Spar Nord H1 2018
Interim report for H1 2018 of Spar Nord Bank Net profit of DKK 630 million and return on equity of 15.3%
1
Spar Nord H1 2018
2
Company announcement no. 9, 2018
Contents MANAGEMENT’S REVIEW Performance indicators and financial ratios – quarterly................. 3 Executive Summary............................................................................................. 5 Management commentary on H1 2018...................................................... 6 Spar Nord shares held by members of the management team..................................................................................... 10 Overview of group companies....................................................................... 10 Alternative performance measures............................................................. 11 INTERIM REPORT H1 2018 SPAR NORD GROUP Performance indicators and financial ratios........................................... 12 Statement by the Board of Directors and the Executive Board... 13 Income statement................................................................................................ 14 Balance sheet........................................................................................................ 15 Capital position..................................................................................................... 16 Cash flow statement........................................................................................... 18 Notes .......................................................................................................................... 19 Notes without reference.................................................................................... 33 INTERIM REPORT FOR H1 2018 SPAR NORD BANK A/S, PARENT COMPANY Performance indicators and financial ratios........................................... 37 Income statement................................................................................................ 38 Balance sheet........................................................................................................ 39 Capital position..................................................................................................... 40 Notes .......................................................................................................................... 42
Spar Nord H1 2018
Performance indicators and financial ratios –
3
Group
Performance indicators and financial ratios – Group CORE EARNINGS – QUARTERLY H1 2018
INCOME STATEMENT DKKm
H1 2017
Change in %
Q2 2018
Q1 2018
Q4 2017
Q3 2017
Q2 2017
Full year 2017
Net interest income *)
773 785
Net fee income
563 573 -2 273 290 279 264 279 1,116
Market value adjustments and dividends
183 285 -36 64 119 102 18 121 404
Other operating income
179 25 - 169 10 15 12 14 51
Income from investments in associates and group enterprises
-2 384 389 373 388 393 1,546
25 20 22 15 9
5 7 7 32
Core income
Salaries
589 602
-2 313 277 316 247 318 1,165
Operating expenses
366 347
6 183 183 195 168 171 710
Depreciation, amortisation and impairment
Costs and expenses
985 977
1 510 474 525 433 502 1,936
Core earnings before impairment
739 711
4 395 344 248 254 312 1,213
Loan impairment charges etc. *)
Profit/loss before tax
Tax
Profit/loss
Of which, share attributable to interest expenses to holders of additional tier 1 (AT1) capital
1,723 1,688
2 905
818
773 688
814 3,150
30 28 5 15 15 14 18 14 61
16 -9 722 720
- 39 -23
13 -42 -10 -38
0 355 367 235 297 322 1,251
93 145 -36 37 56 44 73 64 262 630 575
9 319 311 190 224 258 989
24 24 0 12 12 12 12 12 49
BALANCE SHEET
DKKm
Total assets
83,561 79,595
5 83,561 80,934 80,367 80,372 79,595 80,367
Loans and advances
45,678 42,407
8 45,678 44,866 46,747 45,471 42,407 46,747
Lending, banking and leasing activities
38,336 36,351
Lending, reverse repo transactions
7,342 6,056
5 38,336 37,551 37,272 36,630 36,351 37,272 21 7,342 7,315 9,475 8,841 6,056 9,475
Deposits
64,866 62,782
3 64,866 62,874 64,266 63,296 62,782 64,266
Deposits, banking activities
49,514 47,610
4 49,514 47,765 48,668 48,092 47,610 48,668
Deposits, repo transactions
Deposits in pooled schemes
15,352 15,016
2 15,352 15,110 15,423 15,204 15,016 15,423
1,522 1,089
40 1,522 1,128 1,144 1,086 1,089 1,144
Subordinated debt
Holders of additional tier 1 (AT1) capital instruments Equity
Contingent liabilities
0 156 - 0 0 175 0 156 175
860 863 8,100 7,702 12,095 12,304
0 860 874 861 872 863 861 5 8,100 8,220 8,114 7,920 7,702 8,114 -2 12,095 11,407
11,961 11,742 12,304 11,961
Total risk exposure amount
Tier 1 capital **)
8,235 7,369
12 8,235 8,055 7,924 7,777 7,369 7,924
Impairment account and discount on commitments taken over ***)
1,894 1,901
0 1,894 1,874 1,616 1,708 1,901 1,616
Contractual non-performing loans
Business volume
51,493 49,672
4 51,493 51,559 49,546 49,243 49,672 49,546
383 401 -5 383 393 341 388 401 341 242,522 236,185
3 242,522 239,196 241,393 238,807 236,185 241,393
*) In the core earnings format in 2017, an amount was reclassified between the items Net interest income and Impairment of loans, advances and receivables, etc., which relates to the share of the discount, recognised as income, on commitments taken over. See note 3. *)
Tier 1 capital for H1 2017 is exclusive of recognition of profit/loss for the period.
***) Spar Nord’s impairment account amounts to DKK 1,894 million (H1 2017: DKK 1,839 million) (note 6) and the discount on commitments taken over amounts to DKK 0 million (H1 2017: DKK 62 million). The 2018 quarterly figures are inclusive of impairment of undrawn maximum. In accordance with the accounting policies, the comparative figures have not been restated in connection with the implementation of IFRS 9 on financial instruments at 01.01.2018.
Spar Nord H1 2018
Performance indicators and financial ratios –
4
Group
Performance indicators and financial ratios – Group CORE EARNINGS – QUARTERLY H1 2018
FINANCIAL RATIOS OWN FUNDS
H1 2017
Q2 2018
Q1 2018
Q4 2017
Q3 2017
Q2 2017
Full year 2017
Own funds ratio *)
18.9 16.9 18.9 17.8 18.2 17.9 16.9 18.2
Tier 1 capital ratio *)
16.0 14.8 16.0 15.6 16.0 15.8 14.8 16.0
Common equity tier 1 capital ratio *)
14.4 13.2 14.4 14.0 14.4 14.2 13.2 14.4
EARNINGS
Return on equity before tax excl. additional tier 1 (AT1) capital, % **)
Return on equity after tax excl. additional tier 1 (AT1) capital, % **)
Cost share of core income
0.57 0.58 0.56 0.58 0.68 0.63 0.62 0.61
Cost share of core income
- incl. loan impairment charges, etc.
0.58 0.57 0.61 0.55 0.70 0.57 0.60 0.60
Return on assets, %
0.8 0.7 0.4 0.4 0.2 0.3 0.3 1.2
MARKET RISK AND LIQUIDITY
Interest rate risk, %
0.8 0.2 0.8 0.8 0.7 1.3 0.2 0.7
Foreign-exchange position, %
1.3 3.9 1.3 1.4 3.3 5.2 3.9 3.3
Foreign-exchange risk, %
0.1 0.1 0.1 0.0 0.1 0.1 0.1 0.1
Liquidity Cover Ratio (LCR), %
176 176 176 173 187 165 176 187
Bank and leasing loans relative to bank deposits, %
77.4 76.4 77.4 78.6 76.6 76.2 76.4 76.6
CREDIT RISK
Bank and leasing loans relative to shareholders’ equity
4.7 4.7 4.7 4.6 4.6 4.6 4.7 4.6
Increase in loans and advances for the period, %
3.5 3.6 2.1 1.3 1.8 0.8 1.6 6.2
Sum of large exposures, % ***)
79.1 17.5 79.1 74.1 17.2 18.7 17.5 17.2
Impairment ratio, %
0.0 0.0 0.1 0.0 0.0 -0.1 0.0 -0.1
8.7 9.0 4.3 4.4 2.8 3.6 4.0 15.1 7.6 7.2
3.9 3.7 2.3 2.7 3.2 12.0
EMPLOYEES AND BRANCHES
Number of employees (full-time equivalents, end of period) 1,527 1,555 1,527 1,520 1,538 1,557 1,555 1,538 Number of branches
49 55 49 50 50 51 55 50
SPAR NORD SHARE
DKK PER SHARE OF DKK 10
Share price, end of period
68 85 68 72 72 78 85 72
Net asset value (NAV), **)
66 63 66 67 66 64 63 66
Profit/loss for the period **)
5.0 4.5 2.5 2.5 1.5 1.7 2.0 7.7
Dividend
- - - - - - - 3.5
Return
- - - - - - - -5
Price/earnings **)
- - - - - - - 9
*)
Own funds for H1 2017 is exclusive of recognition of profit/loss for the period.
**)
Financial ratios have been calculated as if the additional tier 1 (AT1) capital were treated as a liability.
***) In 2018, financial ratios are calculated according to new rules. In accordance with the accounting policies, the comparative figures have not been restated in connection with the implementation of IFRS 9 on financial instruments at 01.01.2018.
Spar Nord H1 2018
Executive Summary
5
Executive Summary “A profit after tax of DKK 630 million is on a level with the best half-year results in Spar Nord’s history, and we are of course very pleased with the strong performance. Adding to performance was a decent profit on our shareholdings in Valueinvest Asset Management and BankInvest, but our ordinary banking operations also developed favourably. Net interest and fee income is more or less unchanged from the year-earlier period, and as a result of the favourable economic trends our loan losses remain at a very low level,” said Spar Nord’s CEO Lasse Nyby.
Spar Nord achieved a satisfactory profit after tax of DKK 630 million in H1 2018, which corresponds to an annualised return on equity of 15.3%. The profit marks an increase of DKK 55 million, or 9%, on H1 2017 and is substantially above the Bank’s strategic target of having a return on equity of 9-11% after tax.
BUSINESS VOLUME The Group’s total business volume (deposits, loans, advances and guarantees, mortgage credits arranged and customers’ custodianship accounts) amounted to DKK 242.5 billion at 30 June 2018, which was DKK 1.4 billion higher than at the beginning of 2018.
Core income amounted to DKK 1,723 million, which is 2% higher than in the year-earlier period. Net interest income was DKK 773 million against DKK 785 million in H1 2017, net fee income was DKK 563 million against DKK 573 million, and market value adjustments were DKK 183 million against DKK 285 million. The strong income improvement was thus attributable to an increase in other operating income (sale of shares) in the amount of DKK 155 million.
The increase covers an increase in bank lending of DKK 1.3 billion (3%), an increase in mortgage lending of DKK 2.1 billion (3%) and a DKK 0.8 billion (2%) increase in deposits. Detracting from performance was a decline in customers’ custodian accounts.
Total costs and expenses amounted to DKK 985 million, which is on a level with the same period of last year. As in the preceding periods, costs were affected by investments in the IT area. A reduction in more or less all other cost items has the opposite effect. Core earnings before impairment were DKK 739 million, which is DKK 28 million, or 4%, higher than in H1 last year and higher than expected at the beginning of the year. Loan impairment charges etc. were a net expense of DKK 16 million, which is also better than expected at the beginning of the year.
INCOME FROM BANKINVEST AND VALUEINVEST The financial statements for the first half of 2018 are positively influenced by an income of DKK 154 million concerning the sale of Spar Nord’s shareholding in Valueinvest Asset Management SA to Macquarie. In addition, the financial statements include an extraordinary value adjustment of DKK 82 million with respect to Spar Nord’s ownership interest in BI Holding A/S (BankInvest) as a result of a changed valuation principle in BankInvest. OUTLOOK On the basis of developments and performance in H1, management has resolved to retain the full-year forecast for core earnings before impairment around DKK 1.3 billion, as announced in connection with the news about non-recurring income regarding Valueinvest and BankInvest. The net profit for the year is still expected to be around DKK 1.0 billion.
Spar Nord H1 2018
Management commentary on
6
H1 2018
Management commentary on H1 2018
Spar Nord achieved a profit after tax of DKK 630 million in H1 2018, which corresponds to an annualised return on equity of 15.3%. The profit is DKK 55 million, or 9%, higher than in H1 2017 and is considered satisfactory by management. Core income amounted to DKK 1,723 million, which is 2% higher than in the year-earlier period. Net interest income and net fee income DKKM Net fee income 1,462
401
569
844 H1 2014
Realised net fee income was adversely affected in the amount of DKK 24 million concerning a changed accruals principle. The underlying trends were thus positive, especially due to growth in income from mortgage loans arranged, insurance and pension. On a negative note, there was a small decline in fee income from securities trading.
Net interest income
1,245
NET FEE INCOME AT A SATISFACTORY LEVEL Net fee income was DKK 563 million in H1 2018, against DKK 573 million in the same period of 2017. Net income from fees, charges and commissions thus accounted for 42% of total net interest and fee income in the period.
1,332
1,359
1,336
519
573
563
893
813
785
773
H1 2015
H1 2016
H1 2017
H1 2018
CONTINUED GROWTH IN LENDING AND REDUCED PRESSURE ON INTEREST MARGINS Net interest income was DKK 773 million in H1 2018, against DKK 785 million in the same period of 2017. Compared with the year-earlier period, interest income from loans, bonds, etc. was DKK 24 million lower, while interest expenses were reduced by DKK 12 million. The lending margin was 28 basis points lower in Q2 2018 than it was 1714,285714 in Q2 2017. However, since the fourth quarter, the interest margin has been a mere 7 basis points, covering a fall in the lending margin of 13 1428,571429 basis points and a fall in the deposit margin of 6 basis point.
1142,857143
857,142857 Net interest income for H1 2018 includes DKK 15 million of interest income from previous impairment exposures571,428571 (H1 2017: DKK 21 million). 285,714286
From Q1 to Q2, net interest income fell from DKK 389 million to DKK 384 million, primarily because there was no 0,000000 income due to one-off events in Q2.
MARKET VALUE ADJUSTMENTS AFFECTED BY DIFFICULT BOND MARKET ENVIRONMENT Market value adjustments and dividends amounted to DKK 183 million, which is DKK 102 million, or 36%, lower than in H1 2017. The downward trend is ascribable to a sharp reduction in earnings from bonds and financial instruments. Moreover, there was a negative one-off effect of DKK 12 million concerning value adjustment of derivatives. Market value adjustments and dividends DKKM
311
428
187
285
183 x
H1 2014
H1 2015
H1 2016
H1 2017
H1 2018
On a positive note, market value adjustments and dividends concerning strategic shareholdings in financial sector companies rose by DKK 64 million, especially driven by BankInvest. INCOME OF DKK 154 MILLION FROM DIVESTMENT OF VALUEINVEST Other operating income amounted to DKK 179 million in H1 2018, against DKK 25 million in the same period of 2017. The increase was driven by the sale of Spar Nord’s shareholding in Valueinvest Asset Management SA to Macquarie. Income from investments in associates and group enterprises amounted to DKK 25 million compared with DKK 20 million in 2017.
1714,285714 1428,571429 1142,857143 857,142857 571,428571
600 525
Spar Nord H1 2018
Management commentary on
7
H1 2018
COSTS DRIVEN BY IT INVESTMENTS The Group’s total costs and expenses amounted to DKK 985 million in H1 2018, against DKK 977 million in the same period of 2017. Total costs DKKm 925
964
948
977
985
35
33
35
28
30
Depreciation, amort. and impairment
344
356
327
347
366
Other operating expenses
546
575
586
602
589
Salaries
H1 2014
H1 2015
H1 2016
H1 2017
H1 2018
For Spar Nord, the implementation of the new IFRS 9 rules at 1 January 2018 has resulted in additional impairments of DKK 250 million, and the impact on the Bank’s opening equity after tax is thus DKK 195 million, corresponding to 2.4% of shareholders’ equity.
Wages and salaries accounted for DKK 589 million of total costs and expenses. Realised payroll costs were DKK 13 million, or 2%, lower 1500 than in H1 2017, primarily due to factors of a technical nature. As a re1350 costs for basic salaries sult of pay rises under collective agreements, 1200 were thus slightly higher than in the year-earlier period, although 1050 Spar Nord employed 28 employees fewer at 30 June 2018 than one 900 year before.
750 600 Other operating expenses came to DKK450 366 million, which is DKK 19 million, or 6%, higher than in 2017. The increase was mainly due to 300 higher costs associated with strategic IT150 projects both with respect to the BEC data centre and in-house projects in Spar Nord. A re0 duction in more or less all other material cost items has the opposite 1500 effect.
1350 1200 The realised core income and costs correspond to a Cost/Income 1050 Ratio of 0.57, which is better than Spar Nord’s strategic target of 900 0.60. 750 600 From Q1 to Q2, costs and expenses rose450 from DKK 474 million to DKK 510 million. The increase was primarily 300 due to higher payroll costs 150 driven by adjustment of holiday pay obligations. 0 LOAN IMPAIRMENTS REMAINING MODERATE 1500 Loan impairment charges etc. was an expense of DKK 16 million, 1350 which compares to an income of DKK1200 9 million in the year-earlier period. Of the total H1 impact – an income 1050 of DKK 23 million in Q1 and an expense of DKK 39 million in Q2900 – there was an income of 750 of DKK 69 million for DKK 11 million for retail customers, an income 600expense of DKK 96 million business customers ex. agriculture and an 450 for agriculture.
300 150 0
Impairment DKKM
The overall positive trends for both retail and business customers reflect the continued improvement of macroeconomic conditions, which have resulted in a lower inflow of impairment exposures and better performance of loans already flagged as having weak credit quality. In the agricultural sector, however, the period was characterised by lower pork prices and more difficult conditions for plant cultivation. Against that background, loan impairment charges for the agricultural sector came to DKK 96 million, of which DKK 40 million is reserved for an anticipated higher liquidity requirement in Q3 for customers for which objective evidence of impairment has been established.
