ANNUAL REPORT
2004
1
Contents FACTS THE BANK'S MANAGEMENT 2004 KEY FIGURES - THE GROUP THE YEAR IN REVIEW - THE GROUP CORPORATE GOVERNANCE SHAREHOLDER INFORMATION THE QUALITY ACCOUNTING STATEMENT THE BUSINESS AREAS SPAR NORD'S LOCAL BANKS CORPORATE BANKING TRADING, FINANCIAL MARKETS & THE INT. DIVISION CORPORATE COORDINATION & SUPPORT FINANS NORD A/S CREDIT RISKS MARKET RISKS ENDORSEMENTS ACCOUNTING POLICIES INCOME STATEMENT BALANCE SHEET CASH FLOW STATEMENT PERFORMANCE INDICATORS NOTES TO THE FINANCIAL STATEMENT PENSION POOLS SPAR NORD BANK, EXCL. PENSION POOLS DERIVATIVE INSTRUMENTS QUARTERLY KEY FIGURES - THE GROUP OTHER INFORMATION
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3 4 5 6 7 11 12 13 16 17 19 20 21 22 24 26 28 30 34 35 36 37 38 53 54 56 60 61
Facts Spar Nord is a modern financial institution with a long history. Today it has 208,000 customers, 85,000 shareholders and 1,100 employees. The Bank is divided into five business areas: Spar Nord’s local banks, Corporate Banking, Trading, Financial Markets & the International Division, Finans Nord A/S and Corporate Coordination & Support. The local banks make up the largest business area, with 697 employees spread over 24 banking areas and 69 local banks. In 2002, the Bank set the goal of becoming nationwide, and since then another five local banks have opened for business outside North Jutland. In 2004, a local bank was opened in Horsens, and on 14 January 2005 in Fredericia. The local banks serve private customers and businesses in the local area. Corporate Banking has 22 employees working for two divisions, viz. the Corporate Banking Division and the Private Banking Division, both located in Aalborg. These divisions serve major corporate customers and high-net-worth individuals.
Much has changed since 1824, but there is a recurrent theme. The goal remains to create prosperity, or as we say today: "Choose us for the money" The target group also remains essentially the same, viz. private customers and businesses in the local area. VISION With our roots in North Jutland, Spar Nord Bank will create and develop financial and human values through personal relationships and the sale of individual financial solutions. VALUES Spar Nord Bank is a professional company that engages in good business practices. We strive to be an attractive workplace and to create a congenial atmosphere for both employees and customers.
Trading, Financial Markets & the International Division has 55 employees, working in one of the two subdivisions, the Trading, Financial Markets Division and the International Division. These subdivisions serve and advise major customers and other banks. Finans Nord is an independent subsidiary with 56 employees and offices in Aalborg, Vejle and Roskilde. The company offers financing and leasing services. Corporate Coordination & Support has 198 employees, spread over seven divisions, providing administrative support to the rest of the organization. ORGANIZATIONAL PRINCIPLE The basic principle is that the decentralized units should make demands on headquarters, and not vice versa. Consequently, the decentralized units have a high level of decision-making powers in HR matters, customer service, local marketing initiatives and branch location. HISTORY The foundation stone of what ultimately became Spar Nord Bank was laid in 1824 in a street in Aalborg, called Jomfru Ane Gade. One of the founders was grocer Jacob Kjellerup, who established Aalborg Byes og Omegns Sparekasse. Its mission was: "To be a door to prosperity" In 1967, Aalborg Bys og Omegns Sparekasse merged with Landbosparekassen to become Sparekassen Nordjylland. In the following years, several local banks joined the new savings bank, which was converted into a listed public limited company in 1990 and in 1998 renamed Spar Nord Bank.
3
The Bank's Management SUPERVISORY BOARD
Chief Executive Officer Torben Fristrup Chairman
Senior Teacher Niels Ole Arndt
Principal Adm. Officer Trine Bruun Haals Elected by the employees
CHAIRMEN OF THE LOCAL BANKS COMMITTEES
Estate Agent Erling Kjær Deputy Chairman
Chief Executive Officer Henrik Hougaard
Principal Adm. Officer Ole Skov Elected by the employees
Chief Executive Officer Carsten Normann
Managing Director Per Søndergaard
Senior Clerk Jan Høholt Jensen Elected by the employees
EXECUTIVE BOARD
BRØNDERSLEV State-authorized Estate Agent Jesper Hardahl
SKAGEN Master Carpenter Thomas Dyrnesli Nielsen
FREDERIKSHAVN Master Carpenter Jens Chr. Jensen
STØVRING Farmer Karl Kristian Andersen
HADSUND Fruit Grower Jess Vibech Laursen
SÆBY Attorney Erling Mortensen
HERNING Managing Director Henrik Hyldgaard
TERNDRUP Farmer Søren Sømod Flou
HIRTSHALS Master Auctioneer Knud Damgaard
VEJGAARD Managing Director Kai Max-Jakobsen
HJALLERUP Head of Department Ole Mortensen
VEJLE Technical Director Erik Dahl-Rasmussen
HJØRRING Attorney Troels Bidstrup Hansen
AABYBRO Purchasing Manager Christian Jensen
HOBRO Paint Dealer Ivan Østergaard
AALBORG State-authorized Estate Agent Henning Holm-Pedersen
HORSENS Attorney Anne Koch
AARS Managing Director Ebba Pedersen
KØBENHAVN Managing Director Carsten Hansen
ÅRHUS Attorney Torben Korsager
LØGSTØR Senior Teacher Niels Ole Arndt
FREDERICIA Not yet elected
NØRRESUNDBY Attorney Bjarne Damm Johansen
Chief Executive Officer Lasse Nyby
4
Managing Director John Lundsgaard
Managing Director Lars Møller
ODENSE State-authorized Estate Agent Henrik Therkelsen
CORPORATE BANKING Not yet elected
2004 TO READERS OF THE ANNUAL REPORT 2004 was a year of progress on all fronts. The market share increased, the business volume set a record, losses and provisions declined and profits hit record highs - and we are distributing an extraordinary dividend. All business areas showed progress, in both North Jutland and the rest of the country. The total business volume (deposit, loans, advances and guarantees) swelled 14.7 pct. to DKK 44.9bn.
2005 We take an optimistic view of developments in 2005. We prepared a strategy to follow, and the first three years using this strategy have proved that we took the right course. We cannot promise that our profits this year will reach the heights seen in 2004, since this Annual Report contains some non-recurring income items, but we expect core earnings - exclusive of such income - to rise to DKK 270-290m.
•
We find the DKK 398.9m pre-tax profit highly satisfactory, and this performance underpins the Local strategy chosen in 2001, which focuses on serving private customers and businesses in the local area.
In the 2003 Annual Report, we stated that we expect to maintain a dividend of about DKK 20 per share over the next three or four years, assuming that social economic development remains stable. We repeat this forecast.
•
The updating process for North Jutland local banks continues, and almost two-thirds of the local banks have now been updated.
As mentioned above, we do not forecast significant extraordinary income in 2005, but in 2006 we expect income from the sale of Totalkredit shares to end at approx. DKK 150m.
•
In 2004, we opened Spar Nord Horsens, and on 14 January 2005 Spar Nord Fredericia was ready for business.
•
In 2003, Spar Nord Århus relocated its premises, now operating from the ground floor level, and in the first half of 2005, Spar Nord Copenhagen will do the same, moving its operations to an address facing the Town Hall Square.
Torben Fristrup Chairman of the Supervisory Board
Lasse Nyby Chief Executive Officer
The annual Quality Accounting Statement shows a high customer loyalty ratio among corporate customers that is growing higher, which is very satisfactory. Satisfaction remains at a high, stable level among private customers and employees. In 2004, Spar Nord was highly visible in the media. The intense competition throughout the financial sector necessitates great visibility and attractive offers. In 2004, we introduced the home equity account in the housing area and a number of new products in the investment area. Finally, in January 2005 the Bank launched a campaign with special offers resembling those of other businesses. Throughout 2004, the number of loyal Star Account customers increased, reaching more than 40,000. This has proved a successful concept for customers and the Bank alike. We quote extra good prices to our customers, and the Bank gains greater loyalty and a larger business volume. But another object of the campaign was to emphasize, both internally and externally, that Spar Nord is a business like any other business. We need to be customer-targeted and result-oriented. The following pages of this Annual Report show examples of our marketing initiatives in the past year.
5
Key Figures - The Group RESULTATOPGØRELSE*
INCOME STATEMENT
Mio. kr.
DKK million
2000
2001
2002
2003
2004
Netto renteindtægter
Net income from interest
853.6
838.6
827.9
858.3
851.1
Udbytte af aktier mv.
Net income from fees, charges & comm.
242.2
229.6
243.8
282.1
299.0
Kursreguleringer**
Dividend on shares, etc.
18.6
21.7
23.6
25.4
39.4
Market-value adjustments
44.7
72.1
87.0
80.8
122.1
Andre ordinære indtægter
Other ordinary income
20.7
38.4
65.5
24.9
29.7
Kursregulering af kapitalinteresser
Market-value adjustments af investments
16.2
52.3
-5.0
-10.1
29.7
Basisindtægter
Core income
1,196.0
1,252.7
1,242.8
1,261.4
1,371.0
Lønninger mv.**
Operating costs, depriciation and 777.4
822.1
809.9
845.4
903.8 467.2
amortization Basisindtjening før tab og hensættelser
Core earnings before losses and provisions
418.6
430.6
432.9
416.0
Tab og hensættelser
Losses and provisions
211.0
347.3
307.4
224.8
170.8
Basisindtjening
Core earnings
207.6
83.3
125.5
191.2
296.4
Beholdningsindtjening
Earnings from investment portfolios
164.5
-24.2
18.4
21.0
58.0
Resultat før skat
Totalkredit (sale of shares)
-
-
-
101.0
44.4
-
Profit before tax
372.1
59.1
143.9
313.2
398.8
Skat af årets resultat
Tax on the profit for the year
114.8
0.9
27.6
76.3
84.2
Årets resultat
Profit for the year
257.3
58.2
116.3
236.9
314.6
BALANCE Mio. kr.
BALANCE SHEET DKK Million
2000
2001
2002
2003
2004
Samlede aktiver
Total assets
28,503.0
28,989.6
31,958.9
32,401.2
36,666.5
Indlån
Deposits
14,696.3
15,534.6
16,229.1
17,541.4
20,493.7
Udlån
Loans and advances
16,783.1
16,460.0
16,847.7
17,836.5
19,705.0
Garantier mv.
Guarantees, etc.
2,495.4
3,209.4
3,720.0
3,808.3
4,713.9
Egenkapital***
Shareholders' equity
1,690.0
1,692.2
1,934.3
2,067.4
2,227.9
Efterstillede kapitalindskud
Subordinated capital contributions
699.5
964.0
980.5
1,054.9
1,065.6
NØGLETAL
PERFORMANCE INDICATORS
2000
2001
2002
2003
2004
Egenkapitalforrentning før skat. pct.****
Return on equity before tax
22.8
3.5
7.9
15.7
18.6
Egenkapitalforrentning efter skat. pct.****
Return on equity after tax
15.8
3.4
6.4
11.8
14.6
Omkostningsandel af basisindtægter
Cost share of core income
0.65
0.66
0.65
0.67
0.66
Omkostningsandel af basisindtægter
Cost share (incl. losses/provisions)
inkl. tab og hensættelser
of core income
0.83
0.93
0.90
0.85
0.78
Tab og hensættelser på debitorer. pct.
Losses and provisions, pct.
1.1
1.7
1.7
1.0
0.7
Solvensprocent
Solvency ratio
9.4
10.5
10.5
11.2
10.2
Kernekapitalprocent
Core capital ratio
7.6
7.5
8.0
9.0
8.5
Antal ansatte (ultimo. heltid)
Number of employees 1,142
1,110
1,112
1,104
1,103
68
66
67
68
69
(full-time, end of year) Afdelinger
Branches
THE SPAR NORD SHARE
6
Kr. pr. aktie a 100 kr.
DKK per share of DKK 100
2000
2001
2002
2003
2004
Kurs ultimo
Official price, year end
332
324
344
504
725
Indre værdi
Net asset value (NAV)
331
326
373
398
429
Indtjening pr. aktie
Earnings per share
50
12
22
46
61
Udbytte
Dividend
30
10
10
20
30
Afkast pr. aktie. pct.
Return per share, pct.
25
1
9
49
48
Price earning
Price/earnings
7
28
15
11
12
The Year in Review - The Group DKK 398.8M PRE-TAX PROFIT
The number of customers who have joined the Bank’s loyalty program, "the Star Customer Concept", rose significantly in 2004. This concept was introduced in 2000, and at year-end there were about 40,000 Star Customers.
THE SPAR NORD BANK GROUP
DKK million
The number of shareholders continues to mount. At end-2004, the shareholder roster numbered 85,000, an increase of 2,800.
500 400
OPERATIONAL DEVELOPMENTS 300
Income Net interest income remained largely unchanged compared with 2003, viz. DKK 851.1m in 2004 versus DKK 858.3m the year before.
200
313.2
398.8
0
143.9
100 59.1
The return on equity, measured in terms of the average shareholders’ equity, is thus up from 15.7 pct. to 18.6 pct. Calculated on the shareholders’ equity at 1 January, the return amounts to 19.3 pct.
PRE-TAX PROFIT
372.1
In 2004, Spar Nord Bank generated a DKK 398.8m pre-tax profit - the best performance recorded since Spar Nord became listed in 1990. Compared with 2003, when the pre-tax profit amounted to DKK 313.2m, this represents a 27.3 pct increase.
2000
2001
2002
2003
2004
Due to the record profit performance, the Supervisory Board recommends to the Annual General Meeting to be held on 27 April 2005 that an extraordinary dividend of DKK 10 per share be distributed, which will lift the total dividend per share from DKK 20 to DKK 30. Management finds the profit highly satisfactory, a confirmation of the Local Bank Strategy adopted in 2001, which prescribes a focus on serving private customers and business enterprises in the local area and expanding outside North Jutland. The improvement in core operating earnings stems both from an increase in business volume greater than expected at year-start and a decline in losses and provisions. Growth in customer numbers and a greater volume of business with existing customers are factors affecting the swell in business volume.
THE SPAR NORD BANK GROUP
THE SPAR NORD BANK GROUP
DEPOSITS
LOANS & ADVANCES
DKK billion
DKK billion
12
2000
2001
2002
2003
2004
12
19.7
14 17.8
14
Share dividends amounting to DKK 39.4m in 2004 are somewhat above the 2003 level, viz. DKK 25.4m, a development explained particularly by an extraordinary DKK 11m dividend distributed by PBS International Holding A/S.
Market-value adjustments of equity investments amount to DKK 29.7m compared with DKK -10.1m in 2003, when a loss recorded by SDC, the data processing centre, impacted negatively on performance. The bulk of market-value adjustments derives from the share of profit recorded by Nørresundby Bank, in which Spar Nord’s interest comes to 50.2 pct. 16.8
16
Although fee rates remained largely unchanged, net income from fees, charges and commissions rose 6.0 pct. from DKK 282.1m in 2003 to DKK 299.0m in 2004. Thus, the increase primarily stems from heavy activity in securities trading and the arranging of mortgage-credit loans, as well as the growing interest shown by business enterprises in hedging interest and foreign-exchange transactions.
Other ordinary income rose from DKK 24.9m in 2003 to DKK 29.7m in 2004.
16.5
16
The average interest margin dipped 0.35 pct. from 2003 to 2004. This reduction is due to the sustained low interest level and increased lending of low-interest products. For instance, in 2004 the Bank launched investment credits and a home equity account with interest rates starting from 3.95 pct. p.a.
Market-value adjustments soared 51.1 pct. to DKK 122.1m, primarily due to mounting activity and the highly satisfactory earnings performance by the Trading, Financial Markets Division plus about DKK 20m from gains on shares in PBS International Holding A/S and Københavns Fondsbørs A/S.
16.8
18
20.5
18
17.5
20
16.2
20
15.5
22
14.7
22
Despite a 14.7 pct. growth in total business volume (deposits, loans & advances and guarantees) to DKK 44.9bn, net income from interest declined marginally, chiefly because the interest margin narrowed significantly.
2000
2001
2002
2003
2004
7
The Year in Review - The Group The changed impact caused by market-value adjustments of equity investments in SDC, the data-processing centre, is due to a rearranged price structure and policy. Consequently, the improvement in market-value adjustments is largely offset by higher current payments to SDC - recognized under costs. Costs Total costs edged up 6.9 pct. from DKK 845.4m to DKK 903.8m, which is slightly higher than projected. As stated above, the rise is ascribable to higher computer processing expenses, the establishment of branches outside North Jutland, the updating of the Bank’s branch network, increased marketing costs and a bonus provision. The profit for 2004 triggers a bonus to all Bank employees by way of employee shares at a market value of DKK 8,000 per full-time employee. As mentioned in the 2003 Annual Report, the 12 pct. return on equity - measured in terms of core earnings - triggered DKK 4,000, and a return of 13 pct. triggered a total of DKK 8,000. At end-2004, the number of employees totalled 1,103, which is unchanged from 2003. The goal is to retain the total staff number while also expanding outside North Jutland. In this connection, it should be mentioned that the number of employees in 2004 was roughly the same as in 1999. As is the case for other banks, the average age of Spar Nord’s employees is rising. In 2003 it was 43.3 years, and 43.7 in 2004. To counteract this trend, the Bank has decided to increase the number of new trainees, but retains its goal of keeping the total staffing level unchanged. Losses and provisions Losses and provisions developed on a satisfactory note and slightly better than forecast. In the 2003 Annual Report, losses and provisions were projected to fall from 1.0 pct. of loans, advances and guarantees to 0.9 pct. The result was 0.7 pct., corresponding to DKK 170.8m, versus DKK 224.8m in 2003.
THE SPAR NORD BANK GROUP
THE SPAR NORD BANK GROUP
RETURN ON EQUITY
OPERATING COSTS, AMORTIZA-
BEFORE TAX
TION AND DEPRECIATION
Pct.
DKK million
0
8
2000
2001
2002
2003
2004
0
903.8
200
EARNINGS FROM INVESTMENT PORTFOLIOS 2004 EXCL. ERHVERVSINVEST NORD Income statement Interest Dividend
Earnings from investment portfolios include DKK -4.9m regarding the subsidiary, Erhvervsinvest Nord.
DKK m 35.4 5.1
Market value adjustments
27.3
Income from inv. portfolios
67.8
Operating costs Earnings from inv. portfolios
4.9 62.9
Balance sheet total In 2004, deposits went up 16.8 pct. from DKK 17.5bn to DKK 20.5bn. Deposits at end-2004 are affected by extraordinarily large time deposits. Loans and advances grew 10.5 pct. from DKK 17.8bn at end-2003 to DKK 19.7bn at end-2004. Growth was heaviest in the corporate customer area. Today, corporate customers account for 64.2 pct. of the lending portfolio versus 63.6 pct. at the beginning of 2004.
The solvency ratio stood at 10.2 at end-2004 versus 11.2 pct. the previous year. The core capital percentage amounted to 8.5 at end-2004 versus 9.0 the previous year. 845.4
5
Earnings from investment portfolios Earnings from investment portfolios ended at DKK 58.0m in 2004 versus DKK 21.0m in 2003.
The balance sheet total climbed 13.2%, from DKK 32.4bn at end-2003 to DKK 36.7bn at end-2004.
809.9
400
Core earnings Core earnings have rocketed 55.0 pct., up from DKK 191.2m to DKK 296.4m in 2004.
On the mortgage-credit side, Spar Nord cooperates with Totalkredit, Nykredit and DLR Kredit, while our most important partners in the unit trust area are BankInvest and ValueInvest.
822.1
10
The improved credit rating is partly attributable to the Local Bank Strategy, which places greater focus on private customers and local businesses, and to a strengthening of central credit monitoring, which includes rating corporate customers and credit scoring private customers.
Along with the heavy increase in deposits and loans & advances, the Bank arranged mortgage credit products totalling DKK 4.6bn and unit trust certificates worth DKK 2.5bn.
777.4
600
18.6
15
15.7
800
7.9
20
3.5
1,000
22.8
25
Total provisions amounted to DKK 700.9m at end-2004, up DKK 42.5m compared with end-2003, at which time they stood at DKK 658.4m. Provisions increased while non-performing loans declined from DKK 180.5m to DKK 91.0m. Thus, total provisions are now 7.7 times higher than non-performing loans, compared to 3.6 times at the end of 2003.
