Board of Directors’ Report for 2009 - SpareBank 1 Gruppen

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Board of Directors’ Report for 2009SpareBank 1 Gruppen

2 SpareBank 1 Gruppen

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Board of Directors’ Report for 2009 SpareBank 1 Gruppen AS

OPERATIONS IN 2009

SpareBank 1 Gruppen AS is a holding company that, through its

subsidiaries, provides and distributes products in the fields of life

and P&C insurance, fund management, securities brokering,

factoring, receivables management and debt collection of old claims.

SpareBank 1 Gruppen AS is owned by SpareBank 1 Nord-Norge

(19.5%), SpareBank 1 SMN (19.5%), SpareBank 1 SR-Bank (19.5%),

Samarbeidende Sparebanker AS (19.5%), Sparebanken Hedmark

(12%) and the Norwegian Confederation of Trade Unions and

affiliated trade unions, LO (10%).

In this Directors’ Report, SpareBank 1 Gruppen AS refers to the

holding company and SpareBank 1 Gruppen refers to the group

consisting of SpareBank 1 Gruppen AS and its subsidiaries.

SpareBank 1 Gruppen reported a profit of NOK 1,193.7 million for

2009, compared to a loss of NOK 731.6 million in 2008. The profit

for 2009 is the highest reported result in the history of SpareBank 1

Gruppen. The profit gave a return on equity after tax of 17.5%,

compared with minus 16.2% in 2008. The historic result is

primarily attributed to strong financial markets, which led to

positive returns on SpareBank 1 Gruppen’s diverse securities

portfolios. A substantial improvement in SpareBank 1 Livsforsikring

AS’s risk result also contributed to the positive result. SpareBank 1

Gruppen’s total assets were NOK 61.5 billion as of 31 December 2009,

which is an increase of 9.0% from 2008. In addition, ODIN’s assets

under management were NOK 28 billion as of 31 December 2009,

which is an increase of NOK 8.8 billion from 2008. The capital

adequacy ratio was 16.3% as of 31 December 2009, while the

core capital adequacy ratio was 11.8%. The capital position of

SpareBank 1 Gruppen is considered satisfactory.

In 2009, SpareBank 1 Gruppen AS sold its 24.5% share in First

Securities AS. The holding company owns 73.25% of the shares in

Argo Securities AS. The company is engaged in securities activities

and has its head office located in Oslo. SpareBank 1 Gruppen

Finans Holding AS was established in 2009 as a subgroup of

SpareBank 1 Gruppen AS. SpareBank 1 Gruppen Finans

Holding AS is comprised of a value chain within debt collection.

In the first quarter of 2009, SpareBank 1 Gruppen Finans Holding

AS acquired both SpareBank 1 Factoring AS (formerly known as

Glitnir Factoring AS) and Sparebanken Factoring AS (formerly

owned by SpareBank 1 Nord-Norge). In the second quarter of

2009, the two acquired companies were merged into a single

company called SpareBank 1 Factoring AS. SpareBank 1 Gruppen

AS purchased 10% of Actor Fordringsforvaltning AS from

Sparebanken Sør effective from 1 January 2009 and thereby

increased its owner share to 100%. During the first quarter of 2009,

SpareBank 1 Gruppen Finans Holding AS acquired the shares in

Actor Fordringsforvaltning AS and the company is now a part of

the subgroup. During 2009 SpareBank 1 Gruppen AS purchased

19.99 % of the shares in Eiendomsverdi AS, a company involved

in property valuation. In the fourth quarter of 2009,

SpareBank 1 Skadeforsikring AS purchased the health insurance

division of Skandia Lifeline Norge from Skandia Insurance Company

Ltd. The investment gave SpareBank 1 Skadeforsikring AS a total

market share of 15% in this market segment.

The shares that SpareBank 1 Gruppen AS had in Bank 1 Oslo AS

were demerged with effect from 1 January 2010. Consequently,

Bank 1 Oslo AS became directly owned by the SpareBank 1 banks

(90%) and the Norwegian Confederation of Trade Unions and

affiliated trade unions, LO (10%). An important factor in the

transfer of ownership was the strategy to establish a clear boundary

between production and distribution in the SpareBank 1 Alliance.

Bank 1 Oslo AS will continue to be a part of the SpareBank 1 Alliance.

SpareBank 1 Livsforsikring AS has entered into an agreement

with Gabler Wassum AS concerning the management and

administration of their group defined benefit pension portfolio

valued at approximately NOK 4.0 billion. The agreement provides

Gabler Wassum AS with the opportunity to purchase the portfolio

by the end of 2010.


In 2008, SpareBank 1 Gruppen introduced a new management

system, based on principles taken from «Beyond Budgeting»,

that is called Dynamic Management. A consequence of this change

is that the group has discontinued the traditional budgetary

process and implemented rolling forecasts. Ambitious, relative

targets and the extended use of benchmarks, which illustrate the

company’s performance in relation to the market and competitors,

are important elements of Dynamic Management. The group’s

bonus and profit-sharing plans have been modified in accordance

with the principles of Dynamic Management.

In 2009, SpareBank 1 Gruppen engaged in a profitability improve-

ment program called Delta. The goal of the program is to increase

the annual profitability by NOK 361 million beginning in 2011.

This does not include the Bank 1 Oslo AS profitability improve-

ment program of NOK 89 million, as they are no longer a part of

SpareBank 1 Gruppen AS of 1 January 2010. Large measures have

been completed during 2009 and the program will continue

through 2010. At year end 2009, the program was ahead of

schedule and had already yielded positive results, having given an

annual positive effect of NOK 182 million, including NOK 44

million from Bank 1 Oslo AS’s program.

In January of 2009, Eldar Mathisen, Chief Executive Officer, was

diagnosed with a severe illness. As a result, Kirsten Idebøen, former

Chief Financial Officer, was asked to fill the position of acting

Chief Executive Officer. She was permanently hired as Chief

Executive Officer in June of 2009. Eldar Mathisen passed away in

September of 2009.

SPAREBANK 1 ALLIANCE

The SpareBank 1 Alliance consists of 20 savings banks, two

commercial banks (Bank 1 Oslo AS and BN Bank ASA) and

SpareBank 1 Gruppen. The alliance represents one of the largest

providers of financial products and services in the Norwegian

market. The banks in the SpareBank 1 Alliance distribute Spare-

Bank 1 Gruppen’s products and collaborate in key areas such as

developing brands, work programs, development of skills and

know-how, IT operations, system development and procurement.

SpareBank 1 Gruppen and the banks in the alliance have entered

into various strategic agreements related to banking and insurance

services with the Norwegian Confederation of Trade Unions and

affiliated trade unions, LO. The insurance benefits offered to

members of LO, as well as the management of LO and the affiliated

trade unions’ capital and deposits are essential for the collaboration

between the associated companies. LO and the affiliated trade

unions use the SpareBank 1 Alliance as their main supplier of

financial products and services, provided that these products and

services are offered on commercial and competitive terms. By the end

of 2009, LO and the affiliated trade unions had approximately

865 000 members.

The main goal of the SpareBank 1 Alliance is to ensure each bank’s

independence and regional affiliation through strong competitiveness,

profitability and financial soundness. Additionally, the SpareBank 1

Alliance offers an inclusive competitive banking alternative at a

national level. In an effort to promote common goals, the banks

in the alliance have established a national marketing profile

and developed a common strategy for brand building and

communication. This strategic marketing platform also forms the

basis for joint development of products and concepts. The product

companies established under SpareBank 1 Gruppen AS and the

associated banks have developed a common technology platform.

