Sparebanken Sr Boligkreditt AS Investor Presentation March 2016 - - PowerPoint PPT Presentation

Sparebanken Sør Boligkreditt AS

Investor Presentation March 2016

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Executive summary

Sparebanken Sør

• The fifth largest savings bank in Norway with a strong market position in Southern Norway
• High capitalization; Capital ratio of 15.5 % - Core Tier 1 ratio of 12.7 % at December 31th 2015
• Rated A1 (stable outlook) by Moody’s
• Strong asset quality – 65 per cent of loan book to retail customers
• New rights issue of NOK 600 million in progress will strengthen capital ratio even further

Sparebanken Sør Boligkreditt

• 100 % owned and dedicated covered bond subsidiary of Sparebanken Sør
• Cover pool consisting of 100 % prime Norwegian residential mortgages
• High quality cover pool reflected by the weighted average LTV of 55.3 %
• Covered bonds rated Aaa by Moody’s with 5 notches of “leeway”
• Strong legal framework for covered bonds in Norway with LTV limit of 75 % for residential mortgages

Norwegian economy

• Low interest rates, weak NOK and fiscal stimulus are counterbalancing economic slowdown

stemming from the lower oil investments

• Unemployment is expected to increase gradually but from a very low level and the unemployment

rate remains well below the European levels

• The Norwegian government has a strong financial position with large budget surplus. The

government pension fund, which accounts over 200% of the GDP, provides the government with substantial economic leeway

Southern region economy

• The Southern region is clearly less exposed to oil production than Western Norway
• Registered unemployment in the Southern region remains below 4 % and has moved up only

slightly, at a similar pace than the national average

• House price development over the past years has been more moderate than average in Norway

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Financial key figures Sparebanken Sør Boligkreditt Contact details

Table of content

Norwegian economy

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Historical milestones

190 years of development and renewal

Arendal Sparebank was founded in 1825 as one of the first savings banks in Norway. 1973 The bank merged with 4

• ther savings banks in

Aust-Agder, and formed Aust-Agder Sparebank. Sparebanken Sør was established in 1984 after a merger between Aust- Agder Sparebank, 2 other savings banks in Aust- Agder and 9 from Vest- Agder. 1985 The bank entered for the first time Telemark, through a merger with Nissedal Sparebank and totals today 7 branches in the county, where the latest was the opening of an

• ffice in Skien in the fall
• f 2012.

The bank´s history dates back to 1824 when Christianssand Sparebank was established as one

• f the first savings

banks in Norway. The banks more recent history starts in 1984 when Sparebanken Agder was established through a merger between Christianssands Sparebank, Halse and Harkmark Sparebank, Iveland Sparebank, Oddernes Sparebank, Vennesla Sparebank and Øvrebø and Hægeland Sparebank. Four savings banks in Telemark and Sparebanken Agder joined forces in 1987. Through the merger the bank was named Sparebanken Agder and

• Telemark. In 1988 the

name was changed to Sparebanken Pluss In January 1997 Sparebanken Pluss and Sparebanken NOR agreed that Sparebanken NOR was to take over Sparebanken Pluss’ branches in Telemark while Sparebanken Pluss was to take

• ver Sparebanken Nor`s office

in Kristiansand. Through this deal the banks business again was concentrated in the Agder counties. 2014 Merger between Sparebanken Pluss and Sparebanken Sør and the new bank is named Sparebanken Sør.

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Sparebanken Sør

Proven operational platform | Established customer base| Stable outlook

1 2 4 6 7 8 5 3

Sparebanken Sør is an independent financial group with a history dating back to 1824 The 5th largest Norwegian-owned bank with assets above NOK 100 billions in 2015 Geographical presence mainly in Aust-Agder, Vest-Agder and Telemark Some 450 employees in 36 locations in the Southern part of Norway. General banking services- and products, in addition to real-estate agency, life- and non-life insurance, security trade services and leasing through wholly- and partially owned subsidiaries and companies. Sparebanken Sør is an independent savings bank offering its products and services to the retail banking market, corporate market and to the public sector. 4,768,674 equity certificates listed on Oslo Stock Exchange with a market capitalization of NOK 711m * With a strong and powerful ambition, Sparebanken Sør is committed to create further growth and development in its region.