2000
2001
2002
2003
2004
At the end of the 1. quarter 2005, Spar Nord expects to raise additional subordinated loan capital. The loan, expected to reach DKK 300m, will be raised as a loan with an option for premature redemption in 2015.
The Year in Review - The Group Customers and shareholders The number of both customers and shareholders grew in 2004.
AVERAGE SHORT AND LONG DANISH INTEREST RATE
The customer base expanded by 3,090 to 207,610. In percentage terms, the increase was largest for corporate customers.
Pct. 7
The number of shareholders continues to rise. In 2004, the Bank added 2,811 new shareholders to its shareholder roster, which has now reached 85,391.
6
EVENTS IN 2004 On 12 May 2004, Spar Nord Horsens opened for business as part of the Local Bank Strategy, and was able to report that income exceeded direct costs after only a few months of operation. The goal for new local banks is to yield a profit within three years. Provisional results show that they will reach that goal well ahead of schedule.
4
5
3 2 1997
1998
Long interest
On 14 January 2005, the seventh local bank opened outside North Jutland, this time in Fredericia. The goal continues to be to open one or two banks outside North Jutland a year. ANNUAL GENERAL MEETING AND DIVIDEND The Annual General Meeting will be held on 27 April 2005, at the company's address Skelagervej 15, 9000 Aalborg. At the Annual General Meeting, the Supervisory Board will recommend the distribution of a DKK 30 dividend per share, equal to DKK 155.6m, and that the balance of DKK 158.9m be transferred to the shareholders' equity. OUTLOOK FOR 2005 At the beginning of 2005, domestic business trends are expected to show sustained marginal improvement, except for North Jutland, which is hard hit by the relocation of workplaces to other parts of the country or abroad.
1999
2000
2001
2002
2003
2004
2005 primo
Short interest
On the interest side we expect an unchanged low, short interest in 2005, while the long interest is expected to rise slightly. Thus, the economic prospects signal continued pressure on the interest margin and unchanged or slightly lower losses and provisions. In addition, we expect business volume to grow slightly less than in 2004, measured in terms of year-end figures. Adjusted for non-recurring income deriving from PBS International and the Copenhagen Stock Exchange, core earnings for 2004 end at about DKK 265m. These earnings are expected to grow to DKK 270290m next year. In view of the expected opening of two local banks outside North Jutland, costs are projected to rise slightly less than 5 pct. The Supervisory Board has decided to distribute a DKK 4,000 bonus for 2005, provided that the return on equity, measured in terms of core earnings, amounts to 13 pct. A return on equity of 14 pct. or more will mean each employee gets DKK 8,000 by way of shares.
UNEMPLOYMENT IN NORTH JUTLAND AND DENMARK
YEAR 2004 FOLLOW-UP Business was slightly brisker in 2004 than projected at the beginning at the year, which also resulted in greater earnings than anticipated - even though the interest margin became far narrower than budgeted for.
Pct. 9 8
The more favourable development also caused the Bank to revise its profit forecast for the year upwards three times. Costs rose slightly more than projected, up 6.9 pct. compared with the expected 5-6 pct.
7 6 5 4 1997
1998
North Jutland
1999
2000
2001
2002
2003
Denmark
2004
2005 primo
In contrast, losses and provisions developed on a more favourable note than anticipated. The reason is that losses and provisions dropped significantly, while loans, advances and guarantees rose more than projected, resulting in a trimming of losses and provisions in percentage terms. According to the 2003 Annual Report, losses and provisions were expected to drop from 1 pct. to 0.9 pct., but they actually fell from 1 pct. to 0.7 pct. 9
The Year in Review - The Group IMPLEMENTATION OF IFRS AS FROM 1 JANUARY 2005 (unrevised) As a listed bank, Spar Nord Bank must present its Consolidated Financial Statements according to the international accounting standards, IFRS, no later than as from the 2005 financial year. Accordingly, in December 2004 the Danish Financial Supervisory Authority issued a new Recommended Accounting Procedure regarding financial reporting by credit institutions based on IFRS, which will be applied in the Parent Company’s financial statements. IFRS presents more options than the Recommended Accounting Procedure, but in its Consolidated Financial Statements Spar Nord Bank has chosen not to use the extra options. Accordingly, accounting policies in the Parent Company’s Financial Statements and the Consolidated Financial Statements will be identical after IFRS is implemented. The new accounting rules will be changed with effect from 1 January 2005, and the interim financial statements and quarterly reports for 2005 will thus be presented according to IFRS. The comparative figures for 2004 will be adapted, but the Bank will apply the transitional rules for the initial application of IFRS. This means that the IAS 39 financial reporting standard, which treats financial assets and financial liabilities, will not be implemented until 1 January 2005. The transition to the new accounting standards will impact the Bank’s shareholders’ equity at 1 January 2005 within the following areas:
According to IFRS, the criteria for writedowns of commitments have been clarified, as objective evidence of impairment must now be present before the need for writedown is assessed. Expected cash flows also need to be discounted, and assessments must be made on a portfolio basis. The portfolio will be considered to a much higher degree than in the past when the Bank calculates its writedown of commitments. In the private customer area, portfolio assessment is based on a behaviour score for seven categories. Major commitments, including corporate commitments, will still be assessed individually. Changes in the Bank’s calculation methods will impact the shareholders’ equity positively by DKK 7.3m. More stringent requirements are set up regarding the accrual accounting in respect of fees, charges and commission income, etc. received in connection with agreements on loans and deposits, as they are equated with interest payments and consequently need to be recognized as interest income over the term of the loan. Previously, all fees, charges and commission income, etc. were recognized as income as and when received. This change will affect the shareholders’ equity adversely by DKK 56.7m. According to IFRS, goodwill on consolidation is not to be systematically amortized. Instead, periodic impairment tests are carried out. This change was made effective as from 1 January 2004, for which reason amortization for 2004 will be reversed. The change will affect the shareholders’ equity positively by DKK 5.1m before tax. 10
In future, no provision will be made in the financial statements for proposed dividend to the Bank’s shareholders until such dividend has been adopted at the Annual General Meeting. Instead, proposed dividend will be allocated to a special reserve under the shareholders’ equity. This change will impact the shareholders’ equity positively by DKK 155.6m. Properties are to be assessed at market value according to IFRS and not at cost less depreciation as in the past. The valuation will be based on the return model designated by the Financial Supervisory Authority. The change will affect the shareholders’ equity positively by DKK 20.7m. Treasury shares are not recognized as an asset according to IFRS. The value of the shares must be charged directly against the shareholders’ equity upon acquisition. This change will affect the shareholders’ equity adversely by DKK 10.7m before tax. Own bonds are not considered an asset according to IFRS. The change will not impact the shareholders’ equity, as the value of own bonds is set off against the issued bonds (subordinated loan capital). This change will not affect the shareholders’ equity. According to the previous rules, hedging transactions and the hedged items were not market-value adjusted. According to IFRS, both the hedging transaction and the hedged item should be recognized at fair value. In addition, the hedging definition in IFRS will not comprise a number of hedging transactions according to the old rules. This change will not affect the shareholders’ equity. According to IFRS, the closing price and bid/ask price are used to value listed financial instruments instead of the average price on the closing day as in the past, and a "day 1 profit" is not to be recognized on unlisted financial instruments. This change will impact the shareholders’ equity negatively by DKK 4.1m.
OVERVIEW OF THE PROJECTED IMPACT ON THE BANK'S EQUITY DKK m The equity at 1 January 2005 - as per previous accounting policy Reduced writedowns of loans Income from fees, charges and commissions, etc. on accrual basis Amortization of goodwill on consolidated basis ceased Revaluation of properties to market values Treasury shares booked directly to shareholders' equity Own bonds recognized directly under subordinated loan capital Changed method for recognizing hedging transactions Changed method for calculating fair value of financial instruments Total adjustments before dividends and tax Total tax effect
2,227.9 7.3 -56.7 5.1 20.7 -10.7 0 0 -4.1 -38.4 15.1
Total adjustments before dividend
-23.3
No provision for proposed dividend
155.6
Expected net impact on shareholders' equity Expected equity at 1 January 2005 - after IFRS adjustments
132.3 2,360.2
Corporate Governance Spar Nord Bank lives up to the pivotal recommendations of the Nørby Committee and the Copenhagen Stock Exchange. Shareholder role and interaction with corporate management Spar Nord Bank has no limitations as to voting rights or ownership, these having been lifted at the Annual General Meeting in March 2003 when a model for appointing delegates was introduced. The model is meant to ensure influence for the 85,000 shareholders spread over 25 shareholder regions. Shareholders with less than 2,000 shares appoint eight delegates for the Annual General Meeting at annual decentralized shareholder meetings in each shareholder region, while shareholders holding 2,000 or more shares may attend the Annual General Meeting and vote according to their voting share. The delegates appointed at a shareholder meeting represent the total share capital held by all shareholders in the shareholder region, except for the part relating to shareholders with 2,000 or more shares. Other delegates vote with a weighting corresponding to their share capital. The shareholders directly elect six members of the Supervisory Board at the Annual General Meeting, while another three members are elected by and from among the employees pursuant to legislation. The Annual General Meeting will be held on 27 April 2005 at the Company’s address, Skelagervej 15, Aalborg. The role of stakeholders and their importance to the company Each year, using measurements in the Quality Accounting Statement, the Bank reviews the interaction with its most important stakeholders. In addition, the Bank’s Management holds regular meetings with the local bank councils and the chairmen of the bank councils. When the Interim Financial Statements are published, all delegates are invited to attend a meeting at the Bank to discuss the Bank’s development and how the decentralized and centralized units work together. Further, three annual meetings are held with the chairmen with a view to discussing the Bank’s strategy, the composition of the Supervisory Board and the annual evaluation of the work performed by the bank councils. Openness and transparency A cornerstone of the Bank’s communications and IR policies is for Spar Nord to be an open organization for all stakeholders. Both policies are set out at the Bank’s website, www.sparnord.dk. In addition to the statutory insider disclosures, each quarter the Bank publishes the shareholdings held by members of the Supervisory Board and the Executive Board.
The tasks, responsibilities and composition of the Supervisory Board The Supervisory Board holds ten ordinary meetings a year, a strategy seminar, a plenary meeting of the bank council, and three meetings with the chairmen of the bank councils. Members of the Supervisory Board are elected for terms of two years, with half of the shareholder-elected members being up for election in any given year. The age limit is 70. The Supervisory Board is independent of private interests, and the Annual Report contains all relevant information about individual persons. Each year, the work of the Supervisory Board is subjected to a written evaluation, and the work performed by the members of the Executive Board is also evaluated. Remuneration of the Supervisory Board and the Executive Board Members of the Supervisory Board receive a fixed fee. Besides their fixed salary, members of the Executive Board participate in a bonus program, under which they get a bonus if the employees receive a collective bonus and the employee satisfaction rating develops satisfactorily. The severance program for the members of the Executive Board is mentioned in "Notes to the Financial Statements". The share option program for members of the executive team was wound up in 2004. Risk management Risk management is discussed later in this Annual Report.
SHAREHOLDINGS*
Spar Nord bank shares held by members of the Supervisory Board and the Executive Board Torben Fristrup Erling Kjær Niels Ole Arndt Trine Bruun Haals
No. No. 21 Jan. 04 03 Jan. 05
200
200
1,193
1,049
395
395
-
204
Henrik Hougaard
1,810
0
Jan Høholt Jensen
-
278
-
0
103
118
Per Søndergaard
2,746
1,340
Lasse Nyby
3,489
3,189
John Lundsgaard
3,807
3,807
Lars Møller
3,726
3,726
Carsten Normann Ole Skov
*) The holdings include all shares held by all members of household.
11
Shareholders In 2004, the Spar Nord Bank share yielded a total return of 48 pct., an amount that follows the 49 pct. return in 2003. Measured over the past five years, the return has averaged 27.3 pct., which must be termed highly satisfactory. After a shallow upward trend during the first six months, the share price rallied in the second half of the year - in line with a number of other bank shares - and the price/NAV rose from about 1.3 to 1.7. Beyond growing earnings, expectations of further consolidation in the business have spurred the generally higher price fixing of bank shares.
PRICE DEVELOPMENT FOR THE SPAR NORD BANK SHARE 2004 Index-linked 180 160 140 120
The distribution of shareholders is largely unchanged from 2003, despite the 2,811 new shareholders added to the shareholder roster. The private shareholders, i.e. shareholders holding less than 2,000 shares, still hold more than half the share capital, while the Spar Nord Foundation is by far the largest single shareholder, with 30.2 pct. of the share capital. In total, 44 shareholders hold 2,000 or more shares in Spar Nord, a slight decline compared with 2003, when there were 49. With its 7.3 pct. interest, Nykredit Realkredit A/S, Copenhagen is the second largest shareholder. THE SPAR NORD FOUNDATION The Spar Nord Foundation was established in 1990 when Spar Nord was converted into a public limited company. The Foundation’s objective is to carry on the activities of Spar Nord and distribute funds for charitable purposes. The Foundation’s Board of Trustees is composed of nine members. Pursuant to legislation, members from the Bank’s Supervisory Board must make up the majority - in this case five members. Four members are elected by and from among the chairmen of the decentralized bank councils.
80 Jan.
Feb.
Mar.
Apr.
May
10 August 2005 • Interim Financial Statements. Number of listed
shareholders
Pct. 2003
Pct. 2004
5 shares or less
25,833
84,012
1.6
1.6
6 - 10 shares
10,904
120,975
2.3
2.3
11 - 100 shares
43,808
1,754,874
32.9
33.8
4,387
614,422
12.4
11.9
101 - 400 shares 401 -1,999 shares 2,000 or more shares
414
228,834
4.5
4.4
44
2,347,168
45.8
45.2
14,759
0.1
0.3
Treasury shares Shares not registrated in name Total
85,391
23,436
0.4
0.5
5,188,480
100.0
100.0
Sep.
Oct.
Nov.
Dec.
FINANCIAL CALENDAR 2005
27 April 2005 • Annual General Meeting and quarterly report for the first three months.
Beginning of 2005
Aug.
The KFX index
As a result of the highly satisfactory 2004 profit, the Supervisory Board has decided to distribute an extraordinary dividend of DKK 10 per share. Thus, the total dividend for 2004 will reach DKK 30 per share.
"As long as the Bank presents its shareholders with a competitive yield, it is the Foundation’s policy to defend the Bank’s independence - towards the Bank’s customers, employees and the community at large".
Distribution af shares
Jul.
DIVIDEND POLICY The Bank maintains its policy of distributing the part of its profits not used for business development purposes. In 2003, this policy was extended to account for the expectation that the Bank would be able to distribute about DKK 20 per share per year for the next few years - assuming that financial developments remain stable.
28 February 2005 • 2004 Annual Report.
Shareholders' total shareholdings No. of shares
Jun.
The Spar Nord Bank index
The Foundation bases its Bank ownership policy on the following principle:
SHAREHOLDER DETAILS
12
100
26 October 2005 • Quarterly Report 1st 3rd quarters.
THE SPAR NORD BANK SHARE RETURN Pct. 50
4 3
40 30 20
10
10 9
0
Net
15
-2
3 6
46
44
2000
2001
2002
2003
2004
25
7
9
49
48
Price gains Dividend
The Quality Accounting Statement HIGH SATISFACTION RATE AND CUSTOMER INTAKE Corporate customers For the second year running, corporate customers’ loyalty rating rose, and the intake of new corporate customers also grew significantly.
The number of private customers has grown by 2,180 to 186,939. New customers are chiefly coming from the new areas in which the Bank has opened local banks.
In 2004, corporate customers scored 3.9 on loyalty - on a scale from 1-5 - the score in 2003 being 3.7. During the same period, the Bank netted 910 new corporate customers, equal to a 4.6 pct. increase, which is very satisfactory.
Employees Satisfaction among employees, which is measured quarterly, has reached its highest level in years, and the number of "avid employees" remains at an unchanged high level. Avid employees are defined according to the scores they achieve with respect to satisfaction as well as loyalty. In 2004, avid employees accounted for a 65 pct. share.
The satisfaction rate for corporate customers showed progress across the board; for instance, an increasing number of corporate customers say they would recommend Spar Nord to other customers, which is the best conceivable kind of marketing.
The level is unsatisfactory in three areas – although improving. Dissatisfaction centres on the IT systems, the ability among higher-echelon staff to give feedback, and then the view that extraordinary efforts are not rewarded adequately.
Corporate customers also assess Spar Nord’s image to have improved. In 2004, they rated the Bank’s image at 4.3, compared to 4.1 in 2003.
A more detailed analysis of “avid employees” shows a correlation with age, in the sense that the number of avid employees among older staff members is greater than among younger staff.
Private customers Private customers’ loyalty rate grew to 4.3 in 2004 from 4.2 in 2003.
This result is open to several interpretations. Seen from a positive perspective, the older staff members show greater commitment than younger staff, and we can therefore rightly talk about "the grey gold".
Previous surveys show that customer loyalty greatly depends on the Bank’s general image. The Bank needs to have a good reputation in all areas and be seen as a modern business. In this connection, private customers find the Bank to be showing increasing professionalism and business acumen.
Negatively interpreted, the Bank has failed to create a culture fostering young, avid employees; the culture too narrowly targets the slightly older employees to the detriment of the younger ones.
For private customers, loyalty and a mutual commitment to the customer’s personal financial affairs are closely linked. Analyses of the Quality Accounting Statement show that the more meetings the account officer holds with the customer, the higher the loyalty score becomes. THE QUALITY ACCOUNTING STATEMENT AVID EMPLOYEES* THE QUALITY ACCOUNTING
THE QUALITY ACCOUNTING
Total result for the Bank - pct.
STATEMENT
STATEMENT
100
LOYALTY
THE BANK'S IMAGE
Total result for the Bank
Total result for the Bank
5,0
5,0
4,5
4,5
4,0
4,0
3,5
3,5
3,0
3,0
2,5
2,5
80 60 40 20 0 Medarbejdere
2003 Priv. Custom. Priv. Custom. Corp. Custom. banking with competitors
2003
2004
Priv. Custom. Priv. Custom. Corp. Custom. banking with competitors
2003
2004
2004 *
The definition of "avid employees" is given in the section entitled "The Quality Accounting Statement".
13
The Quality Accounting Statement Finally, the actual interpretation may lie between the two. Young employees demand more from their workplace, and many are undoubtedly undecided about having found their true niche, while the older ones must be assumed to have so. The average seniority in 2004 remains almost unchanged at just under 15 years from 2000 to 2004, while the average age has gone up from 41.7 to 43.7. Incidentally, the average seniority and age of the employees has sparked off internal discussions, and a decision has been made to raise the number of trainees from 12 to 22 in 2005. Spar Nord is not the only organization experiencing ageing. So is most of the financial sector. A sharp rise in the number of employees in the early 1980s and comparatively few recruitments since then are now showing in the age distribution.
THE QUALITY ACCOUNTING STATEMENT Every year since 1990, Spar Nord has published figures detailing the development in customer and employee satisfaction ratings. The project was initially called the "Ethical Accounting Statement", but has become the "Quality Accounting Statement" in more recent years. The results are primarily used in the Bank’s internal management, where targets are set for the development desired during the next few years. On the employee side, a simplified measurement is performed every quarter, with a view to assessing whether the value "attractive workplace" is achieved or not. The most recent measurement, performed in autumn 2004, showed the highest rating since the measurement started in 2001.
The annual comparisons between absenteeism at Spar Nord and generally in the sector also show that Spar Nord is a good place to work. Year for year, comparisons show that absenteeism is somewhat lower than for the sector in general. While the staff was significantly upgraded from 2002 to 2003, largely no development occurred from 2003 to 2004.