The sharing of experience and transfer of knowledge within the

alliance, based on best practice, are key elements of the alliance’s

development. As a result of these efforts, knowledge centres have

been established for Credit Management in Stavanger, Payments

in Trondheim, and Training in Tromsø.

The SpareBank 1 Alliance had total assets of around NOK 625

billion at the end of 2009. Total assets amounted to approximately

NOK 585 billion in 2008. The SpareBank 1 Alliance consists of 350

offices and branches throughout Norway that distribute SpareBank 1

Gruppen’s products.

Alliansesamarbeidet SpareBank 1 DA provides the administrative

framework for the alliance and manages financing and ownership

of applications, concepts, contracts and brands on behalf of the

alliance partners. The company is owned by the banks in the

alliance and SpareBank 1 Gruppen AS, the latter having an

ownership interest of 17.74% at 31 December 2009. When Bank

1 Oslo AS became directly owned by the alliance banks, LO and

affiliated trade unions on 1 January 2010, it simultaneously

became an owner of Alliansesamarbeidet SpareBank 1 DA. Bank

1 Oslo AS bought 7.74% of the shares in Alliansesamarbeidet

SpareBank 1 DA from SpareBank 1 Gruppen AS, leaving the

holding company with shareholdings representing 10%.

SpareBank 1 Gruppen plays an important role in the efforts to

realise the alliance’s strategic goals. The group’s operations are

based on creating value for its customers and owners.

SpareBank 1 Gruppen’s main functions in the SpareBank 1 Alliance

are two-fold:

Manage and develop the financial group with respect to the

production and delivery of competitive products and services

for distribution through the alliance banks, LO and other

banks that have a distribution agreement with companies in

SpareBank 1 Gruppen.

Manage and develop the alliance cooperation with respect to

common management, development and execution of activities

that provide economies of scale and competitive advantages.

SpareBank 1 Gruppen’s vision states that «The customer must

experience security, proximity and a simpler everyday life». This

customer-focused vision supports the alliance’s vision, which

states that «SpareBank 1 shall be the recommended bank where

customers are reminded of their local roots, meet staff who are

experts at what they do, and experience a simpler everyday life».

The core values of SpareBank 1 Gruppen AS are «to be an expert

and close to you». This implies that the employees are friendly and

helpful and are willing to be proactive, by taking initiative and

providing customers with relevant and sound advice. Additionally,

the employees are customer-focused and maintain professional

competence, strong industry-related skills and are available for

customers when needed. Advice given to customers and sales

transactions completed are based on high ethical standards. The

marketing efforts are aimed primarily at the retail market, small

and medium-sized enterprises and trade unions affiliated with LO.

CORPORATE GOVERNANCE

The shares in SpareBank 1 Gruppen AS are not publicly traded,

but the company had per 31 December 2009 bonds listed on the

Oslo Stock Exchange and subordinated loans listed on the Oslo

ABM. The company has a concentrated shareholder structure, with

all shareholder groups either directly or indirectly represented in

the board. There is ongoing communication within all the owner

groups. The board of SpareBank 1 Gruppen AS has discussed the

«Norwegian Code of Practice for Corporate Governance» and

adopted this wherever the guidelines are applicable and where

they are relevant for a company that does not have shares listed

on a stock exchange. The company is managed in accordance

with the objectives, strategies and ethical guidelines drawn up by

the board. The company places great importance on being in

compliance with the requirements set by the stock exchange.

In 2007 the board adopted a new dividend policy for the company.

This means that the company’s owners will be paid the maximum

allowed dividend in accordance with the appropriate rules and

regulations. In determining the dividend for SpareBank 1 Gruppen

AS, importance shall be placed on keeping a satisfactory capital

and core capital adequacy ratio in relation to the planned growth

and risk associated with the company’s operation. The financial

situation must also be deemed satisfactory in other respects.

In 2008, the board established an audit committee and a compensation

committee. The duties and functions of these committees are

described in the instructions set by the board.

SpareBank 1 Gruppen has two management teams, group

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The core values of SpareBank 1 Gruppen ASare «to be an expert andclose to you». This impliesthat the employees are friendly and helpful andare willing to be proactive,by taking initiative andproviding customers with relevant and soundadvice.


management, which is responsible for managing and developing

the financial group, and alliance management, which is responsible

for managing and developing the alliance collaboration. Together,

these two groups constitute an extended management forum

which is led by the Chief Executive Officer. The forum gathers

monthly to discuss strategic decisions and other matters concerning

the alliance cooperation.

Information on the remuneration of the Chief Executive Officer,

group management, board of directors, supervisory board and audit

committee is provided in note 47. Information on the remuneration

to the auditor is provided in note 12.

SPAREBANK 1 GRUPPEN – RESULTS AND KEY FIGURES

SpareBank 1 Gruppen AS and SpareBank 1 Gruppen report the

annual accounts in accordance with IFRS, International Financial

Reporting Standards. The consolidated capital adequacy statement

(COREP) is based on Bank 1 Oslo AS’s IRB statement, and includes

capital requirements for the other companies in the group.

Profit/loss - SpareBank 1 Gruppen:

NOK million 2009 2008

Net result before tax from subsidiaries 1 244.1 -636.6Total operating costs (parent company) -54.1 -47.8Net investment charges (parent company) -36.3 -67.8Gains from sale of companies 29.2 21.1Share of associated company 10.8 17.7Net result before amortisation 1 193.7 -713.4Amortisation - -18.2Pre-tax result 1 193.7 -731.6Taxes -294.0 -126.2Net result for the period 899.6 -857.7

SpareBank 1 Gruppen reported a profit after tax of NOK 899.6

million in 2009, compared with a loss of NOK 857.7 million for the

previous year. This corresponds to a result improvement of NOK

1,757.3 million. The profit before tax was NOK 1,193.7 million, com-

pared with a pre-tax loss in 2008 of NOK 731.6 million. The total

tax expense was NOK 294.0 million compared with a tax expense

in 2008 of NOK 126.2 million.

Pre-tax profit/loss from subsidiaries:


Part of result from subsidiaries before tax:SpareBank 1 Livsforsikring 392.2 -1 038.9SpareBank 1 Skadeforsikring 621.1 217.7Bank 1 Oslo group 198.1 3.1ODIN Forvaltning 42.1 115.2Argo Securities -48.9 -4.0SpareBank 1 Medlemskort 12.1 12.1SpareBank 1 Gruppen Finans Holding 22.5 15.4Correction Group 4.8 42.9Net result before tax from subsidiaries 1 244.1 -636.6

The profit before tax from subsidiaries was NOK 1,244.1 million in

2009, against a loss of NOK 636.6 million in 2008. The improved

result from the subsidiaries was highly influenced by the strong

growth in the financial markets, as well as good results from

insurance operations.