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Complete provider of financial services

Significant product range - still potential for increased product sales

Subsidiaries Vendors Affiliates

• Sparebanken Sør Boligkreditt AS is a

wholly owned subsidiary of Sparebanken Sør

• Sparebanken Sør Boligkreditt AS is licensed as

a financial enterprise with the right to issue bonds where investors receive preferential coverage in home mortgages issued by the bank

• Covered bond financing allows Sparebanken

Sør Group to offer mortgages with competitive terms to its customers

• ABCenter and Plussmegleren have merged

under the name Sørmegleren.

• Sparebanken Sør owns 91% of

Sørmegleren Holding AS which is the parent to the real estate company Sørmegleren AS

• Sørmegleren is headquartered in Kristiansand

as well as 9 branches in 9 other cities

• Conveys about 2,000 homes a year and is

thereby the regions largest real estate agent

• Sparebanken Sør bought 10% of Frende

Holding in 2008, and is one of 15 independent savings banks with stakes in the company

• Frende has 175 000 customers and offers

insurance, both life and non-life to corporates and private customers

• Brage Finans is a leasing company owned by

10 independent savings banks, Sør owns 14%

• Distribution of the company's products is done

through own banks, via dealers of capital and through its own sales organization

• Sør bought 18% of Norne Sec. in 2008
• Norne a full service investment bank with

corporate finance - services, analysis, and stock and bond brokerage

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Company structure

Sparebanken Sør (parent bank) rated A1 Moody’s Sørmegleren (real estate broker)

Ownership 91 %

Sparebanken Sør Boligkreditt (covered bond company) rated Aaa Moody’s

Ownership 100 %

Frende (insurance)

Ownership 10 %

Brage (leasing)

Ownership 14 %

Norne (brokerage)

Ownership 18 %

Subsidiaries Affiliates

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A broad geographical footprint

Important operator in the south: Aust-Agder, Vest-Agder and Telemark

Local relationships and market proximity is essential for good savings bank operations Supporter of local business development

INDUSTRY

The market is totalling 450.000 people and about 9 percent of all business in Norway. Sparebanken Sør is the only bank covering this area.

COMMERCIAL REAL ESTATE TRANSPORTATION TRAVEL HEALTH AGRICULTURE FINANCIAL SERVICES RETAIL PUBLIC SECTOR EDUCATION

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Sparebanken Sør

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Financial key figures Sparebanken Sør Boligkreditt Contact Details

Table of content

Norwegian economy

10 8,9 % 8,4 % 2014 2015 43,2 % 46,2 % 2014 2015 1.511 1.521 2014 2015

Financial key figures

Solid foundation, both financially and operationally

Net interest income (NOKm) Cost ratio* Impairment ratio Net income (NOKm) * Total assets (NOKm) Net lending (NOKm) Return on equity* CET 1 ratio

0,33% 0,11% 2014 2015 94.062 101.334 2014 2015 80.913 88.387 2014 2015 13,1 % 12,7 % 2014 2015 0.7% 6.9%

• 66.7%

1.6% 7.7% 9.2%

• 5.8%
• 3.2%

614 624 2014 2015

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Diversified loan portfolio(I)

High retail share and a broad geographic presence contribute to a balanced portfolio

Lending by region Distribution of retail banking - SME/corporate banking

46 % 27 % 27 %

Vest-Agder Aust-Agder Telemark & Other

35 % 65 %

SME/Corporate (CM) Retail market (RM)

