. There is a new portfolio that will be incorporated into the ESSA bank system. But we have a common underlying infrastructure and platform, so we expect it to go quite well. And the funding says no more than that we have very good access to the funding we need in the market. And we get more internationally than we do nationally, but we have built up a very good access in the last few years. And then, Benedikte, I will pass the baton to you, so you can say a little about the sustainability and the views.

Thank you, Inge. I was just going to say that our... The sustainability goals are set. We have made a so-called transition plan, where we will continue to work to achieve these goals, and be a little more precise on what was announced earlier this quarter. If we now look at what the foreign portfolio looks like, then sustainability in foreign countries almost 20% of the foreign mass, almost determined 19.8%. It is also very happy to see that the way we work is doing well, also internationally. We received a triple A rating from MSCI earlier in April, which confirms that the quality of the way we work is good, and it is still true that we must deliver What this means in practice is the reduction of emissions in addition to delivering on the other sustainability axes, such as governance and social. We have said that we will finance together 50 billion kroner in sustainable both loans and products by 2030. And as you can see, we have come a long way in terms of the target that we set two years ago with about 61 percent. And then it's both a movable goal, what we calibrate it towards, and the first is often the easiest, and the last 40% points are the most demanding to get in place. We experience that companies are resistant, as I said earlier. We experience that there is optimism in the Sør-Vestland. At the beginning of the year, we saw that there was pressure on profitability and expectations for a lower investment level. i bedriftsmarkedet. Det har ikke endret seg. Det er energibedriftene og tjenestytene som venter oppgang fremover, og ganske mange andre bransjer venter et fall i aktiviteten. Også er det, som jeg var inne på, en større optimisme på Sør-Vestlandet enn det er i øvrige delar av Sør-Norge, hvor vi opererer. The construction and construction industry has been down over some time, and we see that there is still a significant reduction in activity in the first quarter. And higher construction costs and increased interest rates have led to very poor profitability in some projects. At the same time, new housing sales have been very low, but we believe that this is a sign that we can now see a certain improvement. And then we have numbers from NAV that show that the unemployment rate in Norway is low, but is slightly increasing. In March, the unemployment rate was 2.6%. And even though the unemployment rate is increasing, the demand for labour is very high. And there are more unemployed positions now than there were last year. The weakening is in line with the effects of the declines in the Norwegian economy. We also see very large variations in the housing market. In the last few months, price development has been better than expected, but still quite large differences if you look at geography. Even though the market now looks to be improving, it is a bit too early to say whether the market will return to normal. And again, we see big regional differences, as I said, and that is Rogaland and Agder, where the development has been good. And again, something that is connected to the activity in the energy industry. But in the cities outside Oslo and in Northern Norway, the situation is a little different, with a much weaker development. And I think that we in the future will be quite optimistic that the differences will still exist and vary a little in line with the regional differences that we see in the business world. So, all the way to the end, even if we grow in power by fusing with Sbarbank 1 Sør-Øst-Norge, we hope to be able to preserve the local perspective and the localization that we think we work well with in both banks, which is one of the forces that we think will give us opportunities for future growth. And we think that being able to increase The credit and service spectrum, with a much larger range, and hopefully also an interesting employer outside the Oslo area, so for competent workers in Norway, is also a very exciting and cool position and starting point to have. So thank you for your attention. Now we open to questions.

We'll open up the questions, and those of us on the webcast, we can of course ask questions there, it's just to write them in, then we'll take it one at a time. But we can start first with questions from the audience, so it would be nice if you could present who you are and where you come from.

Lars-Anne Vestby from Sparbanket, Markus. Let's start with the growth in Oslo. Could you just give some comments on the customer margin of the growth in Oslo relative to the rest of the portfolio?

That's not a number we're going out with.

But just relatively?

No, we don't do that.

But we are very aware of profitable growth. That means both parts. And that means that either taking more risk in some market areas or falling in price is not an actual problem. So it's a profitable growth in all geographical segments.

Good. Let's try the next one. Can you indicate a level of core capital coverage after the merger and the IRB approval?

We haven't gone out with pro-forma figures on that, and that's also a reason why we're not insiders in each other's figures. It will be good, approximately 2.5 billion in capital liberation, which also coincides with what Sør-Øst had as a goal and ambition in relation to its own IRB search. So that will give a significant uplift on pure cores, and as I said, give very good both growth capacity and exchange capacity for them.

Good. And finally, these early indicators show that things are going very well. Trim 3 is going down. So, if Bendicte had been central bank manager and Ingrid had been vice central bank manager, do you see any signs in relation to what you see as your customers, that the interest rate is going down in relation to how well things are going in the Norwegian economy?

There is no doubt that there was a expectation of a significant decline six months back in time. Now we are talking more and more about a rent decline in the course of the year, and then late in the year. And it is clear that when we look at how surprisingly good it is in the portfolio, there is nothing that screams at a rent decline. But we see that single customers still have it demanding. But the sum of this is still very low employment and good performance in our total customer base.

We have a stronger belief now than we dared for some years ago on a so-called soft landing. That this will be a nice landing for the Norwegian economy. I have to say it's a bit of a surprising low output in our customer base on what has shown itself as very high inflation and a much more demanding market for many companies. So I think it's a reason to be optimistic and move forward.

Thank you.

Then there were many more questions here in the room. It does not look like that. And we have not received any digital either. So then that was it.

Thank you for your attention.