SPAREBANK 1 LIVSFORSIKRING AS

Profit/loss - SpareBank 1 Livsforsikring AS:


Risk result after technical allocations 352.3 210.2Administration result -193.1 -207.8Investment result 557.4 -905.6Reserves -74.5 -Result before allocations 642.1 -903.1Allocation to additional provisions -127.9 345.1Compensation guaranted interest 14.6 13.3Transferred to policyholders -209.5 5.4Return on company's assets 73.0 -499.7Net profit to owner before tax 392.2 -1 038.9Taxes - -Net profit/loss for the period 392.2 -1 038.9

SpareBank 1 Livsforsikring AS achieved a pre-tax profit in 2009 of

NOK 392.2 million. The tax expense does not appear in the result

as deferred tax benefits are not recognised in accordance with

accounting standards IAS 12 as of 31 December 2009.

The risk and investment results improved considerably in 2009,

the administration result, also showed improvement compared to

2008. The underlying operations generated positive results and

the company’s operating result was NOK 174.0 million for the

insurance unit. The equivalent result last year adjusted for non-

recurring items was NOK 68 million.

The company achieved a value adjusted return for customer

portfolio with guarantee of 9.5% in 2009. The booked return was 7.1%.

Allocation of portfolio assets as at 31 December 2009:

Group portfolio2009 2008

Bonds 34.2 % 31.4 %Bonds held to maturity 24.3 % 30.3 %Real estate 21.7 % 22.9 %Other 5.2 % 3.0 %Stocks 14.5 % 12.4 %Total value 15 488 14 686

Company portfolio2009 2008

Bonds 48.7 % 26.9 %Bonds held to maturity 14.7 % 32.6 %Real estate 17.0 % 32.2 %Other 19.4 % 1.0 %Stocks 0.1 % 7.3 %Total value 2 479 1 343

Investment choice portfolio2009 2008

Bonds 31.5 % 28.9 %Other 7.1 % 16.7 %Stocks 61.4 % 54.4 %Total value 5 576 4 041

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The capital adequacy ratio was 19.0% as of 31 December 2009

compared with 14.3% at the end of 2008. The core capital adequacy

was 16.1% in 2009 against 11.0% in 2008. The solvency margin

capital was 279% compared with 192% for the previous year. The

minimum requirement for the solvency margin capital is 100%.

At the end of 2009, the solvency margin requirement was NOK 798

million, compared with NOK 848 million in 2008.

The allocation to additional provisions constituted NOK 128

million in 2009. The additional provisions amounted to NOK 289

million as of 31 December 2009. The securities adjustment reserve

was NOK 327 million at year end. The buffer capital represented

11.7% of the insurance provisions, which corresponded to a value

of NOK 1,783.0 million per 31 December 2009.

An important goal for SpareBank 1 Livsforsikring AS is to attain an

equivalent market share as the alliance banks and other distributors

in their local market places. This includes both the retail and the

corporate market.

The company aims to achieve an increased market share by offering

simplified and profitable products and by utilizing the extensive

distribution system in the SpareBank 1 Alliance.

SPAREBANK 1 SKADEFORSIKRING AS

Profit for the period - SpareBank 1 Skadeforsikring AS:


Gross written premium 4 271.2 4 044.0Net earned premium 3 814.3 3 677.6Net incurred claims -2 813.1 -2 651.3Net insurance operating costs -858.0 -804.2Other insurance income/costs 0.8 7.5Changes in other technical reserves -27.5 -13.9Operating result before finance 116.6 215.8Net financial income 532.6 36.9Other costs -5.8 -7.2Result before changes in security reserve 643.3 245.5Changes in security reserve -22.2 -27.8Pre-tax profit 621.1 217.7Taxes -118.1 -91.8Net profit for the period 503.0 125.9

SpareBank 1 Skadeforsikring AS reported a pre-tax profit of NOK

621.1 million for 2009, which is an increase of NOK 403.4 million,

compared to 2008.

The financial income amounted to NOK 532.6 million which was

an increase of NOK 495.7 million compared to 2008. The company

had positive returns on all asset groups in 2009.

The capital adequacy ratio was 34.2% at the end of 2009, which

corresponds to a coverage of NOK 1,077 million in relation to the

minimum requirements set by the authorities. The capital adequacy

ratio increased by 6.1 percentage points in 2009.

Net combined ratio per year:

The net combined ratio for 2009 was 96.2%, which was 2.2

percentage points higher than in 2008.

The gross claims ratio was 74.9% as of 31 December 2009, which

is an increase of 3.8 percentage points compared with 2008.

SpareBank 1 Skadeforsikring AS has ambitions for profitable

growth in both the retail and the corporate markets. Because of this

the company has continued to strengthen its distribution platform

in 2009. The goal is to increase earnings by strengthening the direct

distribution platform, as well as to ensure profitable growth

through the existing distribution network.

In addition to good profitability, the company’s long-term focus on

customer satisfaction has yielded good results. In 2009 independent

surveys showed that the company still has the most satisfied

customers after claims in the Norwegian P&C insurance market.

BANK 1 OSLO GROUP

Profit/loss – Bank 1 Oslo Group:


Net interest income 409.9 391.7Other operating income 443.2 188.4Operating costs 531.8 511.9Operating result before losses 321.3 68.1Net loan loss provisions 123.2 65.1Pre-tax operating profit 198.1 3.1Taxes 33.6 15.4Net profit/loss for the period 164.6 -12.3

The Bank 1 Oslo Group reported a pre-tax profit of NOK 198.1

million in 2009, which is an increase of NOK 195.0 million

compared to the previous year. The pre-tax profit, measured against

average total assets, was 0.77% against 0.01% in 2008. The net

interest income measured against average total assets was 1.60% in

2009, compared to 1.73% in 2008.

0

20

40

60

80

100

Cost ratio, netClaims ratio, net

200920082007200620052004

96.2%94.0%94.6%89.9%87.2%91.1%

22.1

69.0

20.5

66.7

20.6

69.3

20.7

73.9

21.9

72.1

22.5

73.8


The Bank 1 Oslo Group achieved a profit before losses of NOK 321.3

million in 2009, an improvement of NOK 253.2 million compared

to 2008. The increase is, amongst others, due to gains on the sale of

financial instruments of NOK 120.8 million.

Development in commission and other income:


Payments system 57.8 59.2Commission revenues from insurance and savings 99.6 80.5Real estate agency commission 126.5 94.0Guarantee commissions/other 21.1 21.0Net commission and other income 305.0 254.7

Net commission income increased from NOK 239.9 million in 2008

to NOK 294.3 million in 2009. This was an increase of 22.7%.

Losses on loan:


Individual write-downs 65.9 52.3Group write-downs 22.3 16.3Net write-offs 36.3 2.4Incomings on previous write-offs -1.3 -5.9Total loss on loans 123.2 65.1

The Bank 1 Oslo Group had to recognize losses on loan totalling

NOK 123.2 million in 2009, an increase of NOK 58.1 million

compared to 2008. The loss ratio (recognised loss as a percentage

of gross lending) was 0.59% in 2009, against 0.31% in 2008.

The development in non-performing loans (measured as a

percentage of volume) shows a reduction of 0.4 percentage points

compared to 2008. The reduction is largely owed to bigger

recuperating engagements.

The total assets per 31 December 2009 were NOK 25.6 billion, an

increase of NOK 0.9 billion from 31 December 2008. The bank’s

total assets, including transfers to SpareBank 1 Boligkreditt AS,

were NOK 28.9 billion, which corresponded to an increase of

12.4%. The growth is mainly related to increase in lending to the

retail market.

