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Financial results, Q1 2017 Merged bank, new name 2 • Sparebanken Hedmark and Bank 1 Oslo Akershus merged operations with effect from 1 April 2017. • In its afternoon meeting on 30 March 2017, the Supervisory Board of Sparebanken Hedmark decided that the name of the merged bank would be SpareBank 1 Østlandet. The new name matches the merged bank's regional affiliation well. Re-profiling will take place during 2017. • The technical merger of the two banks (including the internet banks) is planned for the autumn of 2017. • New organisational structure and group management became effective on 1 April. • The bank plans to list its equity certificates on Oslo Børs in the first half of June 2017, depending on market conditions. New SpareBank 1 Østlandet 3 • Norway’s fourth largest savings bank, established in 1845. • Operations in Hedmark, Oppland, Oslo and Akershus with 1.7 mill. inhabitants. • Head office in Hamar. • Equity certificate bank, owned by Sparebankstiftelsen Sparebanken Hedmark (75 %), LO (15 %) and other SpareBank 1-banks (10 %). • Part of SB1-Alliance, owns 12.4 % of SpareBank 1 Gruppen AS. • Banking, leasing, accounting and real estate services. • Total adjusted assets (inc. covered bond companies) of NOK 139 bn, with around NOK 122 bn in loans. • 290,000 customers, with a retail share of 74 %. • 38 bank branches, around 1,200 employees. New group structure and management With effect 1 April CEO Richard Heiberg Corporate Hans Olav Wedvik 4 Innovation and Business Development Dag-Arne Hoberg Finance Geir-Egil Bolstad Business operations Gudrun Michelsen Risk and compliance Vidar Nordheim Communications Siv Stenseth HR and legal Eldar Kjendlie Retail Kari Elise Gisnås Organizations and Capital Markets Espen MejlænderLarsen Summary of financials, Group • Improved profitability Higher lending, improved margins Profit after tax in Q1 2017 for Group of NOK 274 mn (Q1 2016 pro forma: 203), with an ROE of 9.3 % (7.6 %). ‒ ‒ • Net interest income in Q1 2017 of NOK 464 mn (416). High lending growth and improvements in deposit and corporate lending margins contributed positively compared to Q1-16, retail lending margins contributed negatively. ‒ Net loan loss reversals Norway’s most solid regional savings bank 6 Improvement from Q1 2016 due mainly to higher net interest income and lower loan losses. Closure of defined benefit pension scheme in Bank 1 contributed positively. Other cost developments impacted by merger, with progress and costs in line with plans. Pro forma lending and deposit margins were 2.17 % (2.18 %) and 0.11 % (0.04 %), respectively, including loans transferred to SpareBank 1 Boligkreditt. • Net reversals on losses on loans and guarantees of NOK 26 mn in Q1 2017 (loss costs of NOK 9 mn), due reduced group write-downs of NOK 27 mn (0). • CET-1 ratio of 16.7 % in Q1 2017 (16.9 % in Q4-16). Decline from Q4 due to a combination of lending growth and a higher ownership share and consolidation of SB1 Kredittkort. Leverage ratio of 7.5 % (7.4 % in Q4-16). Key financials – quarterly Net interest income an commission fees from covered bond companies (MNOK) 517 337 521 Return on equity after taxes (%) 540 14,6 341 7,6 Q1-16 Q2-16 Q3-16* Q4-16* Q1-17* Q1-16 9,0 Q2-16* Q3-16* 9,4 9,3 Q4-16* Q1-17* CET-1 (%) Losses on loans and guarantees 43 17,5 20 9 16,9 3 16,9 16,7 16,0 Q1-16 Q2-16 Q3-16* Q4-16* -26 Q1-17* Q1-16 7 * Includes 100 % ownership of Bank 1. Q2-16* Q3-16* Q4-16* Q1-17* Key financials – annual Net interest income and commission fees from covered bond companies (MNOK) Return on equity after taxes (%) 14,4 1.715 11,4 11,0 1.215 1.271 7,0 1.063 2012 2013 2014 2015 2016* 2012 2013 75 72 2015 17,2 16,9 66 2016* 16,9 16,2 56 14,8 42 8 2014 CET-1 (%) Losses on loans and guarantees (MNOK) 2012 10,5 1.293 2013 2014 2015 2016* * Includes 100 % ownership of Bank 1. For NII, ROE and loan losses this holds only for H2-16. 