Gross loans Gross loans

• # 1 in Vest-Agder and Aust-Agder and # 3 in Telemark.
• Close and long-term cooperation with major stakeholders in the region. The agreement with KNIF* is a good example, which contributes to

growth outside the region

• The lending portfolio is concentrated in the bank's market sectors, concentration risk is low, and is significantly diversified compared to
• ther regions
• Large share of Retail lending which in itself contributes to lower risk, and combined with low average loan size (< NOK 2m) and a low

average LTV, even in a case of a 30% house price drop, lead to a low overall risk level

12 20% 13% 20% 30% 12% 5% < 40 % 41 - 50 % 51 - 60 % 61 - 70 % 71 - 75 % > 75 %

Diversified loan portfolio(II)

Detailed overview of the retail and commercial portfolio

SME/corporate loans grouped by industry Retail loans grouped by size (NOK m) Share of loans in the Retail portfolio Key points for SME/corporate LTV for Sparebanken Sør Boligkreditt Key points for Retail market

50% 12% 11% 7% 20%

44 % 56 % Sparebanken Sør Boligkreditt AS Sparebanken Sør 54% 25% 12% 4% 2% 2% < 1 1-2 2-3 3-4 4-5 > 5

• 44 % of the Retail portfolio is

transferred to Sparebanken Sør Boligkreditt **

• ~ 80 % of the Retail loans have a

principal below NOK 2m

• 95 % of the mortgage portfolio in

SBK has LTV below 75%

• Comfortable with the Retail

portfolio, even in “stormy weather”

• Long term relationships and good

quality in the SME-portfolio

• Clearly defined industry approach

based on local expertise and balanced risk appetite

• Diversified across sectors
• The KNIF-agreement contributes

significantly in the sector ”Social services”

• Long contracts in the public sector

Gross loans Gross loans Gross loans

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Diversified loan portfolio(III)

Low exposure to oil & offshore | stable exposure to real estate

Norway's largest oil regions * Exposure to oil and the oil industry**

Østfold Ytre Sogn Grenland Molde/Kristiansund Trondheims region Arendal- og Kr.sand region Vestfold (expanded) region Sunnmøre Sunnhordaland Bergens region Oslo/Akershus Stavanger region 0,1 % 0,9 % 1,1 % 1,9 % 3,1 % 4,9 % 7,0 % 8,9 % SØR* Sandnes Sparebank* Sparebanken Vest Sparebank 1 Nord Norge* Sparebanken More* Sparebank 1 SMN DNB Sparebank 1 SR

Overall real estate exposure in SME/corporate

17,5 % 3,7 % 1,4 % 0,9 % 23,5 % Overall real estate exposure Split Rental real estate Property development Construction Cooperative housing Gross loans

• Sør has virtually no exposure to oil & offshore, due to a long-term strategic choice
• Although the Vest-Agder area is more exposed to oil than average, the bank as a whole is below average, due to the portfolio in Aust-Agder

and Telemark

• The bank's overall property exposure constitutes ~ 68% of the corporate market portfolio -> The latter constitutes only 23.5% of total loans
• Large parts of the real estate exposures is related to commercial property (rental and condominium). Sør has considerable expertise in this

area, along with its customers that operate very effectively with high level of occupancy

• Exposure towards traditional construction is low

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Credit risk(I)

Manageable risks across the portfolio

Loans grouped by size* Deposits grouped by size SME/corporate portfolio grouped by risk Retail portfolio grouped by risk

51,3 % 18,5 % 30,2 % < 2m 2 - 8m > 8m 77,0 % 17,6 % 5,4 % < 10 mill 10 - 100 mill > 100 mill 94,5 % 4,2 % 1,3 % Low Medium High 69,6 % 19,9 % 10,5 % Low Medium High

Key points Risk categories

• ~70% of the deposits is lower than

NOK 8m

• ~95% of Retail portfolio is in the low

risk category

• ~95% of SME/corporate deposits is

below NOK 100m (few large individual commitments)

• ~90% of the SME/corporate portfolio

is in the low or medium risk category

15 608 488 457 576 594 479 488 418

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 Gross loans in arrears > 90 days Arrears in % of loans