Individual impairment charges (stage 3) amounted to DKK 1,518 million at 30 June 2018, while stage 1 and 2 impairments totalled DKK 376 million. The Group’s loans, advances and guarantees *) Breakdown by industry Loans and guarantees
Industry %
31.12.17 6.1
Fisheries
0.2 0.2 0.0
6.3
34.9
5.3 5.7 4.9 Industry and raw materials extraction Utilities
3.1 2.7 1.3
Construction and engineering
4.8 4.5 4.6
Trade
7.2 7.4 4.4
Transport, hotels and restaurants
3.8 3.9 5.4
Information and communication
0.4 0.4 0.2
Financing and insurance
6.6 6.4 5.7
Real property
11.2 10.8 11.0
Other industries
5.8 6.5 5.4
Total business customers
Public authorities
0 0.0 0.0
Retail customers
45.5 45.2 22.1
Total
100.0 100.0 100.0
54.5 54.8 77.9
*) Excl. reverse repo transactions
Agricultural exposures by production line
Loans, advances and guarantees
30.06.18 DKKm/%
Non-performing loans
Of which impaired
Share impaired
Cattle producers
854
81 486 57.0
Pig producers
680
12 310 45.5
Plant cultivation
766
5 172 22.5
Mink farmers
99
8 39 39.4
Leasing
510
1 20 4.0
Miscellaneous
360
2 19 5.2
Total
3,269
109 1,046 32.0
Agricultural impairment by production line ImpairImpairment ment 2.757 account Written off for the year
DKKm/%
H1 2014
30.06.18
Agriculture, hunting and forestry
30.06.18
160
Impairment account
30.06.18
166
H1 2015
133
H1 2016
Indesign udgave
-9
H1 2017
2.15916
2.239
483
562
H1 2018
1.676
1.677
2011
2012
Cattle producers 863 Pig 723 producers Plant cultivation
315 1.030 202
0
Impairment ratio of exposure
Percentage impaired
8 36.9 64.8
0 46 29.7 65.1
68
0 30
Mink farmers
23
0
7
23 58.5
Leasing
5
0
4
1.0 24.3
0
2
2.2 42.5
Miscellaneous 1.849 Total 2013
8 1.800 1.727 620 2014
2015
8.8 39.4
0 96 19.0 59.3
Spar Nord H1 2018
Management commentary on
8
H1 2018
PROFIT BEFORE TAX OF DKK 722 MILLION AND NET PROFIT OF DKK 630 MILLION The profit before tax was DKK 722 million against DKK 720 million in H1 2017. The Group’s effective tax rate was 13%, bringing the net profit to DKK 630 million, against DKK 575 million in the same period last year. The very low effective tax rate was due to tax exemption for income relating to both Valueinvest and BankInvest in H1.
Lastly, customers’ custodianship accounts have declined by DKK 2.9 billion, or 6%, since 1 January.
BUSINESS VOLUME GROWING TO DKK 243 BILLION The Group’s total business volume (deposits, loans, advances and guarantees, mortgage credits arranged and customers’ custodianship accounts) amounted to DKK 242.5 billion at 30 June 2018, which was DKK 1.4 billion higher than at 1 January 2018.
Subordinated debt, senior loans and issued bonds due within 12 months are not included in the Bank’s strategic liquidity.
Compared with 1 January 2018, bank and leasing loans rose DKK 1.3 billion, or 3%.
100.0
Strategic liquidity 30.06.18
(DKKbn)
31.03.18
31.12.17
30.09.17
30.06.17
Deposits, banking activities
49.5 47.8 48.7 48.1 47.6
Senior loans/bond issues
0.0 0.0 0.0 0.0 0.0
Equity and subordinated debt
10.5 10.2 10.1 9.9 9.7
Liquidity procurement
60.0 58.0 58.8 58.0 57.3
Lending, banking and leasing activities 38.3 37.6 37.3 36.6 36.4
Total credits arranged (DKKbn) 95.6
STRATEGIC LIQUIDITY OF DKK 21 BILLION Spar Nord has defined strategic liquidity as the difference between bank and leasing lending and the long-term funding (bank deposits, senior loans, issued bonds, subordinated debt and equity).
106.5
111.7
117.6
Total
Maturity, senior issued bonds & subordinated debt <1 year
Strategic liquidity, total
21.0 19.8 20.8 21.0 20.5
0.7 0.7 0.7 0.4 0.4
At the end June 2018, Spar Nord’s strategic liquidity amounted to DKK 21.0 billion, up DKK 0.2 billion on end-2017. Spar Nord’s LCR ratio at 30 June 2017 was 176. 60.4
66.1
71.5
75.3
79.3
Lending, mortgage loans
35.2
33.9
35.0
36.4
38.3
Lending, banking and leasing loans
H1 2014
H1 2015
H1 2016
H1 2017
H1 2018
In H1 2018, the volume of mortgage loans arranged grew DKK 2.1 billion to DKK 79.3 billion, equal to 3%. In total, the volume of mortgage loans arranged from Totalkredit amounted to DKK 68.2 billion and from DLR Kredit DKK 11.1 billion. Total deposits (DKKbn) 53.2
56.6
59.6
13.3
62.6
15.0
64.9
Total
15.4
Lending in pooled schemes
10.7
12.5
42.5
44.1
46.3
47.6
49.5
H1 2014
H1 2015
H1 2016
H1 2017
H1 2018
Deposits banking activities
Deposits, banking activities increased by DKK 0.8 billion, or 2%, in H1 while deposits in pooled schemes were unchanged at DKK 15.4 billion.
STRONG CAPITAL POSITION On the capital side, Spar Nord pursues the goal of having a common equity tier 1 (CET1) ratio of 13.0% and an own funds ratio of 16.5%. In connection with the expected assignment of SIFI status (beginning of 2019), Spar Nord expects to raise these targets to 13.5% and 17.5%. At 30 June 2018, the common equity tier 1 (CET1) ratio was 14.4%, while the own funds ratio was 18.9%. This should be viewed relative to the individual solvency need calculated by Spar Nord at 9.3% plus the 1.9% combined buffer requirement, as a result of which the total capital requirement is 11.2%. The excess capital coverage, which is calculated at 7.1 percentage points or DKK 3.7 billion, has been reduced by tier 2 capital of DKK 0.3 billion because Spar Nord currently has more tier 2 capital than what may be included in the excess coverage calculation. In H1 2018, as part of ordinary refinancing initiatives, Spar Nord issued new tier 2 capital of DKK 400 million. PHASING IN OF MREL REQUIREMENTS As Spar Nord is expected to be assigned SIFI status, the Bank must comply with the same requirements regarding eligible liabilities (MREL requirements) as other SIFIs. The requirements will be phased in from the beginning of 2019 to the beginning of 2022, and when they are fully phased in, Spar Nord must have total capital of about 30% of the total risk exposure amount. Over the coming years, the phasing in of the new requirements is expected to lead to a need for issuing subordinated capital (senior non-preferred) to the tune of DKK 6 billion. The first issues are expected to be made in H2 2019, and efforts will be made to ensure an even distribution of issues during the period until the MREL requirements enter into force.
Spar Nord H1 2018
Management commentary on
9
H1 2018
IRB PROJECT STATUS As described in Annual Report 2017, Spar Nord has, among other things due to the expected assignment of SIFI status, resolved to launch a project to facilitate the transition to internal ratings-based models for calculating risk. The preparatory work is progressing according to plan, and Spar Nord has an ambition of transitioning to IRB Advanced for the entire loan portfolio. The time schedule and expected effects are unchanged from the disclosures in our annual report. THE SUPERVISORY AUTHORITY DIAMOND TEST MODEL The Supervisory Authority Diamond Test Model lists a number of reference points stipulating what can basically be considered a financial institution with an increased risk profile. Violations of the principles contained in the Supervisory Authority Diamond Test Model are subject to supervisory reactions by the Danish FSA. At 30 June 2018, Spar Nord was comfortably within all threshold values in the Supervisory Authority Diamond Test Model. At 30 June 2018, Spar Nord could report the following values in respect of the defined reference points:
∑ Large
exposures <175%
Lending growth <20%
Spar Nord:
Spar Nord:
5.8 %
79.1 % Funding ratio <1
Property exposure <25%
Spar Nord:
Spar Nord:
0.5
10.6% Liquidity coverage ratio >100% Spar Nord: 187%
OUTLOOK FOR 2018 At the beginning of 2018, Spar Nord forecast core earnings before impairment around the DKK 1.1 billion mark and a net profit of around DKK 0.8 billion. As a result of information on non-recurring income from market value adjustments of BankInvest in Q1 and sales proceeds from Valueinvest Asset Management SA in Q2, Spar Nord upgraded its guidance twice in Q1 for a profit before impairment for the full-year 2018 from “about DKK 1.1 billion” to “about DKK 1.3 billion”. On the basis of the overall financial performance for H1, Spar Nord retains this guidance. The net profit for the year after the two upgrades is still expected to be around DKK 1.0 billion.
Spar Nord H1 2018
Spar Nord shares held by members of the management team
10
Overview of group companies
SPAR NORD SHARES HELD BY MEMBERS OF THE MANAGEMENT TEAM
Board of Directors Kjeld Johannesen Per Nikolaj Bukh Lene Aaen (took office on 19.04.2018) Kaj Christiansen Morten Bach Gaardboe Laila Mortensen Ole Skov (retired on 19.04.2018) Jannie Skovsen Gitte Holmgaard Sørensen John Sørensen
At 30.06.18
At 31.03.18
80,000 60,000 27,200 27,200 2,593 2,431 21,100 21,100 3,620 3,620 0 0 - 7,785 8,151 7,963 2,392 2,183 5,160 5,160
Executive Board
At 30.06.18
At 31.03.18
5 1 , 1 61 74,274 69,431
Lasse Nyby John Lundsgaard Lars Møller
50,143 72,355 68,430
The holdings comprise all shares held by all members of the household.
OVERVIEW OF GROUP COMPANIES
Consolidated subsidiaries Aktieselskabet Skelagervej 15, Aalborg *) According to the most recent annual report. The company is a wholly subsidiary in 2017 and 2018.
Share capital end of period*) DKKm
Equity end of period*) DKKm
27
Profit/loss *) DKKm
402
18
Spar Nord H1 2018
Alternative performance
11
measures
Alternative performance measures Spar Nord’s Management believes that the alternative performance measures (APMs) used in the Management’s review provide valuable information to readers of the financial statements. The APMs provide a more consistent basis for comparing the results of financial periods and for assessing the performance of the Group. They are also an important aspect of the way in which Spar Nord’s Management defines operating targets and monitors performance. Throughout the Management’s review, performance is assessed on the basis of the financial highlights and segment reporting, which represent the financial information regularly provided to Management. The differences between the financial highlights and the IFRS financial statements relate only to certain changes in the presentation. There are no adjusting items, which means that net profit is the same in the financial highlights and in the IFRS income statement. A reconciliation of the correlation between core income in the management commentary and the IFRS financial statements is shown in note 3 Segment information. Return on equity before tax, excl. additional tier 1 (AT1) capital
Return on equity after tax excl. additional tier 1 (AT1) capital
Cost share of core income Cost share of core income - incl. loan impairment charges
Loans and advances plus impairment account and discount hereon as % of deposits Loans and advances relative to shareholders’ equity
Spar Nord uses core earnings as a performance measure. From 2018, there is no difference between “Core earnings before impairment” in the core earnings format and “Profit/loss before loan impairment charges” in the IFRS financial statements, as there is no discount on commitments taken over. In the core earnings format, the recognised share of discount on commitments taken over was previously presented together with loan impairment charges, etc., whereas in the IFRS financial statements it was included in interest income. In previous years, other items in the core earnings format comprised contributions to sector-wide solutions and special merger-related items. Defined below are the additional key indicators shown on page 4 of the management commentary and in the other sections of the management commentary.
Profit/loss before tax in per cent of shareholders’ equity. The average equity is calculated as a simple average of the shareholders’ equity at the beginning of the year and at the end of the year. Profit/loss before tax and shareholders’ equity are calculated as if the additional tier 1 (AT1) capital were treated as a liability. Profit/loss after tax in per cent of shareholders’ equity. The average equity is calculated as a simple average of the shareholders’ equity at the beginning of the year and at the end of the year. Profit/loss after tax and shareholders’ equity are calculated as if the additional tier 1 (AT1) capital were treated as a liability. Total costs/core income. Total costs plus loan impairment charges etc./core income. Loans and advances plus impairment and discount as % of deposits
Bank and leasing loans relative to bank deposits
Loans and advances as % of equity Bank and leasing loans as a percentage of bank deposits
Bank and leasing loans relative to shareholders’ equity
Bank and leasing loans / shareholders’ equity
Spar Nord H1 2018
Performance indicators and financial ratios –
12
Group
Performance indicators and financial ratios – Group THE DANISH FSA’S LAYOUT AND RATIO SYSTEM 5-YEAR OVERVIEW
H1 2018
INCOME STATEMENT DKKm Net income from interest, fees, charges and commissions
H1 2017
Change in %
1,381 1,404
H1 2018
H1 2017
H1 2016
H1 2015
H1 2014
Full year 2017
-2 1,381 1,404 1,409 1,540 1,315 2,716
Market value adjustments
138 267 -48 138 267 138 374 284 381
Staff costs and administrative expenses
951 945
Loan impairment charges etc.
Income from investments in associates and group enterprises
Profit/loss
1 951 945 909 929 878 1,863
16 19 -12 16 19 162 188 194 -7
25 20 22 25 20 15 13 53 32 630 575
9 630 575 383 632 440 989
BALANCE SHEET
DKKm
Loans and advances
Equity
Total assets
45,678 42,407 8,960 8,565 83,561 79,595
8 45,678 42,407 38,531 34,413 36,935 46,747 5 8,960 8,565 7,799 7,618 6,855 8,975 5 83,561 79,595 77,476 77,832 77,933 80,367
In accordance with the accounting policies, the comparative figures have not been restated in connection with the implementation of IFRS 9 on financial instruments at 01.01.2018.
FINANCIAL RATIOS OWN FUNDS
Own funds ratio *)
18.9 16.9 18.9 16.9 16.8 16.3 16.9 18.2
Tier 1 capital ratio *)
16.0 14.8 16.0 14.8 14.7 14.2 14.7 16.0
EARNINGS
Return on equity before tax, %
Return on equity after tax, %
Income/cost ratio
1.72 1.72 1.72 1.72 1.42 1.62 1.44 1.65
Return on assets, %
0.8 0.7 0.8 0.7 0.5 0.8 0.6 1.2
8.1 8.4 8.1 8.4 6.0 10.1 7.6 14.2 7.1 6.7 7.1 6.7 4.9 8.6 6.6 11.2
MARKET RISK AND LIQUIDITY
Interest rate risk, %
Foreign-exchange position, %
1.3 3.9 1.3 3.9 3.0 3.8 2.4 3.3
Foreign-exchange risk, %
0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.1
Excess coverage relative to statutory liquidity requirement, %
323.0 321.3 323.0 321.3 283.1 268.0 230.2 326.4
Loans and advances as % of deposits
0.8 0.2 0.8 0.2 0.7 0.6 0.5 0.7
70.4 67.5 70.4 67.5 64.6 60.8 69.4 72.7
Loans and advances plus impairment as % of deposits
73.2 70.4 73.2 70.4 67.7 63.9 72.5 75.2
CREDIT RISK Loans and advances relative to equity
5.1 5.0 5.1 5.0 4.9 4.5 5.4 5.2
Increase in loans and advances for the period, %
3.5 3.6 3.5 3.6 3.3 -4.4 -1.9 6.2
Sum of large exposures, % **)
79.1 17.5 79.1 17.5 15.9 16.6 0.0 17.2
Impairment ratio for the period
0.0 0.0 0.0 0.0 0.3 0.4 0.4 0.0
THE SPAR NORD SHARE
DKK PER SHARE OF DKK 10
Profit/loss for the period
5.1 4.7 5.1 4.7 3.1 5.0 3.5 8.0
Net asset value (NAV)
66 63 66 63 60 58 55 66
Dividend
Share price/profit/loss for the period
13.3 18.1 13.3 18.1 17.4 14.8 17.1 9.0
Share price/NAV
1.0 1.3 1.0 1.3 0.9 1.3 1.1 1.1
- - - - - 2.0 - 3.5
*)
Own funds for H1 2017 is exclusive of recognition of profit/loss for the period.
**)
In 2018, financial ratios are calculated according to new rules.
In accordance with the accounting policies, the comparative figures have not been restated in connection with the implementation of IFRS 9 on financial instruments at 1 January 2018.
Spar Nord H1 2018
Management’s statement on the Interim Report
Management’s statement on the Interim Report
The Board of Directors and the Executive Board have today discussed and adopted the Interim Financial Statements of Spar Nord Bank for the period from 1 January to 30 June 2018.