2012 2013 2014 2015 2016* Financial results 9 Financial reporting and the Bank 1-acquisition 10 • The income statement of Bank 1 Oslo Akershus AS for H1-16 has been included in the Group result in accordance with the equity method, with an ownership share of 40.5 %. The income statement includes 100 % consolidation of Bank 1’s result from Q3 2016. • The balance sheet of Bank 1 Oslo Akershus AS has been fully consolidated in the Group balance sheet per 30 June 2016. • Due to the acquisition, comparisons between previous years’ income statements and balance sheets are less informative. • Note 8 in the interim report shows the consolidated profit as it would have been with 100 per cent ownership of Bank 1 Oslo Akershus AS from 1 January 2016. Main figures for Q1 2017 Group, former Sparebanken Hedmark and Bank 1 Reported Sparebanken Hedmark Group Profitability Return on equity capital after tax From the balance sheet Assets (NOK mn) Total adjusted assets (NOK mn) Lending growth last 12 months incl. transferred loans Deposit growth during the last 12 months Deposits to loan ratio Financial strength Common Equity Tier 1 capital ratio Tier 1 capital ratio Capital adequacy ratio Leverage ratio Other key figures Total operating costs in relation to total income Losses in % of gross loans Problem loans in % of total commitments Problem loans in % of gross loans 11 "Former" Sparebanken Bank 1 Oslo Hedmark Akershus Group 9,3 % 8,4 % 13,0 % 101.861 138.661 95,8 % 86,4 % 73,9 % 61.186 79.702 9,4 % 6,4 % 72,5 % 42.028 60.312 9,7 % 9,5 % 76,0 % 16,7 % 17,6 % 19,3 % 7,5 % 56,6 % -0,03 % 0,51 % 0,56 % 12,6 % 14,6 % 17,4 % 5,8 % 55,6 % -0,04 % 0,76 % 0,86 % «Reported Sparebanken Hedmark Group» is the reported result of Sparebanken Hedmark In «Former Sparebanken Hedmark», Bank 1 is included in accordance with the equity method, with an ownership share of 40.5 %. «Bank 1 Oslo Akershus Group» is the reported results of Bank 1. 49,5 % -0,02 % 0,05 % 8,10 % Income statement Q1 2017 Net interest income Net commission income Other income Total operating expenses Result bank operation before losses Losses on loans and guarantees Result bank operation after losses Dividends Net profit from ownership interest Net income from financial assets/liabilities Profit/loss before tax Tax charge Profit/loss after tax Return on equity capital after tax Total operating costs in relation to total income Losses on loans as a percentage of gross loans * Figures for 2016 include 40.5 % ownership of Bank 1 in H1-16, then 100 %. 12 Q1 2017 464 255 53 437 335 -26 361 9 6 -14 361 88 274 Q1 2016 297 110 50 253 204 9 195 70 -63 202 33 169 2016 1.490 759 180 1.203 1.226 75 1.151 46 234 -60 1.371 271 1.100 9,3 % 56,6 % -0,03 % 7,7 % 54,5 % 0,1 % 10,5 % 45,4 % 0,1 % Profits from subsidiaries and joint ventures (Nok million) Parent Bank's profit after tax Dividends received from subsidiaries and joint ventures Profit /loss attributable to: SpareBank 1 Gruppen AS Bank 1 Oslo Akershus AS* SpareBank 1 Boligkreditt AS and Næringskreditt AS EiendomsMegler 1 Hedmark Eiendom AS SpareBank 1 Finans Østlandet AS SpareBank 1 Regnskapshuset Østlandet AS SpareBank 1 Kredittkort AS SpareBank 1 Mobilbetaling AS Other companies Consolidated profit after tax Q1 2017 190 Q1 2016 158 2016 964 -84 -80 -389 42 119 -25 2 28 2 2 -14 11 274 34 23 12 1 18 1 3 -3 0 169 192 250 -23 14 86 2 17 -25 12 1.100 * «Q1 2016»: Ownership share of 40.5 % in Bank 1. «2016»: 40.5 % ownership share for first half of the year, then 100 % ownership in Bank 1. 