Credit risk(II)

Solid buffer in place –no surprises expected due to strong risk management

Loan loss expenses Gross arrears > 90 days Loan loss provisions (collective and individual) Non-performing and doubtful loans** Key points

• Total non-performing and doubtful

loans amounted to 1.5% of the gross loan portfolio for Q4-15

• Loan loss provisions, both collective

and individual, represented more than 50% of the total non-performing and doubtful loans in Q4-2015

• Sør is well prepared for the future

through a solid loan loss provision level vs. similar banks in Norway Total provisions compared to other banks ***

0,82% 0,77% 0,72% 0,62% 0,57% 0,45% 0,45% 0,37% SOR DNB SVEG MORG NONG SB1HE SRBANK MING 1.500 1.271 1.944 1.651 1.634 1.457 1.434 1.320

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 Non-performing and doubtful loans As % of gross loans NOKm NOKm NOKm 669 637 806 714 681 692 694 722

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015

NOKm % of loans 1 56 23 112 45 3 15 24 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015

16 44,2 % 46,8 % 36,3 % 45,8 % 42,6 % 43,9 % 54,2 % 45,7 % Q1 ** Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 1,64% 1,60% 1,58% 1,59% 1,57% 1,57% 1,55% 1,53% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015

Operational effectiveness

Low interest margin offset by good cost and loss rate

Net interest margin* Impairment ratio* Cost ratio

0,14% 0,14% 0,97% 0,09% 0,07% 0,09% 0,08% 0,22% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015

As a result of increased provisions for future losses after an extensive review of the bank's loan portfolio to CM

Net interest income / average assets Operating expenses before loss / net income Losses on loans and guarantees / average net loans to customers

• Slightly decreasing net interest income in 2015, but strengthened nominal income growth due to volume growth
• Among the most cost-effective banks in Norway -> Influenced by a general spread widening in the bond market affecting the bond portfolio

in 2015

• Impairment ratio significantly reduced in 2015, after a thorough review of the corporate market portfolio in 2014 with the associated

strengthening of loss provisions

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Capital requirements

Core capital of 12,7% in 2015 – expected core capital in 2016 of 14,5%

• Sør has implemented ICAAP for 2015

and the Financial Supervisory Authority will conclude on individual Pillar II requirements later in 2016

• Through dialogue with the Financial

Supervisory Authority ("FSA"), there has been an expectation to bank on CET 1 at the end of 2016 of 14.5% (including Pillar II)

• To reach the expectation from the

FSA, Sør will continue to strengthen profitability, making adjustments in the balance sheet and restricting growth in lending

• In addition, Sør will implement rights

issue of NOK 600m during H1-16

• The rights issue will strengthen core

capital per 31.12.2015 from 12.7% to 13.7%

• Further measures are expected to

ensure that Sør will have CET1 of 14.5% at the end of 2016 Sparebanken Sør - Actual coverage, requirements and objectives Key points

7,0 % 11,0 % 11,5 % 12,7 % 14,5 % 1,5 % 1,5 % 0,8 % 1,5 % 2,0 % 2,0 % 1,9 % 2,0 %

CET1 Additional tier 1 Additional Tier 2 Leverage ratio Requirements Today Expected

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Sparebanken Sør

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Financial key figures Sparebanken Sør Boligkreditt Contact Details

Table of content

Norwegian economy

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Sparebanken Sør Boligkreditt

Executive summary

• Dedicated covered bond company of Sparebanken Sør
• The covered bonds have full recourse to the issuer (Sparebanken Sør Boligkreditt), which is a wholly-
• wned subsidiary of Sparebanken Sør
• Sparebanken Sør Boligkreditt has established a revolving credit facility with Sparebanken Sør which

secures the refinancing risk

• The cover pool consists 100 % of prime Norwegian residential assets
• Low LTV of 55.3 % (indexed)
• There are no non-performing assets in the cover pool
• Current OC of 16.8 %, of which 2.0 % is provided on committed basis
• Main cover pool exposure is towards Southern Norway, where price developments have been relatively

stable

• Aaa rating assigned by Moody’s with 5 notches of leeway, pointing to significant buffer against potential

downgrades

• Collateral score of 5.0 % (4.3 % excluding systemic risk)

