Sparekassen Sjælland Fyn A/S : Interim Report Q3-2023

Q1-Q3 2023

Interim Report

Contents

Q1-Q3 2023 highlights

PROFIT BEFORE TAX

Totals DKK 521.1m

Pre-tax profit provides returns on the opening equity at a rate equivalent to 16.8% a year. Net profit stands at DKK 406.7m, equivalent to a return on opening equity of 13.1%.

PROFIT BEFORE TAX IN Q3 2023

Up 31%

Pre-tax profit in Q3 2023 comes to DKK 180.3m against DKK 137.7m in Q3 2022.

CORE EARNINGS

Up 11%

Q1-Q3 2023 reflect a continuously satisfactory development in core earnings.

LOANS AND ADVANCES

Up 1%

Loans and advances have increased by DKK 0.1bn on the 30 September 2022 balance. Since year-end 2022, total loans and advances have gone up by DKK 0.7bn, or 6%. This development has primarily been driven by loans to corporate customer that have increased by over 12% since year-end 2022.

Sparekassen Sjælland-Fyn

DEPOSITS

Up 3%

Deposits have increased by DKK 0.6bn compared to the balance at 30 September 2022 and total DKK 21.3bn.

NET INTEREST AND FEE INCOME

Up 8%

Total net interest and fee income is up by DKK 80.4m to stand at DKK 1,083.4m.

STAFF COSTS AND ADMINISTRATIVE EXPENSES

Up 3%

Staff costs and administrative expenses have gone up by DKK 20.3m and amount to DKK 599.4m.

CAPITAL RATIO

Is 24.3%

The capital ratio includes current profits. Sparekassen's capital position continues to develop quite satisfactorily.

IMPAIRMENT LOSSES ON LOANS AND ADVANCES ETC

Total DKK 19.2m

Despite slightly increasing impairment losses, the credit quality of Sparekassen's customers is still perceived to be fine. In Q3 2023, provisions in the form of management add-ons have increased by DKK 9.6m to a total of DKK 213.7m.

SHARE BUY-BACK PROGRAMME

Of up to DKK 100m launched

The share buy-back programme was launched on 10 August 2023 and will end no later than 9 February 2024.

SPECIFICATION OF EARNINGS EXPECTATIONS TO RANGE BETWEEN

DKK 680m and DKK 725m before tax

In view of a continuously strong development in earnings in Q3 2023, the pre-tax earnings expectations range for the year has been narrowed.

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Contents

2 Management commentary

Q1-Q3 2023 highlights	page	2
Management commentary	page	4
Outlook for 2023	page	5
Financial highlights	page	6
Financial ratios	page	7
Core earnings	page	8
The Supervisory Diamond	page	10
Financial review of the Group	page	11
Towards New Goals -
Sparekassen's 2025 strategy	page	15
Capital structure and liquidity of the Group	page	19
Credit quality categories	page	22
Financial review of the Parent	page	23

Cover photo: The Sparekassen Sjælland-Fyn Group's head office in Holbæk.

Sparekassen Sjælland-Fyn

Contents

25 Interim financial statements

Statement by Management on
the Interim Report	page	26
Income statement	page	27
Statement of comprehensive income	page	27
Balance sheet	page	28
Statement of changes in equity	page	29
Cash flow statement	page	31
Notes	page	32
Parent	page	46
Definitions of official key ratios etc	page	56

This Interim Report has been prepared in Danish and English, with the Danish version being valid in the event of any inconsistencies.

For more information, please visit spks.dk or contact:

Lars Petersson	Lars Bolding	Morten Huse Eikrem-Jeppesen
Chief Executive Officer	Savings Bank Director	Press Officer
5948 1111	5948 1111	[phone]
[e-mail]	[e-mail]

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Management commentary

Sparekassen Sjælland-Fyn delivers a pre-tax profit of DKK 521.1m, providing a 16.8% return on opening equity.

Increasing core earnings

Sparekassen's net interest income has gone up by DKK 138.2m, or 28%, over the first nine months of 2023. This increase reflects the generally higher interest rate levels as a result of Danmarks Nationalbank having raised interest rates several times, last in September 2023. This has, for example, led to increased interest income for Sparekassen from the surplus liquidity placed with Danmarks Nationalbank, and Sparekassen's interest income from loans and advances has gone up as well.

Fee and commission income has gone down by DKK 50.8m, or 10%, on Q1-Q3 2022. Primarily lower activity in the housing market and a lower demand for new residential mortgages and for refinancing of existing mortgage credit loans because of the higher interest rate levels have contributed to the decline in fee and commission income. Moreover, the doubts about the new preliminary public land assessments along with increasing interest rates have led to uncertainty for first-time buyers, among others. This has reduced activities in the housing market. Sparekassen has huge focus on accommodating first-time buyers in so far as this is possible.