KEY FIGURES FOR CUSTOMERS Number - Private customers
2000
2001
2002
2003
2004
177,854
183,473
184,112
184,759
186,939
14,190
15,070
15,200
19,761
20,671
Loyalty - Private customers
-
-
4.1
4.2
4.3
Loyalty - Corporate customers
-
-
3.7
3.7
3.9
Image - Private customers
-
-
4.4
4.4
4.5
Image - Corporate customers
-
-
4.0
4.1
4.3
2000
2001
2002
2003
2004
-
-
58.3
65.3
65.0
70/46
39/70
-
60/72
74/71
Number - Corporate customers
KEY FIGURES FOR EMPLOYEES Share, "avid employees", pct. Recruitments/resignations Average seniority
14.7
14.7
14.5
14.5
14.9
Average age
41.7
42.4
41.2
43.4
43.7
Educational level of employees: a) Financial continuing education
-
-
574
601
581
b) Business Diploma
-
-
251
261
264
c) Graduate in Business Administration
-
-
68
85
87
d) University education
-
-
44
53
53
1.56/2.35
1.72/-
-
2.22/2.59
1.71/-
Absenteeism: the Spar Nord Bank/the Sector, pct.
14
Example from the autumn 2004 campaign
Choose us
for the money
15
Business Areas BROKEN DOWN BY BUSINESS AREAS CORE EARNINGS 2004 Spar Nord's local banks
Corporate Banking
Trading. Financial Market and the Int. Division
24 bank areas 69 local banks
Corporate Banking Division Private Banking
Trading Division International Division
Finans Nord A/S
Corporate Coordination & Support Back Office HR Dept. IT Dept. Concept Dept. Process Dept. SN Production SN Direct
Executive Board
Spar Nord Bank
Management Support Units and other units (headquarters)
Total 2004
Income statement - DKK million Core income
962.6
76.5
132.7
119.1
14.0
66.1
1,371.0
External expenses
381.6
13.8
48.2
46.4
278.4
135.4
903.8
Internal expenses
330.4
15.3
-14.0
3.3
-283.4
-51.6
0.0
Total costs and expenses
712.0
29.1
34.2
49.7
-5.0
83.8
903.8
Core earnings before losses and prov.
250.6
47.4
98.5
69.4
19.0
-17.7
467.2
93.4
7.4
0.1
26.2
1.5
42.2
170.8
157.2
40.0
98.4
43.2
17.5
-59.9
296.4
Losses and provisions Core earnings Earnings from investments portfolios
58.0
Totalkredit (sale of shares)
44.4 398.8
Profit before tax
Balance sheet figures - DKK million Loans and advances Growth in pct. Deposits Growth in pct. Guarantees
13,279.3
2,874.7
3,291.6
15.0
-4.3
5.6
15,621.8
1,651.5
8.3
14.9
4,269.4
126.8
30.2
12.3
13,858.1
2,371.0
2,438.8
2,460.1
1,108.7
189.7
195.1
196.8
Return on equity, pct.
14.2
21.1
50.4
21.9
18.6
Cost share of core income
0.74
0.38
0.26
0.42
0.66
Growth in pct. Risk-weighted items Allocated capital, 8 pct.
Key figures
16
Spar Nord's Local Banks MANAGEMENT Lars Møller, Managing Director
KEY FOCUS AREAS THE QUALITY ACCOUNTING STATEMENT
NUMBER OF EMPLOYEES 697 (end of year, full-time) Spar Nord’s local banks constitute the largest organizational unit in the Bank. This business area includes the 17 bank areas in North Jutland and seven in the rest of the country. In early 2005, there were 69 local banks, including Fredericia, spread over 24 bank areas.
SPAR NORD'S LOCAL BANKS 2003
2004
Private - highest
4.5
4.6
Private - lowest
4.1
4.1
Corp. - highest
4.4
4.5
Corp. - lowest
3.9
4.1
Private - highest
4.3
4.4
Private - lowest
3.6
3.6
Corp. - highest
4.1
4.2
Corp. - lowest
3.6
3.6
66.5
64.4
Image*
Loyalty*
Avid empl.** - pct.
*) Highest/lowest score among the local banks. **) The definition of “avid employees” is given in the section entitled “The Quality Accounting Statement”.
In 2004, Spar Nord Horsens opened for business, followed by Spar Nord Fredericia in January 2005. Thus, outside North Jutland the Bank is represented in Fredericia, Horsens, Odense, Vejle, Herning, Århus and Copenhagen. During 2005, Spar Nord Copenhagen will obtain a more visible location, moving to an address at the Town Hall Square in Copenhagen.
Private customers Interest in the Bank’s loyalty concept, the Star Customer Concept, remains high. In 2004, the number of Star customers increased by almost 6,000, reaching more than 40,000 at the end of the year. A high activity level characterized the home loan area in 2004. In the year under review, the local banks arranged 4,500 mortgage loans through Totalkredit and Nykredit, corresponding to a total of DKK 3.7bn. This activity is in line with the previous year. In 2004, lending via home equity accounts totalled DKK 327.0m at year-end, spread over 1,100 commitments. In the pension area, developments set an all-time record in 2004. Total deposits on customers’ pension savings accounts jumped 23.5 pct. to DKK 590.4m, one reason for the gratifying result being a targeted special training program for pension advisers at Spar Nord’s local banks. In the investment field, the positive stock market trends rubbed off on Spar Nord’s local banks. In 2004, investment certificates with a total market value of about DKK 2.5bn were channelled to customers via BankInvest, ValueInvest and PlusInvest. The number of customers using Spar Nord Netbank services continued to rise sharply. In 2004, 10,000 new Netbank agreements were concluded, meaning that almost 44,000 customers - or 23.5 pct. of customers at the local banks - have signed up for the Netbank system.
Spar Nord’s local banks have wide, decentralized decision-making powers, and by far the most decisions are made locally. This business area focuses primarily on private customers and businesses in the local area. DEVELOPMENT 2004 was an outstanding year for Spar Nord’s local banks, with satisfactory core earnings of DKK 157.2m. This performance yields a 14.2 pct. return on the allocated capital, up 4.2 percentage points on the previous year. The performance derives from a heightened activity level - with total deposits up DKK 1,197.4m, equal to 8.3 pct., and growth in lending of DKK 1,733.9m, corresponding to 15.0 pct. In addition, the local banks recorded an advance in customer intake on both the private and corporate sides. In 2004, Spar Nord’s local banks recorded a marked drop in losses and provisions, which aggregated DKK 93.4m versus DKK 134.9 the previous year. In 2004, the number of staff members at Spar Nord’s local banks rose by 10, up from 687 to 697.
17
Spar Nord's Local Banks DEPOSITS
OUTLOOK FOR 2005 Spar Nord’s local banks forecast sustained positive development in 2005, with growth in the customer base and earnings both in North Jutland and beyond. The local banks also expect losses and provisions to keep declining.
LOANS AND ADVANCES
On the private customer side, the local banks expect activity to step up in the investment and home loan areas, in particular. On the corporate customer side, the loyalty concept, Star Corporate, will be followed up in 2005.
Pct.
Pct.
Private customers
70.2
Private customers
41.3
Corporate customers
29.8
Corporate customers
58.7
Corporate customers Customer development was satisfactory on the corporate side in 2004. The advance is attributable to customers’ favourable response to the Bank’s new loyalty concept for corporate customers, "Star Corporate", launched in 2004. At end-2004, Spar Nord’s local banks had about 350 Star customers in the corporate area.
Additionally, there are expectations to establish one or two new local banks outside North Jutland in the coming year - and with the opening of Spar Nord Fredericia in January 2005, this process is already in motion. In early 2005, a new version of the Netbank was introduced, offering customers a variety of new facilities and improvements in existing ones. In 2005, corporate customers will be introduced to a new self-service system to replace the existing Officebanking system. The new browser-based system has the same functions as before, but contains some new functions that make self-service even easier for customers.
Cooperation with DLR-Kredit and Nykredit in the corporate area remained satisfactory in 2004 as well. The total gross lending arranged amounted to DKK 916.4m. At year-end, more than 46 pct. of the Banks’ corporate customers had linked up with Office Banking. In 2004, the newly established local banks in Horsens, Herning, Vejle and Odense continued the positive development realized since their establishment.
FACTS Income statement
2003
2004
Core income
931.5
962.6
External expenses
371.9
381.6
Internal expenses
324.2
330.4
Total costs and expenses
696.1
712.0
Core earnings before losses and prov.
235.4
250.6
Losses and provisions
134.9
93.4
Core earnings
100.5
157.2
11,545.4
13,276.3
Balance sheet figures Loans and advances Growth in lending, pct. Deposits
DKK m
DKK m 2.8
15.0
14,424.4
15,621.8
4.4
8.3
12,848.2
13,858.1
1,027.9
1,108.7
Return on equity, pct.
10.0
14.2
Cost share of core income
0.75
0.74
Growth in deposits, pct. Risk-weighted items Allocated capital, 8 pct. Performance indicators
18
Corporate Banking MANAGEMENT Niels Arnold Lund, Senior Executive Vice President NUMBER OF EMPLOYEES 22 (end of year, full-time) Corporate Banking employees work for two divisions: Corporate Banking, which is responsible for the Bank’s largest corporate customers - regardless of geographical location - and Private Banking, which specializes in comprehensive counselling of high-net-worth individuals and key executives in the corporate sector on active asset and debt management.
THE QUALITY ACCOUNTING STATEMENT CORPORATE BANKING 2003
2004
- Private customers
4.2
4.4
- Corp. customers
3.9
4.3
- Private customers
3.9
4.1
- Corp. customers
3.4
3.7
Avid empl.* - pct.
75.0
66.7
Image
Loyalty
*) The definition of “avid employees” is given in the section entitled “The Quality Accounting Statement”.
DEVELOPMENT In 2004, Corporate Banking recorded satisfactory core earnings, viz. DKK 40.0m versus DKK 32.7m the previous year. This result yields a 21.1 pct. return on the allocated capital. The result stems from growth in the business volume with existing customers and a respectable intake of new customers. At the same time, total costs dropped 17.6 pct. from DKK 35.3m in 2003 to DKK 29.1m in 2004. Losses and provisions remain at the same low level as the previous year.
In cooperation with the Bank’s International Division, Corporate Banking also joined in the "Scandinavian China Partnership", a contact exchange where representatives of more than 200 Chinese, Danish, Norwegian and Swedish companies met to establish business relations with one another. In 2004, Corporate Banking partnered with SWITZR, a network of Business Partners - formerly business executives and/or owners - which operates as a sparring partner for established companies in connection with generational changes, MBOs or general business development. Business Partners can contribute business competences as well as capital to the companies. OUTLOOK FOR 2005 Corporate Banking expects growth in earnings, as the intake of new customers is projected to continue and the business volume for individual customers to grow. The unit means to meet this target by focusing on promotional sales activities and on a number of customer-related events intended to bolster relations to the corporate customer segment. In 2005, Corporate Banking will establish its own shareholder region and its own bank council. The bank council - intended to operate as a close sparring partner for management in Corporate Banking - will be composed of businessmen with a wide variety of business backgrounds. Corporate Banking will hold the first shareholder meeting in March 2005.
In 2004, total loans and advances dropped 4.3 pct. to DKK 2.9bn, while deposits grew 14.9 pct. to DKK 1.7bn. The decline in loans and advances is attributable to the winding up of major individual commitments. In 2004, the securities trading area was characterized by high activity with the resultant satisfactory earnings level. Brisk activity also characterized interest hedging and financial instruments advisory services. In 2004, Corporate Banking recorded a net customer intake of 82. At year-end, customers totalled 1,409. KEY FOCUS AREAS In 2003, Corporate Banking - in cooperation with Aalborg University - launched a program to develop all employees’ competences, under the heading, "From bankers to businessmen". The program - which is intended to ensure proactive sparring with customers - proceeded according to plan in 2004 and will end with an examination in early summer 2005.
FACTS Income statement
2003
2004
Core income
75.5
76.5
External expenses
14.1
13.8
Internal expenses
21.2
15.3
Total costs and expenses
35.3
29.1
Core earnings before losses and prov.
40.2
47.4
Losses and provisions Core earnings Balance sheet figures
Corporate Banking also took part in a number of customer-targeted activities in 2004 - including the granting of the "Entrepreneur of the Year" award in North Jutland. Throughout the year, Corporate Banking has also arranged several customer events focusing on issues such as investment and Private Banking.
DKK m
Loans and advances Growth in lending, pct. Deposits
7.5
7.4
32.7
40.0
3,004.6
2,874.7
DKK m 18.5
-4.3
1,437.1
1,651.5
40.1
14.9
2,401.3
2,371.0
192.1
189.7
Return on equity, pct.
17.9
21.1
Cost share of core income
0.47
0.38
Growth in deposits, pct. Risk-weighted items Allocated capital, 8 pct. Performance indicators
19
Trading, Financial Markets & the Int. Division MANAGEMENT Jan Gerhardt, Senior Executive Vice President
THE QUALITY ACCOUNTING STATEMENT TRADING, FINANCIAL MARKETS &
NUMBER OF EMPLOYEES 55 (end of year, full-time)
THE INTERNATIONAL DIVISION
Avid empl.* - pct.
2003
2004
45.3
44.2
*) The definition of “avid employees” is given in the section entitled “The Quality Accounting Statement”.
Trading, Financial Markets & the International Division consists of the Trading, Financial Markets Division, which handles customers’ foreign exchange and securities trading, as well as the Bank's interbank trading and the International Division, which is responsible for customers’ foreign transactions. In addition, this business area is responsible for establishing and expanding business cooperation with other Danish banks. DEVELOPMENT In 2004, Trading, Financial Markets & the International Division recorded extremely satisfactory core earnings, viz. DKK 98.4m, up 9.9 pct. on the previous year. This profit yields a 50.4 pct. return on the allocated capital. Besides the result of the area’s own business, the activity level was extremely high in the entire securities, foreign exchange and international area in cooperation with Spar Nord’s local banks. The positive trends in both the Danish and the foreign stock markets characterized activities in securities trading, which meant customers’ securities trading remained highly satisfactory throughout the year. Activities in the bond, foreign exchange and money markets were also satisfactory, even though the bond market encountered a number of challenges, including the launching of new guarantee products by mortgage credit institutions.
KEY FOCUS AREAS One major activity in Trading, Financial Markets was to establish Spar Nord FormueInvest, an independent investment company investing shareholder funds as well as loan capital in a mixed portfolio of listed shares and other financial instruments. The goal is to generate an average return of minimum 10 pct. p.a. before tax and operating costs with an overall risk in line with stockmarket investments. On 9 February 2005, Spar Nord FormueInvest A/S was admitted to official listing on the Copenhagen Stock Exchange, fetching DKK 497m in share capital as a result. Cooperation with Trading, Financial Markets will continue over the next few years, as the company has entered into an agreement with the portfolio function regarding management of its funds. At year-end, the Bank took on ten investment trainees in response to the extremely positive development expected in the investment area over the next few years. In 2004, the International Division dedicated major resources to trimming the IT systems to support the division’s growth. The division has also adapted its systems to a new EU regulation concerning EUR payments that entered into force in 2003. To streamline these payments, the Bank has joined a European payment channel - STEP 2 - thus giving customers access to cheaper EU payments. OUTLOOK FOR 2005 Trading, Financial Markets & the International Division expects satisfactory earnings in 2005 as well. Earnings are expected to remain at a high level, as the interest in investment is projected to continue rising. We expect economic growth in Denmark to intensify in the commercial area, a development that will be mirrored by mounting turnover with foreign entities. Consequently, we also forecast sustained growth in forex and foreign products.
FACTS Income statement
Earnings recorded by the International Division in 2004 were also better than projected. The division’s earnings stem primarily from customers’ foreign trading - and during the year the division set a record concerning the number of foreign payments. The Trade Finance area was also characterized by satisfactory activity.
DKK m
Core income
2004 132.7
External expenses
48.4
48.2
Internal expenses
-16.1
-14.0
Total costs and expenses
32.3
34.2
Core earnings before losses and prov.
89.5
98.5
0.0
0.1
89.5
98.4
1,849.5
2,438.8
148.0
195.1
Return on equity, pct.
48.2
50.4
Cost share of core income
0.27
0.26
Losses and provisions
At year-end, Trading, Financial Markets & the International Division had 55 employees, as in 2003.
2003 121.8
Core earnings Balance sheet figures Risk-weighted items Allocated capital, 8 pct.
DKK m
Performance indicators
20
Corporate Coordination & Support MANAGEMENT John Lundsgaard, Managing Director
THE QUALITY ACCOUNTING STATEMENT CORPORATE COORDINATION &
NUMBER OF EMPLOYEES 198 (end of year, full-time)
SUPPORT
Avid empl.* - pct.
2003
2004
65.2
72.7
*) The definition of “avid employees” is given in the section entitled “The Quality Accounting Statement”.
Corporate Coordination & Support supplies internal and administrative services, with the rest of the Group constituting its customer base. This business area is responsible for creating economies of scale, efficiency and quality in the services provided in-house. Corporate Coordination & Support consists of the Process Department, the Concept Department, the HR Department, the IT Department, Back Office, Spar Nord Production and Spar Nord Direct.
In 2004, Corporate Coordination & Support completed a comprehensive sweep-up of the Bank’s internal business procedures. The updating served to trim the scope of business procedures by 70 pct., much to the satisfaction of the Bank’s customer advisers, who can now devote even more time to customer service. To foster a more business-generating organization, Corporate Coordination & Support has also completed a project to simplify the procedure for distributing the Bank’s internal costs. In 2004, a Hotline service for corporate customers using Officebanking was insourced into the Bank. The object was to boost the service level and to improve the use of resources at Hotline. In addition, the Bank made an agreement with two external banks to handle the Hotline function for their corporate customers. Many of the Bank’s customer-targeted employees also completed a sales-coach training program - and at end-2004, the Bank had a salescoach team of 42 employees. The intention is to develop the competences of the other customer-targeted employees at the Bank.
In 2004, Corporate Coordination & Support realized a decline in total costs of 1.4 pct. from DKK 282.3m in 2003 to DKK 278.4m in 2004. A fall in the Bank’s total IT costs and a number of cost streamlining efforts implemented over the year contributed to this reduction.
OUTLOOK FOR 2005 In 2005, Corporate Coordination & Support expects to expand the insourcing of Hotline services for corporate customers so as to encompass more external banks.
KEY FOCUS AREAS A few organizational adaptations were made in Corporate Coordination & Support over the year. The Process Department was established to focus on the Bank’s efficiency, work processes and workflow. At the same time, the Project Department was closed.
In relation to the continued competence development of the Bank’s employees, there are plans to launch a new training concept for Bank executives in 2005.
In addition, several of the administrative functions were relocated from the local banks to Corporate Coordination & Support, a decision intended to help the Bank continually improve customer service by separating customer-targeted functions from internal administration. Nevertheless, the number of employees in Corporate Coordination & Support declined from 212 in 2003 to 198 in 2004.
On the systems side, a new HRM system will be implemented in 2005 together with a new telephone system at the Bank. In 2005, there will also be focus on boosting efficiency at Corporate Coordination & Support, and as a direct consequence the staffing level is expected to be trimmed.
A high activity level characterized the production units in 2004 as well. The number of processed cases rose 5 pct. on 2003, when the increase was 8 pct. In 2004, Corporate Coordination & Support implemented a number of technological changes at the Bank. On the system side, Corporate Coordination & Support completed a platform change from OS2 to Windows, with all workstations having been transferred to Windows XP at mid-year. Moreover, much of the Bank’s network was updated to fibre cables during the process of establishing a new network at a number of local banks. In continuation of this transition, Corporate Coordination & Support expects to clarify in 2005 whether the Bank will use IP telephony in future.
FACTS Income statement
DKK m
2003
2004
14.9
14.0
External expenses
282.3
278.4
Internal expenses
-271.7
-283.4
Core income
Total costs and expenses Core earnings before losses and prov.
10.6
-5.0
4.3
19.0
Losses and provisions
1.5
1.5
Core earnings
2.8
17.5
21
Finans Nord A/S MANAGEMENT Gert Tougaard, Chief Executive Officer NUMBER OF EMPLOYEES 56 (end of year, full-time)
The year was generally characterized by brisk activity, including the opening of the Vejle office and the commencement of a new strategy term covering the period through 2007. Two sub-elements in the strategy, intended to ensure sustained growth in profit and lending, were already launched in 2004.
THE QUALITY ACCOUNTING STATEMENT FINANS NORD A/S
Avid empl.* - pct.
2003
2004
68.3
65.5
*) The definition of “avid employees” is given in the section entitled “The Quality Accounting Statement”.
The establishment of a new core competence area, Industry, is another initiative. In summer 2004, three key account managers were appointed, possessing special competences within iron, metal, plastics, wood and the offset industry. Yet another element is to implement a rationalization process for the administrative routines, a move that has already produced substantial savings.