EXECUTIVE BOARD
Lasse Nyby Chief Executive Officer
The Consolidated Interim Financial Statements are presented in accordance with IAS 34 “Interim Financial Reporting”, as adopted by the EU. Moreover, the Interim Financial Statements are presented in accordance with additional Danish disclosure requirements regarding interim financial statements of listed financial institutions. The interim financial statements are unaudited and have not been reviewed, but the external auditor has verified the profit. This verification included procedures consistent with the requirements relating to a review. Hence, it was ascertained that the conditions for ongoing recognition of the profit for the period in own funds were met. In our opinion, the Interim Financial Statements give a true and fair view of the Group’s and Parent Company’s financial position at 30 June 2018 and of the results of the Group’s and Parent Company’s operations and the Group’s cash flows for the period from 1 January to 30 June 2018. In addition, we consider the Management’s review to give a fair presentation of the development in the Group’s and Parent Company’s activities and financial affairs as well as a description of the significant risks and elements of uncertainty that may affect the Group or Parent Company.
John Lundsgaard Managing Director
Lars Møller Managing Director
BOARD OF DIRECTORS
Kjeld Johannesen Chairman of the Board of Directors
Per Nikolaj Bukh Deputy Chairman of the Board of Directors
Lene Aaen
Kaj Christiansen
Morten Bach Gaardboe
Laila Mortensen
Jannie Skovsen
Gitte Holmgaard Sørensen
Aalborg, 16 August 2018
John Sørensen
13
Spar Nord H1 2018
Income statement – Group
Income statement – Group NOTE
H1 2018 DKKm
H1 2017 DKKm
Q2 2018 DKKm
14
Q2 2017 DKKm
Full year 2017 DKKm
4.1
Interest income
4.2
Interest expenses
58 71 29 34 141
Net interest income
773 813 384 404 1,577
831 884 413 439 1,719
Dividends on shares, etc. 4.3
Fees, charges and commissions received
4.3
Fees, charges and commissions paid
45 18 39 15 23 640 638 309 314 1,265 77 65 36 35 149
Net income from interest, fees, charges and commissions 1,381 1,404
695
698 2,716
4.4 4.5
Market value adjustments
138 267
Other operating income
179 25 169 14 51
Staff costs and administrative expenses
951 945 493 486 1,863
Amortisation, depreciation and impairment of intangible assets and property, plant and equipment
30 28 15 14 61
Other operating expenses Income from investments in associates and group enterprises Profit/loss before loan impairment charges (core earnings before impairment)
25 107 381
4 5 2 2 13 25 20 15
7 32
739 739 395
323 1,244
6.2.1
Loan impairment charges etc.
16 19 39
1 -7
Profit/loss before tax
722 720 355 322 1,251
Tax
93 145
37
64 262
Profit/loss
630 575 319 258 989
APPROPRIATION:
The shareholders of the Parent Company Spar Nord Bank A/S Holders of additional tier 1 (AT1) capital instruments
Profit/loss
605 551 306 246 940 24 24 12 12 49 630 575 319 258 989
EARNINGS PER SHARE Earnings per share (DKK)
5.0 4.5 2.5 2.0 7.7
Diluted earnings per share (DKK)
5.0 4.5 2.5 2.0 7.7
STATEMENT OF COMPREHENSIVE INCOME Profit/loss for the period
630 575 319 258 989
Other comprehensive income Items that cannot be reclassified to the income statement: Net revaluation of domicile property
1 1 0 0 11
Other comprehensive income after tax
1 1 0 0 11
Total comprehensive income
Appropriation:
The shareholders of the Parent Company Spar Nord Bank A/S Holders of additional tier 1 (AT1) capital instruments
Total comprehensive income
630 576
319
259 1,000
606 552 307 247 951 24 24 12 12 49 630 576
319
259 1,000
Spar Nord H1 2018
Balance sheet – Group
Balance sheet – Group
30.06.18 DKKm
15
30.06.17 DKKm
Full year 2017 DKKm
ASSETS
NOTE
6.4
6.3
5.1
Cash balances and demand deposits with central banks 1,352 1,393 1,298 Due from credit institutions and central banks 2,185 2,366 1,437 Lending, banking and leasing activities 38,336 36,351 37,272 Lending, reverse repo transactions 7,342 6,056 9,475 Loans, advances and other receivables at amortised cost, total 45,678 42,407 46,747 Bonds at fair value 14,151 13,826 10,838 Shares, etc. 1,738 1,552 1,626 Investments in associates 64 111 128 Assets linked to pooled schemes 15,352 15,016 15,423 Intangible assets 180 189 184 Investment properties 135 135 135 Domicile property 527 526 487 Land and buildings, total 662 661 621 Other property, plant and equipment 125 106 119 Current tax assets 172 24 45 Temporary assets 9 27 21 Other assets 1,761 1,794 1,763 Prepayments and deferred income 135 125 115 Total assets 83,561 79,595 80,367
LIABILITIES PAYABLES 5.2
5.3
5.4
5.5 5.6 5.7
Due to credit institutions and central banks 3,624 2,821 1,964 Deposits and other payables 49,514 47,766 48,843 Deposits in pooled schemes 15,352 15,016 15,423 Other non-derivative financial liabilities at fair value 1,619 1,232 934 Other liabilities 2,675 2,908 2,866 Prepayments and deferred income 48 21 19 Total payables 72,832 69,765 70,049 PROVISIONS Provisions for deferred tax 139 108 136 Provision for losses on guarantees 74 41 41 Other provisions 34 27 21 Total provisions 247 176 199 SUBORDINATED DEBT Subordinated debt 1,522 1,089 1,144 Total liabilities 74,601 71,030 71,392 EQUITY Share capital 1,230 1,255 1,230 Revaluation reserves 94 92 94 Proposed dividend - - 431 Retained earnings 6,776 6,355 6,359 Equity 8,100 7,702 8,114 Holders of additional tier 1 (AT1) capital instruments 860 863 861 Total equity 8,960 8,565 8,975 Total equity and liabilities 83,561 79,595 80,367 OFF-BALANCE SHEET ITEMS Contingent assets 15 8 13 Contingent liabilities 12,095 12,304 11,961 Other binding commitments 567 501 501
Spar Nord H1 2018
Capital position – Group
Capital position – Group
16
The shareholders of the Parent Company Spar Nord Bank A/S
STATEMENT OF CHANGES IN EQUITY Share capital DKKm
Revaluation reserve DKKm
Statutory reserves DKKm
Proposed dividend DKKm
Retained earnings DKKm
Total DKKm
Additional tier 1 capital DKKm
Total DKKm
EQUITY AT 30.06.18
Equity at 31.12.17
1,230
Change in accounting policies, IFRS 9. See note 1.1
- - - - -195 -195 - -195
Equity at 01.01.18
1,230
94 94
0 0
431 431
6,359 6,164
8,114 7,919
861 861
8,975 8,780
Comprehensive income in 2018
Profit/loss for the period
- - 25 - 581 605 24 630
Other comprehensive income
- 0 - - 1 1 - 1
Net revaluation of properties
Other comprehensive income, total
- 0 - - 1 1 - 1
Total comprehensive income for the period
-
0
25
- 582 606
24 630
Transactions with owners
Interest paid on additional tier 1 (AT1) capital
- - - - - - -24 -24
Dividends paid
- - - -431 - -431 - -431
Dividends received, treasury shares
- - - - 0 0 - 0
Disposal upon acquisition of treasury shares and additional tier 1 (AT1) capital - - - - -165 -165 -1 -166
Addition upon sale of treasury shares and additional tier 1 (AT1) capital
- - - - 165 165 - 165
Revaluation reserves, associates
- - -23 - 23 0 - 0
Dividends received from associates recognised at net asset value
- - -2 - 2 0 - 0
Tax
- - - - 5 5 - 5
Total transactions with owners
-
-
-25 -431
30 -425
-25 -450
Equity at 30.06.18
1,230
94
0
0
6,776 8,100
860
8,960
The share capital consists of 123,002,526 shares with a nominal value of DKK 10.
EQUITY AT 30.06.17
Equity at 01.01.17
1,255
91
22
628
5,768
7,765
862
8,627
Comprehensive income in 2017
Profit/loss for the period
- - 20 - 531 551 24 575
Other comprehensive income
- 1 - - - 1 - 1
Net revaluation of properties
Other comprehensive income, total
- 1 - - - 1 - 1
Total comprehensive income for the period
-
1 20
- 531 552
24 576
Transactions with owners
Interest paid on additional tier 1 (AT1) capital
Dividends paid
- - - -628 -628 - -628
Dividends received, treasury shares
- - - - 13 13 - 13
Disposal upon acquisition of treasury shares and additional tier 1 (AT1) capital - - - - -258 -258 - -258
- - - - 0 -24 -24
Addition upon sale of treasury shares and additional tier 1 (AT1) capital
- - - - 253 253 1 254
Revaluation reserves, associates
- - -14 - 14 0 - 0
Dividends received from associates recognised at net asset value
- - -29 - 29 0 - 0
Tax Total transactions with owners
- - - - 5 5 - 5 -
- -42 -628
56 -614
-23 -638
Equity at 30.06.17 The share capital consists of 125,529,918 shares with a nominal value of DKK 10.
1,255
92
0
0
6,355
7,702
863
8,565
Spar Nord H1 2018
Capital position – Group
17
H1 2018
TREASURY SHARE PORTFOLIO
H1 2017
Number of shares
40,148 2,647,586
Percentage of share capital
0.0
Full year 2017 38,048
2.1
0.0
On 04.09.2017, the share capital was reduced by a nominal value of DKK 25,273,920 through the cancellation of 2,527,392 shares of the Bank’s treasury share portfolio. These shares were bought back under the Bank’s buyback programme for 2016. ADDITIONAL TIER 1 (AT1) CAPITAL
H1 2018 DKKm
Principal
Currency
Note DKKm
DKK
a
DKK
b
Maturity
H1 2017 DKKm
Full year 2017 DKKm
Interest rate
Received
400.0
6.052%
2015
Perpetual
400
400
411
450.0
5.500%
2016
Perpetual
460
463
450
860
863
861
Additional tier 1 (AT1) capital issued under CRR, total
a)
Issued on 10.06.2015, with an option of early redemption as from 10.06.2020. The loan carries interest at a rate of 6.052 % p.a. until 10.06.2020, after which date interest will be fixed at CIBOR6 + a 5.400 % margin.
b) Issued on 06.12.2016, with an option of early redemption as from 06.12.2021. The loan carries interest at a rate of 5.500 % p.a. until 06.12.2021, after which date interest will be fixed at CIBOR6 + a 5.166 % margin. If Spar Nord’s common equity tier 1 (CET1) ratio falls below 5 1/8%, the loans will be written down. The loans can be written up again based on the rules laid down in CRR. ADDITIONAL TIER 1 (AT1) CAPITAL, SPECIFICATION OF CASH FLOWS Cash flows, beginning of period
767
Movement during the period:
817
817
Change in portfolio of own bonds
-1
Interest paid
-24
-24
-49
-25
-23
-50
Total cash flows for the period
1
-1
Cash flows, end of period
742
794
767
OWN FUNDS
Equity
8,960 8,565 8,975
Phasing in of IFRS 9
185 - -
Result not recognised
- 575
Additional tier 1 (AT1) capital included in equity
860
Proposed dividend, excl. share re. share buyback programme
315
0
431
Intangible assets, incl. share recognised in investments in associates
148
192
188
Other primary deductions
48
40
Deductions, equity investments
379
Common equity tier 1 (CET1) capital
7,396
-
863
861
41
328
331
6,567
7,123
Additional tier 1 (AT1) capital *)
843
Other deductions
4
Tier 1 capital
8,235
843
843
41 7,369
41 7,924
Subordinated debt, excl. Additional Tier 1 (AT1) capital *)
1,507
Other deductions
10
Own funds
9,732
1,081
1,133
41 8,409
41 9,016
Weighted risk exposure amount, credit risk etc.
42,152
Weighted risk exposure amount, market risk
3,636
4,108
3,196
Weighted risk exposure amount, operational risk
5,705
5,692
5,692
Total risk exposure amount
51,493
39,873
49,672
40,658
49,546
Common equity tier 1 capital ratio
14.4
13.2
14.4
Tier 1 capital ratio
16.0
14.8
16.0
Own funds ratio
18.9
16.9
18.2
The capital adequacy calculation for H1 2017 is exclusive of recognition of profit/loss for the period. *) Including portfolio of own bonds As Spar Nord has adopted the transition rules according to CRD, any adverse impact of the IFRS 9 impairment rules will not take full effect on the capital base until after five years. Spar Nord has calculated the negative impact of IFRS 9 on own funds at DKK 10 million on entry into force of the rules at 01.01.2018.
Spar Nord H1 2018
Cash Flow Statement - Group
Cash Flow Statement - Group
NOTE
H1 2018 DKKm
18
H1 2017 DKKm
Full year 2017 DKKm
OPERATING ACTIVITIES Profit/loss before tax
Fair value changes, investment properties and temporary assets
722 720 1,251 0 0 0
30 28 61 Amortisation, depreciation and impairment of intangible assets and property, plant and equipment 0 -2 -1 Gains and losses on the sale of intangible assets and property, plant and equipment Gains and losses on sale of associates
Adjustment of loan impairment charges etc.
Provisions
12 -25 -31
Income from investments in associates and group enterprises
-25 -20 -32
13 28 275
Corporate income tax paid
-155 -146 -251
Operating activities, total
442 582 1,273
WORKING CAPITAL
Movement in credit institutions and central banks, net Movement in loans, advances and other receivables at amortised cost
5.4
-154 0 0
1,664 402 -456 841 -1,089 -5,677
Movement in bonds at fair value
Movement in equity portfolio
-111
Movement in other assets and other liabilities, net
505 -663 -965
Movement in deposits and other payables
671 1,302 2,379
Working capital, total
257 1,066 -689
Cash generated from operations, total
INVESTING ACTIVITIES
Acquisition of associates and group enterprises
Sale of associates and group enterprises
Acquisition of intangible assets
Acquisition of property, plant and equipment
Sale of property, plant and equipment
Dividends from associates and group enterprises
2 29 31
Investing activities, total
186 -7 0
FINANCING ACTIVITIES
Subordinated debt
Additional Tier 1 (AT1) capital recognised in equity (see specification in Capital position)
-3,313 1,110 4,099 5 -69
699 1,649 583
-3 -3 -14 244 2 5 0 0 -1 -63 -51 -94 6 17 72
378 -4 51 -25 -23 -50
Dividends paid, excluding dividends on treasury shares
-430 -615 -615
Acquisition of treasury shares
-165 -258 -454
Sale of treasury shares
165 253 457
Financing activities, total
-77 -647 -612
Movements in cash and cash equivalents for the period
Cash and cash equivalents, beginning of year
Movements in cash and cash equivalents for the period
Cash and cash equivalents, end of year
Cash and cash equivalents, end of period
Cash, cash equivalents and demand deposits with central banks
1,352 1,393 1,298
Due from credit institutions and central banks within less than 3 months
2,129 2,303 1,374
Total
3,480 3,696 2,672
808 995 -29 2,672 2,701 2,701 808 995 -29 3,480 3,696 2,672
Spar Nord H1 2018
Notes – Group
19
Notes – Group NOTE
1
ACCOUNTING POLICIES The interim report is presented in accordance with IAS 34, “Interim Financial Reporting”, as adopted by the EU, and additional Danish disclosure requirements for interim reports. The application of IAS 34 means that the presentation is limited relative to the presentation of an annual report and that the recognition and measurement principles of the International Financial Reporting Standards (IFRS) have been applied. Other than as set out below, the accounting policies are unchanged from those applied in Annual Report 2017. Annual Report 2017 contains the full description of the accounting policies. Figures in the interim report are presented in millions of Danish kroner, unless otherwise stated. Consequently, rounding differences may occur because grand totals are rounded and the underlying decimal places are not shown to the reader.
1.1
CHANGES IN ACCOUNTING POLICIES The following amendments to IFRS were implemented effective 1 January 2018: l IFRS 9 Financial instruments l IFRS 15 Revenue from Contracts with Customers Of these, only IFRS 9 has affected recognition and measurement in the interim report. Shown below is the impact in connection with the transition at 1 January 2018.
1.1.1
Impact of IFRS 9 IFRS 9 ”Financial Instruments”, which replaces IAS 39, changes the classification and related measurement of certain financial assets and liabilities and, to some extent, the rules on hedge accounting. The standard is effective for financial years beginning on or after 1 January 2018, from which date Spar Nord is going to implement it. In accordance with the transition requirements of IFRS 9, comparative figures are not restated as retrospective application of the impairment requirements is not possible without the use of hindsight. The accounting impact is shown below:
IAS 39 Amount 31.12.17 DKKm
Financial assets
Effect of changed measurement *) DKKm
IFRS 9 Amount 01.01.18 DKKm
Cash in hand and demand deposits with central banks
1,298
0 1,298
Due from credit institutions and central banks
1,437
-1 1,437
Lending, banking and leasing activities
Lending, reverse repo transactions
Loans, advances and other receivables at amortised cost, total
37,272 9,475 46,747
-216 37,056 0 9,475 -216 46,531
Non-financial assets
Current tax assets
Total assets
45 55 100 49,528
-162 49,367
Financial liabilities
Due to credit institutions and central banks
Deposits and other payables
Subordinated debt
1,964 48,843 1,144
0 1,964 0 48,843 0 1,144
Non-financial liabilities
Provisions for losses on guarantees
Other provisions (provision for undrawn maximum)
Total liabilities
41 27 68 15 7 21 52,007
33 52,041
One-off effect which is recognised in shareholders’ equity at 01.01.18
-195
Off-balance sheet items
Guarantees
11,961
Undrawn maximum and loan commitments
20,802
-7 20,795
Total
32,763
-33 32,730
-27 11,934
*) Recognised in retained earnings in shareholders’ equity at 01.01.18. As shown, the changed method for determining credit losses is estimated to result in an increase of the Bank’s impairment losses and provisions at 01.01.18 of DKK 250 million. Reduced by the tax impact of 22 per cent, this equals a one-off effect of DKK -195 million, or a reduction in shareholders’ equity of 2.4% The effect after tax has been recognised as a reduction of shareholders’ equity at 01.01.18.
