Sampo Bank’s Covered Bonds Kirsi Autiosalo First Vice President, Head of ALM 13 September 2012
Table of contents Executive Summary 3 • Streamlined platform for covered bond issuance 4 • Overview of Sampo Bank Group 5 • Financial highlights 8 • Finnish Economy and Housing Market 15 • Finnish Covered Bond Legislation 21 • Loan Process 23 • Cover Pool Characteristics 26 • Appendix 31 • Contact details 36 • 2
Executive summary Sampo Bank plc, the Issuer • 100% owned and supported by Danske Bank A/S - Fully integrated in Danske Bank Group, one of the largest financial institutions in the Nordic region - Well-diversified funding base with high deposit ratio - LT ratings of A2 (Stable) /A- (Stable) by Moody’s/S&P, C - Financial strength rating/Moody’s - Covered bonds • EUR 10 billion combined covered bond/senior program established in March 2012 - Issuance under Finnish Covered Bond legislation as amended on 1 August 2010 - Finnish Covered bond legislation is similar to other Nordic jurisdictions but lower LTV cap of 70% - and minimum 2% over-collateralization ratio on NPV-basis Full recourse to the cover pool and to Sampo Bank - Aaa / Moody’s - Covered bonds are fully UCITS/CRD compliant - Cover Pool • 100% prime residential mortgages loans originated solely by Sampo Bank plc - (+ supplementary collateral) Outstanding collateral score of 5.0% and TPI-factor of probable-high (Moody's PO report June - 2012) Weighted average indexed LTV of 48,7% (August 2012) - 3
Streamlined platform for covered bond issuance Act on Mortgage Credit Bank Operations states that covered bonds can be issued either - by specialized mortgage credit bank or any licensed credit institution authorized by FIN- FSA to engage mortgage credit business In November 2011 Finnish FSA granted Sampo Bank a license for mortgage credit bank - operations At year end 2011 Sampo Housing Loan Bank plc (SHLB) as a separate mortgage credit - bank was merged into its parent company Sampo Bank plc The purpose of the merger was to clarify and simplify the corporate structure in Sampo - Bank Group as allowed by the law After the merger, SHLB’s mortgage credit bank business operations, including all the - assets and liabilities of SHLB, were transferred to Sampo Bank without a liquidation procedure and Sampo Bank continues uninterruptedly SHLB’s previous mortgage credit bank business. Starting from 1 January 2012 Sampo Bank plc has acted as an issuer for covered bonds - 4
Overview of Sampo Bank Group
Strong Nordic franchise Personal customers 1,1 M Business customers 0,1M Market rank 3 Sampo Bank is a part of Danske Bank Group Deposit growth (Y/Y) + 0% One of the largest bank groups in northern Europe Loan growth (Y/Y) + 3% Five million customers As of June 2012 Two million eBanking customers 21 000 employees 578 branches Operations in 15 countries Mortgage loans in Sampo Bank Housing loan portfolio EUR 11,6 billion Market share 14 % 6
A bank heading to the future ” The Postal Savings Bank opened its first A bank with a long history branch in 1897. Today, Sampo Bank has 101 branches around Finland and the most popular mobile banking solutions in the Nordic countries . One name and brand in operation Postipankki and the Finnish Export Mandatum joins Sampo. Credit Agency, The group is named merge to become Sampo Group Leonia 2012- Postal Savings Bank becomes 1997 2007 Post Bank 2000 2001 1970 2006 2001-2006 Expansion to Russia and the Baltic countries Leonia and the insurance company Sampo Bank becomes part of Sampo are merged. the Danske Bank Group as one of the largest banks in the Nordic countries The Postal 1886 Savings Bank is established 7
Financial highlights
Sampo Bank Group Financial Performance H12012 MEUR H1/2012 H1/2011 Change Net interest income 189 163 +15 % NII increase due to both Net fee income 96 101 - 5 % increase in lending volumes and in margins Net trading income 22 25 - 11 % Other income 25 36 - 30 % H12011 fee and other income was based on Income total 332 326 +2 % some big one – off commissions Staff costs 98 100 - 2% Other operating expenses 112 133 - 15 % Costs decreased by 10% Expenses total 210 232 - 10 % Profit before taxes Net impairment on loans and 45 46 - 0.4 % receivables improved 60% Profit before tax 76 48 + 60% Income tax 25 12 +110% Net profit for the year 51 36 +43% 9