Finans Nord A/S is a nationwide financing company in the Spar Nord Bank Group, headquartered in Aalborg and with regional offices in Roskilde and Vejle.
OUTLOOK FOR 2005 Finans Nord projects sustained positive development for 2005. As a result, staff numbers are also expected to increase.
The company specializes in corporate financing via
In addition, Finans Nord will expand the potential for following customer activities in a number of European countries. Finans Nord already offers leasing agreements with Poland, France, the UK, Hungary and the Baltic Region. In 2005, Finans Nord will be able to offer agreements for Germany as well.
• • •
fixed asset leasing financing for loans and purchase agreements against mortgages/rights in tangible assets operational leasing of company cars.
Finans Nord’s core competence lies within leasing of equipment to the areas, transport, farming, machine pools, contractors and industry. Leasing is an area undergoing continued growth, as more and more undertakings favour low establishment costs and flexibility in the payment process.
Finans Nord will continue to be known for its personal service, flexibility, swift case processing, and for being a financing partner that understands the line of business. For more details regarding Finans Nord, visit www.finansnord.dk
DEVELOPMENT In 2004, Finans Nord recorded highly satisfactory core earnings in the amount of DKK 43.2m versus DKK 38.4m the previous year. This result shows an advance of 12.5 pct., yielding a 21.9 pct. return on the allocated capital. In 2004, new agreements worth almost DKK 1.7bn were established, corresponding to more than 10 pct. growth compared with 2003. In addition, total net lending rose 5.6 pct. to DKK 3,291.6m.
FACTS Income statement*
DKK m
Core income
2003
2004
112.2
119.1 46.4
Losses and provisions remained largely unchanged compared to 2003. The rate of losses and provisions is considered acceptable.
External expenses
45.7
Internal expenses
2.5
3.3
Total costs and expenses
48.2
49.7
At end-2004, Finans Nord had a staff of 56 compared with 50 in 2003. The growth in the number of employees is a result of the increased activity level over the year.
Core earnings before losses and prov.
64.0
69.4
Losses and provisions
25.6
26.2
Core earnings
38.4
43.2
KEY FOCUS AREAS Finans Nord’s market position was also strengthened in 2004, with growth in both business volume and profit for the year.
Balance sheet figures
3,118.0
3,291.6
Loans and advances
DKK m 5.3
5.6
2,714.4
2,460.1
217.2
196.8
Return on equity, pct.
17.7
21.9
Cost share of core income
0.43
0.42
Growth in lending, pct. Risk-weighted items Allocated capital, 8 pct. Performance indicators
*
22
Internal layout
Example from the autumn 2004 campaign
Did you choose Peter just for the money?
23
Credit Risks CREDIT RISKS Credit risks are defined as those involving the inability of borrowers to meet their obligations. Risks are managed based on the Bank’s credit policy, which is geared to ensure that earnings and risks are in equilibrium, and that the risk of loss is always quantified. The Bank’s primary customer base consists of private customers and small and medium-sized businesses. The Bank has introduced a limit on commitments, which may not exceed 10 pct. of the Group’s shareholders’ equity. Monitoring In recent years, the Bank has focused on developing computer-based tools for controlling and monitoring credit risks. Monitoring takes place via the Bank’s credit analysis system, in which key data regarding credit commitments and customers’ financial affairs are recorded. The objective of using the credit analysis system is to detect danger signals from commitments at an early stage, while also monitoring portfolios and organizational units. Rating and credit scoring The Bank has developed a rating system for corporate customers and a credit score system for private customers, intended to support the central monitoring function.
Provisions are made when there is reason to believe that a customer will be unable to repay loans or credits, whether in whole or in part. Commitments need not be in default before provisioning occurs. When provisions are made regarding a particular credit facility, the approval procedures for any new extension of credit are automatically tightened for the customer. Doubtful loans - loans for which interest accruals have been suspended because full collection of the principal is unlikely or because no interest has been paid for an extensive period of time - are subject to special scrutiny, and if repayment is considered improbable and loss unavoidable, the loan is written off in whole or in part as uncollectible bad debt. The Bank reclassifies credit facilities as non-performing loans when it estimates that booking interest as income will inflict further losses on the Bank. Loan portfolio Before offsetting loan loss provisions, the Group’s loans, advances and guarantees amounted to DKK 25.1bn at end-2004, up 12.7 pct.
THE GROUP'S LOANS, ADVANCES AND GUARANTEES
Banking sector
Industry - pct.
Corporate customers are divided into eight rating classes based on financial performance indicators. Private customers are scored every month and categorized into seven risk classes. The credit scoring is a statistical quantification of the loss risk associated with a commitment. Private customers are categorized based on the calculated probabilities of incurring a loss on the individual customer.
31.12.03
31.12.03
31.12.04 31.12.04
3.9
12.4
13.5
14.8
10.6
6.2
5.3
11.0
Building and construction
2.2
4.3
3.9
5.2
Wholesale and retailing, etc.
7.4
10.4
10.0
12.6
Agriculture, firsheries, etc. Manufacturing
3.1
7.3
7.3
5.9
Financing, services, etc.
47.0
23.0
24.2
12.5
Corporate customers, total
74.2
63.6
64.2
62.0
Private customers, total
25.8
36.4
35.8
38.0
100.0
100.0
100.0
100.0
Transport
Total
Back tests of the rating systems and the ability of the credit scoring to risk-classify customers are carried out regularly. Customers’ placement in individual rating classes is needed for decentralized functions to grant credit and handle unauthorized overdrafts.
Distribution of provisions Spar Nord Spar Nord Spar Nord
Does not include credit institutions, etc.
THE GROUP'S LOANS, ADVANCES AND GUARANTEES
A central function monitors developments in the credit rating of all commitments. This function performs an ongoing and systematic creditworthiness test of the Bank’s entire commitment portfolio. The rating system and credit scoring have been introduced throughout the Group. Provisions policy The Bank assesses the need for making provisions on an ongoing basis. Provisions for commitments of less than DKK 100,000 are made on a statistical basis. The central unit charged with monitoring creditworthiness trends is also responsible for monitoring the adequacy of provisioning at the individual local banks.
SHOWN BY SIZE OF CREDIT FACILITIES
Size of credit facilities
DKK million
No. of credit facilities
31.12.03 31.12.04
Commitments in pct. of the customer portfolio*
31.12.03 31.12.04
0-
0.1
32,990
30,064
4.9
4.1
0.1 -
0.5
20,941
20,043
27.2
24.8
0.5 -
1.0
2,813
5,230
11.4
11.6
1.0 -
5.0
2,592
3,046
24.7
25.2
5.0 -
10.0
256
327
8.0
8.8
10.0 -
20.0
97
129
6.0
6.9
20.0 -
50.0
57
67
7.7
8.3
50.0 - 100.0
20
17
5.4
4.8
100.0 Total
6
12
4.7
5.5
59,772
58,935
100.0
100.0
*) Loans, advances and guarantees before deduction of provisions, in per cent of the combined credit portfolio and excl. claims on credit instititions, etc.
24
Credit Risks The increase in loans, advances and guarantees is due to an upsurge in lending to corporate and private customers alike. The Group’s commitments with private customers reflect a growth of 10.9 pct. In 2004, the Bank’s home equity lending experienced major growth in contrast to the previous year, when such lending was primarily channelled via mortgage credit institutions. The Group’s commitments with corporate customers rose 13.9 pct. in 2004. In general, the Bank’s internal risk analyses regarding the combined creditworthiness of both the private and corporate customer portfolios improved in 2004. This is also evident from the fact that fewer private as well as corporate customers were placed on CreditWatch at end-2004 compared with the beginning of the year. Commitments for which individual provisions have been made are placed on the CreditWatch list. Commitments for which no provisions have been made are also placed on the list if the risk exposure exceeds a predefined level. These commitments are subjected to special follow-up procedures. The loan portfolio consists of 58,935 customers with facilities in the form of loans and advances, credits, guarantees, etc. The portfolio is satisfactorily diversified. The portfolio is also satisfactorily diversified in terms of industries. The larger share advanced to borrowers in the agricultural sector and the transport industry is attributable to the industrial structure of the region and the fact that the Finans Nord subsidiary has specialized in leasing transport equipment and agricultural equipment. Finans Nord has partly hedged its credit risk exposure with a guarantee issued by the European Investment Fund. Losses and provisions The impact of losses and provisions on operations amounts to DKK 171.5m for 2004, compared with DKK 223.9m in 2003. Losses for the year aggregated DKK 167.6m, DKK 114.7m of which was covered by provisions relating to previous years, representing a distinct improvement on 2003. Loan loss provisions Provisions aggregated DKK 700.9m at end-2004, equal to 2.8 pct. of the total portfolio of loans, advances and guarantees. At the same time, non-performing loans dropped by DKK 90.0m to DKK 91.0m. Thus, provisions are 7.7 times higher than non-performing loans.
The Bank expects to continue using the existing rating and credit scoring systems to risk-classify customers, and will place them in the existing portfolios. Commitments that have been individually written down must be removed from the portfolios, a measure that the Bank also took before the new rules were introduced.
THE GROUP'S LOSSES AND PROVISIONS DKK million
2000
2001
2002
2003
2004
Losses
275.0
282.6
540.1
231.2
167.6
-181.1
-181.6
-256.8
-130.8
-114.7
93.9
101.0
283.2
100.4
52.9
249.3
398.9
220.3
242.0
278.6
no longer needed
-114.7
-133.5
-131.7
-93.2
-121.4
New provisions, net
134.6
265.3
88.6
148.8
157.2
Recoveries of loans written off
-13.7
-16.5
-21.6
-25.5
-38.4
Impact on income statement
214.8
349.8
350.2
223.7
171.7
Covered by provisions Losses not covered by provisions New provisions, gross Reversal of provisions
Impact on other items Total impact on income statement
0.2
0.5
-35.9
0.2
0.2
215.0
350.3
314.3
223.9
171.5
THE GROUP'S DEVELOPMENT IN LOSSES AND PROVISIONS AND NON-PERFORMING LOANS DKK million
2000
2001
2002
2003
2004
19,774
20,458
21,188
22,272
25,120
Losses and prov. for the year**
215
350
350
224
171
- in per cent of loans, adv. & guar.
1.1
1.7
1.7
1.0
0.7
Loan loss provision balance**
697
789
646
658
701
"A provisions"**
517
663
519
534
636
- in proportion of loans, adv. & guar.
2.6
3.2
2.4
2.4
2.5
Non-performing loans, year-end**
239
197
280
181
91
- in per cent of loans, adv. & guar.
1.2
1.0
1.3
0.8
0.4
291.6
399.5
231.2
363.5
770.5
Loans, adv. & guarantees, year-end*
Accumulated provisions in per cent of non-performing loans
*) Before provisions and excl. claims on credit institutions, etc. **) Does not include credit institutions, etc.
IMPACT OF LOSSES AND PROVISIONS ON THE GROUP'S INCOME STATEMENT - BROKEN DOWN BY LINES OF BUSINESS
The increase in provisioning is attributable to corporate customers. DKK million
IFRS As from 2005, the Group must implement the new international accounting standards. This will not fundamentally change the Group’s credit risk management. The new IFRS rules result in some changes in the financial statements as concerns the credit risk. Apart from the fact that individual commitments subject to impairment must be written down or provisions made, an assessment must be made to determine whether the portfolios of commitments have been impaired. If a portfolio is impaired, it must be written down in the financial statements.
2000
2001
2002
2003
2004
0.6
-7.4
1.4
16.7
20.5
14.7
13.3
24.1
8.7
12.6
5.6
4.8
4.9
3.6
7.8
Wholesale and retailing, etc.
22.6
10.6
9.8
6.1
9.5
Transport
15.9
4.1
4.5
6.8
9.1
8.0
46.4
45.0
23.2
15.2
Corporate customers, total
67.4
71.8
89.7
65.1
74.7
Private customers, total
32.6
28.2
10.3
34.9
25.3
100.0
100.0
100.0
100.0
100.0
Agriculture, fisheries, etc. Manufacturing Building and construction
Financing, services, etc.
Total Does not include credit institutions, etc.
25
Market Risks MARKET RISKS Market risks are defined primarily as the risk that volatility in market conditions will change the market value of the Group’s portfolio of assets and liabilities. Market risks are controlled based on instructions from the Bank’s Management. The Treasury Division monitors market risks at bank level through an integrated risk management system. In addition, a Middle Office function has been set up in the Bank’s Finance & Accounts Department to check market risks and report them to the Supervisory Board and the Executive Board. All trades are settled by the Bank’s Back Office function according to the guidelines issued by the Danish Financial Supervisory Authority regarding functional separation. Market risks arise and are hedged primarily in the Treasury Division and in Trading, Financial Markets. The Treasury Division manages the Bank’s portfolio of securities, while market risks in Trading, Financial Markets arise chiefly as a result of marketmaking and position-taking. INTEREST RATE EXPOSURE The Fed’s increase of the key US interest rate in early 2004 did not have any spill-over effects on the long-term US interest rate, but surprisingly the long-term European interest dipped by slightly more than half a percentage point.
THE GROUP'S FIVE LARGEST EQUITY INVESTMENTS*
No. of shares
Hedegaard
46,984
23.2
402
18.2
A.P. Møller - Mærsk A & B TDC
54,016
12.5
Danisco
35,064
11.7
Nowaco
16,776
10.2
*) Exclusive pension pool and associates.
EQUITY RISKS In 2003, the Group adjusted its share strategy with a view to reducing the proportion of North Jutland small cap shares and lifting that of KFX shares. This strategy was continued in 2004, and a favourable price development affecting small cap shares permitted a restructuring of the portfolio. The Group has gradually increased the share portfolio on the basis of the brisker trading by customers. The Group has retained its return strategy for equity investments, focusing on absolute return. The group will maintain this strategy in 2005, focusing on value shares and positions in Danish shares that are hedged in whole or in part by derivatives.
The Group’s net interest risk fluctuated more than normally, but the trend declined throughout the year because of substantial uncertainty on the interest market.
FOREIGN-EXCHANGE RISKS The Bank does not assume major risks in the forex market for its own account, but the Bank’s turnover on the forex market continues to rise, which raises foreign-exchange risk exposure, based on commercial transactions.
The Bank calculates the net interest risk by converting all positions in different currencies into Danish Kroner and setting off negative positions against positive ones. The Group has greater interest-risk exposure between different currencies than in previous years, but, conversely, the net interest-risk exposure is smaller.
LIQUIDITY RISKS The Group has a clearly defined target for the liquidity risks it is prepared to run. The risk target for the Group’s liquidity is that the sum total of the Bank’s cash deposits, core capital, supplementary capital and senior loans must exceed the Group’s loans and advances. The Bank chose to redeem a senior loan raised in 2000 - one year prematurely - but still met its liquidity targets at end-2004. Some major deposits made on the fixed-term deposit market, however, positively impacted deposits at year-end.
DEVELOPMENT IN THE GROUP'S INTEREST-RATE RISK EXPOSURE, NET* DKK m
FOREIGN EXCHANGE RISKS -
90
DEVELOPMENT IN THE GROUP'S EQUITY RISKS*
60 DKK m 180
30 2004
2005
*) Impact on the Group’s profit in case of a change in the interest level of 1 percentage point. The figures do not include pension pool 4, which normally forms part of the Group’s interest risk, as the Group has issued a loss guarantee to customers.
26
Market value DKK m
End-2004 Share
150 120 2004
*) The Group’s risk associated with listed shares, excl. pension pools.
2005
The Bank plans to raise a new subordinated loan at the end of the first quarter 2005, with an option for redemption in 2015. This new loan will not exceed DKK 300m. No subordinated loans will mature in 2005.
INCL. CURRENCY OPTIONS CONTRACTS Foreign-exchange indicator*
1
2
End-2002
9.5
0.1
End-2003
6.0
0.2
End-2004
13.9
0.2
*) The foreign-exchange indicators have been calculated pursuant to the guidelines issued by the Danish Financial Supervisory Authority and have been stated as a percentage of the core capital after deductions.
New kitchen or bathroom?
Home equity account from 3.95 pct. a year
Example from the autumn 2004 campaign
Your home equity pays!
27
Endorsements ENDORSEMENT OF THE SUPERVISORY AND EXECUTIVE BOARDS The Supervisory Board and Executive Board have today reviewed and approved the 2004 Consolidated Financial Statements and the 2004 Financial Statements of Spar Nord Bank A/S. The Consolidated Financial Statements and the Parent Company’s Financial Statements have been presented in accordance with the accounting provisions of Danish legislation applicable to banks, Danish Accounting Standards with relevant adaptations for banks and the requirements set by the Copenhagen Stock Exchange as to the presentation of accounts by listed companies.
We consider the accounting policies applied to be appropriate, and in our opinion the Consolidated Financial Statements and the Parent Company’s Financial Statements give a true and fair view of the Group’s and the Parent Company’s assets, liabilities, financial position, result and cash flows for the year. The supplementary Quality Accounting Statement presented by Spar Nord Bank gives a true and fair view of quality standards within the code of practice generally accepted herefor. We recommend the Financial Statements for adoption by the shareholders at the Annual General Meeting.
AALBORG, 28 FEBRUARY 2005
28
EXECUTIVE BOARD
Lasse Nyby Chief Executive Officer
John Lundsgaard Managing Director
Lars Møller Managing Director
SUPERVISORY BOARD
Torben Fristrup Chairman of the Supervisory Board
Erling Kjær Deputy Chairman of the Supervisory Board
Carsten Normann
Niels Ole Arndt
Henrik Hougaard
Per Søndergaard
Trine Bruun Haals Elected by the employees
Ole Skov Elected by the employees
Jan Høholt Jensen Elected by the employees
Endorsements ENDORSEMENT BY THE INTERNAL AUDIT DEPARTMENT
ELECTED AUDITORS’ REPORT
We have audited the Consolidated Financial Statements and the Financial Statements of Spar Nord Bank A/S for the 2004 financial year, which have been presented in accordance with the accounting provisions of Danish legislation. The information from the Quality Accounting Statement has not been included in our audit. The Company’s Supervisory and Executive Boards are responsible for the Consolidated Financial Statements and the Parent Company’s Financial Statements. Our responsibility is to express an opinion on the Consolidated Financial Statements and the Parent Company’s Financial Statements based on our audit.
To the shareholders of Spar Nord Bank A/S We have audited the Consolidated Financial Statements and the Financial Statements of Spar Nord Bank A/S for the 2004 financial year, which have been presented in accordance with the accounting provisions of Danish legislation. The information from the Quality Accounting Statement has not been included in our audit. The Bank’s Supervisory and Executive Boards are responsible for the Consolidated Financial Statements and the Parent Company’s Financial Statements. Our responsibility is to express an opinion on the Consolidated Financial Statements and the Parent Company’s Financial Statements based on our audit.
Basis of opinion We conducted our audit in compliance with the recommendations issued by the Danish Financial Supervisory Authority on the planning and performance of audits in financial institutions and financial groups and in accordance with Danish Auditing Standards. During our audit we assessed procedures, the accounting policies applied and estimates made and examined the evidence supporting the amounts and disclosures in the Consolidated Financial Statements and the Parent Company’s Financial Statements, based on an evaluation of materiality and risk. We believe that our audit provides a reasonable basis for our opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the Consolidated Financial Statements and the Parent Company's Financial Statements give a true and fair view of the Group's and Parent Company's assets and liabilities and financial position at 31 December 2004 and of the results of the Group’s and the Parent Company’s operations and of the Group’ cash flows for the financial year ended 31 December 2004 in accordance with the accounting provisions of Danish legislation.
Basis of opinion We have conducted our audit in accordance with Danish Auditing Standards. Pursuant to these standards we must plan and perform our audit to obtain a high degree of certainty that the Consolidated Financial Statements and the Parent Company’s Financial Statements are free of material misstatement. On a test basis, we have examined evidence supporting the amounts and disclosures in the Consolidated Financial Statements and the Parent Company’s Financial Statements. In addition, our audit includes assessing the accounting policies applied and significant estimates made by the Supervisory and Executive Boards, and an assessment of the overall presentation of the Consolidated Financial Statements and the Parent Company’s Financial Statements. We believe that our audit provides a reasonable basis for our opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the Consolidated Financial Statements and the Parent Company's Financial Statements give a true and fair view of the Group's and Parent Company's assets and liabilities and financial position at 31 December 2004 and of the results of the Group’s and the Parent Company’s operations and of the Group’ cash flows for the financial year ended 31 December 2004 in accordance with the accounting provisions of Danish legislation.