Spar Nord H1 2018
Notes – Group
20
General provisions in IFRS 9 on classification and measurement In accordance with IFRS 9, a more logical approach to classification and measurement of financial assets is introduced, driven by Spar Nord’s business model and the underlying contractual cash flows related to the characteristics of the financial assets: l Amortised cost l Fair value through other comprehensive income (FVOCI) l Fair value through profit or loss (FVPL) Subsequent to initial recognition, financial assets held with the objective of collecting contractual cash flows, and where the contractual cash flows are solely payments of principal and interest on the principal amount outstanding, are measured at amortised cost. Spar Nord’s loans and advances at amortised cost and receivables from credit institutions are part of this classification. Subsequent to initial recognition, financial assets held within a combined business model where some financial assets are held with the objective of collecting contractual cash flows and other financial assets are held with the objective of selling before expiry, and where the contractual cash flows from the financial assets in the combined business model are solely payments of principal and interest on the principal amount outstanding, are measured at fair value through other comprehensive income. When the financial asset is derecognised in the balance sheet, the cumulative gains and losses recognised in other comprehensive income are reclassified to the income statement. Subsequent to initial recognition, financial assets that do not meet the above-mentioned business model criteria, or where the contractual cash flows are not solely payments of principal and interest on the principal amount outstanding, are measured at fair value through profit or loss. This residual category includes financial assets held for trading. The use of the IFRS 9 measurement categories for financial assets on the basis of the business model and on the basis of the contractual cash flows characteristics has led to insignificant changes in measurement principles relative to those applied in Spar Nord’s 2017 Annual Report. The principles applicable to financial liabilities are largely unchanged from IAS 39. Generally, financial liabilities are still measured at amortised cost with bifurcation of embedded derivatives not closely related to a host contract. Financial liabilities recognised at fair value consist of derivatives and the trading book. Impairment model IFRS 9 introduces a new model for impairment of certain financial assets, stipulating that impairments must be recognised for expected credit losses for all financial assets recognised at amortised cost or at fair value through other comprehensive income, lease receivables and certain loan commitments and financial guarantees. For financial assets recognised at amortised cost, the impairment for expected credit losses is recognised in the income statement and set off against the asset in the balance sheet. However, on loan commitments and financial guarantee contracts impairments are recognised as a liability. The above impairment model implies that impairment losses must be recognised on all Spar Nord’s credit exposures measured at amortised cost based on statistically expected credit losses (“expected loss” model). Based on the previous rules, impairment losses were not recognised until there was objective evidence of impairment (“incurred loss” model). In addition, forward-looking information will be taken into consideration. Under the new expected loss model, on initial recognition of a financial asset, a loss allowance will be recognised in an amount equivalent to the 12-month expected credit losses (stage 1). If, on measurement subsequent to initial recognition, the credit risk increases significantly, a loss allowance will be recognised in an amount equivalent to the lifetime expected credit losses of the asset (stage 2). Where it is established that the asset is credit-impaired (stage 3), a loss allowance will be recognised in an amount equivalent to the lifetime expected credit losses of the asset, while revenue will be recognised in the income statement using the effective interest method relative to the recognised impairment loss.. The classification into stages and the calculation of expected credit losses are largely based on Spar Nord’s rating models. The expected credit loss is measured for each facility. Newly developed impairment models support the calculation of expected credit losses based on loss ratios and the concepts of PD (Probability-of-Default), LGD (Loss-Given-Default) and EAD (Exposure-at-Default). The calculation of the expected credit losses on exposures in stages 1 and 2 is based on a model calculation, whereas the calculation in respect of exposures from the weak part of stage 2 as well as stage 3 exposures is made as a combination of an individual assessment and a modal calculation. For the above exposures exceeding DKK 250,000, the Bank performs an individual assessment of the expected credit losses and the pertaining probabilities. For facilities below DKK 250,000, model-based calculations will be used.. The model calculation is based on the Bank’s model, which has been part of the basis for Spar Nord’s credit control for a number of years, supplemented by a macro-economic module, which adjusts the calculated PD values. A smaller, delimited portfolio is classified as being exposed to low credit risk. Exposures to these counterparties are maintained in stage 1.
Spar Nord H1 2018
Notes – Group
21
On transition from stage 1 to stage 2, a substantial increase in the credit risk is defined as follows: The credit risk is assessed based on the development in the customers’ PD level. Accordingly, the credit risk has increased significantly subsequent to initial recognition in the following situations: l A 100% increase in the PD for the expected remaining life of the financial asset and a 0.5 % point increase in the 12-month PD where the 12-month PD was below 1% on initial recognition. l A 100% increase in the PD for the expected remaining life of the financial asset or a 2.0% point increase in the 12-month PD where the 12-month PD was 1% or higher on initial recognition. l The credit quality department oversees changes in the credit quality of exposures and undertakes systematic credit quality control of the credit portfolio. A “weak list” for high-risk customers is used for credit control purposes. If a customer is marked “weak”, the customer’s PD will be re-calculated. l If a financial asset has been in arrears for more than 30 days, the credit risk will be considered to have increased significantly as well. Exposures with customers whose ability to pay shows considerable signs of weakness will be categorised as the weak part of stage 2. Generally, a customer's ability to pay in this category shows a PD that exceeds 5.0 per cent. The prospective information which is part of the calculation of expected losses is based on macroeconomic forecasts. The model is structured around a number of regression models determining the historical correlation between default and a number of explanatory macroeconomic variables such as unemployment, GDP, house price trends, industry indices, etc. Stress scenarios are used as the underlying basis for calculating the weighed expected losses. Macroeconomic scenarios are created: worst case, base case, best case, including an assessment of the probability for each scenario. The scenarios are approved by the Credit Committee with the involvement of specialists. An exposure to a counterparty is considered to have defaulted if l The counterparty’s exposures are credit-impaired, and the counterparty is not considered to be able to settle its credit liabilities as agreed. l The counterparty's liabilities have been put on hold, or significantly relaxed terms have been granted with respect to interest rate, repayment profile or respite l The counterparty’s exposure has for a long period of time (90 days) been in arrears or overdrawn and the amount concerned is considered to be significant. The lifetime expected credit losses cover the expected remaining lifetime of the facility. For most facilities, the expected lifetime is limited to the remaining contractual maturity, however, capped at five years. For facilities comprising both a loan and an undrawn loan commitment, Spar Nord’s exposure to credit losses is not limited to the contractual notice period. For such facilities, the expected lifetime is assumed to be the period during which Spar Nord expects to be exposed to credit losses. For facilities, for which the expected lifetime is longer than the remaining contractual maturity, an expected maturity of one year has been applied. This includes for example credit cards and overdraft facilities. All impairments will be allocated to individual impairments and Spar Nord will cease to recognise collective impairments under IFRS 9. Existing collective impairments aimed at capturing specific high-risk areas are incorporated as forward-looking elements and used in the expected credit losses of the individual exposures. Hedge accounting The new rules on hedge accounting widen the scope for hedge accounting in order to align business entities’ financial reporting with its actual risk management. As Spar Nord has not adopted the changed rules on hedge accounting, they do not affect Spar Nord’s financial reporting. Capital phasing in As Spar Nord has decided to adopt the transition rules according to CRD, any adverse impact of the IFRS 9 impairment rules will not take full effect on the capital base until after five years. The impact of IFRS 9 on Spar Nord’s own funds was DKK 10 million when the rules became effective on 1 January 2018, while the impact on the own funds going forward will be slightly adverse as the transition rules are being phased out.
Spar Nord H1 2018
NOTE
Notes – Group
22
1.1.2
Impact of IFRS 15 IFRS 15 Revenue from Contracts with Customers replaces existing revenue standards (IAS 11 and 18) and relevant interpretations. IFRS 15 introduces a new model for recognition and measurement of revenue concerning sales contracts with customers. The new model comprises five steps that must be applied to all contracts with customers to determine when and how revenue is to be recognised in the income statement. The standard does not change the recognition and measurement of Spar Nord’s sales contracts with customers and will therefore not have any impact.
1.2
Information about standards not yet effective IFRS 16 – Leasing IFRS 16 Leasing, which is approved by the EU, is effective for financial years beginning on or after 1 January 2019. The standard changes the accounting for those leases which are today treated as operating leases. The analysis of the implications of the new standard for Spar Nord has still not been completed. At 30.06.2018, Spar Nord had operating leases with minimum lease liabilities corresponding to maximum 1.0% of the balance sheet total, which are to be recognised in the balance sheet going forward.
2
JUDGMENTS AND ESTIMATES Measuring certain assets and liabilities requires Management to make an estimate of how future events will affect the value of such assets and liabilities. Estimates considered material in presenting the financial statements are, among other things, those made when determining loan impairments, the fair values of unlisted financial instruments as well as provisions. The applied estimates are based on assumptions deemed reasonable by Management but which are inherently uncertain. In the presentation of the condensed Interim Financial Statements, the critical judgments made by Management in the application of the Group’s accounting policies, and the considerable uncertainty related thereto, are identical to those applying to the presentation of the Financial Statements at 31 December 2017. However, there have been changes to financial assets and financial liabilities due to the transition to IAS 39 and IFRS 9. See note 1. Significant estimates related to classification and measurement of financial assets, including in particular Spar Nord’s bond portfolio and shares in sector-related companies, concern the use of the fair value option. In accordance with both IAS 39 and IFRS 9, Spar Nord applies the fair value option concerning shares and bonds, where returns are managed and reported consistently for all bonds on a daily, weekly and monthly basis irrespective of trading volume in the individual ISIN codes. Spar Nord’s business model has not been changed, and Spar Nord continues to recognise and measure bonds and shares at fair value through profit or loss.
Spar Nord H1 2018
NOTE
3 3.1
Notes – Group
23
Segment information BUSINESS SEGMENTS H1 2018
Trading, Spar Nord’s Financial Markets Local Banks & the Int. division
DKKm
Other Areas
Core earnings *) and Group
INCOME STATEMENT Net interest income
705 23 45 773
Net fee income
564
Market value adjustments and dividends
Other operating income
Income from investments in associates and group enterprises
Core income/revenue, total
Operating expenses, depreciation and amortisation
787 35 163 985
Core earnings before impairment
665 -15 88 739
Loan impairment charges etc.
Profit/loss before tax
*)
0 -1 563
171 -4 16 183 12
1 166 179
0 0 25 25 1,452
20 251 1,723
16 1 -1 16 649 -16 89 722
The core earnings column corresponds to the Group figures in the Management’s review.
Trading, Spar Nord’s Financial Markets Local Banks & the Int. division
BALANCE SHEET Loans, advances and other receivables at amortised cost Investments in associates and group enterprises Intangible assets and property, plant and equipment *)
Other Areas
38,184 7,481
Group, total
13 45,678
0 0 64 64 249 0 718 967
Other assets **)
16,797 18,673 1,382 36,852
Allocated assets, total
55,230 26,154 2,177 83,561
Deposits and other payables
48,593
380
541 49,514
Equity (allocated capital)
Other liabilities
15,833 5,830 3,424 25,087
Allocated equity and liabilities, total
69,885 7,177 6,499 83,561
5,459
967 2,534 8,960
Disclosures – income/revenue, total Internal income/revenue
Internal income and eliminations, offset against costs Income/revenue, external customers Income/revenue, total
-79 35 313 269 0 -23 -246 -269 1,531
8 184 1,723
1,452
20 251 1,723
Financial ratios
Return on equity, % ***)
24.5 -3.5
-
-
Cost share of core income
0.54 1.73
-
-
Total risk exposure, end of period
41,991 7,435 2,067 51,493
Number of employees (full-time equivalents, end of period)
1,030
74 423 1,527
As in previous years, the Group uses core earnings as a performance measure. The reporting segments correspond to the Group’s organisational entities, and an internal follow-up is carried out in this regard. DESCRIPTION OF BUSINESS AREA ACTIVITIES: - For a description of the activities of Spar Nord’s Local Banks and Trading, Financial Markets & the International Division, please see page 57 of Annual Report 2017. - The activities of the Local Banks include the Group’s leasing activities, and the activities of Other areas include central staffs and support functions. Intra-group settlement is determined based on the same principles as in previous years and expresses contributions to earnings from the activities carried out by the respective business areas. Internal management takes place based on a net-interest consideration, and accordingly interest income and expenses are not disclosed. *) All assets are located in Denmark. **) Temporary assets amount to DKK 9 million, of which DKK 1 million relates to the Group’s leasing activities and DKK 8 million relates to Other areas. ***) The rate of return on equity per annum has been calculated on allocated capital, which amounts to 13% of the average total risk exposure amount.
Spar Nord H1 2018
Notes – Group
24
Segment information
NOTE 3.2
BUSINESS SEGMENTS H1 2017 DKKm
Trading, Spar Nord’s Financial Markets Local Banks & the Int. division
Other Areas
Core earnings*)
Reclassifications**)
Group, total
INCOME STATEMENT Net interest income
732 20 33 785 28 813
Net fee income
571 0 2 573 0 573
Market value adjustments and dividends
83 151 51 285
Other operating income
10 1 14 25 0 25
Income from investments in associates and group enterprises Core income/revenue, total
0 285
0 0 20 20 0 20 1,397
172 120 1,688
28 1,716
Operating expenses, depreciation and amortisation
798 29 150 977
Core earnings before impairment
599 143 -30 711 28 739
Loan impairment charges etc. Profit/loss before tax
*) **)
0 977
-8 0 -1 -9 28 19 607 143 -29 720
0 720
The core earnings column corresponds to the Group figures in the Management’s review. The relation to the Group is specified in the column Reclassifications. Reclassifications have impacted the items Net interest income and Loan impairment charges etc. in the amount of DKK 28 million. Trading, Spar Nord’s Financial Markets Local Banks & the Int. division
BALANCE SHEET Loans, advances and other receivables at amortised cost Investments in associates and group enterprises Intangible assets and property, plant and equipment *)
Other Areas
36,181 6,077
Group, total
148 42,407
0 0 111 111 257
0 698 955
Other assets **)
16,424 18,331 1,368 36,123
Allocated assets, total
52,862 24,408 2,325 79,595
Deposits and other payables
46,757
495
514 47,766
Equity (allocated capital)
Other liabilities
15,397 4,578 3,289 23,264
Allocated equity and liabilities, total
66,950 5,743 6,902 79,595
4,797 670 3,099 8,565
Disclosures – income/revenue, total Internal income/revenue
-65 35 298 269
Internal income and eliminations, offset against costs
0 -26 -243 -269
Income/revenue, external customers
1,462 162 92 1,716
Income/revenue, total
1,397 172 148 1,716
Financial ratios
Return on equity, % ***)
26.3 45.6
-
-
Cost share of core income
0.57 0.17
-
-
Total risk exposure, end of period Number of employees (full-time equivalents, end of period)
39,971 7,374 2,327 49,672 1,067
74 414 1,555
As in previous years, the Group uses core earnings as a performance measure. The reporting segments correspond to the Group’s organisational entities, and an internal follow-up is carried out in this regard. DESCRIPTION OF BUSINESS AREA ACTIVITIES: - For a description of the activities of Spar Nord’s Local Banks and Trading, Financial Markets & the International Division, please see page 57 of Annual Report 2017. - The activities of the Local Banks include the Group’s leasing activities, and the activities of Other areas include central staffs and support functions. Intra-group settlement is determined based on the same principles as in previous years and expresses contributions to earnings from the activities carried out by the respective business areas. Internal management takes place based on a net-interest consideration, and accordingly interest income and expenses are not disclosed. *) **)
All assets are located in Denmark. Temporary assets amount to DKK 27 million, of which DKK 13 million relates to the Group’s leasing activities and DKK 14 million relates to Other areas. ***) The rate of return on equity per annum has been calculated on allocated capital, which amounts to 12% of the average total risk exposure amount.