Taken together, net interest and fee income has gone up by 8% to DKK 1,083.4m in total. Compared with a 3% increase in staff costs and administrative expenses caused, for example, by the engagement of more specialist competencies along with increased PR costs, Spareka- ssen has increased its core earnings again in the first three quarters of 2023. Core earnings are up 11% during the period.

Growth in the corporate customer area

Sparekassen is experiencing handsome growth in the corporate customer segment. Loans to corporate customers have increased by 12% since year-end 2022, which is considered quite positive. This development reflects that Sparekassen is expanding its business with existing corporate customers as well as winning market shares. For example, Sparekassen is seeing a fine ambassador effect with existing customers, which has resulted in more referrals, among them from major corporate and agricultural customers in both Zealand and Funen.

Overall, Sparekassen's loans and advances have increased by DKK 0.1bn compared to Q3

2022 whereas they have gone up by DKK 0.7bn, or 6%, on the balance at year-end 2022.

Level of impairment losses still low

The credit quality of Sparekassen's private and corporate customers is still strong, and this is attributable, for example, to employment rates remaining high and to the rate of inflation now returning to a normal level after the heavy rises in prices of electricity and gas etc in 2022. This development is supported by an increase in deposits which at 30 September 2023 amounted to DKK 21.3bn, which is 3% up on the amount at 31 December 2022.

At 30 September 2023, impairment losses total DKK 19.2m and so remain low.

In Q3 2023, Sparekassen has increased its management add-ons to DKK 213.7m. This increase represents a continuously conservative approach to the implications of the increasing interest rate levels and the economic forecasts, including the consequences of the geopolitical situation.

On 3 October 2023, the Systemic Risk Council recommended that the Danish Minister for

Industry, Business and Financial Affairs activate a systemic capital buffer of 7% for exposures to property companies effective from 30 June 2024, one of the reasons being the rising interest rate levels. The Minister is required to state his position, within a period of three months from 3 October, on the Council's recommenda- tion. However, the Minister has already stated that the Danish Government intends to follow the recommendation.

For Sparekassen, this is expected to lead to an increase in the capital adequacy requirement of around 0.5 percentage point.

Effective from 30 September 2023, Spareka- ssen has raised its management add-ons for property companies, and an amount has been earmarked in the capital requirement to cover the recommendation of the Systemic Risk Council.

Towards New Goals

Sparekassen has - as a step in its four-year strategy "Towards New Goals" - started some internal strategic initiatives that are designed, for example, to free up 90,000 hours for customer service. This work is proceeding as

Sparekassen Sjælland-Fyn

Q1-Q3 2023 Interim Report | Management commentary

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Contents

planned. At the end of Q3 2023, 98,000 hours' worth of optimisation initiatives had been identified.

As part of the "Towards New Goals" strategy, Sparekassen has also defined a series of financial objectives, among them, that shareholders' cash dividend is to be at least 25% of Spareka- ssen's profit. Another objective has been to increase total distribution by means of share buy-backs. This objective is now being met in that Sparekassen launched a share buy-back programme on 10 August amounting to up to DKK 100m.

The share buy-back will end no later than 9 February 2024 and reflects that Sparekassen wants to pursue an attractive shareholder policy and consider both existing and potential shareholders.

Outlook for 2023

In June 2023, Sparekassen adjusted its pre-tax earnings expectations range for the year upward from DKK 550-650m to DKK 650-725m. In view of sustained strong earnings in Q3 2023, the pre-tax earnings expectations range for the year has been narrowed to DKK 680-725m.

Lars Petersson

Chief Executive Officer

Lars Bolding	Jan Kolbye Jensen
Savings Bank	Savings Bank
Director	Director

LARS BOLDING		LARS PETERSSON	JAN KOLBYE JENSEN
Savings Bank Director		Chief Executive Officer	Savings Bank Director

Sparekassen Sjælland-Fyn

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Financial highlights

		Sparekassen Sjælland-Fyn A/S
		(Group)
	30.09	30.09		Year-end
Amounts in DKK'000	2023	2022	Index1	2022

