* Group profit before tax: 251 NOK million (NOK 220 million) * Return on net capital after tax: 21.3% (20.8%) * Growth in lending: +14.6% (+11.9%) over the last 12 months * Growth in deposits: +14,8% (+16.3%) over the last 12 months * Net losses: 2 NOK million (NOK 3 million) * Net return financial investments: NOK 101 million (NOK 49 million) * Net commission and other income: NOK 156 million (NOK 127 million) * Profit per primary capital certificate: NOK 4.6 (NOK 4.0)
The profit The SpareBank 1 SR-Bank group achieved a result before tax of NOK 251 million as per the first quarter of 2006, an improvement of NOK 31 million compared with the first quarter of 2005. The return on equity capital after tax amounted to 21.3% in the first quarter of 2006, compared with 20.8 % in the first quarter of 2005. The improvement in result is mainly due to high return on financial investments and good development in net commission income and other income.
Net interest income of NOK 268 million (NOK 278 million) gave an interest margin as per the first quarter of 2006 of 1.59% (1.89%). The drop in interest margin is mainly due to lower lending margins both in the retail and corporate market divisions, resulting from the development of the market interest, the competitive situation, as well as improved portfolio quality as a result of the development in market rate and improved portfolio quality.
Net commission income in the first quarter of 2006 amounted to NOK 104 million, an improvement of NOK 17 million (19.5%) compared with the corresponding period last year. Commission income from savings/investments contributed the most to the profit improvement and amounted to NOK 31 million (NOK 20 million) during the first quarter of 2006.
So far this year net return on financial investments amounts to NOK 101 million. This is an increase of NOK 52 million from the corresponding period last year. Net change in value of financial assets assessed at an actual value, gives an income in the first quarter of 2006 of NOK 77 million (NOK 31 million), of which NOK 56 million (NOK 14 million) applies to securities and 21 NOK million (17 NOK million) to capital gain from currency and interest instruments. The profit share from SpareBank 1 Gruppen AS has increased from NOK 14 million in the first quarter of 2005 to NOK 21 million so far this year.
Total operating expenses amounted to NOK 272 million as per 31 March 2006, an increase of NOK 41 million from the corresponding period last year. The cost percentage for the group (IFRS) and the parent bank (NGR) amounted to 58% (52.6%) and 52.5% (48.5%).
At the end of the first quarter of 2006 the group had net losses of NOK 2 million compared with net losses for the same period in 2005 of NOK 3 million.
Lending and deposits Over the last 12 months gross lending has increased by 14.6%, with 14.3% in the retail market and 15.2% in the corporate market. Growth in the retail market improved during the last quarter, while growth in the corporate market remains relatively stable.
The growth in deposit volume (12 months) is 14.8%, with 7.0% in the retail market and 22.3% in the corporate market. The deposit coverage was 62.0% as per 31 March 2006. This is an increase from 60.7% at the end of 2005.
Capital adequacy ratio The group's capital adequacy ratio was 11% at the end of the first quarter of 2006, and the core capital adequacy ratio was 8.4 %. The calculation of capital adequacy ratio is based on the group accounts after NGR and does not include the result so far this year.
Subsidiaries So far this year EiendomsMegler 1 Rogaland AS has year achieved a profit before tax of NOK 5.1 million (NOK 1.7 million). The number of sales and access to new assignments has been very good, and considerably larger than last year.
So far this year the profit before tax for SpareBank 1 SR-Finans AS has amounted to NOK 5.0 million (NOK 4.6 million). As per 31 March 2006 the company had total assets amounting to NOK 2.267 million, an increase of 31.2% from the same time in 2005.
So far this year SR-Forvaltning ASA has achieved a result before tax of NOK 8.6 million, an increase of NOK 3.6 million compared with the same period in 2005. At the end of the first quarter of 2006, the company managed a capital of NOK 4.8 billion, compared with NOK 4.3 billion as per 31 December 2005. During the last 12 months the total assets have increased by 50%.
So far this year the profit before tax of SR-Investering amounted to NOK 13.4 million. The company, which was established at the end of 2005, first became operational during the first quarter of the year. As per 31 March 2006 the company had investments amounting to NOK 46 million. Commitments related to these investments, as well as other investment commitments which have yet to be disbursed, amount to NOK 125 million.
The bank's primary capital certificates At the end of the first quarter of 2006 the market price of the bank's primary capital certificate was NOK 203, compared with NOK 158.8 at the end of the same period last year. Including disbursed dividend, the bank's primary capital certificate has given an effective yield of -5.7% during the first quarter of 2006. Comments on the market The activity level relating to the bank's core activities in Agder and Hordaland has been high. In Agder we opened a new office in Farsund in March. The establishment was well received in the market. Generally, the first quarter has been a good one for Agder, with good growth in volume and extensive, positive attention in the market. The bank will open a new office in Bergen on 5 May. At the opening, the office will have 23 employees and will appear as a complete investment bank.
Outlook The cyclical upturn continued at the beginning of 2006, and the prospects for the bank's market area are still good both in terms of the labour market and the activity and profitability of the companies. The petroleum-related industry and building and construction will to a large degree influence this development. In light of the overall economic cycle, the Board anticipates a good profit for the bank in 2006. In addition, the bank's new initiatives both geographically and within new business areas, will further contribute towards strengthening SpareBank 1 SR-Bank's position in 2006.
Stavanger, 27 April 2006
The Board of Sparebanken Rogaland