Spar Nord H1 2018
NOTE
4
4.1
Notes – Group
Notes to the Income Statement
H1 2018 DKKm
25
H1 2017 DKKm
Full year 2017 DKKm
INTEREST INCOME Due from credit institutions and central banks
Loans, advances and other receivables
2 1 3
Bonds
Foreign-exchange contracts
Interest-rate contracts
-23 -30 -59
Derivative financial instruments, total
-20 -28 -56
Other interest income
Total interest income after offsetting negative interest income
Negative interest income offset against interest income
18 12 30
Negative interest expenses offset against interest expenses
10 8 15
Total interest income before offsetting negative interest income
Of which, income from genuine reverse repo transactions booked under
Due from credit institutions and central banks
Loans, advances and other receivables
785 821 1,611 36 42 84 4 2 3
0 28 31 804 864 1,674
831 884 1,719
-3 -5 -9 -14 -7 -20
Negative interest income amounts to DKK 18 million (30.06.2017: DKK 12 million, 2017: DKK 30 million) and relates to repo transactions. In the table above, negative interest income is offset against interest income. In the income statement, negative interest income is presented as interest expenses, and negative interest expenses are presented as interest income. 4.2
INTEREST EXPENSES
Credit institutions and central banks
Deposits and other payables
12 25 47
Subordinated debt
18 26 52
Other interest expenses
Total interest expenses after offsetting negative interest expenses
30 51 97
Negative interest expenses offset against interest expenses
10 8 15
Negative interest income offset against interest income
18 12 30
Total interest expenses before offsetting negative interest expenses
58 71 141
-1 -1 -3
1 1 1
Of which, interest expenses from genuine repo transactions booked under
Due to credit institutions and central banks
-5 -4 -8
Negative interest expenses amount to DKK 10 million (30.06.2017: DKK 8 million, 2017: DKK 15 million) and relate partly to deposits, partly to repo transac tions. In the table above, negative interest expenses are offset against interest expenses. In the income statement, negative interest expenses are presented as interest income, and negative interest income is presented as interest expenses. 4.3
FEES, CHARGES AND COMMISSIONS RECEIVED Securities trading and custody accounts
Payment services
83 76 166
Loan transaction fees
256 238 493
198 187 380
of which mortgage credit institutions
Guarantee commission
Other fees, charges and commissions
Total fees, charges and commissions received
Total fees, charges and commissions paid
Total net fees, charges and commissions received
208 215 439
13 15 30 81 94 138 640 638 1,265 77 65 149 563 573 1,116
4.4
MARKET VALUE ADJUSTMENTS
Other loans, advances and receivables at fair value
Bonds
-7 43 91
Shares, etc.
131 115 165
Foreign currency
27 16 36
Foreign exchange, interest, share, commodity and other contracts and derivative financial instruments
Assets linked to pooled schemes
-228 503 566
Deposits in pooled schemes
228 -503 -566
Total
138 267 381
-2 0 0
-11 93 89
Spar Nord H1 2018
Notes – Group
H1 2018 DKKm
NOTE
4.5
26
H1 2017 DKKm
Full year 2017 DKKm
STAFF COSTS AND ADMINISTRATIVE EXPENSES Staff costs
589 603 1,165
Administrative expenses
362 342 698
Total
951
Staff costs:
Salaries
Pensions
51 53 106
Social security costs
67 68 129
Total
945 1,863
471 481 930
589 603 1,165
Remuneration to members of the Executive Board and Board of Directors amounts to: Board of Directors Number
Fixed pay
Pension
Total remuneration
Executive Board
Number
Base salary *)
6.0 5.7 11.4
– less fees received from directorships
0.5 0.4 1.5
The Bank’s expense, base salary
5.5 5.3 9.9
9 9 9 1.9 1.6 3.5 - - 1.9 1.6 3.5
3 3 3
Pension, ordinary contribution
0.9 0.7 1.7
Total remuneration earned and paid
6.4 6.0 11.6
Breakdown of remuneration to Executive Board
Lasse Nyby
Base salary*)
2.2 2.1 4.2
– less fees received from directorships
0.2 0.1 0.5
The Bank’s expense, base salary
2.1 2.0 3.7
Pension, ordinary contribution
0.3 0.3 0.6
Total remuneration earned and paid
2.4 2.3 4.3
John Lundsgaard
Base salary
1.9 1.8 3.6
– less fees received from directorships
0.1 0.1 0.4
The Bank’s expense, base salary
1.8 1.7 3.2
Pension, ordinary contribution
0.3 0.2 0.5
Total remuneration earned and paid
2.1 1.9 3.7
Lars Møller
Base salary*)
1.9 1.8 3.6
– less fees received from directorships
0.2 0.2 0.6
The Bank’s expense, base salary
1.7 1.6 3.0
Pension, ordinary contribution
0.3 0.2 0.5
Total remuneration earned and paid
2.0 1.8 3.5
*)
The amount includes the value of a company car etc.
The members of the Executive Board receive no variable pay. Members of the Executive Board receive remuneration for their Group executive board duties based on the management agreement with the subsidiary. Termination rules The members of the Executive Board have a term of notice of 12 months and will receive compensation on termination of employment corresponding to two years’ pay. Pension obligation Like the other employees, members of the Executive Board are comprised by defined contribution pension plans. Number of employees: The average number of employees converted into full-time equivalents 1,524 1,538 1,546
Spar Nord H1 2018
Notes – Group
NOTE 4.5
H1 2018 DKKm
STAFF COSTS AND ADMINISTRATIVE EXPENSES, CONTINUED
27
H1 2017 DKKm
Full year 2017 DKKm
Administrative expenses:
5
IT expenses
203
Marketing costs
51
55
111
Cost of premises
40
48
99
Staff and travelling expenses
27
26
56
Office expenses
11
12
21
Other administrative expenses
31
34
57
Total
362
Notes to the balance sheet
167
342
354
698
5.1
OTHER ASSETS
Positive fair value of derivative instruments, etc.
922
1,056
1,030
Miscellaneous receivables
296
150
296
Interest and commissions receivable
45
205
51
Capital contribution to Bankernes EDB Central a.m.b.a.
445
316
316
Other assets
53
Total
1,761
67 1,794
70 1,763
5.2
DEPOSITS AND OTHER PAYABLES
Demand deposits
44,113
Subject to notice
1,735
1,548
Time deposits
377
1,169
Special types of deposits
3,289
Total
49,514
41,392
3,657 47,766
43,132 1,456 896 3,359 48,843
5.3
OTHER LIABILITIES
Miscellaneous payables
1,708
Negative fair value of derivative financial instruments, etc.
627
Interest and commissions payable
22
46
Other liabilities
318
311
Total
2,675
1,873 679
2,908
1,799 691 12 365 2,866
5.4
SUBORDINATED DEBT
Currency
Principal Note DKKm Interest rate
DKK
a
400
SEK
b
600
Floating
2017 18.10.27
426
DKK
c
700
Floating
2013 18.12.23
DKK
d
400
2012
2.535 %
6.043 %
Received 2018
Supplementary capital contributions, total
Maturity 19.06.28
-
400 -
-
-
452
700
699
699
-
402
1,525
1,100
1,151
Portfolio of own bonds relating to subordinated debt
-3
Subordinated debt, total
-11
-7
1,522 1,089 1,144
Interest on subordinated debt
18
Costs of raising subordinated debt
1
25 1
50 2
a The loan is redeemable as from 19.06.2023. If the loan is not redeemed, interest will remain fixed at CIBOR3 + a 2.100% margin. b Redeemable as from 18.10.2022. If the loan is not redeemed, interest will remain fixed at STIBOR3 + a 2.500 % margin. c
Redeemable as from 18.12.2018. If the loan is not redeemed, interest will remain fixed at CIBOR3 + a 3.900 % margin.
d
Redeemed at 28.11.2017
Subordinated debt, specification of cash flows Beginning of period Movement during the period:
1,144
1,093
1,093
New loans
400
-
Redeemed
-
-
Change in exchange rate adjustments
-26
-
-12
Change in interest rate hedging
0
-2
-4
Change in amortised costs
1
1
-1
Change in portfolio of own bonds
4
-3
378
-4
Total cash flows for the period
466 -400
1 51
Carrying amount, end of period
1,522
1,089
1,144
Spar Nord H1 2018
Notes – Group
28
NOTE 5.5
CONTINGENT ASSETS Deferred tax assets not recognised in the balance sheet amounted to DKK 15 million at 30.06.2018 (30.06.2017: DKK 8 million, 2017: DKK 13 million).
5.6
CONTINGENT LIABILITIES The Bank and all major wholly-owned subsidiaries are jointly registered for payroll tax and VAT and are jointly and severally liable for the payroll tax and VAT payable.
H1 2018 DKKm
H1 2017 DKKm
Full year 2017 DKKm
Financial guarantees
4,604
4,563
4,092
Loss guarantees for mortgage loans
5,158
4,817
4,983
Registration and refinancing guarantees
1,500
1,928
2,011
Other contingent liabilities
834
Total
12,095
996
876
12,304
11,961
Reference is made to note 4.5 regarding the Executive Board’s notice of termination and the associated compensation. In addition, the Spar Nord Group has contingent liabilities and other binding agreements corresponding to the relative ownership interest in associates. Spar Nord is taxed jointly with its Danish subsidiary in the Spar Nord Group. As management company, Spar Nord has unlimited, joint and several liability together with the other jointly taxed companies for the Danish corporate income tax payable. Due to the payment of tax on account, no tax was payable at 30.06.2018 and 30.06.2017. The corporate income tax receivable within the group of jointly taxed companies amounted to DKK 172 million at 30.06.2018 (30.06.2017: DKK 24 million; 2017: DKK 45 million). Any adjustments to the taxable income subject to joint taxation might entail an increase in the Parent Company’s liability. Spar Nord has made provisions for a deferred tax liability in respect of recaptured losses related to international joint taxation. The Bank participates in the national restructuring and resolution scheme, with separate contributions being paid to the Guarantee Fund and the Resolution Fund. For both funds, separate target levels have been set, based on the sector’s total deposits that are covered by the guarantee limit of EUR 100,000 (section 9(1) of the Act on a Depositor and Investor Guarantee Scheme). The Guarantee Fund covers customers’ deposits and securities pursuant to the Act on a Depositor and Investor Guarantee Scheme. The Bank’s costs for the Guarantee Fund are calculated based on the Bank’s pro-rata share. In future, the amount of the contribution will be adjusted by an individual risk factor. The Resolution Fund is to be used pursuant to the Act on Restructuring and Resolution of Certain Financial Enterprises for the purpose of covering the associated costs. The Bank’s costs for the Resolution Fund are calculated based on the Bank’s pro-rata share of the sector’s total equity and liabilities less own funds and covered deposits. This contribution will also be adjusted by an individually determined risk factor. The Bank’s costs for the Resolution Fund for 2018 have been included as a pro-rata share of the annual contributions. The Bank’s costs for the Resolution Fund at 30.06.2018 amounted to DKK 4 million (30.06.2017: DKK 4 million, 2017: DKK 8 million.). The amount of the contingent liabilities and the possible due dates are subject to uncertainty.
5.7
Other binding commitments
H1 2018 DKKm
H1 2017 DKKm
Full year 2017 DKKm
Miscellaneous
567
501
501
Total
567
501
501
Miscellaneous is composed of: Lease obligations, with the Group as lessee *) Spar Nord is the lessee in a number of operating leases. Under such leases, Spar Nord has the right of use of an asset for a specific period of time against lease payments without assuming the significant risks and rewards of ownership of the asset. The leases concern the lease of properties and operating equipment. The leases are not recognised in the balance sheet. The leases represent an amount of DKK 115 million until the legal notice of termination. Data-processing centre Spar Nord has entered into an agreement with BEC a.m.b.a. regarding the provision of IT services. Spar Nord’s membership of BEC a.m.b.a. means that in case of termination of the Bank’s membership, it is liable to pay an exit fee. In addition, a capital contribution to BEC a.m.b.a. has been recognised under Other assets. The Spar Nord Group has no other significant binding agreements. *)
According to the most recent annual report.
Spar Nord H1 2018
NOTE
6
6.1 6.1.1
Notes – Group
29
Credit risk IMPAIRMENTS – TRANSITION FROM IAS 39 TO IFRS 9 IMPAIRMENTS – TRANSITION FROM IAS 39 TO IFRS 9 BY EXPOSURE CATEGORY Individual impairments 31.12.17 DKKm
Collective impairments 31.12.17 DKKm
Change IAS 39 to IFRS 9 01.01.18 DKKm
Total 31.12.17 DKKm
Total 01.01.18 DKKm
Loans and advances at amortised cost
1,323
Due from credit institutions and central banks
0 0 0 1 1
Guarantees
41 0 41 27 68
Undrawn maximum and loan commitments
15 0 15
Total
1,379
251 1,575
251 1,631
216 1,791
7 21
250 1,881
The increase in impairments from IAS 39 to IFRS 9 is explained by the fact that impairments under IFRS 9 must be recognised on all Spar Nord’s credit exposures measured at amortised cost based on statistically expected credit losses (“expected loss” model). Based on the previous rules under IAS 39, impairment losses were not recognised until there was objective evidence of impairment (“incurred loss” model). In future, forward-looking information will be taken into consideration.
6.1.2
6.1.3
Stage 1 Lack of significant increase in credit risk 01.01.18 DKKm
IMPAIRMENTS AT 01.01.18 UNDER IFRS 9 BY STAGES
Stage 3 Credit impaired 01.01.18 DKKm
Total 01.01.18 DKKm
Loans and advances at amortised cost
79 279 1,433 1,791
Due from credit institutions and central banks
1 0 0 1
Guarantees
13 7 48 68
Undrawn maximum and loan commitments
4 5 12 21
Total
96
EXPOSURES BEFORE IMPAIRMENTS AT 01.01.18 UNDER IFRS 9 BY STAGES
6.2 6.2.1
Stage 2 Significant increase in credit risk 01.01.18 DKKm
Stage 1 Lack of significant increase in credit risk 01.01.18 DKKm
291 1,494 1,881
Stage 2 Significant increase in credit risk 01.01.18 DKKm
Stage 3 Credit impaired 01.01.18 DKKm
Total 01.01.18 DKKm
Loans and advances at amortised cost
35,592
Due from credit institutions and central banks
1,437 0 0 1,437
Guarantees
10,978
763
261 12,002
Undrawn maximum and loan commitments
19,472
1,159
171 20,802
Total
67,479 11,590 3,510 82,579
EXPOSURES AT 30.06.18 SUMMARY OF ACCOUNTING VALUE OF EXPOSURES AND RECOGNISED IMPAIRMENTS ETC.
9,667
Exposure before impairments, see 6.2.3 DKKm
3,078 48,337
Impairments, see 6.2.2 DKKm
Recognised impairments DKKm
Loans and advances at amortised cost (note 6.3)
47,467
Due from credit institutions and central banks (note 6.4)
2,185
Guarantees (note 6.5)
12,169
74
6
Drawn maximum and loan commitments (note 6.3)
22,200
30
8
Total
84,021
1,894
16
1,790
3
1
0
Recognised impairments etc. are specified in notes 6.3, 6.4.1 and 6.5. 6.2.2
Stage 1 Lack of significant increase in credit risk 30.06.18 DKKm
IMPAIRMENTS AT 30.06.18 BY STAGES
Stage 2 Significant increase in credit risk 30.06.18 DKKm
Stage 3 Creditimpaired 30.06.18 DKKm
Total 30.06.18 DKKm
Loans and advances at amortised cost
87 263 1,440 1,790
Due from credit institutions and central banks
1 0 0 1
Guarantees
13 5 55 74
Undrawn maximum and loan commitments
4 3 22 30
Total
105 271 1,518 1,894
Spar Nord H1 2018
NOTE
6.2.3
Notes – Group
EXPOSURES BEFORE IMPAIRMENTS AT 30.06.18 BY STAGES
Stage 1 Lack of significant increase in credit risk 30.06.18 DKKm
30
Stage 2 Significant increase in credit risk 30.06.18 DKKm
Stage 3 Creditimpaired 30.06.18 DKKm
Total 30.06.18 DKKm
Loans and advances at amortised cost
33,777 10,509
Due from credit institutions and central banks
2,185 0 0 2,185
Guarantees
11,324
516
329 12,169
Undrawn maximum and loan commitments
20,229
1,820
151 22,200
Total
67,515 12,845 3,661 84,021
3,181 47,467
Spar Nord does not have the categories “Financial assets at fair value through other comprehensive income” and “Loans at fair value through profit or loss”.
6.3
LOANS AT AMORTISED COST AND UNDRAWN MAXIMUM AND LOAN COMMITMENT IMPAIRMENTS AND PROVISIONS FOR LOSSES Analysis of changes in impairments for the period broken down by stages and correlated to recognised impairments, etc. Summary of combined recognised impairments, etc. is provided in note 6.2.1.
Stage 1 Lack of significant increase in credit risk 30.06.18 DKKm
Stage 2 Significant increase in credit risk 30.06.18 DKKm
Stage 3 Creditimpaired 30.06.18 DKKm
Total 30.06.18 DKKm
Recognised impairments DKKm
Impairments at 01.01.18 under IFRS 9, loans at amortised cost
79 279 1,433 1,791
Impairments at 01.01.18 under IFRS 9, undrawn maximum and loan commitment
4 5 12 21 -
-
Impairments re. new exposures during the year, including new accounts to existing customers 13 21 45 79 79 Reversed impairments re. repaid accounts
-6 -16 -55 -77 -77
Change in impairments at 1 January, transfer to/from stage 1
90 -53 -37
-
-
Change in impairments at 1 January, transfer to/from stage 2
-12 35 -22
-
-
Change in impairments at 1 January, transfer to/from stage 3
-8 -33 41
-
Impairments during the year due to change in credit risk
-69
Previously impaired, now finally lost
0
Other movements (interest rate correction etc.)