13 Change in profit from Q1 2016 to Q1 2017 Contribution to changes in profit before tax from Q1-16 to Q1-17. Sparebanken Hedmark (Group). MNOK. 28 7 9 12 -42 -142 137 -27 11 137 30 361 202 Profit before tax Q1-2016 14 NII SH NII B1 Commission and other income SH Commission and other income B1 Op. costs SH Losses B1 Dividend/result Income from from owner financial inv. B1 interests Losses SH Op. costs B1 Income from Profit before financial inv. SH tax Q1-2017 Group income profile Income by type. Sparebanken Hedmark (Group). % share of total income.* 12,3 % 12,1 % 16,6 % 16,2 % 14,9 % 9,9 % 9,7 % 4,1 % 4,8 % 5,9 % 4,3 % 8,7 % 6,1 % 10,5 % 9,3 % 9,2 % 4,9 % 5,0 % 4,5 % 4,7 % 4,9 % 5,0 % 16,4 % 17,0 % 17,1 % 8,7 % Other commission and other income Income from accounting services Income from real estate brokerage Commission income from cov bond companies B1 Commission income from cov bond companies SH 64,9 % Q1-16 * Includes 100 % ownership of Bank 1. 15 Net interest income B1 63,4 % Q2-16 42,4 % 43,5 % 43,0 % Q3-16* Q4-16* Q1-17* Net interest income SH Net interest income Interest income excl. commissions from covered bond companies. Interest income incl. commissions from covered bond companies 500 450 2,05% 2,08% 442 2,11% 1,68% 350 280 289 464 2,50% Commission fees from cov bond comp B1 297 1,77% 1,79% 1,85% 2,00% 38 123 127 132 1,50% 250 200 38 NII B1 NII SH 300 38 33 35 37 Commission fees from cov bond comp SH 400 300 452 45 46 40 41 289 297 300 319 325 332 280 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16* Q4-16* Q1-17* 1,00% 150 100 0,50% 50 0 0,00% Q3-15 Q4-15 Q1-16 Net interest income Q2-16* Q3-16* Q4-16* Q1-17* NI in % of avrg total adjusted assets * Q3-16, Q4-16 and Q1-17 include net interest income, commission income and the balance sheet of Bank 1. Q2-16 only includes the balance sheet of Bank 1. 16 Loan and deposit volumes Deposits. NOK bn. Loans. Numbers in boxes: Total loans. NOK bn.** 115 118 119 36 36 37 122 63 62 63 63 Q2-16* Q3-16* Q4-16* Q1-17* 37 62 34 18 79 81 83 85 Q2-16* Q3-16* Q4-16* Q1-17* 44 Q1-16 Loans transferred to coverd bond companies 17 Gross loans own balance * Includes 100 % ownership of Bank 1. ** Numbers include loans transferred to the covered bond companies. Q1-16 Lending margins Retail lending margins, incl transferred loans. %.* Corporate lending margins, incl transferred loans. %.* 2,77% 2,01% 1,95% 1,89% 1,82% 1,58% Q2 2016 SH Q3 2016 B1 * Proforma includes 100 % ownership of Bank 1. 18 1,71% 2,52% 1,64% 1,47% Q1 2016 2,68% 2,59% 2,62% 2,47% 2,49% Q2 2016 Q3 2016 2,63% 2,68% 1,74% 1,64% 2,67% 1,83% 1,78% 1,61% 2,63% 1,55% 2,31% Q1 2017 Q1 2016 2,56% 2,50% 2,43% 1,43% Q4 2016 Proforma SH+B1 SH B1 Q4 2016 Q1 2017 Proforma SH+B1 Deposit margins Corporate (excl Organisation Market) deposit margins. %.* Retail deposit margins. %.* 0,44% 0,39% 0,30% 0,22% 0,08% -0,17% 0,24% 0,17% 0,03% 0,17% 0,16% 0,08% 0,00% 0,25% 0,28% 0,27% 0,19% 0,26% 0,29% -0,04% 0,15% 0,14% 0,15% -0,20% 0,21% 0,23% 0,23% 0,11% 0,17% 0,08% Q1 2016 Q2 2016 SH Q3 2016 B1 * Proforma includes 100 % ownership of Bank 1. 19 Q4 2016 Q1 2017 Proforma SH+B1 Q1 2016 Q2 2016 SH Q3 2016 B1 Q4 2016 Q1 2017 Proforma SH+B1 Net commission and other income Commission and other income, by type. MNOK.* 8 13 17 31 14 36 15 16 46 Commission income from credit cards Other income 79 6 13 9 10 70 71 Income from real estate brokerage 46 Mutual fund and insurance commisions 45 45 47 20 24 13 15 Q1-16 Q2-16 * Includes 100 % ownership of Bank 1. 