The Bank 1 Oslo Group’s total eligible primary capital was NOK

1,525.5 million at year end and resulted in a capital adequacy ratio

of 11.6%. The core capital was NOK 1,128 million with a core

capital adequacy ratio of 8.6%. The bank’s target is a capital

adequacy ratio of 11%. During the first quarter of 2009 the bank

raised a subordinated loan capital of NOK 500 million.

ODIN FORVALTNING AS

Profit for the period – ODIN Forvaltning AS:


Management fees 244.8 293.6Subscription and redemption fees 25.9 42.3Total operating income 270.7 336.0Total operating costs 228.3 250.9Operating profit 42.4 85.1Net financial income -0.3 30.1Pre-tax profit 42.1 115.2Taxes 13.5 27.7Net profit for the period 28.6 87.5

ODIN Forvaltning AS reported pre-tax profit of NOK 42.1 million for

2009, compared to a pre-tax profit of NOK 115.2 million in 2008.

The lower profit is attributed primarily to a decrease in average

total assets under management throughout the year.

ODIN’s value-oriented investment philosophy entails that the

annual return yielded by ODIN’s equity funds varies from year to

year. 2009 was a good year in the equity markets, and nine of

ODIN’s eleven self-managed equity funds showed a better return

than the market in which they were invested. The equity funds

show a good long-term return.

At year end ODIN managed total assets of NOK 28 billion in eighteen

equity funds and six interest funds. This is an increase of NOK 8.8

billion compared to 2008. Gross new subscriptions was somewhat

reduced compared to the previous year, but low realisations resulted

in an increase of NOK 2.1 billion in net new subscriptions.

ARGO SECURITIES GROUP

Loss for the period – Argo Securities Group:

NOK million 2009

Total operating income and other income 47.0Salaries and other ordinary personnel expenses -66.5Depreciation and amortisation -9.2Other operating expenses -27.2Operating result -55.9Net financial income 7.0Pre-tax loss -48.9Taxes 13.5Net loss for the period -35.4

Argo Securities Group reported a pre-tax loss of NOK 48.9 million

in what was the company’s first complete financial year. The result

shows the effects of desired expansion and strengthened competence.

The company is expected to yield a profit for the 2010 financial year.

The company used 2009 to build competence and the number of

employees rose during the period. The future focus will be on

increasing market share within all business areas together with

the continuing work exploiting all synergies that participation in the

SpareBank 1 Alliance provides. The department for alternative

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investments has launched its first fund, Argo ProAktiv. Starting

2010, Argo Securities Group has implemented share trading via the

SpareBank 1 Alliance’s internet banking platform, which is expected

to increase revenue.

SpareBank 1 Gruppen AS reduced its owner share from 75% to

73.25% during 2009. The remaining shares are owned by the

employees.

SPAREBANK 1 GRUPPEN FINANS HOLDING GROUP

Profit for the period – SpareBank 1 Gruppen Finans Holding Group:

NOK million 2009

Actor Fordringsforvaltning 25.8Actor Portefølje -2.1Actor Verdigjenvinning -1.2SpareBank 1 Factoring 6.6Net result before tax from subsidiaries 29.0Total operating costs (parent company) -1.5Net investment result (parent company) 0.3Amortisation -5.3Pre-tax profit 22.5Taxes -6.7Net profit for the period 15.9

Actor Fordringsforvaltning AS:

Actor Fordringsforvaltning AS runs a debt recovery business and

provides services within receivables management, litigatory debt

prosecution and juridical advice. The pre-tax profit increased by

NOK 10.6 million to NOK 25.8 million in 2009. In the same period

the revenue increased by NOK 19.2 million, from NOK 55.4 million

to NOK 74.6 million.

Actor Portefølje AS:

Actor Portefølje AS operates with portfolio acquisitions and

collection, the refinancing of non-performing loans and other

related services. The company had a pre-tax loss of NOK 2.1

million in what was the company’s first financial year. Most of the

portfolios were acquired during the fourth quarter of 2009 and

started to generate income at the end of the year.

Actor Verdigjenvinning AS:

Actor Verdigjenvinning AS operates within the debt collection of

old claims business and other related services. Total revenue for

2009 was NOK 4.2 million. The company had a pre-tax loss of NOK

1.2 million. The loss is due to delays in expected supply of

receivables and the significant restructuring the company went

through in 2009.

SpareBank 1 Factoring AS:

SpareBank 1 Factoring AS is a finance company that operates within

the factoring business and provides guarantees services. The company

achieved a pre-tax result of NOK 6.6 million in 2009. The factoring

revenue amounted to NOK 8,409.5 million in 2009 against 8,306.4 in

2008. 13.4%, equivalent to NOK 1,128.5 million comes from export

revenue, compared to NOK 995.1 million in 2008. SpareBank 1

Factoring AS also had a revenue of NOK 85.1 million within bloc-

factoring during 2009.

The company had per 31 December 2009 a market share in factoring

revenue of 6.7%, an increase from last year with one percentage

point. The market share excluding bloc-factoring increased from

7.7% to 9.1% in 2009. In the same period of time the total factoring

revenue in Norway decreased by 13.9 %. Exclusive bloc-factoring the

reduction was 13.6%.

SPAREBANK 1 MEDLEMSKORT AS

Profit for the period – SpareBank 1 Medlemskort AS:


Total operating income 59.4 53.0Salaries 7.0 5.4Other operating expenses 41.2 37.2Operating result 11.2 10.4Net financial income 0.9 1.7Pre-tax profit 12.1 12.1Taxes 3.5 3.4Net profit for the period 8.6 8.7

2009 was a good year for SpareBank 1 Medlemskort AS, with a

pre-tax profit of NOK 12.1 million and a net profit for the period of

NOK 8.6 million.

The company has a close cooperation with LO and affiliated trade

unions and is the supplier of the advantage concept LOfavør, which

is offered to all members on behalf of LO and the affiliated trade

unions. The company also cooperates with the other companies in the

SpareBank 1 Alliance, especially the banks and insurance companies.

At the LO Congress in May 2009, LO and affiliated trade unions

agreed to continue the LOfavør program until 2013. This has led to

an increased activity in the company, and SpareBank 1 Medlems-

kort AS has experienced yet another year of growth in the use of

membership benefits relating to the credit cards. This has led to a

large increase in commission from the credit card supplier, which

has been a good source of income for LOfavør. There is still

substantial commercial potential. The company also experiences

increased demand for its services from the alliance banks.

OTHER

In addition to shares in subsidiaries, the holding company's assets

consist of bank deposits and other assets. The holding company had

liquidity reserve of NOK 502 million as of 31 December 2009, and

unutilised credit facilities accounted for NOK 400 million of this

amount. The liquidity reserve decreased by approximately NOK 650

million compared with 2008. The group's cash and cash equivalents


decreased by NOK 857.2 million in 2009. The reduction is a result

of net cash flow from operations and net cash flow from financing

of NOK 3,263.5 million and NOK 730.3 million, against a net cash

flow of NOK -4,851.0 million from investment activities. Lending

to customers increased by NOK 1,153.5 million, the holding of

financial instruments rose by NOK 4,735.9 million and the real

estate portfolio increased by NOK 48.0 million. Increased debt

from securities issued rose by NOK 3,064.7 million and deposits

from and liabilities to customers and credit institutions increased

by NOK 455.0 million. SpareBank 1 Gruppen AS received NOK 176

million in new equity in 2009. A dividend of NOK 800 million was

paid to the shareholders in 2009.