AALBORG, 28 FEBRUARY 2005
AALBORG, 28 FEBRUARY 2005
SPAR NORD BANK Internal Audit
BDO SCANREVISION Incorporated as a limited liability company of Danish stateauthorized public accountants
KPMG C.JESPERSEN Incorporated as a partnership of Danish state-authorized public accountants
Margit Nicolajsen Head of Internal Audit
Peter Have Jensen State-authorized Public Accountant
Flemming Brokhattingen State-authorized Public Accountant 29
Accounting Policies GENERAL The Consolidated Financial Statements and the Financial Statements of Spar Nord Bank have been prepared pursuant to the rules laid down in the Danish Financial Business Act, the Consolidated Act on Commercial Banks and Savings Banks, etc., the Recommended Accounting Procedures for Financial Institutions and the guidelines issued by the Danish Financial Supervisory Authority. In addition, the Financial Statements have been prepared pursuant to the rules of the Copenhagen Stock Exchange on disclosure obligations for issuers of listed securities and prevailing Danish Accounting Standards, subject to such departures and modifications as follow from the Recommended Accounting Procedures for Financial Institutions. In other respects, the accounting policies for the Financial Statements and the Consolidated Financial Statements have been consistently applied. Significant departures from applicable Danish Accounting Standards: • The dividend proposed for the financial year is recognized as a liability in the Financial Statements. Pursuant to the Danish Accounting Standards, dividends must be recognized under the shareholders' equity until adopted by the shareholders at the Annual General Meeting. • Treasury shares are recognized at listed prices in the Balance Sheet. Pursuant to the Danish Accounting Standards, treasury shares must be recognized directly under the shareholders' equity. • Properties whose commercial value is assessed to be permanently lower than the carrying amount are written down. Pursuant to the Danish Accounting Standards, properties cannot be written down if the utility value to the business exceeds the fair market value. CONSOLIDATED FINANCIAL STATEMENTS In preparing the Consolidated Financial Statements, the financial statements of Spar Nord Bank and the subsidiaries Finans Nord A/S, Erhvervsinvest Nord A/S and Sparekassen Nordjyllands Investeringsselskab af 10.10.91 A/S, Aalborg, are combined on a line by line basis by adding together items of a uniform nature. Insignificant subsidiaries are not consolidated, but are instead included according to the equity method as equity investments in the Consolidated Financial Statements. Intercompany income and expenses, gains and losses, intercompany shareholdings as well as intercompany balances are eliminated in consolidation. The financial statements used in preparing the Consolidated Financial Statements are drawn up in accordance with the Group's accounting policies. In the Consolidated Financial Statements, the consolidated accounting items of subsidiaries are recognized in full.
30
Newly acquired or newly established companies are recognized in the Consolidated Financial Statements as from the time of acquisition. Companies sold or wound up are recognized in the consolidated income statement until the time of divestment. Comparative figures are not adjusted for newly acquired, sold or wound-up companies. Acquisition accounting is used for company acquisitions, with identified assets and liabilities of the acquired companies being measured at their fair market value as of the date of acquisition. Allowance is made for the tax impact of the revaluations. Positive differences (goodwill) between the cost and the fair market value of the acquired identified assets and liabilities are recognized under intangible fixed assets and amortized according to the straightline method against the income statement based on an individual assessment of useful life, however not more than 20 years. Gains or losses upon the divestment or winding-up of subsidiaries and associates are recognized at the difference between the sales price or the winding-up price and the carrying amount of net assets at the time of sale plus the expected costs of sale or winding-up. ACCOUNTS IN FOREIGN CURRENCIES Accounts in foreign currencies are recognized at the official rates of exchange published by Danmarks Nationalbank (the Danish Central Bank) at the balance sheet date. Rates of exchange assessed at a conservative estimate are used for unlisted currencies. Income and expenses denominated in a foreign currency are translated at the rate of exchange ruling at the date of the transaction. LOANS, ADVANCES, GUARANTEES AND CLAIMS ON CREDIT INSTITUTIONS AND CENTRAL BANKS Commitments have been assessed individually, and provisions have been made to meet expected losses. The calculated losses are expensed in the Income Statements under "Losses and provisions for losses", either as a recognized loss or as a provision to meet losses. The provisions are removed from the provision account and applied to write down the receivable once the loss is recognized. A portion of the fixed-interest loans and advances is hedged by interest-rate swaps. Hedging is basically made based on cash flow. Consequently, no market-value adjustments are made in respect of the hedged loans and advances. If relevant, other fixed-interest claims, loans and advances have been written down so that the return is equal to or higher than the market rate for comparable claims. Mortgage deeds have been valued at the lower of purchase price and market price and written up by an amount to reflect the reduction in the term to maturity.
Accounting Policies LEASING ASSETS Leasing assets, where the Group is the lessor, are recognized under loans and advances at the purchase price of the leased equipment less depreciation (repayments), calculated according to the annuity method over the term of the lease. Lease payments stated according to the matching concept less repayments for the year are recognized in the income statement under interest income. BONDS AND SHARES, ETC. The portfolio of listed bonds and shares is measured at the official prices quoted at the balance sheet date. Unlisted shares and other equity investments are recognized at their fair market value. In determining the fair market value, the point of departure is accessible deals in the investments in the relevant company or a capital value based on an assessment of the expected future earnings and cash flows or the like. If a reliable fair market value cannot be identified, it will instead be valued at cost less any writedowns for impairment. Unlisted units in unit trusts are recognized at the price calculated by the unit trust. EQUITY INVESTMENTS IN GROUP ENTERPRISES AND ASSOCIATES AND OTHER MAJOR EQUITY INVESTMENTS Equity investments in group enterprises and associates and other major equity investments are recognized at a proportionate share of the net asset value with due regard paid to an estimated result for the year. When investments are made, the difference between the purchase price and the net asset value at the time of acquisition is recognized as goodwill on consolidation, which is amortized according to the guidelines stated under "Intangible assets". The share of the result for the year is recognized in the income statement under "Profit on investments in associates and group enterprises". In connection with the purchase or sale of subsidiaries, the results of such subsidiaries are included in the income statement until the takeover date. Any gain or loss on the sale is computed as the difference between the sales price and the book net asset value at the transfer date and is included under "Other ordinary income/expenses". INTANGIBLE ASSETS Goodwill acquired is recognized at cost less accumulated provisions for amortization. Amortization is made on a straight-line basis over the expected maximum useful life of 20 years.
The carrying value of intangible assets is assessed regularly and written down against the income statement if the carrying amount exceeds the expected future net income from the business or the asset. TANGIBLE ASSETS Properties are recognized at their acquisition cost plus the cost of conversions and improvements and less provisions for depreciation and writedowns. All properties are depreciated, apart from properties acquired in connection with winding up the pertinent customer arrangement. Properties whose commercial value is estimated to be permanently lower are written down. The depreciation base for buildings is the purchase price plus improvements. Buildings are depreciated according to the straight-line method over a term of 50 years. Special installations in buildings are depreciated according to the straight-line method over at term of 20 years. Expenses for leasehold improvements are recognized at cost and depreciated over the lease term, however max. ten years. Operating equipment and IT equipment are recognized at cost at the beginning of the year, adjusted for acquisitions and disposals during the financial year, as well as depreciation charges and impairment losses. Operating equipment and IT equipment are depreciated according to the straight-line method over a period of three to five years. Minor acquisitions, as defined according to Danish tax legislation, are written off in full in the year of acquisition. Leased assets that are repossessed as a result of winding up customer arrangements are not depreciated. The assets are written down if the fair market value is considered to be permanently lower. TREASURY SHARES Treasury shares are recorded at listed prices at the end of the financial year, and allocations are made to the treasury share reserve under the shareholders’ equity. SHARE OPTION PROGRAMS Provisions are made currently for the anticipated costs associated with share option programs for the benefit of Management and other employees as an element in an incentive scheme. The costs are calculated as the difference between the exercise price and the official share price and are recognized in the income statement under ‘Staff costs and administrative expenses’. Accounting for treasury shares used to hedge risks is based on the general accounting policies, which means that market-value adjustments are recognized under ‘Market-value adjustments’ in the income statement.
Software acquired is recognized at cost plus installation expenses and amortized according to the straight-line method over a term of five years.
31
Accounting Policies DERIVATIVE INSTRUMENTS AND UNSETTLED SPOT TRANSACTIONS Forward securities transactions, forward exchange contracts, futures, options, FRAs, Caps, Floors, swaptions and unsettled spot transactions are valued at market prices. The hedging element of swaps hedging fixed-interest assets and liabilities is not market-value adjusted.
CASH FLOW STATEMENT The cash flow statement shows cash flows for the year and the Group’s cash funds at the beginning and end of the year.
Interest from forward securities transactions, forward exchange contracts and interest and currency swaps are recognized net under interest income.
Cash flows from operations are calculated as the net profit for the year, adjusted for non-cash operating items and any changes in working capital.
Positive market values are recognized under "Other assets". Negative market values are recognized under "Other liabilities". The average market values shown in the Financial Statements are calculated as a simple average of the quarterly figures.
Cash flows from investments comprise the purchase and sale of fixed assets, companies and securities.
REPO/REVERSE TRANSACTIONS Sold securities are recognized in the balance sheet as if the securities were still part of the Group’s portfolio if the sale is made subject to a right of repurchase. The amount received is recognized as debt owing to the purchaser, and the difference between the offered price and the bid price is booked as interest. The yield on the securities is recognized in the income statement. Bought securities are not recognized in the balance sheet and the yield is not recognized in the income statement if a resale agreement is made simultaneously with the purchase. The amounts paid for the securities are recorded as a claim on the seller and the difference between the bid price and the offered price is booked as interest. TAXES Estimated tax on the profit for the year comprises the estimated tax on the taxable income for the year, the adjustment of provisions for deferred tax or deferred tax assets, adjustment of tax relating to prior years and tax on the provision account. Deferred tax is calculated at the current tax rate on the basis of timing differences between carrying amounts and tax values. Deferred tax assets are recognized if it is highly probable that they can be utilized at the value at which they are expected to be realized. Spar Nord Bank, Finans Nord A/S, Erhvervsinvest Nord A/S, Spar Nord Finanslån A/S, Ejendomsselskabet af 30.12.86 ApS and Sparekassen Nordjyllands Investeringsselskab af 10.10.91 A/S are taxed on a pooled basis. Corporate income tax for the companies taxed on a pooled basis is distributed among companies recording a profit or, as the case may be, a loss in proportion to the taxable income of each company (full absorption method), and an interest supplement is also calculated.
32
The cash flow statement is presented according to the indirect method, based on the net profit for the year.
Cash flows from financing comprise dividends paid, movements in the shareholders' equity and subordinated capital contributions. Cash funds comprise cash and cash equivalents as well as claims at call on central banks. FINANCIAL STATEMENTS FOR BUSINESS AREAS The financial statements for business areas are based on the Consolidated Financial Statements and the affiliation of the relevant customer. Profit and capital are allocated on this basis. Directly allocable costs, such as salaries, rent, depreciation and amortization, etc. are charged directly to the relevant business area. Costs that are not directly allocable are allocated according to the activitybased costing method (ABC) as internal costs. Net interest includes a cash-based interest calculated according to the net cash drawings of the individual business area and the average deposit certificate interest. Other income and expenses are charged to “Staff and other” together with the Bank’s management support functions. An 8 pct. shareholders’ equity of the solvency-weighted asset and liability items is allocated to each business area.
MONEY
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Income Statement
NOTE
INCOME STATEMENT 1. 2.
Interest income Interest expenses Net income from interest
3.
Dividends on investments Fees, charges and commissions received Fees, charges and commissions paid Net income from interest, fees, charges and commissions
Market-value adjustments Other ordinary income 5. Staff costs and administrative expenses Depreciation, amortization and writedowns of intangible and tangible assets Other ordinary expenses Losses and provisions for losses 6. Profit on investments in associates and group enterprises 4.
Profit on ordinary operations before tax 7.
Tax Profit for the year
Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK' 000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
1,380,419 495,469
1,469,931 580,730
1,282,905 496,316
1,369,661 581,805
884,950
889,201
786,589
787,856
44,446 349,127 50,169
31,569 338,305 56,329
44,401 344,831 49,482
31,479 334,410 55,632
1,228,354
1,202,746
1,126,339
1,098,113
176,456 29,781 854,523
187,696 25,102 836,816
182,360 16,306 813,428
200,935 19,383 794,930
51,712 6,959 171,490 48,879
41,463 17,280 223,929 17,194
46,272 3,077 144,607 65,216
36,924 14,651 199,176 33,682
398,786
313,250
382,837
306,432
84,209
76,304
68,260
69,486
314,577
236,946
314,577
236,946
314,577 0
236,946 100,605
314,577
337,551
155,654 158,923
103,770 233,781
314,577
337,551
PROPOSED DISTRIBUTION OF PROFIT Profit for the year Brought forward from prior years Total amount available for distribution Dividend - DKK 30 per share (2003: DKK 20 per share) Appropriation to shareholders’ equity Total amount distributed
34
Balance Sheet
NOTE
ASSETS
8. 9. 10.+11. 11. 12. 13. 14. 15. 16. 17.
24.
Cash in hand and claims at call on central banks Claims on credit institutions and central banks Loans and advances Bonds Shares, etc. Investments in associates, etc. Investments in group enterprises Intangible assets Tangible assets Treasury shares Other assets Prepayments Total assets
Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK' 000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
1,825,823 2,544,890 19,705,062 8,950,104 1,428,068 577,792 9,947 41,776 469,200 10,642 1,059,309 43,930
733,699 2,461,622 17,836,460 8,095,129 1,281,387 535,718 5,980 40,506 428,132 3,365 933,144 46,026
1,825,823 2,544,832 19,133,420 8,950,104 1,373,317 531,789 341,790 11,506 446,289 10,642 1,060,253 43,778
733,699 2,461,378 17,347,174 8,095,129 1,215,782 496,391 312,445 11,274 425,943 3,365 940,602 43,469
36,666,543 32,401,168
36,273,543 32,086,651
LIABILITIES Debt to credit institutions and central banks Deposits 20. Other liabilities Deferred income 21. Provisions for commitments 22. Subordinated capital contributions 18.
19.
23.
9,794,139 17,541,372 1,760,728 69,495 113,118 1,054,884
10,578,816 20,544,395 1,827,887 8,149 20,799 1,065,627
9,794,139 17,587,457 1,566,001 7,287 9,451 1,054,884
518,848 10,642 142,816 1,461,006 94,558
518,848 3,365 111,106 1,210,320 223,793
518,848 10,642 314,773 1,289,049 94,558
518,848 3,365 257,685 1,078,443 209,091
2,227,870
2,067,432
2,227,870
2,067,432
SHAREHOLDERS’ EQUITY Share capital Reserve for treasury shares Other reserves Brought forward from prior years Retained earnings for the year Total shareholders’ equity
24.+25.
10,578,816 20,493,702 2,068,306 71,631 160,591 1,065,627
Total liabilities and equity
36,666,543 32,401,168
36,273,543 32,086,651
OFF-BALANCE-SHEET ITEMS 26. 27.
Guarantees, etc. Other commitments Total off-balance-sheet items
4,713,853 0
3,777,016 31,315
5,452,161 0
4,472,001 31,315
4,713,853
3,808,331
5,452,161
4,503,316
35
Cash Flow Statement
CASH FLOWS FROM OPERATIONS
Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK' 000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
Profit on ordinary operations before tax Depreciation, amortization and writedowns of tangible and intangible assets Adjustment of provisions Provisions for commitments Result of investments Corporation tax paid
398,786
313,250
382,837
306,432
51,712 42,435 47,473 -48,879 -109,609
41,463 12,198 -3,704 -17,194 -1,815
46,272 48,440 11,348 -65,216 -112,090
36,924 9,582 -3,704 -33,682 -1,815
Total cash flows from operations
381,918
344,198
311,591
313,737
701,409 -1,911,037 -854,975 -146,681 159,161 2,952,330
-755,553 -1,000,971 144,954 -167,780 379,770 1,312,227
701,223 -1,834,686 -854,975 -157,535 134,734 2,956,938
-786,148 -888,077 144,954 -174,092 337,631 1,298,003
900,207
-87,353
945,699
-67,729
1,282,125
256,845
1,257,290
246,008
Net investment in associates and group enterprises Net investment in intangible fixed assets Net investment in tangible fixed assets Net investment in treasury shares Dividend from group enterprises/associates Goodwill on consolidation in connection with acquisition of group enterprises and associates
-9,865 -1,946 -87,135 -7,277 14,217
-19,935 -335 -28,414 100,605 10,157
-7,684 -1,947 -64,902 -7,277 9,671
-13 -335 -37,636 100,605 9,643
-4,968
-651
0
0
Total investments
-96,974
61,427
-72,139
72,264
Subordinated capital contributions Dividend to shareholders
10,743 -103,770
74,367 -51,885
10,743 -103,770
74,367 -51,885
Total financing
-93,027
22,482
-93,027
22,482
1,092,124
340,754
1,092,124
340,754
733,699
392,945
733,699
392,945
1,825,823
733,699
1,825,823
733,699
WORKING CAPITAL Movement in credit institutions and central banks, net Movement in loans and advances Movement in bond portfolio Movement in equity portfolio Movement in other assets and other liabilities, net Movement in deposits Total working capital Total cash flows from operations
INVESTMENTS
FINANCING
Movement in cash funds Cash funds, beginning of year Cash funds, end of year
36
Performance Indicators CALCULATED ACCORDING TO THE DANISH FINANCIAL SUPERVISORY AUTHORITY’S RATIO SYSTEM
THE SPAR NORD BANK A/S GROUP 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.
Solvency ratio Core capital ratio Return on equity before tax Return on equity after tax Income/cost ratio Interest-rate risk Foreign-exchange position Foreign-exchange risk Coverage relative to statutory cash ratio requirement Sum total of major commitments Provisions in per cent Losses and provisions for the year in per cent Increase in loans and advances for the year Loans and advances rel. to shareholders’ equity
pct. pct. pct. pct. DKK pct. pct. pct. pct. pct. pct. pct. pct.
SPAR NORD BANK A/S - PARENT COMPANY
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.