Income statement items
Interest income calculated under
the effective interest method	603,504	384,372	157	530,620
Other interest income	156,804	82,676	190	133,131
Negative interest income	-	14,963	-	14,963
Interest expenses	136,659	40,094	341	63,917
Positive interest expenses	-	73,489	-	74,671
Net interest income	623,649	485,480	128	659,542
Dividends on shares	19,739	26,451	75	26,451
Fees and commission income	451,764	502,517	90	664,661
Fees and commission expenses paid	11,796	11,513	102	15,547
Net interest and fee income	1,083,356	1,002,935	108	1,335,107
Translation and market value
adjustments	63,078	-83,269	-	-73,492
Other operating income	13,768	11,864	116	16,030
Staff costs and administrative
expenses	599,352	579,086	103	771,235
Amortisation, depreciation and impair-
ment losses on intangible assets and
property, plant and equipment	36,038	27,824	130	32,930
Other operating expenses	21,030	12,625	167	18,867
Impairment losses on loans and
advances etc	19,187	-30,934	-	-15,952
Investments in associates and
group enterprises	36,468	8,063	452	11,481
Profit for the year before tax	521,063	350,992	148	482,046
Income tax	114,340	74,589	153	110,281
Profit for the year after tax	406,723	276,403	147	371,765
Profit allocated to shareholders	374,955	258,095	145	345,651

Sparekassen Sjælland-Fyn

Contents

		Sparekassen Sjælland-Fyn A/S
		(Group)
	30.09	30.09		Year-end
Amounts in DKK'm	2023	2022	Index1	2022

Balance sheet items

Loans and advances etc	12,390	12,324	101	11,690
Deposits	21,302	20,665	103	20,673
Deposits in pooled plans	1,968	1,983	99	1,976
Total deposits	23,270	22,649	103	22,649
Subordinated loan capital	596	621	96	571
Equity	4,350	3,911	111	4,129
Balance sheet total	30,570	28,529	107	29,631
Capital resources	3,735	3,755	99	4,133
Guarantees	5,121	6,412	80	5,613
Total credits arranged	60,917	60,558	101	59,946
Custody accounts	15,177	12,809	118	13,771

Developments in Sparekassen's business areas

Loans and advances etc	12,390	12,324	101	11,690
Totalkredit	35,097	35,531	99	35,080
DLR	13,430	12,703	106	13,176
Guarantees (exclusive of loss
guarantees for mortgage loans)	2,968	3,928	76	3,213
Deposits	21,302	20,665	103	20,673
Deposits in pooled plans	1,968	1,983	99	1,976
Custody accounts	15,177	12,809	118	13,771
Total	102,332	99,943	102	99,579
Average headcount (full-time
employees on average)	552	544	101	546
Per employee	185	184	101	182

1 Index:: 30.09.2023 relative tol 30.09.2022.

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Financial ratios

Sparekassen Sjælland-Fyn A/S

(Group)

30.09	30.09		Year-end
2023	2022	Index1	2022

Financial ratios
Capital ratio 2	22.1	22.3	99
Core capital ratio 2	19.0	18.6	102
Common equity Tier 1 capital 2	16.6	16.4	101
Excess capital adequacy in percentage points 2	11.3	11.6	97
Return on equity before tax (for the period)	12.3	9.1	135
Return on equity after tax (for the period)	9.6	7.2	133
Income/cost ratio DKK	1.77	1.60	111
Rate of cost	59.8	61.1	98
Interest rate risk relative to core capital net of deductions	4.4	0.4	1,100
Currency position relative to core capital net of deductions	1.3	1.5	87
Currency risk relative to core capital net of deductions	0.0	0.0	-
Loans and advances relative to equity	2.8	3.2	88
Loans and advances plus loan impairment losses relative to deposits	55.6	56.8	98
Growth in loans and advances for the for the period	6.0	2.1	286
Impairment ratio for the for the period	0.1	-0.2	-
Accumulated impairment ratio	3.4	3.1	110
Zero interest loans and advances relative to total loans and advances	0.3	0.1	300
Liquidity benchmark	563	472	119
Liquidity LCR	435	377	115
Total large exposures	85.1	78.7	108
Return on invested capital	1.4	1.0	140
Earnings per share (DKK) 3	21.7	14.9	146
Dividend per share (DKK)	0.0	0.0	-
Book value per share (DKK)	225.7	203.2	111
Price/earnings per share 3	9.1	10.2	89
Price/equity per share4	0.9	0.8	113
Price at year-end (DKK)	197.4	153.0	129
Average headcount (full-time employees on average)5	552	544	101
Average headcount (converted into full-time employees at year-end)5	558	553	101

1. Index: 30.09.2023 relative to 30.09.2022.
2. 30.09.2023 and 30.09.2022 have been calculated exclusive of profit for the period. If the profit for the period after tax is reduced with the dividend policy's target was included in the capital base, the capital ratio, core capital ratio, actual core capital ratio, and capital transfer would be 2.2 pct. points higher. (30.09.2022: capital ratio, core capital ratio, actual core capital ratio, and capital transfer 1.0 pct. points higher)
3. Calculated based on the average number of shares during the year.
4. Calculated based on the number of outstanding shares at the end of the year.
5. Engaged in financial business.