The equity consists of share capital, share premium reserve and

other equity. The share capital in the holding company was NOK

1,782.4 million as of 31 December 2009, while the total equity

was NOK 3,432.4 million. The group’s total equity was NOK 5,293.3

million at the end of the year. Recognised goodwill in the group

amounted to NOK 760.5 million as of 31 December 2009.

The group’s capital adequacy ratio was 16.3% as of 31 December

2009 on a consolidated basis, compared with 12.6% in 2008. The

group's core capital adequacy ratio was 11.8% as of 31 December

2009, compared with 9.4% for the previous year. For the holding

company, capital adequacy ratio was 57.7%, compared to 74% in

2008, and the core capital adequacy ratio was 47.6% in 2009 and

61.7% in 2008. The holding company had distributable equity of

NOK 822.9 million at the end of the year.

The transfer of shares in Bank 1 Oslo AS to the SpareBank 1 banks

and LO brought along a decrease of capital in SpareBank 1

Gruppen AS of NOK 1 billion per 1 January 2010. Share premium

reserves were reduced by NOK 579.2 million and other equity was

reduced by NOK 420.8 million.

The annual accounts have been presented on the assumption that

the company will continue as a going concern. The board finds that

the prerequisites for the going concern assumption have been met

by the annual accounts for 2009 and the result forecasts for 2010 and

2011. Beyond matters mentioned in this report, no circumstances

have arisen after the end of the financial year that would be of mate-

rial significance to the company's financial position and results.

DIVIDEND

The board proposes that a dividend of NOK 120 million be

distributed for 2009 from SpareBank 1 Gruppen AS. To pay the

proposed dividend, SpareBank 1 Gruppen AS has to transfer

NOK 103 million from other equity since this year’s result was of

NOK 17 million.

PROPOSED ALLOCATION OF THE PROFIT FOR THE

YEAR AND PAYMENT OF DIVIDEND

Transferred from other equity: NOK 103 million.

Proposed payment of dividend: NOK 120 million.

RISK FACTORS

The operations of SpareBank 1 Gruppen are organised into different

business areas through the group’s subsidiaries. There are major

differences in the risk structure between each subsidiary. The most

important risk categories that impact the group are related to

market risk, credit risk, liquidity risk, insurance risk, operational

risk, concentration risk, as well as strategic and business risk.

Bank 1 Oslo AS was demerged from SpareBank 1 Gruppen with effect

from 1 January 2010. This has led to a decreased risk exposure on

many of the above mentioned risks.

Responsibility for risk management and control

The responsibility for risk management lies within the board of

each subsidiary, the executive board and line management. The

boards from each subsidiary have the responsibility for overall risk

management in their own companies. Each subsidiary has its own

risk managers. The responsibility for the overall risk management

within the group lies with the Director for Strategy, Analysis and

Risk Management in the holding company. The director reports to

the Chief Executive Officer of SpareBank 1 Gruppen.

The purpose of risk management in SpareBank 1 Gruppen is to

ensure capital adequacy and the fulfilment of statutory capital

requirements. This shall be achieved through a moderate risk

profile characterised by

a strong risk culture with a high level of risk management

awareness

striving towards an optimal capital allocation within the

adopted business strategy

exploitation of synergy and diversification effects, and

an adequate core capital in accordance with the chosen risk

profile

Internal control within the group is defined as a line responsibility.

In accordance with the «Regulations relating to Risk Management

and Internal Control» and the group’s own guidelines, risk factors in

the operations are reviewed annually and action plans are prepared

in all units, which are reported to the respective subsidiary’s board

of directors. In addition, surveys are conducted across the group

with regard to internal control, Personal Data Act, and security

matters. SpareBank 1 Gruppen has outsourced the internal auditing

11

function to Ernst & Young AS. The group has benefited with

increased expertise as a result of this. Internal auditing operations

also encompass the subsidiaries.

PERFORMANCE OF RISK MANAGEMENT IN 2009

The development in the Norwegian and International financial

markets 2007 to February 2010. Index as of January 1st 2007 = 100

While 2008 was characterised by one of history’s largest plummets

in both the stock and commodity markets, as well as significant

fluctuation in the interest and currency rates; 2009 brought with

it a reversal of large parts of the fall in rates. Moreover, Norway

seems to have been affected by the financial crisis to a lesser degree

compared to other countries. The positive market development in

2009 has yielded a considerable increase in risk capital for the

company. The turbulence in 2008 provided the organisation with

insights that are built upon in the development of future risk

models and other relevant areas for risk management in SpareBank 1

Gruppen.

SpareBank 1 Gruppen is, as a financial group, subject to an extensive

set of regulations which are constantly under development. Within

insurance, a new set of rules for calculating capital requirement,

Solvency II, is being developed. This will have consequences for

SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring

AS. Solvency II is expected to be in force from 2012. Similar to the

effect Basel II had on the development of risk management in banks;

Solvency II is expected to have at least the same effect on the

calculation of capital requirements as well as the need for developing

new models for risk management in insurance companies. Extensive

work is being performed to prepare for the new rules, including

participation in regulatory trial projects.

SpareBank 1 Gruppen has recently gone through considerable

changes which will have consequences for risk management in the

group. Among the most important events with short term impact, is

that Bank 1 Oslo AS is no longer owned by SpareBank 1 Gruppen

AS. Instead, it is directly owned by the shareholders of SpareBank

1 Gruppen AS. This separation has a significant effect on the risk

profile of SpareBank 1 Gruppen. For additional information, we refer

to Pillar 3-report, which is a publication in accordance with the

instructions of the capital requirements. The separation of Bank 1

Oslo AS will not have any effect on the work related to risk

management, such as work on regulatory requirements and

requests from Finanstilsynet, other than a reduced risk exposure for

SpareBank 1 Gruppen.

At the same time, acquisition, restructuring and development of the

companies in SpareBank 1 Gruppen Finans Holding Group and

Argo Securities AS will in the future become an important part of

the value added in SpareBank 1 Gruppen. They will also constitute

a more significant part of risk elements in SpareBank 1 Gruppen.

These companies have earlier been included as an element of

ownership risk in the calculation of risk. From 2009, the companies

were included in the overall risk calculation and were also a part

of the calculation of diversification effects.

The group’s risk management review program has continued

through 2009. The model developed and partly implemented in

2008 is still in progress and formed the basis for comparison of

ICAAP calculations in 2009.

RISK CATEGORIES

The group’s risk exposure is related primarily to market risk, owner-

ship risk, credit risk, concentration risk, insurance risk, operational

risk, liquidity risk as well as strategic and commercial risk.

For an explanation of each risk category, see Note 3 – Financial risk

management.

Market risk

The group’s consolidated market risk is measured and reported

quarterly to the board of directors in SpareBank 1 Gruppen AS.

The calculations are based on a Value at Risk (VAR) model. A

corresponding model is used for the follow-up of each subsidiary.

The subsidiaries manage and monitor risk exposure in accordance

with their own models and routines.

