SpareBank 1 SMN : Profit growth and continued low losses

SpareBank 1 SMN recorded a profit of NOK 1,782m in 2014, an increase of NOK 382m compared with the previous year. Net losses amount to a mere 0.08% of total outstanding loans.

The preliminary annual accounts for 2014 reflect strengthened core business with increased net interest income and limited cost growth, low loan losses and defaults, high deposit and lending growth, good return on financial investments and a good performance at SpareBank 1 Gruppen.

"2014 was another good year for SpareBank 1 SMN. The core business shows that we are strengthening our market position, and activity levels last year were high in all parts of the group," says CEO Finn Haugan at SpareBank 1 SMN.

Dividend of NOK 2.25
In keeping with the bank's capital plan, the board of directors recommends a cash dividend of NOK 2.25 per equity certificate. This gives a payout ratio of 25%, which is half the level defined in the bank's dividend policy. A provision of NOK 160m is recommended for gifts, of which NOK 40m goes to non-profit causes in 2015. 

The bank's capital plan targets a CET1 ratio of at least 13.5% by 30 June 2016. The level at the end of 2014 was 11.2%. The plan to attain this target without launching an ordinary stock issue stands firm.

Accounts for 2014 - key figures:

• Pre-tax profit: NOK 2,143m (1,758m in 2013)
• Post-tax profit: NOK 1,782m (1,400m)
• Return on equity: 15.1% (13.3%)
• Growth in lending: 7.3% (6.8%)
• Growth in deposits: 10.9% (7.3%)
• Loan losses: NOK 89m (101m)
• CET1 capital: 11.2% (11.1%)
• Earnings per equity certificate: NOK 8.82 (6.92)
• Recommended dividend: NOK 2.25 (1.75)

Strengthened net interest income
Net interest income totalled NOK 1,790m in 2014, an increase of NOK 174m over the previous year. The increase is due mainly to sound growth and slightly lower funding costs. Commission income and other operating income increased by 3% to NOK 1,512m compared with 2013. This growth is ascribable to a positive income trend from sales of accounting services, insurance and payment products.

9,700 new retail customers
SpareBank 1 SMN increased lending to retail customers by 8.0% to NOK 74.0bn. This growth is higher than the general market growth, and the bank further strengthened its market position in 2014. The bank acquired 9,700 new retail customers over the course of the year.

Lending to corporates rose by 6.1% to NOK 46.2bn. This growth is somewhat higher than the bank's adopted capital plan allows for. For 2015 we intend to lower growth to a level that better reflects the general demand among the bank's SMB customers.

Low losses
The bank has low losses and low defaults. Net losses measure a mere 0.08% of total outstanding loans. The very low loss and default figures reflect both the macroeconomic trend in Trøndelag and Møre and Romsdal and the bank's close attention to quality in its lending process and customer follow up.

"Since the financial crisis in 2008 we have focused even more strongly on credit quality since we wish to be well prepared if impaired economic conditions were to affect our market area. We still see no clear signs of change in the bank's default figures, but will intensify our portfolio monitoring in 2015, says Finn Haugan.

Zero growth in costs
Disregarding a provision of NOK 30m for reorganisation, cost growth at the parent bank last year was 3.1%. The directors adopted in autumn 2014 new cost trend targets for the bank, entailing zero growth in the bank's nominal costs in 2015 and 2016. The background is the growing preference of the bank's customers for digital solutions and the fact that a number of internal production processes are about to undergo extensive automation.

This requires efficiency enhancements on the part of the bank. An important aspect of this work will be to reduce the bank's staff by up to 100 FTEs over the course of the current year and next year. The bank will also develop a new distribution strategy in 2015, and the effort to achieve continuous improvement is being stepped up.

Limited exposure
SpareBank 1 SMN expects 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, totalling about 4% of aggregate lending. After a thorough review of this portfolio, no basis has been found for individually assessed impairment write-downs on exposures to this sector or for changes in collectively assessed impairment write-downs.

Trondheim, 4 February 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

http://quarterlyreport.smn.no/2014/:
http://quarterlyreport.smn.no/2014/content.ap?thisId=5

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 490 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/.