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Sparebanken Sør Boligkreditt

Breakdown of portfolio

29 % 36 % 35 %

Cov.bond Other retail SME/corporate

20% 13% 20% 30% 12% 5%

< 40 % 41 - 50 % 51 - 60 % 61 - 70 % 71 - 75 % > 75 % Sparebanken Sør total loan portfolio LTV breakdown of Sparebanken Sør Boligkreditt (cover pool) 55,3 % 59,7 % 67,2 % 76,8 % 16,8 % 14,5 % 10,3 % 2,9 %

0% 25% 50% 75% 100% Status Q4 15 House price decline 10 % House price decline 20 % House price decline 30 % Weighted average LTV Nominal OC

Stress test of the cover pool

21 Category Type of Collateral 100 % residential Total loan balance NOK 25,673,390,250 Average loan balance NOK 1,017,614

• No. of loans

25,229 WA seasoning (in months): 36 WA remaining term (in months): 206

• NO. of borrowers

22,752

• NO. of properties

24,755 WA Indexed LTV 55.30 % WA LTV 58.30 % Percentage of variable mortgages (S.Def.): 100.00 % Loans in arrears > 90 days (e.g. 1% or 0.01): 0.00 % Committed over collateralisation: 2.00 % Over Collateralisation: 16.76 % Total Cover Pool 25,673,390,250

The Cover Pool(I)

Cover pool composition

• 100 % prime Norwegian residential mortgages
• No non-performing mortgages in the cover pool
• Current OC level of 16.8 % and commitment to maintain level

above 2.0 %

0% 5% 10% 15% 20% 25% 30% 35% 0-≤40% >40%-≤50% >50%-≤60% >60%-≤70% >70%-≤80% >80%

• The weighted-average LTV is 55 % on an indexed basis. This is

well below the legislative maximum of 75 % for residential mortgages Indexed LTV distribution

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The Cover Pool(II)

Source: Moody’s deal-by-deal overview Q2 2015 and Sparebanken Sør Boligkreditt performance overview Sep 2015

Cover pool geographic split

• The cover pool is primarily exposed towards Vest-Agder and

Aust-Agder, as well as Oslo and Telemark to some extent

• Property price development in Vest-Agder and Aust-Agder

has been more modest than in the rest of the country

• A low c-score points to strong credit quality of the cover pool
• Sparebanken Sør Boligkreditt covered bond program has been

assigned a c-score of 5.0% (4.3% excluding systemic risk)

• This is stronger than the national average and also compares

well with international peers

• Sparebanken Sør Boligkreditt covered bond program has been

assigned a TPI of ’high’ and has ’Aaa’ rating with 5 notches of

• leeway. This indicates strong resilience against potential issuer

rating downgrades

Vest-Agder (44%) Aust-Agder (29%) Telemark (8%) Oslo (9%)

Moody’s collateral scores

0% 5% 10% 15% 20% 25% CA FR FI NL SE UK Sør NO IE PT BE IT DE AT DK ES

• Avg. c-score assigned by jurisdiction and to Sparebanken Sør BK

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Funding

Well diversified maturity profile giving great confidence during turmoil

• Total funding amounted to NOK 42bn,
• f which NOK 22 billion is issued as

covered bonds

• International turmoil has been

affecting liquidity and price volatility in Norwegian bonds

• The bank has a diversified maturity

profile and few expiring bonds in 2016 and 2017

• Funding > 12 months totalled 89%
• Liquidity indicator 1 is 106%
• LCR is 108% on a group level
• The average maturity is 3.4 years

corresponding with the average among similar Norwegian banks Key points Remaining maturity of outstanding wholesale funding