Solvency ratio Core capital ratio Return on equity before tax Return on equity after tax Income/cost ratio Interest-rate risk Foreign-exchange position Foreign-exchange risk Loans and advances + provisions rel. to deposits Coverage relative to statutory cash ratio requirement Sum total of major commitments Share of claims with reduced interest rate Provisions in per cent Losses and provisions for the year in per cent Increase in loans and advances for the year Loans and advances rel. to shareholders’ equity Earnings per share for the year Net asset value per share Dividend per share Share price/earnings per share for the year Share price/net asset value per share
pct. pct. pct. pct. DKK pct. pct. pct. pct. pct. pct. pct. pct. pct. pct. DKK DKK DKK
2004
2003
2002
2001
2000
10.2 8.5 18.6 14.6 1.37 4.4 14.1 0.2 108.8 47.7 2.8 0.7 10.5 8.8
11.2 9.0 15.7 11.8 1.28 5.4 6.0 0.2 67.4 64.1 3.0 1.0 5.9 8.6
10.5 8.0 7.9 6.4 1.13 4.7 9.5 0.1 26.7 67.8 3.1 1.7 2.6 8.7
10.5 7.5 3.6 3.5 1.05 6.2 7.8 0.1 70.7 96.6 3.9 1.7 -1.9 9.7
9.4 7.6 22.2 15.4 1.37 4.7 14.9 0.1 44.2 94.5 3.4 1.1 15.7 9.8
2004
2003
2002
2001
2000
10.4 8.7 17.8 14.6 1.38 4.4 13.9 0.2 96.2 107.0 47.1 0.2 2.5 0.6 10.3 8.6 60.6 429 30 12.0 1.69
11.4 9.1 15.3 11.8 1.29 5.3 6.0 0.2 101.9 54.0 63.5 0.6 2.6 0.9 5.3 8.4 45.7 398 20 11.1 1.27
10.6 8.1 7.9 6.4 1.13 4.5 9.5 0.1 104.7 26.1 67.3 1.0 2.8 1.7 2.6 8.5 22.4 373 10 15.4 0.93
10.4 7.4 2.7 3.5 1.04 6.3 8.0 0.1 107.4 69.5 98.2 0.7 3.7 1.6 -3.0 9.5 11.5 326 10 28.1 0.99
9.6 7.8 19.8 15.5 1.37 3.7 14.9 0.1 115.7 41.4 95.1 0.9 3.0 0.8 13.9 9.3 50.1 331 30 6.6 1.00
37
Notes to the Financial Statements
1. INTEREST INCOME/PREMIUM ON FORWARD TRANSACTIONS Claims on credit institutions and central banks Loans and advances Bonds Derivative instruments, total of which Foreign-exchange contracts Interest-rate contracts Other Total interest income Of which, income from genuine purchase and resale transactions, booked under Claims on credit institutions and central banks Loans and advances 2. INTEREST EXPENSES Credit institutions and central banks Deposits Subordinated capital contributions Other Total interest expenses Of which, interest expenses on genuine sale and repo transactions, booked under Claims on credit institutions and central banks Deposits 3. DIVIDENDS ON Shares Total dividend on shares and other investments 4. MARKET-VALUE ADJUSTMENT OF Bonds Shares Fixed-interest loans Foreign exchange Derivative instruments, total of which Foreign-exchange contracts Interest-rate contracts Share contracts Total market-value adjustments including pension pools Of which, pension pools Total market-value adjustments
38
Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK' 000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
55,696 1,027,955 313,148 -18,419
66,556 1,081,072 321,952 -283
55,694 930,800 313,148 -18,419
66,426 981,253 321,952 -283
17,834 -36,253 2,039 1,380,419
20,566 -20,849 634 1,469,931
17,834 -36,253 1,682 1,282,905
20,566 -20,849 313 1,369,661
3,316 31
9,837 2,860
3,316 31
9,837 2,860
145,178 293,594 55,075 1,622 495,469
173,732 338,320 62,638 6,040 580,730
145,178 294,546 55,075 1,517 496,316
173,732 339,449 62,638 5,986 581,805
5,745 105
11,244 0
5,745 105
11,244 0
44,446 44,446
31,569 31,569
44,401 44,401
31,479 31,479
102,123 222,698 1,146 69,943 -102,148
11,690 271,273 793 2,024 -1,823
102,123 229,345 471 69,875 -102,148
11,690 283,376 1,904 2,049 -1,823
-44,443 -62,865 5,160 293,762 117,306 176,456
1,040 -2,777 -86 283,957 96,261 187,696
-44,443 -62,865 5,160 299,666 117,306 182,360
1,040 -2,777 -86 297,196 96,261 200,935
Notes to the Financial Statements Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK' 000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
6,329 1,344 0 7,673
14,177 1,538 57 15,772
6,329 1,344 0 7,673
14,177 1,538 57 15,772
Staff costs Salaries Pensions Social security costs Total
457,420 51,156 32,067 540,643
461,823 46,956 35,268 544,047
432,038 48,695 30,249 510,982
434,527 44,523 33,429 512,479
Other administrative expenses Computer expenses Marketing costs Cost of premises Telephone and postage Other office expenses Other administrative expenses Total
125,710 43,974 40,646 27,516 10,334 58,027 306,207
126,112 24,590 41,028 24,263 13,624 47,380 276,997
124,142 42,661 39,917 26,348 9,746 51,959 294,773
124,851 23,632 40,053 23,057 12,609 42,477 266,679
Total staff costs and administrative expenses
854,523
836,816
813,428
794,930
0
8,633
0
8,633
The amount of loans, mortgages, pledges, sureties or guarantees and the associated security furnished on behalf of the below-mentioned board and committee members. Loans and advances, etc. Executive Board Supervisory Board Committee of Representatives
888 34,890 -
586 61,698 -
888 34,890 -
586 61,698 -
Security Executive Board Supervisory Board
0 17,220
0 33,342
0 17,220
0 33,342
1,277 218
2,320 809
1,039 201
1,916 705
Number of employees The average number of employees during the financial year in terms of full-time employees
1,119,8
1,118,9
1,066,7
1,067,6
6. PROFIT ON INVESTMENTS IN ASSOCIATES AND GROUP ENTERPRISES Profit on investments in associates, etc. Profit on investments in group enterprises Total profit on investments in associates and group enterprises
48,015 864 48,879
16,796 398 17,194
40,299 24,917 65,216
18,583 15,099 33,682
5. STAFF COSTS AND ADMINISTRATIVE EXPENSES Salaries and remuneration of Supervisory Board, Executive Board and Committee of Representatives Executive Board */** Supervisory Board Committee of Representatives Total
*
Termination rules: The members of the Executive Board have a term of notice of 12 months and will receive a compensation corresponding to two years’ pay. ** Of this amount, the management incentive scheme accounts for
Audit fees Total fees to the auditing firms elected by the shareholders to perform the statutory audit Of which, services other than audit
39
Notes to the Financial Statements Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK' 000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
70,199 42,426 -31,982 3,566 84,209
62,003 6,566 4,225 3,510 76,304
70,254 12,018 -17,578 3,566 68,260
55,375 5,772 4,829 3,510 69,486
30.0 pct. -0.1 pct. -1.7 pct. -8.0 pct. 0.9 pct. 21.1 pct.
30.0 pct. 0.0 pct. -8.0 pct. 1.3 pct. 1.1 pct. 24.4 pct.
30.0 pct. -2.0 pct. -6.5 pct. -4.6 pct. 0.9 pct. 17.8 pct.
30.0 pct. -1.5 pct. -8.5 pct. 1.6 pct. 1.1 pct. 22.7 pct.
999,522 1,545,368 2,544,890
1,098,885 1,362,737 2,461,622
999,522 1,545,310 2,544,832
1,098,885 1,362,493 2,461,378
Of which, subordinated claims
125,000
115,000
125,000
115,000
Shown by term to maturity Claims at call Up to 3 months Over 3 months and up to 1 year Over 1 year and up to 5 years Over 5 years Total
179,292 1,497,896 616,164 103,019 148,519 2,544,890
185,389 1,458,488 652,745 50,000 115,000 2,461,622
179,234 1,497,896 616,164 103,019 148,519 2,544,832
185,145 1,458,488 652,745 50,000 115,000 2,461,378
250,042
27,977
250,042
27,977
7. TAX Estimated tax on the income for the year Deferred tax Post-adjustment of tax calculated for prior years Tax on provision account Total tax Current Danish tax rate Profit on investments in associates and group enterprises Non-deductible costs and non-taxable income Adjustment of taxes relating to prior years Tax on provision account Total effective tax rate The Spar Nord Bank Parent Company and Group has a deferred tax liability. The deferred tax liability is recognized under “Provisions for commitments” and relates primarily to timing differences relating to leasing assets, tangible and intangible assets.
8. CLAIMS ON CREDIT INSTITUTIONS AND CENTRAL BANKS Balances with central banks, subject to notice Balances with credit institutions Total claims on credit institutions and central banks
Of which, genuine purchase and resale transactions Reverse transactions
40
Notes to the Financial Statements
9. LOANS AND ADVANCES Overdraft facilities Lease contracts Mortgage deeds Other loans and advances Total Of which, subordinated claims Shown by term to maturity Claims at call Up to 3 months Over 3 months and up to 1 year Over 1 year and up to 5 years Over 5 years Total
Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK' 000
9,685,276 6,925,931 2,787,021 2,585,250 111,517 173,128 7,121,248 8,152,151 19,705,062 17,836,460 27,930
34,255
1,852,951 1,678,611 6,099,442 5,236,254 1,945,484 1,943,509 6,436,783 5,924,055 3,370,402 3,054,031 19,705,062 17,836,460
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
9,610,025 8,736,301 0 0 111,517 173,128 9,411,878 8,437,745 19,133,420 17,347,174 20,466
28,683
1,930,864 1,751,181 7,818,364 7,088,771 2,015,423 1,822,674 4,302,403 3,900,825 3,066,366 2,783,723 19,133,420 17,347,174
Of which, genuine purchase and resale transactions Reverse transactions
101,732
0
101,732
0
Value adjustment of fixed-interest assets Book amount Purchase price Market value Nominal value
720,199 720,199 738,942 720,199
1,006,997 1,006,997 1,030,060 1,006,997
720,199 720,199 738,942 720,199
1,006,997 1,006,997 1,030,060 1,006,997
Hedged by swap contracts Synthetic principal/nominal value Book value Market value
769,656 0 -18,743
1,000,749 0 -23,063
769,656 0 -18,743
1,000,749 0 -23,063
1 pct.
1 pct.
1 pct.
1 pct.
Loans, advances and guarantees broken down by sectors and industries Public authorities Corporate Farming, hunting and forestry Fisheries Manufacturing businesses, raw materials extraction, public utilities (power, gas, water and heating) Building and construction Trade, restaurants and hotels Transportation, postal services and telecommunications Credit and financing activities and insurance Property administration and trade, business service Other sectors Corporate customers, total
12 pct. 1 pct.
12 pct. 1 pct.
9 pct. 1 pct.
8 pct. 1 pct.
5 pct. 4 pct. 10 pct. 7 pct. 3 pct. 13 pct. 8 pct. 63 pct.
6 pct. 4 pct. 10 pct. 7 pct. 4 pct. 9 pct. 10 pct. 63 pct.
4 pct. 2 pct. 9 pct. 2 pct. 17 pct. 13 pct. 6 pct. 63 pct.
5 pct. 3 pct. 9 pct. 2 pct. 19 pct. 9 pct. 7 pct. 63 pct.
Private
36 pct.
36 pct.
36 pct.
36 pct.
100 pct.
100 pct.
100 pct.
100 pct.
Total credit risks
41
Notes to the Financial Statements
Accumulated provisions Provisions for loans, advances and guarantees, end of year Provisions for claims on credit institutions and other items subject to a credit risk, end of year Total accumulated provisions Accumulated provisions for loans, advances and guarantees in per cent of loans, advances and guarantees Non-performing loans 10. BONDS Listed bonds Other Total bonds Of which, subordinated claims Bonds sold as an element in genuine sale and repo transactions Securities deposited with Danmarks Nationalbank, The Royal Bank of Scotland and foreign clearing centres 11. SHARES, ETC. Shares/unit trust certificates listed on the Copenhagen Stock Exchange Shares/unit trust certificates listed on other stock exchanges Other shares Other investments Total shares, etc. Financial current assets a. Financial current assets valued at market price b. Difference between purchase price of financial current assets listed under a. and the higher market value at the balance sheet date c. Financial current assets not valued at market price d. Difference between purchase price of financial current assets listed under c. and the higher market value at the balance sheet date Financial fixed assets A. Total purchase price, beginning of year - Additions - Disposals B. Total purchase price, end of year C. Revaluations and writedowns, beginning of year - Revaluations and writedowns for the year - Revaluations and writedowns reversed D. Revaluations and writedowns, end of year F. Book holding, end of year (B+D) - of which credit institutions
42
Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK' 000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
700,870
658,435
640,877
592,437
1,367 702,237
1,887 660,322
1,367 642,244
1,887 594,324
2,8
3,0
2,5
2,6
90,962
180,534
54,564
126,127
8,889,671 60,433 8,950,104
8,095,129 0 8,095,129
8,889,671 60,433 8,950,104
8,095,129 0 8,095,129
2,505
7,885
2,505
7,885
169,242
40,592
169,242
40,592
5,433,045
4,962,683
5,433,045
4,962,683
670,814 280,387 476,124 743 1,428,068
560,532 275,865 444,990 0 1,281,387
670,814 280,387 421,373 743 1,373,317
560,532 275,865 379,385 0 1,215,782
9,989,344
9,026,156
9,934,593
8,960,551
157,997 0
130,484 0
157,997 0
130,484 0
0
0
0
0
170,609 14,799 10,134 175,274 179,751 69,819 36,016 213,554 388,828 205,693
96,351 96,910 22,652 170,609 164,256 57,123 41,628 179,751 350,360 192,130
170,609 14,799 10,134 175,274 179,751 69,819 36,016 213,554 388,828 205,693
96,351 96,910 22,652 170,609 164,256 57,123 41,628 179,751 350,360 192,130
Notes to the Financial Statements
QUALIFIED SHARES Companies in which the interest amounts to 10 pct. or more of the share capital, but which are not associates or group enterprises BI Holding A/S, Copenhagen Høgsberg Assurance Service A/S I/O Technologies A/S, Valby Linde Partners, Luxembourg Nordjysk Agrocenter A/S, Aars VICH 1552 ApS, Næstved *** Adept Technology A/S, Kolding */** Bifodan A/S, Hundested * Brüel Holding A/S, Hjørring * Futarque A/S, Aalborg * Gangsø Møbler A/S, Silkeborg * Kometh & Company A/S, Farum */** Regulus ApS, Vestbjerg * Saxotech A/S, Aalborg *
Share capital, end of year, DKK ’000
Shareholders’ equity, end of year DKK ‘000
10,500 500 10,024 7,438 5,400 0 0 25,971 5,500 1,941 2,808 0 2,475 11,065
80,560 743 1,018 8,350 6,297 0 0 21,055 14,480 7,693 49,222 0 17,265 35,853
* Erhvervsinvest Nord A/S, Aalborg ** The company is subject to insolvency proceedings *** The company has been dissolved after liquidation
Outstanding balances: Asset item Loans and advances Liability item Deposits Off-balance-sheet items Guarantees, etc.
12. INVESTMENTS IN ASSOCIATES AND OTHER MAJOR INVESTMENTS A. Total purchase price, beginning of year - Additions - Disposals B. Total purchase price, end of year C. Revaluations and writedowns, beginning of year - Profit - Dividends - Differential value upon acquisition - Other capital movements - Revaluations and writedowns for the year - Revaluations and writedowns reversed D. Revaluations and writedowns, end of year F. Book holding, end of year (B+D) - of which credit institutions The value of the portfolio of listed shares at the official year-end prices
Profit/loss DKK '000
Spar Nord Bank A/S The Group 2004 Pct.
Spar Nord Bank A/S The Group 2003 Pct.
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
24,344 191 -150 1,167 33 0 0 -5,463 2,036 -2,511 122 0 2,632 4,130
13.00 20.00 15.88 18.00 11.57 0.00 14.50 14.53 10.00 18.55 12.52 19.28 10.10 12.62
11.15 0.00 15.88 10.00 11.57 13.33 14.50 14.53 10.00 18.55 12.52 19.28 10.10 12.62
13.00 20.00 15.88 18.00 11.57 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
11.15 0.00 15.88 10.00 11.57 13.33 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK' 000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
21,747
40,383
0
0
134
7,564
0
0
0
246
0
0
467,375 15,610 5,488 477,497 68,343 48,015 14,217 -4,968 1,515 -2,685 -4,292 100,295 577,792 395,434
461,705 17,191 11,521 467,375 53,509 19,096 10,157 -651 0 -2,300 -8,846 68,343 535,718 362,242
383,970 6,764 2,213 388,521 112,421 40,299 9,671 0 191 -1,167 -1,195 143,268 531,789 395,434
383,976 45 51 383,970 103,519 18,583 9,643 0 0 0 38 112,421 496,391 362,242
530,383
458,101
530,383
458,101 43
Notes to the Financial Statements
ASSOCIATES, ETC. Capitalis A/S, Horsens Dansk OTC Holding A/S, Horsens Ejendomsselskabet Storkower Strasse 133 A/S, Copenhagen Erhvervsinvest Management A/S, Aalborg Fr.havn af 30. april 2003 A/S (ex NUSA A/S), Frederikshavn ***** Nørresundby Bank A/S, Nørresundby Projektformidling Nord A/S, Aalborg Ruwo A/S, Copenhagen SDC af 1993 Holding A/S, Ballerup Active Sportswear Int. Holding A/S, Brønderslev *. Brynje A/S, Sæby * DESMI A/S, Nørresundby * ICEA A/S, Pandrup */*** J. A. Plastindustri A/S, Bedsted * Jun-Air International A/S, Nørresundby * KM Holding A/S, Skive * Medana Aalborg ApS, Aalborg * NetNord A/S, Aalborg */**** ON-AIR A/S, Aalborg * Pantech Maskinfabrik A/S, Pandrup *** Prey 4 A/S, Copenhagen * Weiss A/S, Hadsund *
Other major investments Nørager Industrihuse I/S, Nørager Erhvervsinvest K/S Nordic Investment Partners I/S, Copenhagen ** * **
Owned by Erhvervsinvest Nord A/S, Aalborg Owned by Sparekassen Nordjyllands Investeringsselskab af 10.10.91 A/S, Aalborg *** The company is subject to insolvency proceedings **** The company has been dissolved after insolvency proceedings ***** The company has been wound up compulsorily
44
Profit/loss, DKK ‘000
Spar Nord Bank A/S The Group 2004 Pct.
Spar Nord Bank A/S The Group 2003 Pct.
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
16,872 11,414
-2,509 -1,734
28.44 34.42
23.27 34.43
28.44 34.42
23.27 34.43
7,000 2,000
7,108 -
-270,512 -
20.00 25.00
20.00 0.00
20.00 25.00
20.00 0.00
0 48,000 500 500 104,264
0 705,458 1,428 -17,438 457,768
0 113,497 133 -17 -73,670
0.00 50.23 25.00 40.00 27.87
75.00 50.23 25.00 40.00 28.41
0.00 50.23 25.00 40.00 27.87
75.00 50.23 25.00 40.00 28.41
2,368 9,000 27,400 0 1,000 2,190 26,392 720 0 10,285 0 780 500
14,663 23,046 67,242 0 15,993 28,640 7,205 1,565 0 -1,235 0 -870 18,165
4,621 -3,671 9,612 0 812 6,037 1,224 861 0 -8,640 0 64 8,797
28.67 29.00 24.84 25.00 27.50 34.25 25.57 25.00 0.00 24.19 42.54 25.64 26.00
28.67 29.00 26.73 25.00 27.50 37.50 14.57 25.00 30.00 23.27 28.83 25.64 26.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-
-
-
33.33 21.98
33.33 0.00
33.33 21.98
33.33 0.00
-
-
-
43.75
43.75
0.00
0.00
Share capital, end of year, DKK ’000
Shareholders’ equity, end of year DKK ‘000
22,000 12,200
Notes to the Financial Statements Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK '000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
10,500
10,750
10,000
10,000
58,444 56,997 115,441
70,998 59,821 130,819
58,444 35,818 94,262
70,998 40,280 111,278
Liability item Debt to credit institutions Deposits Total liability items
27,013 41,619 68,632
66,091 51,448 117,539
27,013 16,428 43,441
66,091 39,728 105,819
Guarantees Guarantees
27,548
0
0
0
8,785 0 -328 3,103 0 11,560 -2,805 0 328 864 0 0 0 -1,613 9,947
4,743 4,739 -754 57 0 8,785 -4,743 786 754 398 0 0 0 -2,805 5,980
168,672 0 -328 3,103 0 171,447 143,773 0 328 24,917 0 1,325 0 170,343 341,790
169,369 0 -754 57 0 168,672 127,920 0 754 15,099 0 0 0 143,773 312,445
Spar Nord Bank A/S The Group 2003 Pct.
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
Subordinated claims Loans and advances Outstanding balances: Asset item Claims on credit institutions and central banks Loans and advances Total asset items
13. INVESTMENTS IN GROUP ENTERPRISES (SUBSIDIARIES) Financial fixed assets A. Total purchase price, beginning of year - Change in consolidation policy - Exchange adjustment - Additions - Disposals B. Total purchase price, end of year C. Revaluations and writedowns, beginning of year - Change in consolidation policy - Exchange adjustment - Profit - Dividends - Other capital movements - Revaluations and writedowns reversed D. Revaluations and writedowns, end of year E. Book holding, end of year (B+D)
GROUP ENTERPRISES Consolidated companies Erhvervsinvest Nord A/S, Aalborg Finans Nord A/S, Aalborg Sparekassen Nordjyllands Investeringsselskab af 10.10.91 A/S (a subsidiary of Erhvervsinvest Nord A/S, Aalborg) Non-consolidated companies Beluni Inc., USA* Ejendomsselskab af 30.12.86 ApS, Aars* Spar Nord Finanslån A/S, Aalborg* Spar Nord FormueInvest A/S** Aars Invest II A/S, Aars Aars Invest I A/S, Aars* * **
Share capital, end of year, DKK '000
Shareholders' capital end of year, DKK '000
Profit/loss DKK '000
Spar Nord Bank A/S The Group 2004 Pct.