20 29 24 Income from accounting services 58 Q3-16* Payment transmission 48 43 36 Q4-16* Q1-17* Operating expenses Operating expenses, by type. MNOK.* 25 11 68 24 8 27 12 75 23 11 116 112 69 19 85 22 63 21 99 116 122 49 47 11 50 195 209 223 * Includes 100 % ownership of Bank 1. 21 Social security Pensions Payrolls -245 Q2-16 Depreciation Admin. and other operating costs -26 Q1-16 Other operating expenses Q3-16* Q4-16* Q1-17* Financial assets and liabilities Net income from financial assets and liabilities, by type. MNOK.* 2 Net result from financial assets and liabilites ex valuation of own debt 96 19 82 52 70 45 49 21 1 -49 -52 Q2-16 Q3-16* 6 9 -20 -66 -82 Q1-16 * Includes 100 % ownership of Bank 1. 22 Valuation of own debt 37 Q4-16* Q1-17* Net result from ownership interests Dividends from equity investment shares Losses Losses on loans and guarantees. Quarterly. MNOK.* Losses on loans and guarantees. Annual. MNOK.* 1 72 42 75 66 56 42 20 9 3 0 -19 -7 -26 Q1-16 Q2-16 * Includes 100 % ownership of Bank 1. 23 Q3-16* Q4-16* Q1-17* 2012 2013 2014 2015 2016* Q1-2017* Problem loans Defaulted commitments 700 Defaulted and other doubtful commitments. MNOK.* 1,6% Other doubtful commitments 1,40% Gross defaulted and doubtful in % of gross commitments 600 1,20% 500 1,10% 1,4% Gross defaulted and doubtful in % of gross comm. inc. transferred loans 1,2% 1,10% 1,0% 0,90% 400 0,72% 300 0,8% 0,55% 0,38% 200 0,51% 0,36% 100 0,4% 0,2% 0,0% - 2013 * Includes 100 % ownership of Bank 1. 24 0,6% 2014 2015 2016* Q1-17* Composition of loans and receivables 74 % of lending to retail customers – 77 % including agriculture Composition of loans incl. covered bond companies. MNOK Commercial services 3.404 Composition of loans incl. covered bond companies. % share. Other 4.139 Primary industries 4.412 Wholesale and retail trade 1.388 Corporate, 26,2 % Real estate 14.275 Private customers 54.244 Building and construction 3.038 Transferred to Næringskreditt 1.279 Retail, 73,8 % Transferred to Boligkreditt 35.521 25 Geographical distribution of loans The loan portfolio is evenly distributed across three counties. Gross lending pr county. % of total lending*. Mortgage loans pr county. % of total mortgage lending*. Other, 6% Other, 6% Hedmark, 37% Oslo, 29% Akershus, 23% Oppland, 5% * Figures include loans transferred to covered bond companies, but not loans from SpareBank 1 Finans Østlandet. 26 Hedmark, 33% Oslo, 30% Akershus, 27% Oppland, 4% Capital adequacy The most solid regional savings bank. Maintains target of CET-1 of 16 % over time. Measures of bank solidity for Sparebanken Hedmark (Group). %. Leverage ratio in Q1 2017: 7,5% 1,0 % 0,9 % 12,0 % 12,1 % 17,2 % 16,9 % 16,7 % 2015 2016* Q1-17* 0,3 % 0,4 % 2,7 % 13,7 % 14,2 % 16,9 % 2012 * Includes 100 % ownership of Bank 1. 27 16,2 % 15,6 % 15,3 % 14,8 % 2013 2014 CET-1 Other Tier 1 capital Equity ratio Equity capital Equity capital. End-of-year balances. MNOK. 12.107 12.370 2016* Q1-17* 8.718 7.624 6.718 6.044 2012 * Includes 100 % ownership of Bank 1. 28 2013 2014 2015 Size of balance sheet Total assets and total adjusted assets (incl loans transferred to covered bond companies). End-of-year balances. NOK bn. 138 160 139 140 Figures in boxes: Total adjusted assets 37 37 120 100 73 57 13 63 66 15 16 80 17 60 102 102 40 44 47 50 56 2012 2013 2014 2015 20 0 Total assets * Includes 100 % ownership of Bank 1. 29 2016* Transferred to covered bond companies Q1-17* Richard Heiberg Chief Executive Officer Tel.: +47 902 06 018 [email protected] Contact details 30 Geir-Egil Bolstad Chief Financial Officer Tel.: +47 918 82 071 [email protected]