Financially, 2009 has been a very good year for SpareBank 1

Gruppen. From a risk management perspective, this applies

particularly to SpareBank 1 Livsforsikring AS which had the

most positive development in 2009. The company chose to retain

its high holdings of stocks in 2008 and 2009. This resulted in weak

results for the second half of 2008; however, in 2009 the company

delivered the highest return to their customers compared to their

competitors. The value adjusted return in the group portfolio

was 9.5% and the booked return was 7.1%. SpareBank 1

Livsforsikring AS’s securities adjustment reserves climbed from 0


to NOK 327.1 million during the year. The additional provisions

amounted to NOK 289.5 million, which is an increase of NOK

117.2 million at year end. The capital and solvency margin are

satisfying, and significantly better than at the beginning of the year.

Up until August 2009, the buffer capital utilisation in SpareBank 1

Livsforsikring AS was followed up on a daily basis in order to

monitor the risk exposure of the company. In August, the risk level

in the company was lowered, and since then, there has been, a

weekly follow-up of buffer capital utilisation. The value of property

was reduced during the year.

Despite the fact that SpareBank 1 Skadeforsikring AS has a

conservative investment profile in its investment portfolio, the

company’s financial return was significantly affected in a positive

direction by the development in the financial markets throughout

2009. The company invested 7.2% of the total financial assets in

stocks, compared with 5.1% in 2008. During 2009, the company

chose to exit hedgefunds. The company has a very short term to

maturity on its interest placements. At the end of the year, 14%

of the company’s investment portfolio was placed in real estate,

compared to 15.7% in 2008. The market risk on the company’s

financial placements is considered to be moderate.

Ownership risk

SpareBank 1 Livsforsikring AS received NOK 413 million in 2009 as

contribution from the group.

Given the present risk exposure, the holding company’s financial

position is regarded to be satisfying. The development of the

results in 2009 has entailed a significantly better financial situation

than at the beginning of the year.

Credit risk

In 2009, the group’s credit risk was, first and foremost, associated

with the credit risk in Bank 1 Oslo AS, which was demerged

from SpareBank 1 Gruppen with effect from 1 January 2010.

Credit risk represents the most significant risk element in Bank 1

Oslo AS. The bank’s retail market portfolio increased by 15.3% in

2009. The growth within the corporate market was 2.6%. The

corporate market’s share of total lending constituted 27% as of

31 December 2009, compared to 29% as of 31 December 2008.

The level of non-performing loans in Bank 1 Oslo AS increased

in 2009 compared to 2008. This applies both to the retail and

corporate market. Non-performing and impaired loans amounted

to NOK 439.6 million as of 31 December 2009, which was 2.1%

of the bank’s gross lending portfolio compared to 1.9% as of 31

December 2008.

The credit risk in SpareBank 1 Livsforsikring AS and SpareBank 1

Skadeforsikring AS is related to investments in commercial paper

The development of the results in 2009 has

entailed a significantly better financial situation

than at the beginning of the year.

13

and bonds. SpareBank 1 Livsforsikring AS is exposed towards

so-called CDOs in its portfolios. CDOs are bonds where the yield

depends on the credit characteristics of several underlying parties.

In 2009 the CDOs, which are recognised as receivables at amortised

value, were written down by NOK 21 million. The remaining

positions in CDOs in SpareBank 1 Livsforsikring AS were

recognised at NOK 211 million as of 31 December 2009. Other

CDOs in the company’s portfolio at the beginning of 2009, that are

either indirect investments through interest funds or classified as

current assets, came to maturity during 2009. The risk for additional

write-downs of the remaining CDOs is expected to be moderate.

Concentration risk

In 2009, the concentration risk in SpareBank 1 Gruppen was

mostly connected to the credit element in Bank 1 Oslo AS.

Concentration risk in Bank 1 Oslo AS is the risk of losses as a result

of concentrated exposure within individual customers, industries

or geographic areas.

Concentration risk for SpareBank 1 Livsforsikring AS and

SpareBank 1 Skadeforsikring AS is expected to be related to

investment, especially in connection with investment in bonds

issued by financial institutions. Capital requirements for this risk

have not been calculated as of 31 December 2009. SpareBank 1

Skadeforsikring AS has a certain concentration risk in connection

with reinsurers.

Insurance risk

Insurance risk is a central part of the operations in both SpareBank 1

Livsforsikring AS and SpareBank 1 Skadeforsikring AS. Losses in

SpareBank 1 Skadeforsikring AS can arise as a consequence of fluc-

tuations in the current year’s claims ratio and changes in claims

reserves. For SpareBank 1 Livsforsikring AS the insurance risk

comes mainly from risk products without profit sharing.

SpareBank 1 Livsforsikring AS and SpareBank 1 Skadeforsikring AS

relieve risk through reinsurance. The companies either cede a

significant level of risk within individual business areas or cede a

share of the claims from the overall insurance business to reinsurers.

Reinsurance also covers cumulative claims and disasters. The risk

associated with the reinsurers’ creditworthiness is placed under

credit risk.

The control of the insurance risk in both the life and P&C insurance

companies is considered to be satisfactory.

Operational risk

The operational risk in the subsidiaries is currently documented

in connection with the work done to meet the «Regulations relating

to Risk Management and Internal Control». This work normally

requires the management group of each subsidiary and staff area

in the holding company to identify the main category of operational

risk before and after the implementation of measures. This work

did not identify any serious risk factors in the group in 2009. In

connection with the implementation of the group’s ICAAP cal-

culations, models were put in place for calculating necessary

capital needs for operational risk. Reference is made to the Pillar

3-report for a more detailed description of these calculations.

In connection with the new «Regulations relating to Risk Management

and Internal Control», including paragraph § 6 (last section) of

these regulations, which clarifies the overlap with the «Capital

Adequacy Regulations», all the framework and management

documents in the group have been updated to clarify the boundaries

between the risk processes that are encompassed by the internal

control work and those that are encompassed by the ICAAP work.

Compliance with statutory risk processes and an efficient

implementation of these are ensured through this work.

Liquidity risk

Financing structure is based on an overall liquidity strategy which

is reviewed and approved by the board at least once a year. The

liquidity risk is reduced through diversification of the deposits

across different markets, deposit sources, instruments and

maturity terms. In 2009, the liquidity risk in SpareBank 1 Gruppen

was mainly associated with the parent company and Bank 1 Oslo

AS, and it is considered to be low.

Strategic and commercial risk

SpareBank 1 Gruppen has established a contingency plan for

handling reputation-sensitive issues. Work on specific matters

will be initiated and managed by the Director of Information and

Public Relations, and will be a dynamic part of the department’s

planning. The contingency plan’s agenda will be reviewed and

updated every quarter.

Together with the alliance’s Risk Management Forum, the group

will continue to focus on the establishment of quantitative models

with the purpose of estimating the capital needs for the strategic and

commercial risks in the group.

Changes in the regulations

As the owner of a bank, SpareBank 1 Gruppen is subject to the new

capital adequacy rules for banks and other financial institutions

(Basel II). The Pillar 2 stipulates that the institution must have a

separate process for measuring capital requirements based on

the company’s risk profile. From 2007, SpareBank 1 Gruppen

has submitted its own ICAAP calcualtions to Finanstilsynet. Work

to identify the group’s overall risk situation is under continuous

development, and updated ICAAP calculations are prepared

quarterly for the board. SpareBank 1 Gruppen publishes an annual

Pillar 3-report, which covers the requirements stipulated in the


capital adequacy regulations with regard to market discipline

and the publication of financial information.