3.314 2.702 3.719 3.238 4.687 860 520 819 1.314 2.202 4.521 4.542 6.444 2.000 405 600 4.628 4.904 8.240 7.780 11.131 2.860 520 405 1.419 2016 2017 2018 2019 2020 2021 2022 2023 > 2024 Sparebanken Sør Sparebanken Sør Boligkreditt

11% 3% 1% 7% 27% 19% 20% 12% 1%

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Covered Bond programme

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Sparebanken Sør

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Financial key figures Sparebanken Sør Boligkreditt Contact Details

Table of content

Norwegian economy

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Key indicators for the Norwegian economy

Temporary slowdown in growth

In % 2014 2015 2016E 2017E 2018E GDP growth, mainland 2.3 1.0 1.1 1.9 2.3 Core inflation 2.4 2.7 2.9 2.5 2.0 Unemployment rate registered 2.8 3.0 3.3 3.4 3.3 Key policy rate 1.5 1.1 0.5 0.4 0.7 Current account surplus / GDP 9.7 8.0 7.1 7.9 8.2 Sovereign wealth fund / GDP 204 224 N.A N.A N.A

• Economic growth in Norway has edged down due to lower oil investments
• Low interest rates, historically weak NOK and fiscal stimulus are sustaining growth in rest of the

economy

• Unemployment is expected to increase gradually but from a very low level and remains well

contained in the European context

• Excellent financial position of the Norwegian government with large budget surplus and the

government pension fund accounting over 200% of GDP

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Mainland growth

Weaker growth due to lower oil investments

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NOK, oil price and competitiveness

Weak NOK has reduced cost level significantly

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Mainland exports

Export sector benefits from weak NOK and is boosting growth

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Breakdown of Norwegian exports

Norwegian exports is more than oil

Fish 20 % Food 2 % Raw materials 4 % Chemicals 15 % Metals 19 % Machines 28 % Other 12 %

Export of traditional goods

Traditional goods 32 % Oil and Gas 39 % Services 29 %

Exports

REGION EU ex Nordic Asia North America Nordics South America Europe ex EU Oceania Africa SHARE OF GOODS EXPORT 30 % 20 % 16 % 14 % 6 % 5 % 3 % 3 %

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Public finances

Strong fiscal power to support the economy

• The Government Pension Fund currently amounts

to NOK 7,000bn (approx. EUR 737bn) which is more than twice the size of the Mainland GDP and equals to five annual national budgets

• This gives the Norwegian government substantial

economic leeway

• The fiscal rule: 4% of the fund’s value can be used in

the national budget (expected real return on the fund)

• The rule is to ensure that the fund itself would not

be tapped. Thus the fiscal break even oil price is zero

• In response to lower oil price public spending has
• increased. The fiscal policy stimulus is estimated to

be 0.7% of the Mainland GDP in 2016

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Western Norway is the oil region

Sparebanken Sør’s operating regions is less exposed to oil

Indirect employment Supply industry export Supply industry home market Employed onshore Employed offshore

Direct and indirect employment in the oil sector

Employed in oil sector in absolute numbers and % of employment

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Bank specific exposure to oil related industries

Sparebanken Sør has practically no exposure to oil or oil service industry

0,1 % 0,9 % 1,1 % 1,9 % 3,1 % 4,9 % 7,0 % 8,9 %

SØR* SADG* SVEG NONG* MORG* MING DNB SRBANK

Østfold Ytre Sogn Grenland Molde/Kristiansund Trondheims region Arendal- og Kr.sand region Vestfold region +,+ Sunnmøre Sunnhordaland Bergens region Oslo/Akershus Stavanger region

Norway’s largest petroleum regions* Banks exposure towards oil- and oil service**

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Unemployment

Only moderate increase in unemployment in Sparebanken Sør’s regions

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Household economy

Low interest rate burden and solid financial buffers

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Norwegian housing market(I)