30,000 10,000
173,444 158,400
-1,978 26,031
-
-
100.00 100.00
100.00 100.00
12,000
12,265
-241
-
-
100.00
100.00
0 200 500 3,000 2,500 2,500
0 3,180 505 3,000 2,927 1,721
0 638 -15 0 254 -14
100.00 100.00 100.00 100.00 96.00 85.60
100.00 100.00 100.00 0.00 92.40 85.60
100.00 100.00 100.00 100.00 96.00 85.60
100.00 100.00 100.00 0.00 92.40 85.60
The company is in liquidation The company is listed on the Copenhagen Stock Exchange as of 2005
45
Notes to the Financial Statements Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK '000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
5,117 5,117
5,258 5,258
2,685,997 2,685,997
2,653,145 2,653,145
5,876 5,876
2,239 2,239
56,768 56,768
48,324 48,324
5,117
5,258
5,876
2,239
14. INTANGIBLE ASSETS Goodwill A. Total purchase price, beginning of year - Additions B. Total purchase price, end of year E. Amortization and writedowns, beginning of year - Amortization for the year F. Amortization and writedowns, end of year G. Book portfolio, end of year
46,572 4,968 51,540 8,086 5,090 13,176 38,364
45,921 651 46,572 3,473 4,613 8,086 38,486
11,000 0 11,000 1,746 1,160 2,906 8,094
11,000 0 11,000 550 1,196 1,746 9,254
Miscellaneous A. Total purchase price, beginning of year - Additions - Disposals B. Total purchase price, end of year E. Amortization and writedowns, beginning of year - Amortization for the year - Amortization and writedowns reversed F. Amortization and writedowns, end of year G. Book portfolio, end of year
3,442 1,947 0 5,389 1,422 555 0 1,977 3,412
15,202 1,135 12,895 3,442 12,982 535 12,095 1,422 2,020
3,442 1,947 0 5,389 1,422 555 0 1,977 3,412
15,202 1,135 12,895 3,442 12,982 535 12,095 1,422 2,020
Intangible assets, total A. Total purchase price, beginning of year - Additions - Disposals B. Total purchase price, end of year E. Amortization and writedowns, beginning of year - Amortization for the year - Amortization and writedowns reversed F. Amortization and writedowns, end of year G. Book portfolio, end of year
50,014 6,915 0 56,929 9,508 5,645 0 15,153 41,776
61,123 1,786 12,895 50,014 16,455 5,148 12,095 9,508 40,506
14,442 1,947 0 16,389 3,168 1,715 0 4,883 11,506
26,202 1,135 12,895 14,442 13,532 1,731 12,095 3,168 11,274
Outstanding balances Asset item Loans and advances Total asset items Liability item Deposits Total liability items Total balances receivable by companies included in the Consolidated Financial Statements from subsidiaries excluded from consolidation Total balances payable by companies included in the Consolidated Financial Statements to subsidiaries excluded from consolidation
46
Notes to the Financial Statements Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK '000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
448,189 0 25,589 5,924 467,854 80,256 0 8,037 5,000 1,174 92,119 375,735 369,880
459,159 -12,599 17,071 15,442 448,189 76,253 -2,193 7,034 0 838 80,256 367,933 364,048
448,189 0 25,589 5,924 467,854 80,256 0 8,037 5,000 1,175 92,118 375,736 369,880
446,560 0 17,071 15,442 448,189 74,060 0 7,034 0 838 80,256 367,933 364,048
Operating equipment A. Total purchase price, beginning of year - Additions - Disposals B. Total purchase price, end of year E. Depreciation and writedowns, beginning of year - Depreciation for the year - Depreciation and writedowns reversed F. Depreciation and writedowns, end of year G. Book portfolio, end of year Write-off in full of operating equipment for the year
192,458 57,944 1,305 249,097 132,259 24,203 830 155,632 93,465 8,827
165,722 29,453 2,717 192,458 112,595 22,036 2,372 132,259 60,199 7,245
187,649 35,857 531 222,975 129,639 23,254 471 152,422 70,553 8,265
159,911 28,463 725 187,649 108,911 21,245 517 129,639 58,010 6,914
Total tangible assets A. Total purchase price, beginning of year - Change in consolidation policy - Additions - Disposals B. Total purchase price, end of year E. Depreciation and writedowns, beginning of year - Change in consolidation policy - Depreciation for the year - Writedowns for the year - Depreciation and writedowns reversed F. Depreciation and writedowns, end of year G. Book portfolio, end of year Write-off in full of operating equipment for the year
640,647 0 83,533 7,229 716,951 212,515 0 32,240 5,000 2,004 247,751 469,200 8,827
624,881 -12,599 46,524 18,159 640,647 188,848 -2,193 29,070 0 3,210 212,515 428,132 7,245
635,838 0 61,446 6,455 690,829 209,895 0 31,291 5,000 1,646 244,540 446,289 8,265
606,471 0 45,534 16,167 635,838 182,971 0 28,279 0 1,355 209,895 425,943 6,914
10,642 1,468 14,683 0.3
3,365 667 6,671 0.1
10,642 1,468 14,683 0.3
3,365 667 6,671 0.1
65,995 9,106 91,055 1.8
47,304 9,378 93,780 1.8
65,995 9,106 91,055 1.8
47,304 9,378 93,780 1.8
15. TANGIBLE ASSETS Land and buildings A. Total purchase price, beginning of year - Change in consolidation policy - Additions - Disposals B. Total purchase price, end of year E. Depreciation and writedowns, beginning of year - Change in consolidation policy - Depreciation for the year - Writedowns for the year - Depreciation and writedowns reversed F. Depreciation and writedowns, end of year G. Book portfolio, end of year Most recent official property valuation
16. TREASURY SHARES Book value Nominal value Number of shares Percentage of share capital TREASURY SHARES FURNISHED AS SECURITY Book value Nominal value Number of shares Percentage of share capital
47
Notes to the Financial Statements Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK '000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
759,553 31,704 262,549 0 5,503 1,059,309
702,078 17,234 190,142 0 23,690 933,144
759,553 20,088 269,349 0 11,263 1,060,253
702,078 13,152 196,173 5,717 23,482 940,602
3,411,670 7,167,146 10,578,816
3,155,941 6,638,198 9,794,139
3,411,670 7,167,146 10,578,816
3,155,941 6,638,198 9,794,139
1,981,460 6,405,776 729,027 1,462,553 0 10,578,816
1,466,472 6,521,510 873,276 932,881 0 9,794,139
1,981,460 6,405,776 729,027 1,462,553 0 10,578,816
1,466,472 6,499,117 745,508 1,083,042 0 9,794,139
Of which, genuine sales and repo transactions Repo transactions
72,738
41,396
72,738
41,396
Mortgage debt on real property The book value of the mortgaged properties amounts to
12,122 17,417
7,634 9,188
12,122 17,417
7,634 9,188
17. OTHER ASSETS Positive market value of derivative instruments, etc. Various receivables Interest and commissions receivable Tax asset Other assets Total 18. DEBT TO CREDIT INSTITUTIONS AND CENTRAL BANKS Debt to central banks Debt to credit institutions Total debt to credit institutions and central banks Shown by term to maturity Claims at call Up to 3 months Over 3 months and up to 1 year Over 1 year and up to 5 years Over 5 years Total
19. DEPOSITS Claims at call Subject to notice Time deposits Special types of deposit Total deposits Shown by term to maturity Claims at call Subject to notice Up to 3 months Over 3 months and up to 1 year Over 1 year and up to 5 years Over 5 years Total Of which, genuine sales and repo transactions Repo transactions 20. OTHER LIABILITIES Sundry payables Tax due on the income for the year Dividends on share capital Negative market value of derivative instruments, etc. Interest and commissions payable Other liabilities Total
48
13,432,362 11,780,374 172,939 171,171 3,169,394 2,093,655 3,719,007 3,496,172 20,493,702 17,541,372
13,432,362
10,378,148
4,379,847 4,752,520 680,574 390,154 533,887 567,797 1,467,032 1,452,753 20,493,702 17,541,372
13,483,055 11,826,459 172,939 171,171 3,169,394 2,093,655 3,719,007 3,496,172 20,544,395 17,587,457
13,483,055
10,424,233
4,379,847 4,752,520 680,574 390,154 533,887 567,797 1,467,032 1,452,753 20,544,395 17,587,457
101,032
0
101,032
0
270,170 0 155,654 855,745 237,287 549,450 2,068,306
239,132 61,901 103,770 707,089 215,909 432,927 1,760,728
187,880 0 155,654 855,745 237,462 391,146 1,827,887
196,731 55,599 103,770 707,089 216,096 286,716 1,566,001
Notes to the Financial Statements Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK '000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
3,756 146,093 2,939 7,803 160,591
3,822 103,667 3,539 2,090 113,118
3,756 6,301 2,939 7,803 20,799
3,822 0 3,539 2,090 9,451
0 133 3,312 7,371 149,775 160,591
0 150 2,989 5,362 104,617 113,118
0 133 3,312 7,371 9,983 20,799
0 150 2,989 5,362 950 9,451
3,822 -406 340 3,756
3,762 0 60 3,822
3,822 -406 340 3,756
3,762 0 60 3,822
103,667 42,426 146,093
97,101 6,566 103,667
0 6,301 6,301
0 0 0
Provisions for loss in connection with legal actions Beginning of year Applied to cover loss Reduction of provisions for loss End of year
3,539 -600 0 2,939
6,450 -1,653 -1,258 3,539
3,539 -600 0 2,939
6,450 -1,653 -1,258 3,539
Other provisions for liabilities Beginning of year Applied to cover liabilities Additional provisions End of year
2,090 -591 6,304 7,803
2,943 -853 0 2,090
2,090 -591 6,304 7,803
2,943 -853 0 2,090
21. PROVISIONS FOR COMMITMENTS Provisions for pensions and related commitments Provisions for deferred tax Provisions for loss in connection with legal actions Other provisions for liabilities Total provisions for liabilities Shown by term to maturity Claims at call Up to 3 months Over 3 months and up to 1 year Over 1 year and up to 5 years Over 5 years Total Provisions for pensions and related commitments Beginning of year Pension amounts paid Additional pension provisions End of year Provisions for deferred tax Beginning of year Additional provisions for deferred tax End of year
49
Notes to the Financial Statements Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK '000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
0 300,000 180,460 50,000 150,000 100,000 74,381 18,595 37,191 155,000 1,065,627
297,784 300,000 176,820 50,000 0 100,000 74,446 18,611 37,223 0 1,054,884
0 300,000 180,460 50,000 150,000 100,000 74,381 18,595 37,191 155,000 1,065,627
297,784 300,000 176,820 50,000 0 100,000 74,446 18,611 37,223 0 1,054,884
53,953 1,122
61,325 1,409
53,953 1,122
61,325 1,409
1,065,627
1,054,884
1,065,627
1,054,884
Value adjustment of fixed-interest liabilities Book amount Purchase price Market value Nominal value
805,627 812,267 830,926 805,627
652,101 662,381 678,784 652,101
805,627 812,267 830,926 805,627
652,101 662,381 678,784 652,101
Hedged by swap contracts Synthetic principal/nominal value Book value Market value
805,627 -6,640 18,759
652,101 -10,280 16,403
805,627 -6,640 18,759
652,101 -10,280 16,403
22. SUBORDINATED CAPITAL CONTRIBUTIONS Nom. EUR 40,000,000 redeemed prematurely Nom. DKK 300,000,000 interest rate 7.240 pct. exp. 26.06.2009 Nom. NOK 200,000,000 interest rate 3.690 pct. exp. 17.07.2009 Nom. DKK 50,000,000 interest rate 6.407 pct. exp. 13.12.2009 Nom. DKK 150,000,000 interest rate 4.100 pct. exp. 12.03.2010 Nom. DKK 100,000,000 interest rate 3.9425 pct. exp. 06.06.2011 Nom. EUR 10,000,000 interest rate 7.080 pct. exp. 17.05.2012 Nom. EUR 2,500,000 interest rate 7.080 pct. exp. 17.05.2012 Nom. EUR 5,000,000 interest rate 7.080 pct. exp. 17.05.2012 Nom. DKK 155,000,000 interest rate 3.505 pct. exp. 29.10.2012 Subordinated capital contributions, total Interest on subordinated capital contributions Costs of raising subordinated capital contributions Subordinated capital contributions that can be included for the purpose of calculating the capital resources
50
Notes to the Financial Statements Share capital DKK '000
Reserve for treasury shares DKK '000
Other reserves DKK '000
Retained earnings DKK '000
Total DKK '000
518,848 0 0
3,365 0 7,277
111,105 0 0
1,434,114 314,577 -7,277
2,067,432 314,577 0
0 0 0 518,848
0 0 0 10,642
31,711 0 0 142,816
-31,711 1,515 -155,654 1,555,564
0 1,515 -155,654 2,227,870
518,848 0 0 0 0 0 518,848
3,365 0 7,277 0 0 0 10,642
257,685 0
1,287,534 314,577 -7,277 -57,088 1,515 -155,654 1,383,607
2,067,432 314,577 0 0 1,515 -155,654 2,227,870
Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK '000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
5,370,387 4,578,471
4,573,785 4,553,106
5,370,387 4,578,471
4,576,829 4,553,106
Foreign-exchange indicator 1 Foreign-exchange indicator 1 in pct. of core capital after deductions Foreign-exchange indicator 2 Foreign-exchange indicator 2 in pct. of core capital after deductions
305,787 13,9 3,852 0,2
122,317 6,0 3,179 0,2
305,787 13,9 3,852 0,2
122,317 6,0 3,179 0,2
Interest-rate risk distributed on currencies subject to the highest interest-rate risk: Currency: DKK EUR SEK USD CHF NOK JPY Other currencies Interest-rate risk attaching to instruments of indebtedness, etc., total
155,178 -62,575 8,266 -7,386 5,520 -652 0 -278 98,073
102,827 4,868 167 656 1,524 0 -193 -43 109,806
153,628 -62,575 8,266 -7,386 5,520 -652 0 -278 96,523
101,365 4,868 167 656 1,524 0 -193 -43 108,344
23. SHAREHOLDERS’ EQUITY – SPAR NORD BANK A/S THE GROUP Shareholders’ equity, beginning of year Profit for the year Transferred to reserve for treasury shares Transferred to reserve for net revaluation according to the equity method Other capital movements in associates Dividend Shareholders’ equity, end of year PARENT COMPANY Shareholders’ equity, beginning of year Profit for the year Transferred to reserve for treasury shares Transferred to reserve for net revaluation acc. to the equity method Other capital movements in associates and group enterprises Dividend Shareholders’ equity, end of year
57,088 0 0 314,773
The share capital consists of 5,188,480 shares in the denomination of DKK 100
24. MARKET RISKS Foreign-exchange risk Assets denominated in foreign currencies, total Liabilities denominated in foreign currencies, total
51
Notes to the Financial Statements Spar Nord Bank A/S The Group 2004 DKK '000
Spar Nord Bank A/S The Group 2003 DKK '000
2,151,974
2,532,268
3,565,071 1,148,782 4,713,853
Of which, guarantee(s) furnished to subsidiary OTHER COMMITMENTS Irrevocable credit commitments Other commitments Other commitments, total
25. CONSOLIDATED DEBT Total debt in the Consolidated Balance Sheet that falls due beyond 5 years 26. GUARANTEES, ETC. Financial guarantees Other guarantees Guarantees, etc., total
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
2,573,078 1,203,938 3,777,016
4,303,379 1,148,782 5,452,161
3,268,063 1,203,938 4,472,001
0
0
738,309
664,985
0 0 0
31,315 0 31,315
0 0 0
31,315 0 31,315
2,175,452 1,063,294 -613,348 2,625,398
2,023,561 1,051,231 -552,988 2,521,804
2,205,723 1,063,294 -610,321 2,658,696
2,047,076 1,051,231 -550,636 2,547,671
27.
The Bank has concluded rent agreements with real property owners. The rent commitment until the legal notice of termination date amounts to DKK 74.0m. (2003: DKK 72.0m.)
NOTES NOT REFERRED TO IN THE FINANCIAL STATEMENTS 28. SOLVENCY INFORMATION Core capital after deductions Supplementary capital included Deductions from capital base Capital base after deductions Risk-weighted items outside the trading portfolio Risk-weighted items subject to a market risk, etc. Risk-weighted items, total Solvency ratio according to s. 124(1) of the Danish Financial Business Act Core capital percentage after deductions in per cent of risk-weighted items, total 29. CONNECTED PARTIES The Group’s connected parties include group enterprises and associates, the major shareholder, the Spar Nord Foundation, and the members of the Supervisory Board, the Executive Board and executive staff members of the Group. Transactions between connected parties, including credit facilities, are concluded on an arm’s length basis or on a non-profit basis. No transactions have been concluded during the year with members of the Supervisory Board, the Executive Board or executive staff members, other than transactions involving salary, emoluments, etc., securities trading and loans and security. The Spar Nord Foundation has furnished a DKK 50m guarantee against losses for the highest-ranking portion of the commitment that exceeded the Bank’s strategic commitment limit of 10 pct. of the shareholders’ equity at 31 December 2002. The term of the guarantee expires on 31 December 2006. The Bank pays an arm’s length premium for the guarantee issued by the Foundation. The guarantee constitutes half of the total DKK 100m hedging of the commitment in question, as the lowest-ranking portion has been hedged in the financial market.
52
22,026,787 19,455,352 3,591,683 3,055,272 25,618,470 22,510,624
21,987,008 19,460,457 3,508,969 2,917,059 25,495,977 22,377,516
10.2 pct.
11.2 pct.
10.4 pct.
11.4 pct.
8.5 pct.
9.0 pct.
8.7 pct.
9.1 pct.
Pension Pools Pension pools DKK '000
Child savings pool DKK '000
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
818 1,366 46,817 49,001
10 48 580 638
828 1,414 47,397 49,639
962 1,592 49,116 51,670
14,304 14,304
157 157
14,461 14,461
13,500 13,500
554 9,094 122,700 0 -16,956 663 116,055
19 100 1,324 0 -200 8 1,251
573 9,194 124,024 0 -17,156 671 117,306
2,067 -9,167 132,177 0 -28,847 30 96,260
29,742
350
30,092
23,388
149,618
1,696
151,314
138,042
179,218 31,002 1,094,585 783,317 25,586
2,392 1,087 13,380 8,475 317
181,610 32,089 1,107,965 791,792 25,903
116,786 32,249 961,323 691,971 26,617
2,113,708
25,651
2,139,359
1,828,946
LIABILITIES Total deposits Other liabilities
1,951,016 162,692
23,800 1,851
1,974,816 164,543
1,679,496 149,450
Total liabilities
2,113,708
25,651
2,139,359
1,828,946
1,841,668
22,137
1,863,805
1,612,890
INCOME STATEMENT Interest income/premium on forward transactions Cash deposits Index-linked bonds Other bonds Total interest income Dividends on Shares, etc. Total dividends Market-value adjustment of Index-linked bonds Other bonds, etc. Shares, etc. Unit trust certificates Foreign exchange Derivative instruments Total market-value adjustments Fees and commissions paid Profit for the pools
BALANCE SHEET ASSETS Cash deposits Index-linked bonds Other bonds Other shares, etc. Other assets Total assets
1.
1.
NOTES Average deposits
53
Spar Nord Bank EXCL. PENSION POOLS
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
1,234,094 433,044
1,318,953 517,597
801,050
801,356
29,940 344,831 49,482
17,979 334,410 55,632
1,126,339
1,098,113
182,360 16,306 813,428
200,935 19,383 794,930
46,272 3,077 144,607 65,216
36,924 14,651 199,176 33,682
382,837
306,432
68,260
69,486
314,577
236,946
NOTES Interest income/premium on forward transactions Claims on credit institutions and central banks Loans and advances Bonds Derivative instruments, total Other
55,694 930,800 264,337 -18,419 1,682
66,426 981,253 271,244 -283 313
Interest expenses Deposits
231,273
275,241
92,355 105,322 471 87,032 -102,820
18,790 151,165 1,904 30,896 -1,853
INCOME STATEMENT Interest income 3. Interest expenses
2.
