2010 – outlook and challenges Danske Markets seminar 11. marts 2010

Lasse Nyby, CEO

Status coming into 2010

2009: Acceptable result achieved under challenging conditions ¾ Core income up 34 per cent ¾ Expansion of interest-margin ¾ Benign market-conditions for mortgage bonds

¾ Cost growth of 17 per cent ¾ Underlying cost growth of 6 per cent - unsatisfactory

¾ Core earnings before impairment above DKK 1bn. – first time ¾ Impairment of loans etc. of DKK 584m. – impairment percentage of 1.22 ¾ Contribution to ”Bank Package I”, incl. sector losses, of DKK 291m. Growth in business volume DDKm Core income Costs Core earnings before impairment Impairments of loans and advances, etc. Core earnings Investment income Totalkredit Profit/loss on ordinary activities Sector Fund Profit before tax

2009 2.624 1.621 1.003 584 419 17 0 436 -291 145

2008 1.957 1.380 577 236 341 -229 93 205 -81 124

Indeks 134 117 174 248 123 213 117

Pct.

30

24

21

13

15 -8

-10 2005

2006

2007

2008

2009

3

Impairment of loans at high level – as expected ¾ Impairment percentage: 1.22 ¾ Impairment percentage by segment:

Impairment and impairment in pct.

DKKm 700

0,49

¾ Corporate: 1.4 (DKK 488m.) ¾ Agriculture: 2.5 (DKK 141m.) ¾ Household: 0.6 (DKK 96m.)

584

¾ 2/3 of impairments contribute to buffering up for future losses

236 0

-1,50 2008

Impairment of loans, advances and guarantee debtors Y/Y: 81 pct.

1.250

Impairment in % of loans, adv. and guarantees

Non-performing loans

20

23

583

666

767

850

969 1,2

0

1,5

1,9

2,2

2,5

1Q 09

2Q 09

3Q 09

4Q 09

103 48

0,0 4Q 08

DKKm

103

Pct.

DKKm

79

Cover-ratio

Y/Y: 115 pct.

125

3,0

2009

130 34

Pct.

1,22

65

76

57

1Q 09

2Q 09

3Q 09

4Q 09

11

11

1Q 09

2Q 09

11

0

0 4Q 08

17 13

4Q 08

1Q 09

2Q 09

3Q 09

4Q 09

4Q 08

3Q 09

4Q 09

Sector fund Spar Nord ex. sector fund

4

Solvency strengthened – 14.2 per cent ¾ Individual solvency requirement: 8.5 per cent (7.8 per cent at end-2008) ¾ Hike in requirement attributable to sharper assessment principles

2006 8,8 0,9 9,7 3,0 -1,9 10,8

Pct. of RWA Core capital Hybrid capital Core capital ratio Subordinated debt Deductions Solvency ratio

2007 8,6 0,8 9,4 3,4 -1,7 11,1

2008 8,9 0,8 9,7 3,1 -1,5 11,3

2009 9,3 3,9 13,2 2,6 -1,7 14,2

¾ Excess coverage of DKK 2.4bn. 3,5 mia. kr.

¾ Core capital after deduction 5,9 mia. kr.

¾ Core capital percentage excl. hybrid: 8 per cent. ¾ Core capital incl. hybrid: 12 per cent

Subordinated loan capital per year (Maturity)

20

13,2

Pct.