House prices have increased alongside income growth

City 2009 2010 2011 2012 2013 2014 2015 Sum Oslo 1 % 8 % 10 % 10 % 5 % 1 % 10 % + 45 % Kr.sand 2 % 7 % 6 % 1 %

• 2 %
• 1 %

6 % + 19 % Stavanger 2 % 12 % 13 % 8 % 4 %

• 2 %

1 % + 38 % Norway 2 % 8 % 9 % 7 % 5 % 2 % 7 % + 40 %

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Norwegian housing market(II)

Key characteristics

High home

• wnership
• Around 80 % of Norwegian households own their home which is among the highest home
• wnership ratios in the world. Hence, buy-to-let market is limited in Norway

Key features of residential mortgage loans in Norway

• Residential mortgage loans are predominantly granted by banks and mortgage credit

institutions (97 % as of January 2015)

• Lenders have access to wide range of information about borrowers before granting the

mortgage (e.g. tax records for the last three years, any debt collection outstanding, any bankruptcies)

• Properties are registered in a central register to which banks have direct access
• Typical maturity of a new loan is 25 to 30 years
• The majority of residential mortgage loans have a floating interest rate meaning that banks are

allowed to increase the interest rate with a six weeks’ notice

• Borrowers are personally liable for their debt also after foreclosure or forced sale

Good tax incentives and supportive social security system

• Borrowing costs on mortgages are tax deductible (the tax rate applied is 25 %)
• Tax valuation of dwellings is favourably treated in the wealth tax system
• If a dwelling is occupied by the owner for a minimum of one year, capital gain is tax free when

the dwelling is sold

• Unemployment benefit equals approximately 62 % of the previous calendar year’s gross

income and is paid for up to 104 weeks

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Financial key figures for 2015 and expectations for 2016

Operational measures are implemented to ensure the bank's continued growth

Cost development (The bank) Return on equity Common equity (The group) Lending growth Dividend ratio 50% 50%

2015 2016

9,2 % 2,0 % 2,0 %

2015 2016

12,7 % 14,5 % 1,0 %

2015 2016 Equity emission added

8,4 % 9,0 %

2015 2016 Potential buffer / Effect of initiatives

46,2 % 42%

2015 2016 Satisfying level given the banks solid equity ratio 2015 was impacted by the spread widening in the liquidity portfolio

13.7% 4.0%

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Contact details

and website

Marianne Lofthus – Managing director/CEO Sparebanken Sør Boligkreditt AS Phone, direct line + 47 38 17 35 38 Phone, mobile + 47 90 51 41 83 E mail marianne.lofthus@sor.no Bjørn Erik Kittelsen – Head of Treasury, Sparebanken Sør Phone, mobile + 47 90 92 86 63 E mail bjorn.kittelsen@sor.no

www.sor.no

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Disclaimer

This presentation has been prepared solely for use at this presentation. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations. This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Sparebanken Sør Boligkreditt AS (the “Company”), in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation has been prepared solely for use in connection with the presentation of the Company. The information contained in this document is strictly confidential and is being provided to you solely for your information and cannot be distributed to any other person or published, in whole or in part, for any purpose. It may not be reproduced, redistributed, passed on or published, in whole or in part, to any other person for any purpose. Failure to comply with this and the following restrictions may constitute a violation of applicable securities laws. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of their respective affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. This presentation is only for persons having professional experience in matters relating to investments and must not be acted or relied on by persons who are not Relevant Persons (as defined below). Solicitations resulting from this presentation will only be responded to if the person concerned is a Relevant Person. This presentation is not an offer of securities for sale in the United States. Neither the presentation nor any copy of it may be taken or transmitted into United States, its territories or possessions or distributed, directly or indirectly, in the United States, its territories or possessions, except to qualified institutional buyers as defined in Rule 144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or outside the United States in reliance on Regulation S under the Securities Act. Any failure to comply with this restriction may constitute a violation of the United States securities laws.