0 0 19 19 -
Loss without prior impairment
- - - - 23
Amounts recovered on previously impaired receivables
- - - - -40
Impairments at 30.06.18
29
66
25
0 -40 -40
91 266 1,462 1,819
25 -
11
Impairments at 30.06.18 under IFRS 9, loans at amortised cost
87 263 1,440 1,790
3
Impairments at 30.06.18 under IFRS 9, undrawn maximum and loan commitment 4 3 22 30 8 Impairments at 30.06.18
91 266 1,462 1,819
11
The change in portfolio impairments was driven by an increase in gross lending and movements between the stages as illustrated in the table, which is the result of a change in customers’ credit risk. In addition, impairments are affected by impaired macroeconomic factors. The figures concerning newly established and repaid accounts may include administrative movements in which the balance is moved between two accounts for the same customer.
Spar Nord H1 2018
NOTE
6.4 6.4.1
Notes – Group
31
DUE FROM CREDIT INSTITUTIONS AND CENTRAL BANKS IMPAIRMENTS Analysis of changes in impairments for the period broken down by stages and correlated to recognised impairments, etc. Summary of combined recognised impairments, etc. is provided in note 6.2.1. Stage 1 Lack of significant increase in credit risk 30.06.18 DKKm Impairments at 01.01.18 under IFRS 9
Stage 2 Significant increase in credit risk 30.06.18 DKKm
Stage 3 Creditimpaired 30.06.18 DKKm
Total 30.06.18 DKKm
Recognised impairments DKKm
1 0 0 1 -
Impairments re. new exposures during the year, including new accounts to existing customers 0 0 0 0 0
6.4.2
6.5
Reversed impairments re. repaid accounts
0 0 0 0 0
Change in impairments at 1 January, transfer to/from stage 1
0 0 0 - -
Change in impairments at 1 January, transfer to/from stage 2
0 0 0 - -
Change in impairments at 1 January, transfer to/from stage 3
0 0 0 - -
Impairments during the year due to change in credit risk
0 0 0 0 0
Impairments at 30.06.18
1 0 0 1 0
H1 2018 DKKm
DUE FROM CREDIT INSTITUTIONS AND CENTRAL BANKS, OTHER SPECIFICATIONS
H1 2017 DKKm
Full year 2017 DKKm
Balances at notice with central banks
0
Due from credit institutions
2,185
1,941
425
1,437
0
Total
2,185
2,366
1,437
GUARANTEES PROVISIONS FOR LOSSES Analysis of changes in provisions for losses during the period broken down by stages and correlated to recognised impairments, etc. Summary of combined recognised impairments, etc. is provided in note 6.2.1. Stage 1 Lack of significant increase in credit risk 30.06.18 DKKm
Stage 2 Significant increase in credit risk 30.06.18 DKKm
Stage 3 Creditimpaired 30.06.18 DKKm
Total 30.06.18 DKKm
Recognised impairments DKKm
Provisions for losses at 01.01.18 under IFRS 9
13 7 48 68 -
Provisions for losses re. new exposures during the year
6
Reversed provision for losses re. repaid exposures
-3
1 47 54 54 -3
-9
-15 -15
Change in provisions for losses at 1 January, transfer to/from stage 1 7 -5 -2 0 Change in provisions for losses at 1 January, transfer to/from stage 2 0
1 -1 0 -
Change in provisions for losses at 1 January, transfer to/from stage 3 -1 -1 2
0 -
Provisions for losses during the year due to change in credit risk
Provisions for losses at 30.06.18
13 5 55 74 6
-7
4
-31
-33 -33
The change in portfolio impairments was driven by an increase in gross lending and movements between the stages as illustrated in the table, which is the result of a change in customers’ credit risk. In addition, impairments are affected by impaired macroeconomic factors.
Spar Nord H1 2018
Notes – Group
NOTE 6.6
H1 2018 DKKm
IMPAIRMENT ACCOUNT AT 30.06.17 AND 31.12.17 (IAS 39) Individual loan impairment charges
32
H1 2017 DKKm
Full year 2017 DKKm
Individual impairment, beginning of period
-
1,686
New individual impairment charges
-
204
1,686 310
Reversal of individual impairment charges
-
216
326
Previously impaired, now finally lost
-
135
383
Other movements
-
23
36
Individual impairment, end of period
-
1,562
1,323
Collective loan impairment charges
Collective impairment, beginning of period
-
124
124
New collective impairment charges
-
98
128
Reversal of collective impairment charges
-
4
9
Other movements
-
4
9
Collective impairment, end of period
-
221
251
Total loan impairment charges, etc.
Impairment, beginning of year
-
1,810
1,810
New impairment charges
-
301
438
Reversed impairment charges
-
220
334
Previously impaired, now finally lost
-
135
383
Other movements
-
27
44
Impairment, end of period
-
1,783
1,575
Impairment recognised in the income statement
New impairment charges
-
301
438
Reversed impairment charges
-
220
334
Loss without prior impairment
-
23
96
Amounts recovered on previously impaired receivables
-
59
167
Recognised in the income statement
-
45
33
Provisions for losses on guarantees
Provisions, beginning of period
-
67
New provisions
-
7
19
Reversed provisions
-
33
45
Provisions for losses on guarantees, end of period
-
41
41
67
Provisions for losses on guarantees recognised in the income statement
New provisions
-
7
19
Reversed provisions
-
33
45
Recognised in the income statement
-
-26
-26
-
1,825
1,616
Impairment, other credit risks, beginning of period
-
14
14
Reversed impairment charges
-
1
14
Other movements
-
1
-
Impairment, other credit risks, total
-
14
0
Impairment account for loans and provisions for losses on guarantees, total Impairment, other credit risks
Impairment account for loans, provisions for losses on guarantees and other credit risks, total
-
1,839
1,616
Loan impairment charges etc. The total recognition in the income statement under impairment of loans and receivables etc. can be broken down as follows: Loan impairment charges etc.
-
45
33
Provision for losses on guarantees
-
-26
-26
Impairment, credit institutions
-
-1
-14
Total impairment of loans and receivables etc.
-
19
-7
Loans with suspended interest payments
-
127
143
6.7
Interest on impaired receivables is calculated on the impaired balance only.
Recognised interest on impaired loans and receivables
-
CREDIT RISK POLICY Spar Nord’s credit policy is unchanged relative to the description in note 51 in the annual report for 2017.
28
44
Spar Nord H1 2018
NOTE 7 7.1
Notes without reference – Group
33
Notes without reference – Group FAIR-VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS Financial instruments recognised at fair value The fair value is the amount at which a financial asset can be exchanged between knowledgeable, willing parties in an arm’s length transaction. If an active market exists, the market price in the form of a listed price or price quotation is used. If a financial instrument is quoted in a market that is not active, the measurement is based on the most recent transaction price. Adjustment is made for subsequent changes in market conditions, for instance by including transactions in similar instruments that are assumed to be motivated by normal business considerations. For a number of financial assets and liabilities, no effective market exists. In such situations, an estimated value is used instead, taking account of recent transactions in similar instruments, and discounted cash flows or other recognised estimation and valuation techniques based on the market terms existing at the balance sheet date. The most frequently used valuation models and estimation and valuation techniques include the pricing of transactions for future settlement and swap models that apply present value calculations, credit pricing models as well as option models, such as Black & Scholes models. In most cases, the valuation is largely based on observable input. Unlisted shares recorded at fair value comprise unlisted shares that are not included in the Group’s trading portfolio. These unlisted shares are recognised at fair value, using the Fair Value Option (FVO), and are measured in accordance with provisions in shareholders’ agreements and generally accepted valuation methods, etc. As regards derivative instruments with a positive fair value, the Bank makes a credit valuation adjustment (CVA) to allow for changes in the associated credit risk. In addition, fair value adjustments are made of derivative financial instruments based on counter party PD (Probability of Default). The calculation of CVA is based on the customer’s PD (Probability of Default), LGD (Loss Given Default) and EPE (Expected Positive Exposure). In the event that the customer has no external rating, the customer’s PD is based on the Bank’s own credit models. The credit valuation adjustment (CVA) amounted to DKK 3 million at 30.06.2018 (30.06.2017: DKK 4 million; end-2017: DKK 4 million).
Spar Nord H1 2018
Breakdown of financial instruments relative to the fair-value hierarchy classification and carrying amount
Notes without reference – Group
Quoted prices Level 1 DKKm
Observable input Level 2 DKKm
34
Nonobservable Input Level 3 DKKm
Total DKKm
30.06.18 Financial assets Bonds at fair value
11,353
2,798
0 14,151
Shares, etc.
205
35
1,498 1,738
Assets linked to pooled schemes
10,767
Positive fair value of derivative financial instruments
Total
22,325
4,258
0
906 7,996
328 15,352 16 922 1,841 32,162
Financial liabilities
Deposits in pooled schemes
0 15,352 Other non-derivative financial liabilities at fair value 1,388 231
0 15,352
Negative fair value of derivative financial instruments
0 627
Total
1,388 16,209
0
627
0 1,619 0 17,597
30.06.17
Financial assets Bonds at fair value
10,896 2,930 0 13,826
Shares, etc.
Assets linked to pooled schemes
10,118
4,595
Positive fair value of derivative financial instruments
1,056
Total
21,201
187
13
0
8,593
1,352 1,552 304 15,016 0 1,056 1,656 31,450
Financial liabilities
Deposits in pooled schemes
0
15,016
0 15,016
Other non-derivative financial liabilities at fair value 927 306
0 1,232
Negative fair value of derivative financial instruments
0 679
Total
0 927
679
16,001
0 16,928
31.12.17 Financial assets Bonds at fair value
8,732
Shares, etc.
Assets linked to pooled schemes
10,604
4,508
Positive fair value of derivative financial instruments
1,030
Total
19,534
2,106
197
0 10,838
21 1,408 1,626
0
7,663
310 15,423 0 1,030 1,719 28,916
Financial liabilities
Deposits in pooled schemes
0
15,423
Other non-derivative financial liabilities at fair value 476 458 Negative fair value of derivative financial instruments
Total
0 476
691
16,571
0 15,423 0 934 0 691 0 17,047
Bonds, assets linked to pooled schemes, derivative financial instruments and other non-derivative financial liabilities are valued according to the following principles: - In case of quoted prices, the fair value is fixed as a quoted price or a price quotation by a recognised exchange or another external party. - In case of pricing based on observable inputs, the fair value is calculated by means of a market-based yield curve plus/minus a credit spread, which is also calculated based on market prices. - In case of pricing based on non-observable inputs, the calculation includes inputs based on the Bank’s own valuations of individual components, and also market data in some cases. Shares are valued according to the following principles: - In case of quoted prices, the fair value is fixed as a price quoted by a recognised exchange or an external party. - In case of pricing based on observable inputs, the fair value is calculated based on available prices for shares that are not listed. - In case of pricing based on non-observable inputs, the calculation includes shares valued according to generally accepted valuation principles, e.g., the discounting of expected future cash flows, market expectations as to required rate of return on equity and comparable transactions. Shares that are priced on the basis of the prices recommended by Lokale Pengeinstitutter (the Association of Local Banks, Savings Banks and Cooperative Banks in Denmark) are included as non-observable inputs. The fair values are based on shareholders’ agreements for the individual companies and share transactions completed. The fair value is often based on the companies’ book equity (intrinsic value), which is used as a basis for the transaction price between shareholders. The fair value has been reliably measured for all shares, and accordingly no shares have been recognised at cost. If an instrument is classified differently at the reporting date as compared to the beginning of the financial year, it is transferred to another category in the valuation hierarchy. Any reclassification is considered to have been made as of the reporting date. In 2018, assets recognised under positive fair value of derivative financial instruments were transferred observable inputs (Level 2) to non-observable inputs (Level 3). The adjustment to fair value is recognised in market value adjustments.
Spar Nord H1 2018
Notes without reference – Group
NOTE
30.06.18 DKKm Level 3
Equities Assets linked to pooled schemes
30.06.18 DKKm
Fair value based on net asset value, cf. shareholders’ agreements
35
30.06.17 DKKm
30.06.17 DKKm
Fair value based on net asset value, cf. shareholders’ agreements Other
Other
1,136 362 995 358 - 328 - 304
Positive fair value of derivative financial - 16 - instruments Sensitivities Change in fair value of shares if the profit/loss of the companies 12 - 9 changes by 10% (annualised) A substantial portion of the shares included under “Other” are valued based on the discounting of expected future cash flows from dividends, selling prices or market expectations as to the required rate of return on equity. H1 2018 DKKm
Financial instruments measured at fair value based on non-observable inputs (Level 3)
H1 2017 DKKm
Full year 2017 DKKm
Carrying amount, beginning of period
1,719
Value adjustments through profit or loss
121
Market value adjustments in other comprehensive income
0
Purchase
29
109
131
Sale
62
96
99
Transferred to/from Level 3
35
0
Carrying amount, end of period
1,841
1,550 93 0
1,656
1,550 136 0
0 1,719
Market-value adjustments in the income statement of assets held at
the reporting date
117
48
91
Dividends on shares are recognised in the income statement and are not included
in the above statement.
7.2
COLLATERAL PROVIDED Collateral provided through clearing systems, with central counterparties and other infrastructure institutions: Deposits, clearing
97
Collateral provided for the market value of derivatives transactions
319
452
424
Positive market value of derivative contracts subject to netting
196
200
215
Collateral provided as part of repo transactions
1,313
Other collateral provided
0
Total
1,925
114
1,375 44 2,185
105
729 30 1,503
Spar Nord H1 2018
NOTE
7.3
HEDGE ACCOUNTING Assets
Notes without reference – Group
H1 2018 DKKm
H1 2017 DKKm
36
Full year 2017 DKKm
Loans and advances Carrying amount
75
79
Fair value
75
79
77
Nominal value
75
75
75
77
Interest risk-hedging financial instruments
Derivatives (swap contracts) Carrying amount
0
-4
-2
Fair value
0
-4
-2
Synthetic principal/nominal value
75
75
75
Liabilities
Subordinated debt Carrying amount
-
394
-
Fair value
-
402
-
Nominal value
-
400
-
Interest risk-hedging financial instruments
Derivatives (swap contracts)
7.4
Carrying amount
-
2
-
Fair value
-
2
-
Synthetic principal/nominal value
-
400
-
OWNERSHIP AT 30.06.18 Spar Nord Fonden, Aalborg, and Nykredit Realkredit A/S, Copenhagen, have disclosed that they each own more than 5% of the share capital of Spar Nord Bank A/S.
Spar Nord H1 2018
Performance indicators and financial ratios –
37
Parent Company
Performance indicators and financial ratios – Parent Company THE DANISH FSA’S LAYOUT AND RATIO SYSTEM 5-YEAR OVERVIEW H1 2018
INCOME STATEMENT DKKm
H1 2017
Change in %
H1 2018
H1 2017
H1 2016
H1 2015
H1 2014
Full year 2017
Net interest and fee income
Market value adjustments
138 266 -48 138 266 115 374 106 379
Staff costs and administrative expenses
953 948
Loan impairment charges etc.
Income from investments in associates and group enterprises
Profit/loss
1,381 1,401
-1 1,381 1,401 1,388 1,504 1,293 2,711 1 953 948 913 933 881 1,869
16 19 -12 16 19 162 188 194 -7
30 30 -1 30 30 61 47 251 51 630 576
9 630 576 383 633 441 991
BALANCE SHEET
DKKm
Loans and advances
Equity
Total assets
45,678 42,280 8,960 8,565 83,690 79,686
8 45,678 42,280 38,404 34,286 36,808 46,747 5 8,960 8,565 7,799 7,618 6,855 8,975 5 83,690 79,686 78,632 80,941 78,678 80,597
In accordance with the accounting policies, the comparative figures have not been restated in connection with the implementation of IFRS 9 on financial instruments at 01.01.2018. FINANCIAL RATIOS OWN FUNDS Own funds ratio *)
18.9 16.9 18.9 16.9 16.5 16.1 16.7 18.1
Tier 1 capital ratio *)
16.0 14.8 16.0 14.8 14.4 14.0 14.6 15.9
EARNINGS
Return on equity before tax, %
Return on equity after tax, %
7.1 6.7 7.1 6.7 4.9 8.6 6.6 11.3
Income/cost ratio
1.72 1.72 1.72 1.72 1.42 1.61 1.43 1.65
Return on assets, %
0.8 0.7 0.8 0.7 0.5 0.8 0.6 1.2
8.1 8.4 8.1 8.4 5.9 10.0 7.6 14.2
MARKET RISK AND LIQUIDITY
Interest rate risk, %
Foreign-exchange position, %
1.3 3.9 1.3 3.9 3.0 3.6 2.3 3.3
Foreign-exchange risk, %
0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.1
Excess coverage relative to statutory liquidity requirement, % Loans and advances as % of deposits
0.8 0.2 0.8 0.2 0.7 0.3 0.4 0.7
322.4 320.8 322.4 320.8 277.6 263.1 227.0 325.2
70.3 67.2 70.3 67.2 63.1 59.4 68.1 72.4
Loans and advances plus impairment as % of deposits
73.0 70.0 73.0 70.0 66.1 62.4 71.2 74.9
CREDIT RISK Loans and advances relative to equity
5.1 4.9 5.1 4.9 4.9 4.5 5.4 5.2
Increase in loans and advances for the period, %
3.5 3.6 3.5 3.6 3.3 -4.4 -2.3 6.6
Sum of large exposures, % **)
79.1 14.0 79.1 14.0 14.6 15.3 0.0 17.2
Impairment ratio for the period
0.0 0.0 0.0 0.0 0.3 0.4 0.4 0.0
THE SPAR NORD SHARE
DKK PER SHARE OF DKK 10
Profit/loss for the period
5.1 4.7 5.1 4.7 3.1 5.0 3.5 8.1
Net asset value (NAV)
66 63 66 63 60 58 55 66
Dividend
Share price/profit/loss for the period
Share price/NAV
- - - - - 2.0 - 3.5 13.3 18.1 13.3 18.1 17.4 14.8 17.1 8.9 1.0 1.3 1.0 1.3 0.9 1.3 1.1 1.1
*)
Own funds for H1 2017 are exclusive of recognition of profit/loss for the period.
