SpareBank 1 SMN : Good profit performance and new capital target

SpareBank 1 SMN recorded a profit of NOK 871 million in the first half of 2015 compared with NOK 963 million in the same period last year. The bank is raising its capital adequacy target.

The half-year accounts reflect strengthened core business with increased net interest income and limited cost growth, low loan losses, sound growth in deposits and lending and a strengthened financial position. Profit is down compared with the first half of last year, mainly due to an extraordinary disposal gain of NOK 156 million in the same period last year.

"We are very well satisfied with the first-half profit performance. Sound earnings enable us to continue to build capital in keeping with the authorities' expectations and requirements. The core business has strengthened further, and loss and default levels remain very low. Activity is high across all parts of the group, and we have strengthened our position as the leading bank in Trøndelag and in Møre and Romsdal", says Group CEO Finn Haugan at SpareBank 1 SMN.

New capital target
The bank's capital plan has targeted a CET1 capital ratio of at least 13.5% by 30 June 2016. As of mid-2015 the level is 12.7%, an increase of 1.3 percentage points from the same point last year.

The board of directors has set a new target to raise the CET1 ratio to 14.0% by the end of 2016. The bank will be sufficiently capitalised to fulfil regulatory requirements and market expectations in general.

First-half accounts 2015 - highlights

• Pre-tax profit: NOK 1,080m (1,165m in first half 2014)
• Post-tax profit: NOK 871m (963m)
• Return on equity: 13.7% (16.8%)
• Growth in lending: 8.4% (5.1%)
• Growth in deposits: 11.4% (8.5%)
• Loan losses: NOK 56m (32m)
• CET1 capital ratio: 12.7% (11.4%)
• Earnings per equity certificate: NOK 4.31 (4.77)

Strengthened net interest income
Net interest income totalled NOK 934m in the first half of 2015, an increase of NOK 91m from the same period last year. The increase is mainly due to increased volumes of both lending and deposits along with increased deposit margins. Lending margins were down as a result of increased competition. Commission income and other operating income totalled NOK 790m, an increase of NOK 10m over the same period last year.

Rising market shares
SpareBank 1 SMN increased its lending to retail customers by 8.4% to NOK 77.3bn in the 12 months to end-June. This growth is higher than that shown by the market in general, and the bank strengthened its market position in the first half-year. The rate of growth quickened in the second quarter. An increase of 6,400 new customers was recorded by the bank in the year's first six months.

Lending to corporates rose by 8.4% to NOK 47.2bn. In the second quarter loans to this segment were reduced by NOK 0.6bn. This is in keeping with the bank's capital plan.

Zero growth in costs
The parent bank reduced costs by 0.8% in the year's first three months. In autumn 2014 the board of directors adopted new cost growth targets for the bank, entailing zero growth in the bank's nominal costs in 2015 and 2016.

There is a major potential for efficiency gains. The bank has a substantial focus on digitalisation of a number of customer processes, successively followed by digitalisation of - and hence more efficient - production processes. The bank is considering changes to the bank's distribution strategy so as to better reflect changed customer behaviour.

Low losses
The bank has low losses and a low rate of defaults. Net losses measure 0.09% of total outstanding loans. The very low loss and default figures reflect both the macroeconomic trend in Trøndelag and in Møre and Romsdal and the bank's close attention to quality in the lending process and in customer follow-up.

SpareBank 1 SMN anticipates a slight weakening of the economic climate in 2015, mainly driven by the oil price fall and weak international growth impulses. Our market area appears to be less vulnerable than is the case for Norway as a whole. The bank has only limited credit exposure to oil service related activity, in all about 4% of total outstanding loans. 

Trondheim, 12 August 2015.

Contact persons at SpareBank 1 SMN:
Group CEO Finn Haugan on +47 900 41 002
Executive Vice President, Finance, Kjell Fordal on +47 905 41 672
Executive Vice President, Corporate Communications, Hans Tronstad on +47 941 78 322

About SpareBank 1 SMN
SpareBank 1 SMN is the region`s leading financial services group. It is the market leader in the retail and corporate segments, with a total of 49 offices located at 42 sites across the region`s municipalities.

We aim to be the recommended bank for customers in Trøndelag and in Møre and Romsdal. Being a local, independent savings bank we feel a special responsibility for stimulating growth and prosperity in the region. We base our business on closeness to our customers, good accessibility, a full product range and comprehensive financial advisory services.

Our head office is located in Trondheim. The Group employs about 1,200 full-time equivalents and includes the following subsidiaries: SpareBank 1 SMN Finans Midt-Norge, EiendomsMegler 1 Midt-Norge, Allegro Finans and SpareBank 1 Regnskapshuset SMN. SpareBank 1 SMN is the largest shareholder in BN Bank with a 33% stake.

SpareBank 1 SMN is one of six owners of SpareBank 1 Gruppen. For further information, visit our website at www.smn.no:
http://www.smn.no/.

http://quarterlyreport.smn.no/2015/:
http://quarterlyreport.smn.no/2015/