Sampo Bank Group Financial highlights Sampo Bank Group H12012 H12011 Change Cost/income ratio, % 63,3 % 71,3 % -8.0 %-points Return on equity, % 4,5 % 3,3 % +1,2 %-points Loans, MEUR ( as of 30 June) 21 719 21 069 + 3 % Deposits, MEUR (as of 30 June) 14 858 14 844 + 0 % Impairment charges/ loans & 0,38 % 0,40 % -0,02 %-points guarantees, % Number of staff (as of 30 June) 2 432 2 696 - 10 % Sampo Bank Group H12012 H12011 FY2011 Total capital 2 661 2 540 2 617 - of which Tier 1 2 661 2 540 2 617 Risk-weighted assets 18 060 18 445 18 155 The Group’s capital adequacy ratio clearly Solvency ratio, % 14,7 % 13,8% 14,4% exceeds the regulatory requirement (8%). Tier 1 solvency ratio, % 14,7 % 13,8% 14,4% Core Tier 1 solvency 12,8% 11,9% 12,5% 10
Sampo Bank Group loan portfolio* MEUR 25 000 20 000 15 000 10 000 5 000 0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q12012 Q2 2012 Housing loans Other household loans Corporate loans *Average balances 11
Quarterly impairment balances and net credit losses of housing loans in Sampo Bank Group, % of outstanding housing loan exposure % 0,18 Impairment balance Net losses 0,16 0,14 0,12 0,10 0,08 0,06 0,04 0,02 0,00 -0,02 -0,04 Q4/2008 Q1/2009 Q2/2009 Q3/2009 Q4/2009 Q1/2010 Q2/2010 Q3/2010 Q4/2010 Q1/2011 Q2/2011 Q3/2011 Q4/2011 Q1/2012 Q2/2012 12
Housing loans in arrears - as percentage of housing loan portfolio of Sampo Bank % 1,0 0,9 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0,0 30-60 days 60-90 days Over 90 days Payments in arrears Payments in arrears Total loan balance 13
Sampo Bank Group’s funding structure 30 June 2012 Subordinated debt Equity • Strong deposit base 1 % 9 % Deposits 57 % • Strong capitalization Issued bonds 4 % • Covered bond a core funding tool Covered bonds 17 % Deposits taken from Group 4 % Cd's MM deposits 6 % 2 % 14
Finnish Economy and Housing market
Macro economy GDP in Nordic countries Labour market has been performing relatively well % 107,5 107,5 18 18 GDP indexed 2007 = 100 105,0 105,0 16 16 102,5 102,5 Sweden 14 14 100,0 Norway 12 12 100,0 Finland Euro area 97,5 10 10 97,5 95,0 8 8 95,0 Denmark 92,5 6 6 92,5 Finland 90,0 4 4 90,0 Source: Reuters EcoWin Iceland Source: Reuters EcoWin 87,5 2 2 87,5 87 89 91 93 95 97 99 01 03 05 07 09 11 2007 2008 2009 2010 2011 2012 Bankruptcies at a slightly elevated level • Finnish economy has been growing reasonably well in 2011 and 800 800 Initiated, number H1 2012, which has resulted in better employment. However, Q2 700 700 2012 was a modest disappointment as consumers became 600 more cautious. 600 500 500 • Unemployment rate is forecast to stay below 8% in 2012 and 400 400 2013. 300 300 • Number of bankruptcies has been stable since 2010 200 200 100 100 Source: Reuters EcoWin 0 0 86 88 90 92 94 96 98 00 02 04 06 08 10 16 18-09-2012
Public finances Public deficit/GDP (%), 2012 Public debt/GDP (%), 2012 -8,3 USA 109 -8,3 Ireland 116 -8,2 Japan 219 Greece -7,3 161 -6,7 United Kingdom 91 -6,4 Spain 81 -4,7 Slovakia -4,7 Portugal 114 France -4,5 91 -4,4 Netherlands 70 -4,1 Denmark 41 -3,2 Lithuania 40 -3 Poland 55 Belgium -3 101 -3 Austria 74 44 -2,9 Czech -2,8 Romania -2,5 Hungary 79 -2,4 Estonia 10 -2,1 Latvia 44 -2 Italy 124 -1,9 Bulgaria -0,9 Germany 82 -0,7 Finland 51 -0,3 Sweden 36 EU commission forecasts, May 2012 Norway 37 Switzerland 42 -10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 0 25 50 75 100 125 150 175 200 225 Source: European Commission forecast for 2012 (May 2012) Source: European Commission forecast for 2012 (May 2012) Yield on 10 year government bonds % 8 8 • Being part of core euro-zone Republic 7 of Finland has access to funding levels 7 Spain close/in line with Germany. Debt seems 6 6 to be on a sustainable path. Finland has 5 Italy 5 been seen as one of the safe havens. 4 4 3 3 Finland Germany 2 2 1 1 Source: Reuters EcoWin 0 0 2008 2009 2010 2011 2012 17 18-09-2012
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