After the separation of Bank 1 Oslo AS, SpareBank 1 Gruppen is no

longer required to prepare ICAAP calculations in accordance with the

Basel II regulations. Some subsidiaries in SpareBank 1 Gruppen are

still required to prepare ICAAP calculations. SpareBank 1 Gruppen

will continue to prepare ICAAP calculations in accordance with

current Basel II regulations. The consequence of this will be that the

requirements for similar reporting in the respective subsidiaries will

cease, and that complete ICAAP calculations will be prepared at group

level only.

PILLAR 3

Reference is made to a separate Pillar 3-report prepared in accordance

with the requirements stipulated in Part IX, Chapters 45 and 46,

of the Capital Adequacy Regulations. The report has also been

prepared to meet the market’s increased demand for transparency

and openness with regard to risk in general and a more detailed

review of the company’s capital and risk situation. For the Pillar

3-report we reference to http://investor.sparebank1.no/.

ORGANISATION AND WORKING ENVIRONMENT

AT SPAREBANK 1 GRUPPEN AS

Organisation

SpareBank 1 Gruppen AS had 217 employees and 211.6 full-time

equivalents at the end of 2009. In SpareBank 1 Gruppen there

were a total of 1,445 employees and 1,411 full-time equivalents. The

corresponding figures for 2008 were 1,380 and 1,340, respectively.

The increase in the workforce is related primarily to ventures in new

business areas through the acquisition of companies and esta-

blishment of new companies.

A total of 104 employees resigned from their positions in 2009. The

total turnover in 2009 was 7.1%. The corresponding figure for

2008 was 9.4%. Adjusted for early retirement pensions (AFP), old

age pensions and disability pensions, the group’s turnover was

4.9%. This is regarded as a satisfactory level in relation to the

market as a total.

All business areas are organised within each subsidiary. The

Chief Executive Officers for the four largest subsidiaries; together

with the directors for Finance, Communication and Strategy &

Business development; partake in the corporate management

group of SpareBank 1 Gruppen AS.

SpareBank 1 Gruppen AS leads and administers the cooperation

within the SpareBank 1 Alliance. The managers of the staff areas

in SpareBank 1 Gruppen AS, IT, Information and Public Relations

and functions related to alliance cooperation, lead the alliance coo-

peration.

HR strategy

SpareBank 1 Gruppen’s HR strategy is based on the company’s

vision, values, goals and success factors. The main goal of the HR

strategy is to ensure that SpareBank 1 Gruppen

Attracts the right employees by focusing on the values «to be

an expert and close to you».

Retains the best employees by giving them responsibilities,

communicating with them and rewarding them for good

performance.

Develops employees through involvement, establishment of

clear goals and follow-up.

The HR strategy follows the employment cycle of an employee and

contains frameworks and guidelines for how the company as an

employer should manage and develop its employees. Key areas of

the HR strategy include skills development, career opportunities,

remuneration and rewards, equal opportunities, fitness programme

(HSE) and a trainee programme.

The HR strategy includes guidelines that will develop SpareBank 1

Gruppen as an attractive and including working place without

any form for discrimination.

Since the trainee programme was introduced in 2006 a total of 14

trainees have completed their trainee period. All of them have

central positions within the group. SpareBank 1 Gruppen has

currently eight trainees and will recruit a new group of trainees in

2010. The purpose of the trainee programme is to recruit future

managers and technical specialists who, during a two-year

period, will acquire wide-ranging expertise in the group’s various

business areas.

The remuneration policy is another key area of the HR strategy.

Regular analyses are conducted to ensure that the group offers

competitive terms. The incentive scheme and profit sharing at the

group level and bonus scheme at the company level was continued

in 2009. The final results in relation to defined criteria for the

group and the performance level compared to the competitors,

form the basis for the profit sharing.

Working environment and sickness leave

The group’s working environment is considered to be very good.

Annual work climate surveys are conducted, which are

followed up through systematic activities in the organisation to

eliminate any weaknesses that are identified in the surveys.

Each subsidiary in SpareBank 1 Gruppen has its own working

15

environment committee. This ensures an optimal way of identifying

challenges in the working environment and establishes a body that

has the authority to resolve them. Also, the safety personnel in

each subsidiary make an active contribution. A central Workplace

Anti-Alcoholism and Drug Addiction Dependency Committee

has been appointed. Collaboration with the employee organisations

has been constructive and had a positive impact on the operations

and results for 2009.

SpareBank 1 Gruppen continued the agreement on an Inclusive

Workplace and had set a target for reducing sickness leave by 20%

during the period of the agreement, which ran to the end of 2009.

Sickness leave in 2009 was 4.5%, compared with 4.4% in 2008.

These rates are among the lowest in the industry. Training in

various HSE disciplines was provided for managers and safety

coordinators in 2009. This was carried out in consultation with the

individual working environment committees.

SpareBank 1 Gruppen’s ethical guidelines specify rules for how

the employees and representatives shall give notice if they become

aware of matters that are in violation of laws, regulations or the

group’s internal rules. A separate notification routine has also been

established.

Expertise

Work related to human resources and expertise development in the

alliance is organised in a HR-Committee. The Expertise-Committee’s

work focuses on the realisation of synergies based on the expertise

identified in the alliance’s various units, with the purpose to

enhance the alliance’s overall performance. A large portion of the

committee’s work is associated with the training model in the

SpareBank 1 Alliance. Through this model, training is offered in

the specialist areas of investment, insurance, financing and

payment transfers. In connection with the training model, an

internal certification programme has been developed for customer

advisors, and a large number of advisors have already been

certified. A separate proficiency strategy has been formulated to

support the development of a culture of continuous learning. A

common competency centre has been established in Tromsø,

which will contribute to essential proficiency enhancement

throughout the alliance.

The proficiency strategy has to be considered in the context of the

HR strategy, which aims to attract the right employees by focusing

on the group’s values «to be an expert and close to you». The

strategy will also contribute to retain the best people through

accountability, communication and reward of good performance.

Involving the employees and setting good goals are emphasized as

important for the employees’ success.

SpareBank 1 Gruppen has a collective strategy of expertise. The

subsidiaries initiate vocational training and other skills upgrading

initiatives if required. The group has joint programmes for

leadership development.

Equal opportunities

Of the group’s employees, 46% are women and 54% are men.

6.1% of all female employees work on a part-time basis, compared

with 1.5% of the male employees. In the group management, two

out of eight members are women. The central management groups

in the parent company and subsidiaries have 26% female

representation overall, while the total share of female leaders in the

group is 34%. There were two women among the eight members

of the executive board at the end of the year, while female

representation on the subsidiary boards was 35% overall.

The group’s Life Phase Committee ensures that the company

complies with the Norwegian Gender Equality Act. The committee

also focuses on how SpareBank 1 Gruppen can be an attractive

employer for employees in various life phases.

In connection with the development of the company’s remuneration

and reward system, an objective assessment was made of the

group’s various roles/positions. This was to ensure equal pay for

work of equal value. The main reason why there is a somewhat

higher wage level for men than women in the group is that there

are more men than women in both senior and professional

positions at a high level. The average salary for women in the

group was 463,000 kroner as of December, compared with 571,000

kroner for men.

As a member of the Norwegian Financial Services Association;

SpareBank 1 Gruppen AS has participated in the FUTURA

programme. This is a development programme that aims to

increase the share of women in the recruitment basis for leading

positions.