**)
In 2018, financial ratios are calculated according to new rules.
In accordance with the accounting policies, the comparative figures have not been restated in connection with the implementation of IFRS 9 on financial instruments at 01.01.2018.
Spar Nord H1 2018
Income statement – Parent Company
Income statement – Parent Company NOTE
H1 2018 DKKm
H1 2017 DKKm
Q2 2018 DKKm
Q2 2017 DKKm
38
Full year 2017 DKKm
2.1
Interest income
2.2
Interest expenses
58 71 29 34 141
Net interest income
773 809 384 402 1,572
831 880 413 437 1,713
Dividends on shares, etc. 2.3
Fees, charges and commissions received
2.3
Fees, charges and commissions paid
45 18 39 15 23 640 638 309 314 1,265 77 65 36 35 149
Net income from interest, fees, charges and commissions 1,381 1,401
696
696 2,711
2.4 2.5
Market value adjustments
138 266
Other operating income
175 20 167
Staff costs and administrative expenses
953 948 495 488 1,869
Amortisation, depreciation and impairment of intangible assets and property, plant and equipment Other operating expenses 4.2.1
Loan impairment charges etc. Income from investments in associates and group enterprises Profit/loss before tax
25 107 379 11 42
29 27 14 14 59 4 5 2 2 13 16 19 39
1 -7
30 30 18 12 51 722 718 355
321 1,249
Tax
91 142 36
62 258
Profit/loss
630 576 319 259 991
APPROPRIATION: The shareholders of the Parent Company Spar Nord Bank A/S Holders of additional tier 1 (AT1) capital instruments
Profit/loss
606 552 307 247 942 24 24 12 12 49 630 576 319 259 991
STATEMENT OF COMPREHENSIVE INCOME Profit/loss for the period
630 576 319 259 991
Other comprehensive income Items that cannot be reclassified to the income statement: Net revaluation of domicile property
0 0 0 0 9
Other comprehensive income after tax
0 0 0 0 9
Total comprehensive income
Appropriation:
The shareholders of the Parent Company Spar Nord Bank A/S Holders of additional tier 1 (AT1) capital instruments
Total comprehensive income
630 576
319
259 1,000
606 552 307 247 951 24 24 12 12 49 630 576
319
259 1,000
Spar Nord H1 2018
Balance sheet – Parent Company
39
Balance sheet – Parent Company ASSETS
NOTE
4.4
4.3
3.1
3.3
3.4 3.5
30.06.17 DKKm
Full year 2017 DKKm
Cash balances and demand deposits with central banks 1,352 1,393 1,298 Due from credit institutions and central banks 2,184 2,366 1,435 Lending, banking and leasing activities 38,336 36,224 37,272 Lending, reverse repo transactions 7,342 6,056 9,475 Loans, advances and other receivables at amortised cost, total 45,678 42,280 46,747 Bonds at fair value 14,151 13,826 10,838 Shares, etc. 1,738 1,552 1,626 Investments in associates 64 111 128 Investments in group enterprises 307 394 402 Assets linked to pooled schemes 15,352 15,016 15,423 Intangible assets 180 189 184 Investment properties 70 70 70 Domicile property 411 424 384 Land and buildings, total 481 494 454 Other property, plant and equipment 125 106 119 Current tax assets 177 27 50 Temporary assets 9 27 21 Other assets 1,754 1,782 1,756 Prepayments and deferred income 138 125 116 Total assets 83,690 79,686 80,597
LIABILITIES PAYABLES 3.2
30.06.18 DKKm
3,624 2,791 1,934 Due to credit institutions and central banks 49,642 47,891 49,105 Deposits and other payables 15,352 15,016 15,423 Deposits in pooled schemes 1,619 1,233 934 Other non-derivative financial liabilities at fair value 2,675 2,907 2,864 Other liabilities 48 18 19 Prepayments and deferred income 72,959 69,854 70,278 Total payables PROVISIONS 140 109 137 Provisions for deferred tax 74 41 41 Provision for losses on guarantees 34 26 21 Other provisions 248 177 199 Total provisions SUBORDINATED DEBT 1,522 1,089 1,144 Subordinated debt 74,729 71,120 71,622 Total liabilities EQUITY 1,230 1,255 1,230 Share capital 89 89 90 Revaluation reserves - - 431 Proposed dividend 6,781 6,358 6,364 Retained earnings 8,100 7,702 8,114 Equity 860 863 861 Holders of additional tier 1 (AT1) capital instruments 8,960 8,565 8,975 Total equity 83,690 79,686 80,597 Total equity and liabilities OFF-BALANCE SHEET ITEMS 13 6 11 Contingent assets 12,095 12,304 11,961 Contingent liabilities 584 530 518 Other binding commitments
Spar Nord H1 2018
Capital position – Parent Company
Capital position – Parent Company
40
The shareholders of the Parent Company Spar Nord Bank A/S
STATEMENT OF CHANGES IN EQUITY Share capital DKKm
Revaluation reserve DKKm
Statutory reserves DKKm
Proposed dividend DKKm
Retained earnings DKKm
Total DKKm
Additional tier 1 capital DKKm
Total DKKm
EQUITY AT 30.06.18
Equity at 31.12.17
1,230
Change in accounting policies, IFRS 9. See note 1.1
- - - - -195 -195 - -195
Equity at 01.01.18
1,230
90 90
0 0
431 6,364 431
6,169
8,114 7,919
861 861
8,975 8,780
Comprehensive income in 2018
Profit/loss for the period
- - 30 - 576 606 24 630
Other comprehensive income
- -1 - - 1 0 - 0
Net revaluation of properties
Other comprehensive income, total
- -1 - - 1 0 - 0
Total comprehensive income for the period
-
-1 30
- 577 606 24 630
Transactions with owners
Interest paid on additional tier 1 (AT1) capital
- - - - - - -24 -24
Dividends paid
-
Dividends received, treasury shares
- - - - 0 0 - 0
-
- -431
- -431
- -431
Disposal upon acquisition of treasury shares and additional tier 1 (AT1) capital - - - - -165 -165 -1 -166 Addition upon sale of treasury shares and additional tier 1 (AT1) capital
- - - - 165 165 - 165
Dissolution of revaluation reserves in group enterprises
- - 95 - -95 0 - 0
Revaluation reserves, associates
- - -23 - 23 0 - 0
Dividends received from group enterprises
- - -100 - 100 0 - 0
Dividends received from associates recognised at net asset value
- - -2 - 2 0 - 0
Tax
- - - - 5 5 - 5
Total transactions with owners
-
- -30 -431
36 -425 -25 -450
Equity at 30.06.18
1,230
89
0
0
6,781
8,100
860
8,960
The share capital consists of 123,002,526 shares with a nominal value of DKK 10.
EQUITY AT 30.06.17
Equity at 01.01.17
1,255
89
386
628 5,407
7,765
862
8,627
Comprehensive income in 2017
Profit/loss for the period
- - 30 - 521 552 24 576
Other comprehensive income Net revaluation of properties Other comprehensive income, total
- 0 - - - 0 - 0 - 0 - - - 0 - 0
Total comprehensive income for the period
-
0 30
- 521 552 24 576
Transactions with owners
Interest paid on additional tier 1 (AT1) capital
- - - - - - -24 -24
Dividends paid
-
Dividends received, treasury shares
- - - - 13 13 - 13
-
- -628
- -628
- -628
Disposal upon acquisition of treasury shares and additional tier 1 (AT1) capital - - - - -258 -258 - -258 Addition upon sale of treasury shares and additional tier 1 (AT1) capital
- - - - 253 253 1 254
Dissolution of revaluation reserves in group enterprises
- - 826 - -826 0 - 0
Revaluation reserves, associates
- - -14 - 14 0 - 0
Dividends received from group enterprises
- - -1,200 - 1,200 0 - 0
Dividends received from associates recognised at net asset value
- - -29 - 29 0 - 0
Tax
- - - - 5 5 - 5
Total transactions with owners
-
0 -417 -628 430 -614 -23 -638
Equity at 30.06.17 The share capital consists of 125,529,918 shares with a nominal value of DKK 10.
1,255
89
0
0 6,358
7,702
863
8,565
Spar Nord H1 2018
Capital position – Parent Company
41
The Parent Company applies the same accounting policies as the Group. The difference between the profit or loss in the Group and in the Parent Company is due to properties being classified as investment properties in subsidiaries and as domicile properties in the Group. The difference consists of depreciation on such properties. See below.
PROFIT/LOSS
EQUITY H1 2017 DKKm
H1 2018 DKKm
H1 2017 DKKm
H1 2018 DKKm
Spar Nord Bank Group
630 575 8,960 8,565
Depreciation, domicile property
1 1 0 0
Spar Nord Bank, Parent Company
630 576 8,960 8,565 H1 2018
TREASURY SHARE PORTFOLIO
H1 2017
Full year 2017
Number of shares
Percentage of share capital
0.0 2.1 0.0
40,148 2,647,586
38,048
On 04.09.2017, the share capital was reduced by a nominal value of DKK 25,273,920 through the cancellation of 2,527,392 shares of the Bank’s treasury share portfolio. These shares were bought back under the Bank’s buyback programme for 2016. Additional tier 1 (AT1) capital
H1 2018 DKKm
Principal
Currency
Note DKKm
DKK
a
DKK
b
Maturity
H1 2017 DKKm
Full year 2017 DKKm
Interest rate
Received
400.0
6.052%
2015
Perpetual
400
400
411
450.0
5.500%
2016
Perpetual
460
463
450
860
863
861
Additional tier 1 (AT1) capital issued under CRR, total
a
Issued on 10.06.2015, with an option of early redemption as from 10.06.2020. The loan carries interest at a rate of 6.052% p.a. until 10.06.2020,
after which date interest will be fixed at CIBOR6 + a 5.400% margin.
b Issued on 06.12.2016, with an option of early redemption as from 06.12.2021. The loan carries interest at a rate of 5.500% p.a. until
06.12.2021, after which date interest will be fixed at CIBOR6 + a 5.166% margin.
If Spar Nord’s common equity tier 1 (CET1) ratio falls below 5 1/8%, the loans will be written down. The loans can be written up again based on the rules laid down in CRR.
OWN FUNDS Equity
8,960
Phasing in of IFRS 9
185
Result not recognised
- 576
Additional tier 1 (AT1) capital included in equity
860
Proposed dividend, excl. share re. share buyback programme
315
0
431
Intangible assets, incl. share recognised in investments in associates
148
192
188
Other primary deductions
48
40
Deductions, equity investments
379
Common equity tier 1 (CET1) capital
7,396
8,565
8,975
-
-
863
861
41
328
331
6,566
7,123
Additional tier 1 (AT1) capital *)
843
Other deductions
4
Tier 1 capital
8,235
843
843
41 7,368
41 7,924
Subordinated debt, excl. Additional Tier 1 (AT1) capital *)
1,507
Other deductions
10
Own funds
9,732
1,081
1,133
41 8,408
41 9,016
Weighted risk exposure amount, credit risk etc.
42,275
39,961
Weighted risk exposure amount, market risk
3,636
4,108
3,196
Weighted risk exposure amount, operational risk
5,639
5,605
5,605
Total risk exposure amount
51,551
49,674
40,886
49,687
Common equity tier 1 capital ratio
14.3
13.2
14.3
Tier 1 capital ratio
16.0
14.8
15.9
Own funds ratio
18.9
16.9
18.1
The capital adequacy calculation for H1 2017 is exclusive of recognition of profit/loss for the period. *) Including portfolio of own bonds As Spar Nord has adopted the transition rules according to CRD, any adverse impact of the IFRS 9 impairment rules will not take full effect on the capital base until after five years. Spar Nord has calculated the negative impact of IFRS 9 on own funds at DKK 10 million on entry into force of the rules at 01.01.2018.
Spar Nord H1 2018
Notes – Parent Company
42
Notes – Parent Company NOTE
1
ACCOUNTING POLICIES The interim report is presented in accordance with IAS 34, “Interim Financial Reporting”, as adopted by the EU, and additional Danish disclosure requirements for interim reports. The application of IAS 34 means that the presentation is limited relative to the presentation of an annual report and that the recognition and measurement principles of the International Financial Reporting Standards (IFRS) have been applied. Other than as set out below, the accounting policies are unchanged from those applied in Annual Report 2017. Annual Report 2017 contains the full description of the accounting policies. Figures in the interim report are presented in millions of Danish kroner, unless otherwise stated. Consequently, rounding differences may occur because grand totals are rounded and the underlying decimal places are not shown to the reader.
1.1
CHANGES IN ACCOUNTING POLICIES The following amendments to IFRS were implemented effective 1 January 2018: l IFRS 9 Financial instruments l IFRS 15 Revenue from Contracts with Customers Of these, only IFRS 9 has affected recognition and measurement in the interim report. For a description of the effect in connection with the transition to IFRS 9 and IFRS 15 at 1 January 2018, please see the Group's accounting policies in note 1.
Spar Nord H1 2018
NOTE
2
Notes – Parent Company
NOTES TO THE INCOME STATEMENT H1 2018 DKKm
2.1
43
H1 2017 DKKm
Full year 2017 DKKm
INTEREST INCOME Due from credit institutions and central banks
2
Loans, advances and other receivables
785
Bonds
36
Foreign-exchange contracts
4
Interest-rate contracts
-23
-30
-59
Derivative financial instruments, total
-20
-28
-56
Other interest income
0
Total interest income after offsetting negative interest income
804
Negative interest income offset against interest income
18
12
Negative interest expenses offset against interest expenses
10
8
Total interest income before offsetting negative interest income
831
Of which, income from genuine reverse repo transactions booked under
Due from credit institutions and central banks
-3
-5
Loans, advances and other receivables
-14
-7
1 817
3 1,606
42
84
2
3
28 860
880
31 1,669 30 15 1,713
-9 -20
Negative interest income amounts to DKK 18 million (30.06.2017: DKK 12 million, 2017: DKK 30 million) and relates to repo transactions. In the table above, negative interest income is offset against interest income. In the income statement, negative interest income is presented as interest expenses, and negative interest expenses are presented as interest income. 2.2
INTEREST EXPENSES
Credit institutions and central banks
-1
-1
Deposits and other payables
12
25
47
Subordinated debt
18
26
52
Other interest expenses
1
Total interest expenses after offsetting negative interest expenses
30
Negative interest expenses offset against interest expenses
10
8
15
Negative interest income offset against interest income
18
12
30
Total interest expenses before offsetting negative interest expenses
58
71
141
-3
1
1
51
97
Of which, interest expenses from genuine repo transactions booked under
Due to credit institutions and central banks
-5
-4
-8
Negative interest expenses amount to DKK 10 million (30.06.2017: DKK 8 million, 2017: DKK 15 million) and relate partly to deposits, partly to repo transactions. In the table above, negative interest expenses are offset against interest expenses. In the income statement, negative interest expenses are presented as interest income, and negative interest income is presented as interest expenses. 2.3
FEES, CHARGES AND COMMISSIONS RECEIVED Securities trading and custody accounts
Payment services
83
Loan transaction fees
256
238
493
198
187
380
of which mortgage credit institutions
208 215 439 76
166
Guarantee commission
13
15
30
Other fees, charges and commissions
81
94
138
Total fees, charges and commissions received
640
Total fees, charges and commissions paid
77
Total net fees, charges and commissions received
563
638
1,265
65 573
149 1,116
2.4
MARKET VALUE ADJUSTMENTS
Other loans, advances and receivables at fair value
-2
0
0
Bonds
-7
43
91
Shares, etc.