¾ Strategic goals

Core capital ratio

1.500

9,7 0,9

9,4 0,8

9,7 0,8

3,9

8,8

8,6

8,9

9,3

DKKm

¾ Capital requirement

1.265

594 249

0

350

200

0

2006

2007

Core capital Kernekapital

2008

2009

Hybrid capital Hybridkapital

2010 2011 2012 2013 2014 2015 Subordinated loan capital

Hybrid capital

5

Strong strategic liquidity ¾ Excess coverage relative to strategic liquidity target stands at DKK 7.4bn. ¾ Further improvement mainly due to decline in lending of DKK 6.7bn. ¾ Bonds issues of DKK 5.0bn. – in the same period senior loans and bonds worth DKK 4.0bn have been redeemed

Senior loans maturity

DKKm

2007 27,4 2,2 6,4 5,9 41,9 40,9

2008 33,8 3,4 6,0 5,7 49,0 45,4

2009 31,9 6,5 4,0 6,8 49,2 38,3

-0,4 -2,9

-1,0 0,0

-4,2 -0,6

-3,5 7,4

8 6 4 2 0 -2 -4

5.209 3.204

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

1.940

0 2011

2006 22,7 0,0 4,0 5,1 31,8 34,3

Strategic target

DKKb

6.000

2010

DKKb Cash deposits Issued Bonds Senior loans Core capital and sub. capital Stable long term funding Loans and advances Senior funding and sub. loan capital0)

2012

19

22

20

2013

2014

2015

2007

2008

2009

6

Expectations for 2010 ¾ Small decline in NII ¾ Stabile margin and positive loan growth ¾ Hike in interest expenses relating to hybrid core capital and issued bonds ¾ Declining interest income from bonds portfolio ¾ Net income from fees and commissions expected to grow ¾ Activity in capital-market related areas expected to rise ¾ Market-value adjustments still expected to be at satisfactory level ¾ Difficult to top 2009, though... ¾ Focus on costs and efficiency ¾ Cost growth of 0 - next two years ¾ Core earnings before impairment expected in the range DKK 800-1,000m. ¾ Impairment ratio is expected to be in the range 1.00-1.25 ¾ Still primarily attributable to business customers in general and customers in agriculture in particular ¾ Expenses relating to guarantee commission to the Danish Banking Sector Emergency Fund is expected to amount to DKK 135m. To this must be added further losses on sector targeted solutions

7

3 important issues for 2010…

Costs ¾ The 0s was a decade of great growth for Spar Nord – coming into the 10s the vision of nationwide presence is within reach ¾ Through the years of growth our costs have grown too much ¾ Hence, it’s time for a strategy adjustment: From sow to harvest ¾ Goal: Zero cost growth in 2010 and 2011 100 positions to be cut Reduction of the number of parallel development projects A new and responsible cost culture Income/Cost ratio Ringkjøbing Landbobank Jyske Bank Amagerbanken Sydbank Vestjysk Bank Nordjyske Bank Spar Nord Bank Sparbank Forstædernes Bank

2006 2,92 (1) 1,51 (9) 1,87 (3) 1,78 (4) 1,90 (2) 1,68 (5) 1,58 (7) 1,56 (8) 1,66 (6)

2007 2,97 (1) 1,81 (4) 2,09 (2) 1,83 (3) 1,79 (5) 1,74 (7) 1,55 (8) 1,48 (9) 1,76 (6)

2008 3,08 (1) 1,66 (6) 2,06 (2) 1,70 (5) 1,61 (7) 1,72 (4) 1,42 (8) 1,41 (9) 1,75 (3)

2009 3,16 (1) 1,95 (2) 1,94 (3) 1,86 (4) 1,78 (5) 1,72 (6) 1,62 (7) 1,45 (8) 1,27 (9)

17-03-2010

9

Impairment of loans ¾ Improvement of business climate comes slowly and gradually → continued high losses and impairments ¾ Challenges for many businesses – not least for the agricultural sector ¾ Household customers are not a concern

The group's loans, advances and guarantees shown by line of business

Line of Business Pct.

Banking Sector 2008

Spar Nord Bank

2008

2009

Impairment in % of loans, advances and guarantees 2009

Public sector

2,3

1,6

1,4

0,0

Agriculture, forestry etc.

3,5

11,0

12,7

2,8

Fishing

0,2

0,2

0,5

2,3

Manufact. raw materiel, power-, gas-, water- etc.

