SpareBank 1 SMN: Good profit performance and strong growth in a demanding year

In the crisis year of 2020, SpareBank 1 SMN kept a steady course and achieved strong growth in all of the group’s lines of business. Despite demanding conditions due to the Covid-19 pandemic, the group delivered a net profit of NOK 1,978m. This was NOK 585m down on the previous year.

The fall in net profit is due to high loss provisions prompted by the pandemic and the crisis in the offshore industry. Losses on loans in 2020 amounted to NOK 951m, compared with NOK 299m in 2019. Net interest income and commission income increased by NOK 354m to NOK 5,331m. The increase was particularly marked for loans and deposits, and for SpareBank 1 SMN Regnskapshuset and SpareBank 1 Markets. Operating expenses increased by NOK 155m to NOK 2,952m. This increase is mainly due to reorganisation costs of NOK 83m and NOK 42m from increased activity among the subsidiaries.

“We have spent the crisis reorganising, and were well under way on efficiency improvements with a view to increasing the group’s competitive power. We are now well into the process of achieving our goal of an annual profit growth of NOK 400m, about half of which is down to reduced costs”, says group CEO Jan-Frode Janson.

Increased lending and strong growth in all business lines
SpareBank 1 SMN recorded strong growth in loans and deposits alike in 2020. Lending increased by 9 per cent, and overall deposits by 13.5 per cent. This is a substantial increase over the previous year. In 2020 the group strengthened its market share in Central Norway, and in December was chosen by the City of Trondheim as its new main bank.

“We know the region better than anyone and have faith in the people who live and work here. For almost 200 years SpareBank 1 SMN has followed people and businesses in Central Norway through their ups and downs. We have also done so through the present crisis by keeping a cool head and continuing to lend money to people and viable businesses”, says Mr Janson.

In addition to high lending and deposit growth to personal and corporate clients alike, the subsidiaries have also shown a positive trend. SpareBank 1 Regnskapshuset SMN posted a profit of NOK 110m, compared with NOK 108m in 2019. SpareBank 1 Markets increased its profit to NOK 179m, up NOK 136m from the previous year. Eiendomsmegler 1 Midt-Norge strengthened its profit by NOK 21m to NOK 52m.

Community dividend again in 2021
After record-high profit in 2019 and a solid equity capital situation, the supervisory board of SpareBank 1 SMN chose to allocate NOK 200m to the distribution of community dividend in 2020. Of this figure, NOK 100m was earmarked for the group’s Covid-19 response in favour of the region’s voluntary sector. In addition, all parts of the group have gone to great lengths to help people and businesses through the crisis.

“We were the first bank in the country to lend money through the government’s guarantee scheme, and we advanced payments of unemployment benefit to persons who were laid off in spring last year. It is in the DNA of our 1,600 employees to step up when people encounter problems. Thanks to the fact that the community is our largest single owner, we can go an extra mile”, says group CEO Jan-Frode Janson.

Even with the cap limiting dividend payouts to 30 per cent of overall profits for the last two years, SpareBank 1 SMN’s board of directors sees fit to declare a dividend of NOK 4.40 per equity certificate in 2021. Of this, NOK 1.30 per EC is to be paid out pursuant to the supervisory board’s decision in March, while the remainder will be reviewed after the third quarter in keeping with the Ministry of Finance’s recommendation. It is proposed to set aside NOK 95m to the distribution of community dividend in March. A further NOK 105m will be available for distribution in the fourth quarter if conditions permit, bringing the overall amount for distribution this year, like last year, to NOK 200m.

Higher loss provisions but positive expectations
Challenges faced by the Norwegian economy, and the uncertain outlook for the region’s business sector, have brought substantially increased losses. Net loan losses ended at NOK 951m, an increase of NOK 652m from 2019. Of this figure, NOK 873m comprises losses on corporate clients, of which NOK 451m is down to the offshore segment.

Losses on loans to retail customers total NOK 78m, a small increase from NOK 68m in 2019.

The Covid-19 pandemic has had varying impacts on business and industry in Central Norway. 10 per cent of businesses are hit very negatively, while 3 per cent have seen a positive impact since the outbreak in March 2020. Prospects for businesses in the region are now more positive. Expectations in the business sector reversed from record-high pessimism in March 2020 to normal optimism at year-end. This emerges from a survey of 600 business leaders in Central Norway conducted by Sentio.

“We believe there is cause for cautious optimism for 2021, even though uncertainty remains large. SpareBank 1 SMN is well capitalised and well equipped to offer funding and services to people and businesses ahead”, says Mr Janson.

Key figures:

• Pre-tax profit: NOK 2,378m (3,081)
• Post-tax profit: NOK 1,978m (2,563m)
• Return on equity: 10.0% (13.7%)
• CET1 ratio: 18.3% (17.2%)
• Growth in lending: 9.0% (4.7%) and in deposits: 13.5% (6.6%) in the past 12 months
• Losses on loans and guarantees: NOK 951m (299m), 0.54% of gross lending
• Earnings per EC: NOK 8.87 (12.14). Book value per EC: NOK 94.71 (90.75)

Contacts at SpareBank 1 SMN:
Chief Financial Offiser, Kjell Fordal on +47 905 41 672
Executive Director Rolf Jarle Brøske on +47 911 12 475

This information is subject of the disclosure requirements acc. to §5-12 vphl

(Norwegian Securities Trading Act)

https://quarterlyreport.smn.no/2020/

Attachments

• Presentation eng Q420
• Quarterly report eng Q4 20
• Supplementary information Q4 20