Attractive employer

SpareBank 1 Gruppen experiences an increased interest by young

employees. This is a result of the fact that the group has a strong

brand in the SpareBank 1-name and the activities that are carried

out to market the group as an attractive employer at universities

and colleges. SpareBank 1 Gruppen recruited 117 new employees

in 2009. The majority of those employed had at least four years of

education beyond high school. Most new employees were aged 26

to 40 years, but the group has recruited employees of all ages in

2009. The average age of employees in SpareBank 1 Gruppen

was 42.5 years at the end of 2009. Efforts to emerge as an attractive

employer with exciting career opportunities and competitive

terms will continue in 2010.


SOCIAL RESPONSIBILITY

SpareBank 1 Gruppen has the following definition of community

involvement: «We are committed to contribute to sustainable

economic development together with our employees, their families,

the community and society in general to improve the quality of life

for most people. This work is based on four principles: economic

growth, environmental balance, social progress and positive influence

in society».

Our goal is to make money, but value creation has to be in line with

sustainable development. Our social commitment is thus about

how value is created.

We are committed to take into account how our behaviour affects

people, the environment and the society. This responsibility

makes demands beyond the laws, which the financial markets are

subject to. Social Responsibility covers everything from investment

management to labour rights.

Social Responsibility is also about fraud and injury prevention

measures, protection of life, health and values, good products to

customers, business ethics, environmental impact, credit policies,

attitudes and local involvement.

An active community involvement consists of a long-term

perspective on all aspects and consequences of business in

society.

Environment

Although SpareBank 1 Gruppen does not pollute in the same way

as traditional industry, we have an impact on the environment – both

directly and indirectly. This includes waste, energy use, travel,

transportation, materials, procurement and water consumption.

100% of the waste produced in the SpareBank 1 Gruppen is sorted

at source. This has been a common practice for the past six years.

The company’s goal is to continue to sort 100% of the waste.

Most of the group's employees work in Hammersborggata.

Hammersborggata 2 uses electric heating in the offices and district

heating for ventilation. In Hammersborggata 9 district heating is

used for both radiators and ventilation. SpareBank 1 Gruppen's

ambition is to reduce energy consumption further in 2010.

An overriding goal for the procurement strategy is to always take into

account the environmental impact and life cycle costs during the

planning of procurement and purchasing processes.

SpareBank 1 Gruppen provides annual climate accounts. The

independent party Co2Focus AS makes the report. They examine

the total energy consumption related to the daily operation of

SpareBank 1 Gruppen. The climate accounts show the CO2

emissions measured in CO2- equivalents, based on reported data

from various internal and external systems. These data are

controlled by Co2Focus. Climate statements are prepared using the

best available practice. The climate accounts are published on the

websites of SpareBank 1 Gruppen.

The climate statements are developed in accordance with the

international standard Greenhouse Gas Protocol Initiative (GHG

Protocol), which is the most common standard for measuring

greenhouse gas emissions. The methodology is developed by the

World Resources Institute (WRI) and World Business Council for

Sustainable Development (WBCSD).

During 2009 measures to reduce SpareBank 1 Gruppen’s impact on

the environment were implemented. Increased use of video conferences

to reduce the number of flights, more digital communications with

customers to reduce the amount of paper mailings and less internal

use of printers are some of the measures. The environmental

effect of these measures will be measured in the climate statement

for 2009.

CHANGES TO THE BOARD AND EXECUTIVE

MANAGEMENT

In April 2009, Harry Konterud, who is Chief Executive Officer of

Sparebanken Hedmark, was elected Chairman of the Executive

Board. He succeeded Knut Oscar Fleten who had been the Chairman

of the Board since April 2008. There were three changes in 2009

within corporate management. In June 2009 Kirsten Idebøen was

hired as Chief Executive Officer, succeding Eldar Mathisen.

Previously, she held the position as Chief Financial Officer in the

group and had been acting Chief Executive Officer since January

2009. In September 2009 Sigurd Aune was appointed Chief Financial

Officer in the group. He previously held the position as Chief

Financial Officer of Bank 1 Oslo AS. In October 2009 Aud Lysenstøen

was hired as Chief Executive Officer of SpareBank 1 Livsforsikring

AS, succeeding Ole-Wilhelm Meyer, who was hired as Chief

Executive Officer at The Norwegian Central Securities Depository

(VPS). Lysenstøen came from the position as Division Manager with

responsibility for the corporate area in SpareBank 1 Livsforsikring

AS.

OUTLOOK

The results of 2009 were very good for SpareBank 1 Gruppen. An

improvement in the stock markets, lower interest rates and lower

risk premiums on bonds contributed to net gains on financial

instruments. After a sharp downturn in 2008, the Oslo Stock

Exchange rose as much as 65 % in 2009. The events from the last two

years have shown how dependent the group's results are upon

17

developments in financial markets. This dependence emphasizes

the importance of focusing on profitability and risk management

in the group’s operations. The board expects that the profitability

program Delta will provide a significant improvement in the

underlying operations of all group companies during 2010.

Norway seems to have overcome the financial crisis, but our small,

open economy will remain highly dependent on developments in

the world. At the beginning of 2010, there is a considerable

uncertainty about the macroeconomic development. It is however

probable that this year will not provide the corresponding

development in the stock markets as in 2009. Thus, the group will

not get the same help from good financial markets in 2010 as it

experienced in 2009.

The board is of the opinion, that SpareBank 1 Gruppen is financially

well positioned to withstand volatility in credit and equity markets

and that it has established appropriate risk management systems

for the continuous monitoring of the SpareBank 1 Gruppen's overall

risk exposure. During 2009, the group’s risk-bearing capacity was

significantly improved, among other factors through the

development of securities reserves and additional provisions in

SpareBank 1 Livsforsikring AS.

The board considers that SpareBank 1 Gruppen has established a

financial robustness in all companies, so that future volatility in

financial markets should be managed in a good way in 2010.

More demanding customers and increasingly professional actors

contribute to increased competition in the financial markets. The

result is an increased need for having the most competitive products

and services in addition to the best and most motivated employees.

Strengthening expertise as well as innovation and execution

capability is therefore among the key factors of success in the

further development of our operations.

Through acquisitions and the establishing of new companies in both

2008 and 2009, SpareBank 1 Gruppen and its owners have demon-

strated both willingness and ability to invest aggressively, even in

situations that have been financially challenging. SpareBank 1

Gruppen has in recent years strengthened its overall financial

position and financial flexibility, and thereby strengthened its

ability to self-manage structural choices ahead.

A WORD OF GRATITUDE

The employees have shown strong commitment in 2009. There has

been a close and productive collaboration with the employee

organisations. The Board would like to extend thanks to all the

employees of SpareBank 1 Gruppen for their excellent effort and

contribution to this year’s outstanding results.

Oslo, 23 March 2010

Harry Konterud Bjørn Engaas Hans Olav Karde CHAIRMAN OF THE BOARD

Terje Vareberg Finn Haugan Bente N. Halvorsen

Knut Bekkevold Venche Johnsen Kirsten IdebøenCHIEF EXECUTIVE OFFICER

NOTE: This translation from Norwegian has been prepared for information purposes only.

Board of Directors’ Report for 2009 - SpareBank 1 Gruppen

Investor Relations

Transcript of Board of Directors’ Report for 2009 - SpareBank 1 Gruppen