9,1

6,2

6,5

3,3

Construction and civil engineering

3,2

4,2

4,4

2,2

Trade-, restaurant- and hotel business

6,0

8,5

8,3

3,5

3,6

5,7

6,4

2,5

Credit, financing and insurance

29,0

11,4

6,0

1,6

Property management, sales and renting

13,9

12,0

12,3

1,3

Other corporate customers

4,4

5,2

4,8

2,6

Corporate customers, total

72,9

64,4

61,9

2,4

Personal customers, total

24,8

34,0

36,7

1,1

100,0

100,0

100,0

1,9

Transport-, mail- and phone

Total Impairment in % of loans, advances and guarantees (Incl. Groups of impairment losses)

2,2

Agriculture – light at the end of the tunnel? 500

¾ Group exposure to agriculture DKK 4.0bn.

¾ Leasing

DKK 1.7bn.

166 0

¾ Credit quality is sound ¾ Balanced in terms of lines of production ¾ Generally cautious approach ¾ Crisis hasn’t really hit the leasing business ¾ Positive results expected in 2010

1.000 DKK

¾ Bank

-500

-782

-1.000 -1.500

-1.608

-2.000 2008

Crop producers Ave. profit per farm

2010

500

-41 -239

-250

333

250

64 1.000 DKK

1.000 DKK

2009 Cattle producers Ave. profit per farm

250

0

Pork producers Ave. profit per farm

0 -48 -250

-500

-326

-500 2008

2009

2010

2008 2009 2010 Source: Fødevareøkonomisk Institut, Købehavns Universitet (Januar 2010)

11

Converting geographic growth into business growth ¾ Great investment in distribution power from 2002 to 2009 ¾ Revision of strategy in 2010: From sow to harvest ¾ Still huge market potential in new areas ¾ Strong capital base and liquidity

spar nord

Jebjerg

Spar Nord local banks Geographical break down

spar nord

Skive spar nord

Core earnings before impairm. (DKKm) 2009

709

61

22

-110

2008

618

15

6

-77

Randers

Silkeborg spar nord Århus Århus Herning Ikast

Århus

Established Established before 2002 2002- Roskilde Central

spar nord

spar nord

spar nord

spar nord

spar nord

spar no

Hel Hillerød spar nord

spar nord

spar nord

København

Horsens Vejle spar nord Fredericia spar nord spar nord Middelfart spar nord Kolding Odense spar nord

spar nord

Esbjerg

spar nord

Nyborg spar nord

Svendborg

spar nord

spar no Holbæk spar nord Køb Roskilde spar nord Slagelse spar nord Køge spar nord

Næstved

30/9 2010…

We’re not worried ¾ Strong image – Spar Nord is among the winners ¾ Strong strategic liquidity ¾ Favorable distribution of deposits ¾ International rating ¾ Possibility to issue bonds with state-backed guarantee

Deposits and other payables (DKKb) 2009 On demand 21,1 Subject to notice 4,1 Time deposits 3,2 Special types of deposits 3,5 Total 31,9

2008 21,4 2,7 6,7 3,1 33,8

” Spar Nord Bank is strongly positioned for the expiration of Bank Package I. In this bank there no need for panic – even without an unlimited state guarantee. (Penge & Privatøkonomi 01.10)

30/9 in a sector perspective ¾ Trend toward a more ”natural” link between deposit structure and business model (customer profile) ¾ Still possible to issue bonds with government-backed guarantee ¾ Improved market-conditions for non-guaranteed issues ¾ We’re not headed for a sector-wide disaster – but some banks may experience major challenges

Challenges in the horizon…

Regulation

Surplus capacity – low demand for financing

Skibe uden fragt – for anker uden for Singapore

Ill.: Sindal – a small town in Northern Jutland

Loan losses

Key messages ¾ Spar Nord is strongly positioned to face future challenges ¾ Image hasn’t suffered ¾ Well diversified high quality loan book (agriculture the only concern) ¾ Investment in distribution power – also during the crisis ¾ Strong liquidity