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

Sparebanken Sør Boligkreditt AS Investor Presentation March 2016

Executive summary  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 31 th 2015 Sparebanken Sør  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  100 % owned and dedicated covered bond subsidiary of Sparebanken Sør  Cover pool consisting of 100 % prime Norwegian residential mortgages Sparebanken Sør  High quality cover pool reflected by the weighted average LTV of 55.3 % Boligkreditt  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  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 Norwegian rate remains well below the European levels economy  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  The Southern region is clearly less exposed to oil production than Western Norway  Southern region Registered unemployment in the Southern region remains below 4 % and has moved up only slightly, at a similar pace than the national average economy  House price development over the past years has been more moderate than average in Norway 2

Table of content I Sparebanken Sør II Financial key figures III Sparebanken Sør Boligkreditt IV Norwegian economy V Contact details 3

Historical milestones 190 years of development and renewal 1985 The bank entered for the first time Telemark, through a Sparebanken Sør was merger with Nissedal established in 1984 after a Sparebank and totals merger between Aust- today 7 branches in the Arendal Sparebank 1973 Agder Sparebank, 2 other county, where the latest was founded in 1825 The bank merged with 4 as one of the first other savings banks in savings banks in Aust- was the opening of an savings banks in Aust-Agder, and formed Agder and 9 from Vest- office in Skien in the fall Aust-Agder Sparebank. Agder. of 2012. Norway. 2014 Merger between Sparebanken Pluss and Sparebanken Sør and the new bank is named Sparebanken Sør. The bank´s history In January 1997 Sparebanken The banks more recent Four savings banks in dates back to 1824 Pluss and Sparebanken NOR history starts in 1984 when Telemark and agreed that Sparebanken when Christianssand Sparebanken Agder was Sparebanken Agder NOR was to take over Sparebank was established through a joined forces in 1987 . established as one Sparebanken Pluss’ branches merger between Through the merger the of the first savings in Telemark while Christianssands Sparebank, bank was named banks in Norway. Sparebanken Pluss was to take Halse and Harkmark Sparebanken Agder and over Sparebanken Nor`s office Sparebank, Telemark. In 1988 the in Kristiansand. Through this Iveland Sparebank, name was changed to deal the banks business again Oddernes Sparebank, Sparebanken Pluss was concentrated in the Agder Vennesla Sparebank counties. and Øvrebø and Hægeland Sparebank. 4

Sparebanken Sør Proven operational platform | Established customer base| Stable outlook 1 Sparebanken Sør is an independent financial group with a history dating back to 1824 Sparebanken Sør is an independent savings bank offering its products and services to the retail 2 banking market, corporate market and to the public sector. 3 Geographical presence mainly in Aust-Agder, Vest-Agder and Telemark 4 The 5th largest Norwegian-owned bank with assets above NOK 100 billions in 2015 5 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 6 insurance, security trade services and leasing through wholly- and partially owned subsidiaries and companies. 4,768,674 equity certificates listed on Oslo Stock Exchange with a market capitalization of NOK 7 711m * With a strong and powerful ambition, Sparebanken Sør is committed to create further growth and 8 development in its region. 5 Note(*): based on the share price per 03.02.16

Complete provider of financial services Significant product range - still potential for increased product sales Subsidiaries Affiliates Vendors  Sparebanken Sør bought 10% of Frende  Sparebanken Sør Boligkreditt AS is a Holding in 2008, and is one of 15 independent wholly owned subsidiary of Sparebanken Sør savings banks with stakes in the company  Sparebanken Sør Boligkreditt AS is licensed as  Frende has 175 000 customers and offers a financial enterprise with the right to issue insurance, both life and non-life to corporates bonds where investors receive preferential and private customers coverage in home mortgages issued by the bank  Covered bond financing allows Sparebanken Sør Group to offer mortgages with competitive terms to its 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  ABCenter and Plussmegleren have merged under the name Sørmegleren.  Sparebanken Sør owns 91% of Sørmegleren Holding AS which is the parent to  Sør bought 18% of Norne Sec. in 2008 the real estate company Sørmegleren AS  Norne a full service investment bank with  Sørmegleren is headquartered in Kristiansand corporate finance - services, analysis, and as well as 9 branches in 9 other cities stock and bond brokerage  Conveys about 2,000 homes a year and is thereby the regions largest real estate agent 6

Company structure Sparebanken Sør (parent bank) r ated A1 Moody’s Subsidiaries Affiliates Sparebanken Sør Boligkreditt Sørmegleren (covered bond company) (real estate broker) r ated Aaa Moody’s Frende Brage Norne Ownership 91 % Ownership 100 % (insurance) (leasing) (brokerage) Ownership 10 % Ownership 14 % Ownership 18 % 7

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 TRANSPORTATION TRAVEL COMMERCIAL REAL ESTATE RETAIL HEALTH PUBLIC SECTOR AGRICULTURE The market is totalling 450.000 people and about 9 percent of all business in Norway. FINANCIAL EDUCATION Sparebanken Sør is the only bank covering this area. SERVICES 8

Table of content I Sparebanken Sør II Financial key figures III Sparebanken Sør Boligkreditt IV Norwegian economy V Contact Details 9

Financial key figures Solid foundation, both financially and operationally Net interest income (NOKm) Cost ratio* Impairment ratio Net income (NOKm) * 0.7% 6.9% -66.7% 1.6% 624 1.511 1.521 46,2 % 0,33% 614 43,2 % 0,11% 2014 2015 2014 2015 2014 2015 2014 2015 Total assets (NOKm) Net lending (NOKm) Return on equity* CET 1 ratio 7.7% 9.2% -5.8% -3.2% 88.387 101.334 8,9 % 13,1 % 12,7 % 8,4 % 94.062 80.913 2014 2015 2014 2015 2014 2015 2014 2015 10 Note(*): 2014 is adjusted for gains from the sale of a stake in Nets with NOK 71m and recognition of negative goodwill of NOK 200m |

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 Gross loans Gross loans 27 % 35 % 46 % 65 % 27 % SME/Corporate (CM) Retail market (RM) Vest-Agder Aust-Agder Telemark & Other  # 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 other 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 11 Note(*): KNIF = Kristen-Norges interessefellesskap -> consists of more than 70 national organizations