131
114
163
Foreign currency
27
16
36
Foreign exchange, interest, share, commodity and other contracts and derivative financial instruments
Assets linked to pooled schemes
-228
503
566
Deposits in pooled schemes
228
-503
-566
Total
-11
93
89
138 266 379
Spar Nord H1 2018
Notes – Parent Company
H1 2018 DKKm
NOTE
2.5
44
H1 2017 DKKm
Full year 2017 DKKm
STAFF COSTS AND ADMINISTRATIVE EXPENSES Staff costs
589 603 1,165
Administrative expenses
364 345 704
Total
953
948 1,869
Staff costs:
Salaries
Pensions
51 53 106
Social security costs
67 68 129
Total
471 481 930
589 603 1,165
Remuneration to members of the Executive Board and Board of Directors amounts to: Board of Directors
Number
Fixed pay
Pension
Total remuneration
9 9 9 1.9 1.6 3.5 - - 1.9 1.6 3.5
Executive Board
Number
Base salary *)
6.0 5.7 11.4
– less fees received from directorships
0.5 0.4 1.5
The Bank’s expense, base salary
5.5 5.3 9.9
3 3 3
Pension, ordinary contribution
0.9 0.7 1.7
Total remuneration earned and paid
6.4 6.0 11.6
Breakdown of remuneration to Executive Board
Lasse Nyby
Base salary*)
2.2 2.1 4.2
– less fees received from directorships
0.2 0.1 0.5
The Bank’s expense, base salary
2.1 2.0 3.7
Pension, ordinary contribution
0.3 0.3 0.6
Total remuneration earned and paid
2.4 2.3 4.3
John Lundsgaard
Base salary
1.9 1.8 3.6
– less fees received from directorships
0.1 0.1 0.4
The Bank’s expense, base salary
1.8 1.7 3.2
Pension, ordinary contribution
0.3 0.2 0.5
Total remuneration earned and paid
2.1 1.9 3.7
Lars Møller
Base salary*)
1.9 1.8 3.6
– less fees received from directorships
0.2 0.2 0.6
The Bank’s expense, base salary
1.7 1.6 3.0
Pension, ordinary contribution
0.3 0.2 0.5
Total remuneration earned and paid
2.0 1.8 3.5
*)
The amount includes the value of a company car etc.
The members of the Executive Board receive no variable pay. Members of the Executive Board receive remuneration for their Group executive board duties based on the management agreement with the subsidiary. Termination rules The members of the Executive Board have a term of notice of 12 months and will receive compensation on termination of employment corresponding to two years’ pay. Pension obligation Like the other employees, members of the Executive Board are comprised by defined contribution pension plans. Number of employees: The average number of employees converted into full-time equivalents 1,524 1,538 1,546
Spar Nord H1 2018
Notes – Parent Company
NOTE 2.5
H1 2018 DKKm
STAFF COSTS AND ADMINISTRATIVE EXPENSES, CONTINUED
45
H1 2017 DKKm
Full year 2017 DKKm
Administrative expenses: IT expenses
203
Marketing costs
51
55
111
Cost of premises
43
51
105
Staff and travelling expenses
27
26
56
Office expenses
11
12
21
Other administrative expenses
30
34
57
Total
364
167
345
354
704
3
Notes to the balance sheet
3.1
OTHER ASSETS
Positive fair value of derivative instruments, etc.
922
1,056
1,030
Miscellaneous receivables
289
142
289
Interest and commissions receivable
45
201
51
Capital contribution to Bankernes EDB Central a.m.b.a.
445
316
316
Other assets
53
Total
1,754
67 1,782
70 1,756
3.2
DEPOSITS AND OTHER PAYABLES
Demand deposits
44,241
41,517
Subject to notice
1,735
1,548
Time deposits
377
1,169
Special types of deposits
3,289
Total
49,642
3,657 47,891
43,393 1,456 896 3,359 49,105
3.3
OTHER LIABILITIES
Miscellaneous payables
1,709
Negative fair value of derivative financial instruments, etc.
627
Interest and commissions payable
22
Other liabilities
317
Total
2,675
1,872 679
1,798 691
46 310 2,907
12 364 2,864
3.4
CONTINGENT LIABILITIES
The Bank and all major wholly-owned subsidiaries are jointly registered for payroll tax and VAT and are jointly and severally liable for the payroll tax and VAT payable. Financial guarantees
Loss guarantees for mortgage loans
5,158
4,817
4,983
Registration and refinancing guarantees
1,500
1,928
2,011
Other contingent liabilities
834
Total
12,095
4,604 4,563 4,092
996 12,304
876 11,961
3.5
OTHER BINDING AGREEMENTS Miscellaneous
584
Total
530
518
584 530 518
Miscellaneous is composed of: Lease obligations, with the Parent as lessee *) Spar Nord is the lessee in a number of operating leases. Under such leases, Spar Nord has the right of use of an asset for a specific period of time against lease payments without assuming the significant risks and rewards of ownership of the asset. The leases concern the lease of properties and operating equipment. The leases are not recognised in the balance sheet. The leases represent an amount of DKK 132 million until the legal notice of termination. Data-processing centre Spar Nord has entered into an agreement with Bankernes EDB Central a.m.b.a. regarding the provision of IT services. Spar Nord’s membership means that in case of termination of the Bank’s membership, it is liable to pay an exit fee. In addition, a capital contribution to Bankernes EDB Central a.m.b.a. has been recognized under Other assets. The Spar Nord Group has no other significant binding agreements. *) According to the most recent annual report.
Spar Nord H1 2018
NOTE
4
4.1 4.1.1
Notes – Parent Company
46
Credit risk IMPAIRMENTS – TRANSITION FROM IAS 39 TO IFRS 9 IMPAIRMENTS – TRANSITION FROM IAS 39 TO IFRS 9 BY EXPOSURE CATEGORY Individual impairments 31.12.17 DKKm
Collective impairments 31.12.17 DKKm
Change IAS 39 to IFRS 9 01.01.18 DKKm
Total 31.12.17 DKKm
Total 01.01.18 DKKm
Loans and advances at amortised cost
1,323
Due from credit institutions and central banks
0 0 0 1 1
Guarantees
41 0 41 27 68
Undrawn maximum and loan commitments
15 0 15
Total
1,379
251 1,575
251 1,631
216 1,791
7 21
250 1,881
The increase in impairments from IAS 39 to IFRS 9 is explained by the fact that impairments under IFRS 9 must be recognised on all Spar Nord’s credit exposures measured at amortised cost based on statistically expected credit losses (“expected loss” model). Based on the previous rules under IAS 39, impairment losses were not recognised until there was objective evidence of impairment (“incurred loss” model). In future, forward-looking information will be taken into consideration.
4.1.2
4.1.3
Stage 1 Lack of significant increase in credit risk 01.01.18 DKKm
IMPAIRMENTS AT 01.01.18 UNDER IFRS 9 BY STAGES
Stage 3 Creditimpaired 01.01.18 DKKm
Total 01.01.18 DKKm
Loans and advances at amortised cost
79 279 1.433 1.791
Due from credit institutions and central banks
1 0 0 1
Guarantees
13 7 48 68
Undrawn maximum and loan commitments
4 5 12 21
Total
96
291 1.494 1.881
EXPOSURES BEFORE IMPAIRMENTS AT 01.01.18 UNDER IFRS 9 BY STAGES
4.2 4.2.1
Stage 2 Significant increase in credit risk 01.01.18 DKKm
Stage 1 Lack of significant increase in credit risk 01.01.18 DKKm
Stage 2 Significant increase in credit risk 01.01.18 DKKm
Stage 3 Creditimpaired 01.01.18 DKKm
Total 01.01.18 DKKm
Loans and advances at amortised cost
35,592
Due from credit institutions and central banks
1,437 0 0 1,437
Guarantees
10,978
763
261 12,002
Undrawn maximum and loan commitments
19,472
1,159
171 20,802
Total
67,479 11,590 3,510 82,579
EXPOSURES AT 30.06.18 SUMMARY OF ACCOUNTING VALUE OF EXPOSURES AND RECOGNISED IMPAIRMENTS ETC.
9,667
Exposure before impairments, see 4.2.3 DKKm
3,078 48,337
Impairments, see 4.2.2 DKKm
Recognised impairments DKKm
Loans and advances at amortised cost (note 4.3)
47,467
Due from credit institutions and central banks (note 4.4)
2,184
Guarantees (note 4.5)
12,169
74
6
Drawn maximum and loan commitments (note 4.3)
22,200
30
8
Total
84,021
1,894
16
1,790
3
1
0
Recognised impairments etc. are specified in notes 4.3, 4.4.1 and 4.5. 4.2.2
Stage 1 Lack of significant increase in credit risk 30.06.18 DKKm
IMPAIRMENTS AT 30.06.18 BY STAGES
Stage 2 Significant increase in credit risk 30.06.18 DKKm
Stage 3 Creditimpaired 30.06.18 DKKm
Total 30.06.18 DKKm
Loans and advances at amortised cost
Due from credit institutions and central banks
1 0 0 1
Guarantees
13 5 55 74
Undrawn maximum and loan commitments
4 3 22 30
Total
105 271 1,518 1,894
87 263 1,440 1,790
Spar Nord H1 2018
NOTE
4.2.3
Notes – Parent Company
EXPOSURE BEFORE IMPAIRMENT 30.06.18 BY STAGES
Stage 1 Lack of significant increase in credit risk 30.06.18 DKKm
Stage 2 Significant increase in credit risk 30.06.18 DKKm
47
Stage 3 Creditimpaired 30.06.18 DKKm
Total 30.06.18 DKKm
Loans and advances at amortised cost
33,777 10,509
Due from credit institutions and central banks
2,184 0 0 2,184
Guarantees
11,324
Undrawn maximum and loan commitments
20,229
Total
67,514 12,845 3,661 84,021
3,181 47,467
516
329 12,169
1,820
151 22,200
Spar Nord does not have the categories “Financial assets at fair value through other comprehensive income” and “Loans at fair value through profit or loss”.
4.3
LOANS AT AMORTISED COST AND UNDRAWN MAXIMUM AND LOAN COMMITMENT IMPAIRMENTS AND PROVISIONS FOR LOSSES Analysis of changes in impairments for the period broken down by stages and correlated to recognised impairments, etc. Summary of combined recognised impairments, etc. is provided in note 4.2.1. Stage 1 Lack of Stage 2 significant Significant Stage 3 increase increase Creditin credit risk in credit risk impaired 30.06.18 30.06.18 30.06.18 DKKm DKKm DKKm
Total 30.06.18 DKKm
Recognised impairments DKKm
Impairments at 01.01.18 under IFRS 9, loans at amortised cost
79 279 1,433 1,791
Impairments at 01.01.18 under IFRS 9, undrawn maximum and loan commitment
-
4 5 12 21 -
Impairments re. new exposures during the year, including new accounts to existing customers 13 21 45 79 79 Reversed impairments re. repaid accounts
-6 -16 -55 -77 -77
Change in impairments at 1 January, transfer to/from stage 1
90 -53 -37
-
-
Change in impairments at 1 January, transfer to/from stage 2
-12 35 -22
-
-
Change in impairments at 1 January, transfer to/from stage 3
-8 -33 41
-
Impairments during the year due to change in credit risk
-69
Previously impaired, now finally lost
0
Other movements (interest rate correction etc.)
0 0 19 19 -
Loss without prior impairment
- - - - 23
Amounts recovered on previously impaired receivables
- - - - -40
Impairments at 30.06.18
Impairments at 30.06.18 under IFRS 9, loans at amortised cost
Impairments at 30.06.18 under IFRS 9, undrawn maximum and loan commitment
Impairments at 30.06.18
29
66
25
0 -40 -40
91 266 1,462 1,819
25 -
11
87 263 1,440 1,790
3
4 3 22 30 8 91 266 1,462 1,819
11
The change in portfolio impairments was driven by an increase in gross lending and movements between the stages as illustrated in the table, which is the result of a change in customers’ credit risk. In addition, impairments are affected by impaired macroeconomic factors. The figures concerning newly established and repaid accounts may include administrative movements in which the balance is moved between two accounts for the same customer.
Spar Nord H1 2018
NOTE
4.4 4.4.1
Notes – Parent Company
48
DUE FROM CREDIT INSTITUTIONS AND CENTRAL BANKS IMPAIRMENTS Analysis of changes in impairments for the period broken down by stages and correlated to recognised impairments, etc. Summary of combined recognised impairments, etc. is provided in note 4.2.1. Stage 1 Lack of significant increase in credit risk 30.06.18 DKKm Impairments at 01.01.18 under IFRS 9
Stage 2 Significant increase in credit risk 30.06.18 DKKm
Stage 3 Creditimpaired 30.06.18 DKKm
Total 30.06.18 DKKm
Recognised impairments DKKm
1 0 0 1 -
Impairments re. new exposures during the year, including new accounts to existing customers 0 0 0 0 0
4.4.2
4.5
Reversed impairments re. repaid accounts
0 0 0 0 0
Change in impairments at 1 January, transfer to/from stage 1
0 0 0 - -
Change in impairments at 1 January, transfer to/from stage 2
0 0 0 - -
Change in impairments at 1 January, transfer to/from stage 3
0 0 0 - -
Impairments during the year due to change in credit risk
0 0 0 0 0
Impairments at 30.06.18
1 0 0 1 0
H1 2018 DKKm
DUE FROM CREDIT INSTITUTIONS AND CENTRAL BANKS, OTHER SPECIFICATIONS
H1 2017 DKKm
Full year 2017 DKKm
Balances at notice with central banks
0
Due from credit institutions
2,184
1,941
425
1,435
0
Total
2,184
2,366
1,435
GUARANTEES PROVISIONS FOR LOSSES Analysis of changes in provisions for losses during the period broken down by stages and correlated to recognised impairments, etc. Summary of combined recognised impairments, etc. is provided in note 4.2.1. Stage 1 Lack of significant increase in credit risk 30.06.18 DKKm
Stage 2 Significant increase in credit risk 30.06.18 DKKm
Stage 3 Creditimpaired 30.06.18 DKKm
Total 30.06.18 DKKm
Recognised impairments DKKm
Provisions for losses at 01.01.18 under IFRS 9
13 7 48 68 -
Provisions for losses re. new exposures during the year
6
Reversed provision for losses re. repaid exposures
-3
1 47 54 54 -3
-9
-15 -15
Change in provisions for losses at 1 January, transfer to/from stage 1 7 -5 -2 0 Change in provisions for losses at 1 January, transfer to/from stage 2 0
1 -1 0 -
Change in provisions for losses at 1 January, transfer to/from stage 3 -1 -1 2
0 -
Provisions for losses during the year due to change in credit risk
Provisions for losses at 30.06.18
13 5 55 74 6
-7
4
-31
-33 -33
The change in portfolio impairments was driven by an increase in gross lending and movements between the stages as illustrated in the table, which is the result of a change in customers’ credit risk. In addition, impairments are affected by impaired macroeconomic factors.
Spar Nord H1 2018
Notes – Parent Company
NOTE 4.6
H1 2018 DKKm
IMPAIRMENT ACCOUNT AT 30.06.17 AND 31.12.17 (IAS 39) Individual loan impairment charges
49
H1 2017 DKKm
Full year 2017 DKKm
Individual impairment, beginning of period
-
1,686
New individual impairment charges
-
204
310
Reversal of individual impairment charges
-
216
326
Previously impaired, now finally lost
-
135
383
Other movements
-
23
36
Individual impairment, end of period
-
1,562
1,323
1,686
Collective loan impairment charges
Collective impairment, beginning of period
-
124
124
New collective impairment charges
-
98
128
Reversal of collective impairment charges
-
4
9
Other movements
-
4
9
Collective impairment, end of period
-
221
251
Total loan impairment charges, etc.
Impairment, beginning of year
-
1,810
1,810
New impairment charges
-
301
438
Reversed impairment charges
-
220
334
Previously impaired, now finally lost
-
135
383
Other movements
-
27
44
Impairment, end of period
-
1,783
1,575
Impairment recognised in the income statement
New impairment charges
-
301
438
Reversed impairment charges
-
220
334
Loss without prior impairment
-
23
96
Amounts recovered on previously impaired receivables
-
59
167
Recognised in the income statement
-
45
33
Provisions for losses on guarantees
Provisions, beginning of period
-
67
New provisions
-
7
19
Reversed provisions
-
33
45
Provisions for losses on guarantees, end of period
-
41
41
67
Provisions for losses on guarantees recognised in the income statement
New provisions
-
7
19
Reversed provisions
-
33
45
Recognised in the income statement
-
-26
-26
Impairment account for loans and provisions for losses on guarantees, total
-
1,825
1,616
Impairment, other credit risks Impairment, other credit risks, beginning of period
-
14
14
Reversed impairment charges
-
1
14
Other movements
-
1
-
Impairment, other credit risks, total
- 14 0
Impairment account for loans, provisions for losses on guarantees and other credit risks, total
-
1,839
1,616
Loan impairment charges etc.
The total recognition in the income statement under impairment of loans and receivables etc.
can be broken down as follows:
Loan impairment charges etc.
-
45
33
Provision for losses on guarantees
-
-26
-26
Impairment, credit institutions
-
-1
-14
Total impairment of loans and receivables etc.
- 19 -7
Loans with suspended interest payments
-
127
143
4.7
Interest on impaired receivables is calculated on the impaired balance only.
Recognised interest on impaired loans and receivables
-
CREDIT RISK POLICY Spar Nord’s credit policy is unchanged relative to the description in note 51 in the annual report for 2017.
28
44
Spar Nord H1 2018 Spar Nord Bank A/S Skelagervej 15 P.O. Box 162 DK-9100 Aalborg, Denmark
Tel. +45 9634 4000 Fax +45 9634 4560 www.sparnord.dk
[email protected] CVR no. 13 73 75 84
The Interim Report has been prepared in a Danish and an English version. In case of discrepancy between the Danish-language original text and the English-language translation, the Danish text shall prevail.
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