25.1

21.9

18.9

14.2

12.2

9.4

1.60

60.9

5.2

1.5

0.0

2.8

54.0 -3.1-0.1 3.5 0.2 481 372 62.9

1.3

20.0

6.0

209.3

9.7

0.9

193.5

546

555

Sparekassen Sjælland-Fyn

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Core earnings

						Sparekassen Sjælland-Fyn A/S
							(Group)
	YTD	Q3	Q2	Q1	YTD	Q4	Q3	Q2	Q1	YTD	Q4	Q3	Q2	Q1
Amounts in DKK'm	2023	2023	2023	2023	2022	2022	2022	2022	2022	2021	2021	2021	2021	2021

Core earnings

Net interest income	623.6	226.6	206.9	190.1	659.5	174.1	170.7	168.7	146.1	581.6	142.6	143.4	149.6	146.0
Dividends on shares	19.7	0.0	0.6	19.1	26.5	0	0	21.4	5.1	18.5	0.3	0	15.8	2.4
Fees and commission income	451.7	142.4	143.2	166.1	664.6	162.1	166.9	158.4	177.2	634.6	156.2	156.2	155.9	166.3
Fees and commission income paid	11.7	3.8	4.1	3.8	15.5	4.0	3.8	3.8	3.9	17.2	4.3	4.3	4.0	4.5
Other operating income	13.8	3.9	6.0	3.9	16.0	4.2	4.2	4.7	2.9	15.6	4.1	4.2	3.9	3.5
Other operating expenses	21.0	6.4	7.5	7.1	18.9	6.2	4.3	3.9	4.4	19.7	6.2	4.3	6.5	2.7
Core income	1,076.1	362.7	345.1	368.3	1,332.2	330.2	333.7	345.5	323.0	1,213.5	292.7	295.2	314.8	311.0
Staff costs and administrative expenses	599.4	194.4	202.9	202.1	771.2	192.1	188.1	204.1	186.9	723.1	188.8	176.3	184.9	173.1
Amortisation, depreciation and impairment
losses on intangible assets and property,
plant and equipment	36.0	10.2	13.8	12.0	32.9	5.1	12.9	7.7	7.3	35.8	7.0	11.4	8.2	9.2
Core earnings	440.7	158.1	128.4	154.2	528.1	133.0	132.7	133.7	128.8	454.7	96.9	107.5	121.7	128.7

Quarterly development in core earnings

DKK'm
175
150
125
100
75
Q1 2021	Q2 2021	Q3 2021	Q4 2021	Q1 2022	Q2 2022	Q3 2022	Q4 2022	Q1 2023	Q2 2023	Q3 2023

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Core earnings

Development in core earnings

	DKK'm
650
				+219.8	-81.6
575
								-50.8
						2
500												-20.3
													-8.2		-6.8	-6.7
									3								440.7
									4
425												5
																6
395.3
					1
350
		Q1-Q3 2022	Interest		Interest	Fee and		Staff costs,	Depreciation	Other		Dividend	Q1-Q3 2023
					income /		expenses/	commission		administrative	and	items
					positive		negative	income		expenses	amortisation
					interest		Interest
					expenses		income

1

Loans and

advances etc

Bonds

Credit institutions

and centralbanks

Deposits

2

Deposits

Credit institutions and central- banks

3

Activity in the real estate market

4

Staff costs

Marketing cost Inflation

5

Impairment losses on owner-occupied properties

6

Sector companies co-owned

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The Supervisory Diamond

Sparekassen observes all thresholds for the benchmarks of the Danish FSA's risk management tool, "the Supervisory Diamond"; the Supervisory Diamond lays down risk-based benchmarks for four specific areas that sparekassen must comply with.

The four benchmarks and the current calculations are:

Benchmark	Threshold	Group at 30.09.2023	Group at 30.09.2022

The total of large exposures as a percentage of common equity tier 1 capital

Loan growth per annum

Property exposure of loans advances and guarantees

Liquidity benchmark

<175 % 85.1 % 78.7 %

<20 % 0.5 % 1.7 % <25 % 11.4 % 10.6 % >100 % 562.8 % 472.0 %

For all four benchmarks, Sparekassen has internal targets that are duly below the Supervisory Diamond thresholds.

The internal targets and the controlled management of developments in the four Supervisory Diamond benchmarks entail that sparekassen does not expect to have any difficulties in respecting the thresholds of the Supervisory Diamond in future either.

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