Net income from interest Dividends on investments Fees, charges and commissions received Fees, charges and commissions paid Net income from interest, fees, charges and commissions 4.
Market-value adjustments Other ordinary income Staff costs and administrative expenses Depreciation, amortization and writedowns of intangible and tangible assets Other ordinary expenses Losses and provisions for losses Profit on investments in associates and group enterprises Profit on ordinary operations before tax Tax Profit for the year
2.
3.
4.
54
Market-value adjustments of Bonds Shares Fixed-interest loans Foreign exchange Derivative instruments
Spar Nord Bank EXCL. PENSION POOLS
BALANCE SHEET ASSETS Cash in hand and claims at call on central banks Claims on credit institutions and central banks Loans and advances Bonds Shares, etc. Investments in associates, etc. Investments in group enterprises Intangible assets Tangible assets Treasury shares Other assets Prepayments Total assets LIABILITIES AND EQUITY Debt to credit institutions and central banks 5. Deposits Other liabilities Deferred income Provisions for commitments Subordinated capital contributions Shareholders’ equity Total liabilities and equity OFF-BALANCE-SHEET ITEMS Guarantees, etc. Other commitments Total off-balance-sheet items
5.
NOTES Of which cash deposits from pension pools
Spar Nord Bank A/S Parent Comp. 2004 DKK '000
Spar Nord Bank A/S Parent Comp. 2003 DKK' 000
1,825,823 2,544,832 19,133,420 7,810,049 581,525 531,789 341,790 11,506 446,289 10,642 1,034,352 43,778
733,699 2,461,378 17,347,174 7,101,557 523,811 496,391 312,445 11,274 425,943 3,365 913,985 43,469
34,315,795 30,374,491
10,578,816 18,751,189 1,663,345 8,149 20,799 1,065,627 2,227,870
9,794,139 16,024,747 1,416,551 7,287 9,451 1,054,884 2,067,432
34,315,795 30,374,491
5,452,161 0
4,472,001 31,315
5,452,161
4,503,316
181,610
116,786
55
Derivative Instruments Broken down by term to maturity:
Up to 3 months Nominal value DKK '000
Net market value DKK '000
Foreign-exchange contracts Forward/futures, purchase Forward/futures, sale Swaps Options bought Options written
7,416,733 6,413,628 0 231,708 262,416
-75,035 77,698 0 4,596 -5,402
Interest-rate contracts Forward/futures, purchase Forward/futures, sale Forward Rate Agreements, purchase Forward Rate Agreements, sale Swaps Options bought Options written
1,010,107 306,600 0 0 7,116,154 437,408 1,357,294
13,423 -4,400 0 0 7,101 354 -1,477
0 22,516 1,663 1,678
0 -799 -96 196
2,898,802 3,327,483 0 207,449 165,322
-50,625 83,916 0 1,289 -1,965
223,701 139,462 0 0 26,612,348 0 0
924 825 0 0 357 0 0
2,629 11,292 5,096 5,096
20 -89 186 -186
THE GROUP AND THE PARENT COMPANY 2004
Share contracts Forward/futures, purchase Forward/futures, sale Options bought Options written Net market value, total
THE GROUP AND THE PARENT COMPANY 2003 Foreign-exchange contracts Forward/futures, purchase Forward/futures, sale Swaps Options bought Options written Interest-rate contracts Forward/futures, purchase Forward/futures, sale Forward Rate Agreements, purchase Forward Rate Agreements, sale Swaps Options bought Options written Share contracts Forward/futures, purchase Forward/futures, sale Options bought Options written Net market value, total
56
Derivative Instruments Over 3 months and up to 1 year
Total
Total
Nominal value DKK '000
Net market value DKK '000
Over 1 year and up to 5 years Nominal value DKK '000
Net market value DKK '000
Nominal value DKK '000
Over 5 years Net market value DKK '000
Nominal value DKK '000
Net market value DKK '000
799,688 228,896 0 82,757 67,525
-21,422 5,544 0 3,798 -3,538
6,838 13,669 0 0 0
-66 168 0 0 0
0 0 0 0 0
0 0 0 0 0
8,223,259 6,656,193 0 314,465 329,941
-96,524 83,410 0 8,395 -8,940
3,477,122 4,096,391 69,086,500 62,784,200 249,892 4,395,710 4,094,474
-1,798 110 -91,189 82,438 -18,100 358 0
3,399,155 3,711,632 17,863,132 18,919,255 3,872,275 3,633,953 1,029,238
189 1,873 -17,334 21,233 -34,258 1,287 -1,484
0 1,282,032 0 0 488,293 1,088,377 290,943
0 1,771 0 0 -38,955 16,168 0
7,886,385 9,396,654 86,949,632 81,703,455 11,726,615 9,555,447 6,771,949
11,814 -647 -108,523 103,671 -84,211 18,167 -2,961
833 0 854 659
191 0 24 -14
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
833 22,516 2,516 2,338
191 -799 -73 182 -76,846
1,475,460 1,320,734 0 4,688 14,298
-67,936 86,275 0 214 -402
152,662 0 0 0 0
243 0 0 0 0
0 0 0 0 0
0 0 0 0 0
4,526,924 4,648,217 0 212,137 179,620
-118,318 170,191 0 1,503 -2,367
1,740,395 3,577,288 71,625,250 61,775,250 20,512,039 0 0
2,375 -3,262 -32,541 37,113 1,679 0 0
8,468,866 4,773,530 34,850,000 31,950,000 3,806,121 212,137 179,620
18,941 -10,566 -660 2,528 -52,512 1,502 -2,367
0 665,391 0 0 742,672 377,816 264,219
0 27 0 0 -1,390 0 0
10,432,962 9,155,671 106,475,250 93,725,250 51,673,180 589,953 443,839
22,240 -12,976 -33,201 39,641 -51,866 1,502 -2,367
0 0 0 0
0 0 0 0
0 0 0 17,040
0 0 0 -18,418
0 0 0 0
0 0 0 0
2,629 11,292 5,096 22,136
20 -89 186 -18,604 -4,505
57
Derivative Instruments Market value
Average market value
Market value of non-guaranteed contracts
THE GROUP AND THE PARENT COMPANY 2004 Foreign-exchange contracts Forward/futures, purchase Forward/futures, sale Swaps Options bought Options written
Positive DKK '000
Negative DKK '000
Positive DKK '000
Negative DKK '000
Positive DKK '000
Negative DKK '000
32,923 100,181 0 8,395 0
129,446 16,771 0 0 8,940
43,478 92,052 0 2,099 1
84,327 28,385 0 0 2,236
32,923 100,181 0 8,395 0
129,446 16,771 0 0 8,940
Interest-rate contracts Forward/futures, purchase Forward/futures, sale Forward Rate Agreements, purchase Forward Rate Agreements, sale Swaps Options bought Options written
19,571 9,318 4,372 107,489 448,084 18,167 0
7,757 9,965 112,895 3,818 532,295 0 2,961
13,936 2,415 9,850 103,098 180,322 4,542 0
7,358 10,526 102,445 7,899 270,635 0 740
19,571 9,318 4,372 107,489 448,084 18,167 0
7,757 9,965 112,895 3,818 532,295 0 2,961
191 0 0 182
0 799 73 0
48 0 0 45
0 200 18 0
191 0 0 182
0 799 73 0
748,873
825,720
451,886
514,769
748,873
825,720
Share contracts Forward/futures, purchase Forward/futures, sale Options bought Options written Total
748,873
Total, after netting
THE GROUP AND THE PARENT COMPANY 2003 Foreign-exchange contracts Forward/futures, purchase Forward/futures, sale Swaps Options bought Options written Interest-rate contracts Forward/futures, purchase Forward/futures, sale Forward Rate Agreements, purchase Forward Rate Agreements, sale Swaps Options bought Options written Share contracts Forward/futures, purchase Forward/futures, sale Options bought Options written Total Total, after netting
58
35,606 188,388 0 1,503 0
153,924 18,197 0 0 2,367
51,916 168,082 0 2,572 1
142,110 47,695 0 0 1,960
35,606 188,388 0 1,503 0
153,924 18,197 0 0 2,367
22,899 1,665 15,966 52,051 61,777 1,502 0
659 14,641 49,167 12,410 113,643 0 2,367
18,611 1,893 8,865 126,733 247,736 12,421 456
4,121 17,774 134,188 8,074 314,446 414 9,253
22,899 1,665 15,966 52,051 61,777 1,502 0
659 14,641 49,167 12,410 113,643 0 2,367
20 0 186 0
0 89 0 18,604
5 192 253 0
182 150 0 4,887
20 0 186 0
0 89 0 18,604
381,563
386,068
639,736
685,254
381,563
386,068
381,563
Derivative Instruments Nominal value
Market value
Net market value
DKK '000
Positive DKK '000
Negative DKK '000
DKK '000
535,472 1,380,851
369 688
3,271 419
-2,902 269
Interest-rate transactions, purchase Interest-rate transactions, sale
886,517 573,705
179 635
509 130
-330 506
Share transactions, purchase Share transactions, sale
152,360 179,330
462 1,136
976 353
-514 783
3,708,234
3,470
5,658
-2,189
Foreign-exchange transactions, purchase Foreign-exchange transactions, sale
727,572 625,335
111 2,460
3,780 1,123
-3,669 1,337
Interest-rate transactions, purchase Interest-rate transactions, sale
413,119 541,472
111 378
383 25
-272 353
2,942 3,018
369 164
141 267
228 -103
2,313,458
3,593
5,719
-2,126
2004 DKK '000
2003 DKK '000
0
0
Counterparty with 20 pct. risk weighting Positive market value after netting
147,227
380,380
Counterparty with 100 pct. risk weighting Positive market value after netting
65,988
52,542
232,515 86,871
37,608 24,164
UNSETTLED SPOT TRANSACTIONS THE GROUP AND THE PARENT COMPANY 2004 Foreign-exchange transactions, purchase Foreign-exchange transactions, sale
Total
UNSETTLED SPOT TRANSACTIONS THE GROUP AND THE PARENT COMPANY 2003
Share transactions, purchase Share transactions, sale Total
CREDIT RISK ATTACHING TO DERIVATIVE INSTRUMENTS POSITIVE MARKET VALUE (AFTER COUNTERPARTY RISK) THE GROUP AND THE PARENT COMPANY Counterparty with 0 pct. risk weighting Positive market value after netting
Reference is made to s. 27(3) and s. 12 of the Danish Capital Adequacy Order for a list of counterparties belonging to the three risk categories. Genuine sale and repo transactions, total Concluded, unsettled short portion of reverse transactions Concluded, unsettled short portion of repo transactions
59
Quarterly Key Figures - The Group RESULTATOPGØRELSE*
INCOME STATEMENT
Mio. kr .
DKK million
Netto renteindtægter
Net income from interest
Udbytte af aktier mv.
Net income from fees, charges and
2004
2004
2004
4Q
1Q
2Q
3Q
2004 4Q
211.9
211.8
207.7
217.2
214.4 80.3
68.9
78.9
71.5
68.3
Dividends on shares, etc.
1.2
4.9
19.4
1.3
13.8
Market-value adjustments
17.5
33.2
13.8
26.8
48.5 12.0
commissions Kursreguleringer**
2003
Andre ordinære indtægter
Other ordinary income
5.9
8.3
6.4
3.0
Kursregulering af kapitalinteresser
Market-value adjustment of investments
1.3
11.6
6.5
13.6
-2.0
Basisindtægter
Core income
306.7
348.7
325.3
330.2
366.8
Lønninger mv.**
Operating costs, depreciation and 219.7
223.9
221.8
217.3
240.8 126.0
amortization Basisindtjening før tab og hensættelser
Core earnings before losses and provisions
87.0
124.8
103.5
112.9
Tab og hensættelser
Losses and provisions
51.5
43.3
51.1
40.3
36.1
Basisindtjening
Core earnings
35.5
81.5
52.4
72.6
89.9
Beholdningsindtjening
Earnings from investment portfolios
-14.1
19.5
11.1
14.4
13.0
Resultat før skat
Totalkredit (sale of shares)
101.0
0
0
0
44.4
-
Profit before tax
122.4
101.0
63.5
87.0
147.3
-
Tax on the profit for the period
-
Profit after tax
BALANCE
BALANCE SHEET
Mio. kr.
DKK million
Samlede aktiver Indlån
14.7
28.3
15.1
21.1
19.7
107.7
72.7
48.5
65.9
127.6
Total assets
32,401.2
33,423.2
34,575.1
33,186.3
36,666.5
Deposits
17,541.4
18,063.4
18,482.6
18,388.9
20,493.7
Udlån
Loans and advances
17,836.4
17,532.0
18,210.0
18,027.1
19,705.0
Garantier mv.
Guarantees, etc.
3,777.0
4,018.9
4,169.4
4,277.6
4,713.9
Egenkapital***
Shareholders’ equity
2,067.4
2,140.2
2,188.7
2,256.2
2,227.9
Efterstillede kapitalindskud
Subordinated capital contributions
1,054.9
906.8
906.0
908.7
1,065.6
NØGLETAL
PERFORMANCE INDICATORS
Egenkapitalforrentning før skat. pct.****
Return on equity before tax
6.1
4.8
3.0
4.0
6.9
Egenkapitalforrentning efter skat. pct.****
Return on equity after tax
5.4
3.5
2.3
3.0
5.9
Omkostningsandel af basisindtægter
Cost share of core income
0.72
0.64
0.68
0.66
0.66
Omkostningsandel af basisindtægter
Cost share (incl. losses/provisions)
inkl. tab og hensættelser
of core income
0.88
0.77
0.84
0.78
0.75
Tab og hensættelser på debitorer. pct.
Losses and provisions, pct.
0.2
0.2
0.2
0.2
0.1
Solvensprocent
Solvency ratio
11.2
10.3
9.6
9.9
10.2
Kernekapitalprocent
Core capital ratio
9.0
8.8
8.4
8.7
8.5
THE SPAR NORD SHARE Kr. pr. aktie a 100 kr.
DKK per share of DKK 100
Kurs ultimo
Earnings before tax per share
Indre værdi
Official price, end of period
Indtjening pr. aktie
Equity value, incl. profit/loss for
Udbytte
60
24
19
12
17
28
504
517
535
599
725
the period
398
412
422
435
429
Price/equity value
1.3
1.3
1.3
1.4
1.7
Other Information DIRECTORSHIPS, ETC. HELD BY MEMBERS OF THE EXECUTIVE BOARD The Danish Financial Business Act It appears from section 80(1) in the Danish Financial Business Act that individuals appointed by the Supervisory Board may not own or run their own businesses, nor may they be directors or salaried employees or in any other way participate in the management or operations of businesses other than the Bank without the permission of the Supervisory Board. The Supervisory Board has granted permission that as from 1 January 2005: Lasse Nyby, CEO, may sit on the supervisory board of the following companies: • Finans Nord A/S • Erhvervsinvest Nord A/S • Dansk AMP A/S • Capitalis A/S • Advizer A/S Lars Møller, Managing Director, may sit on the supervisory board of the following companies: • Ejendomsselskabet af 30.12.86 ApS in liquidation • BI Holding A/S • DLR Kredit A/S • Erhvervsinvest Nord A/S John Lundsgaard, Managing Director, may sit on the supervisory board of the following companies: • Mindwork A/S • SDC af 1993 Holding A/S • SDC Udvikling A/S • DataService A/S • Foreningen SDC • Høgsberg Assurance Service A/S • Det Hem’li Teater
Niels Arnold Lund, Senior Executive Vice President, Corporate Banking. Member of the supervisory board: • Erhvervsinvest Nord A/S • Finans Nord A/S • Sparekassen Nordjyllands Investeringsselskab af 10.10.91 A/S Bent Schade, Local Bank Manager, Spar Nord Aars. Chairman of the supervisory board: • Aars Invest I A/S in liquidation • Aars Invest II A/S Member of the supervisory board: • Ejendomsselskabet af 30.12.86 ApS in liquidation DIRECTORSHIPS, ETC. HELD BY MEMBERS OF THE SUPERVISORY BOARD Torben Fristrup (b. 1951), Chairman of the Supervisory Board since 2004; member of the Supervisory Board since 2003. • Chief Executive Officer of Cubic-Modulsystem A/S Chairman of the supervisory board: • CUBIC-Imek A/S • CUBIC-Cabinet System A/S • CUBIC Modular System Ltd. • CUBIC-Svenska AB • Aalborg Træindustri af 1992 A/S Member of the supervisory board: • CUBIC Holding Brønderslev A/S • Dybvad Stål Industri A/S Erling Kjær (b. 1954), Deputy Chairman of the Supervisory Board; member of the Supervisory Board since 1989. • Owner of ELK Handels- og Investeringsselskab ApS. Member of the supervisory board: • L.B. Invest ApS • K.B. Invest ApS Niels Ole Arndt (b. 1950), member of the Supervisory Board since 1992.
DIRECTORSHIPS, ETC. HELD BY OTHER EXECUTIVE STAFF MEMBERS Kim Christensen, Senior Executive Vice President, Credit Rating. Member of the supervisory board: • Finans Nord A/S Jan Gerhardt, Senior Executive Vice President, Trading, Financial Markets & the International Division. Member of the supervisory board: • Linde Partners Asset Management S.A. • Dansk AMP A/S • Dansk O.T.C. Fondsmæglerselskab A/S • Spar Nord FormueInvest A/S
Henrik Hougaard (b. 1958), member of the Supervisory Board since 2001. • Chief Executive Officer of Skiold Holding A/S; • Chief Executive Officer of Skiold Sæby A/S Chairman of the supervisory board: • Skiold Echberg A/S • Engsko A/S • Graintec A/S Member of the supervisory board: • United Milling System ApS
61
Other Information Carsten Normann (b. 1962), member of the Supervisory Board since 2004.
STOCK EXCHANGE ANNOUNCEMENTS 2004
Jan Høholt Jensen (b. 1965), employee-elected member of the Supervisory Board since 2004.
21 January • Financial Calendar 2004 for Spar Nord Bank
Trine Bruun Haals (b. 1959), employee-elected member of the Supervisory Board since 2004.
6 February • New investment company
Ole Skov (b. 1959), employee-elected member of the Supervisory Board since 2000.
25 February • Pre-tax profit of DKK 313.2m
Per Søndergaard (b. 1954), member of the Supervisory Board since 2002. Chairman of the supervisory board: • Nowaco Group A/S • Celenia Software A/S • VICH 4305 ApS • PL Holding Aalborg A/S • Bjørk & Maigaard ApS • Business Institute Aalborg A/S • J.A. Plastindustri A/S • TBP Invest Aalborg A/S • Lindgaard A/S • Meip 2-1 - 2-5 A/S Member of the supervisory board: • TK Development A/S • Hedegaard A/S • Small Cap Danmark A/S • Boform A/S • OKF Holding A/S • Toppenberg Maskinfabrik A/S • Aalborg Boldspilklub A/S • Skandia Kalk International Trading A/S • Gigantium Arena A/S • 9000 Lux A/S • Marius A/S • Scanmatch A/S • Kollegiefonden Bikuben • Exportakademiet Holding ApS • Ib Andersen VVS A/S
12 March • Spar Nord Bank floats additional supplementary capital 7 April • Notice convening the Annual General Meeting 28 April • Quarterly Report, 1st quarter 2004, for Spar Nord Bank 28 April • Annual General Meeting of Spar Nord Bank 28 July • Notice convening an Extraordinary General Meeting 18 August • Interim Financial Statements 2004 for Spar Nord Bank 18 August • Extraordinary General Meeting of Spar Nord Bank 29 September • Date for Quarterly Financial Statements 27 October • Quarterly Report, 1st – 3rd quarters 2004, for Spar Nord Bank 29 October • Spar Nord receives supplementary capital STOCK EXCHANGE ANNOUNCEMENTS 2005 19 January • Spar Nord Bank - Upward revision of profit for 2004 21 January • Financial Calendar 2005 for Spar Nord Bank
62
63
© • SPAR NORD BANK • ØRVAD KOMMUNIKATION • PRINFO AALBORG • 2005
SPAR NORD BANK A/S Skelagervej 15 P.O. Box 162 DK-9100 Aalborg
PHONE +45 96 34 40 00
FAX +45 96 34 45 60
WEB www.sparnord.dk
E-MAIL
[email protected]
CVR-NR. 13 73 75 84
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