EIENDOMSMEGLER VEST FRENDE FORSIKRING NORNE … · eiendomsmegler vest | frende forsikring | norne...

EIENDOMSMEGLER VEST | FRENDE FORSIKRING | NORNE SECURITIES | BRAGE FINANS | KYTE NÆRINGSMEGLING

Annual report 2011

Sparebanken Vest aims to be the leading financial services group in Western Norway.

The environment: Sparebanken Vest pursues an active, forward-looking environmental policy, both internally and externally. This report has therefore only been published in a PDF-version. The report is available at www.spv.no.

Other contributors: Photos by Knut Egil Wang, Jens Inge Ringstad, Tor Yttri, Marit Hommedal and Scanpix, design and layout by Knowit Reaktor. The cover photo is one of several everyday portraits that are used in Sparebanken Vest’s communication with the market and society at large.

ContentsKey figures for the Sparebanken Vest Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Managing directors: 2011 - a good year despite uncertain times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5The corporate management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Sparebanken Vest – local identity through generations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Board of Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8The board of Directors of Sparebanken Vest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Change in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Note 1 Accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Note 2 Accounting estimates and discretionary assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Note 3 Segment information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Note 4 Classification of financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Note 5 Fair value of financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Note 6 Valuation hierarchy, financial instruments at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Note 7 Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Note 8 Risk classification of the credit portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Note 9 Loans broken down by market, geographical area and type of receivable . . . . . . . . . 50Note 10 Net loans and guarantees broken down by industries and retail market. . . . . . . . . . . . 52Note 11 Capitalised write-downs on commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54Note 12 Losses, commitments in default and other potential bad debt . . . . . . . . . . . . . . . . . . . . . . . . . . 55Note 13 Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Note 14 Loans to and receivables from credit institutions ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Note 15 Guarantees and secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Note 16 Certificates and bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Note 17 Shareholdings in group companies and associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59Note 18 Sensitivity analysis, market risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Note 19 Interest rate sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62Note 20 Currency positions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Note 21 Financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Note 22 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Note 23 Liquidity risk / remaining time to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Note 24 Net interest and credit commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Note 25 Interest on individual balance sheet items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Note 26 Net other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70Note 27 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71Note 28 Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72Note 29 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76Note 30 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77Note 31 Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79Note 32 Debt to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Note 33 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Note 34 Deposits broken down by customer groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82Note 35 Securitised debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83Note 36 Subordinated loan capital and subordinated bond loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Note 37 Capital adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86Note 38 The equity certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88Note 39 Transactions with related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Note 40 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Note 41 Integration of Hardanger Sparebank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Auditor’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96Control Committee’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98Declaration from BoD & CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99Group key figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108Subsidiaries and associated companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117Organizational model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118Regional map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119ANNuAL REPORT 2011 PAGE 3

Key figures for the Sparebanken Vest GroupAmounts in NOK millions 2011 2010 2009 2008 2007Income statementNet interest and credit commission income 1 590 1 516 1 453 1 308 1 126Net other operating revenues 603 635 489 375 678Total operating expenses 1 335 1 224 1 172 1 068 973Profit before write-downs and tax 858 927 770 615 831

Write-downs and losses on loans and guarantees 126 127 270 204 (34)Pre-tax profit/loss 732 800 500 411 865

Balance sheetAssets under management 115 985 105 275 97 661 94 893 75 048

Net lendings 99 304 88 465 82 302 76 235 64 683Securities 13 970 14 829 13 129 11 463 6 876

Deposits 53 142 48 719 44 881 40 521 37 611Subordinated loan capital 1 613 1 495 2 062 1 437 1 042Equity 6 691 5 929 4 885 4 372 4 293

Key figures in %Net interest and credit commission income as % of primary capital 1,46 1,49 1,58 1,60 1,69Pre-tax profit as % of primary capital 0,67 0,79 0,54 0,50 1,30

Return on equity after tax 8,7 11,3 8,0 4,9 16,2

Percentage loss on lendings 0,1 0,2 0,3 0,3 (0,1)

Change in net lendings 12,3 7,5 8,0 17,9 21,0Change in deposits 9,1 8,6 10,8 7,7 20,9

Net subordinated capital (NOK) 7 191 6 387 6 111 4 858 4 597Capital adequacy 11,6 11,6 11,8 9,1 9,7Core capital adequacy 10,8 10,8 10,5 7,7 8,3Basel II fully implemented 15,6 15,0 13,2 11,2 14,7

Dividend per equity certificate (NOK) 2,00 3,50 2,00 1,88 9,50Listed price per equity certificate at year end (NOK) 31,7 47,0 51,0 43,3 95,0Effective return per equity certificate (25,1) (3,9) 22,3 (44,5) (2,2)Owner fraction, profit per equity certificate calculated pursuant to NRS 7 21,5 18,1 9,4 6,6 6,3

See page 101 for a full overview of key figures and definitions

ANNuAL REPORT 2011PAGE 4

Managing Director Stein KlaKegg

2011 – a good year despite uncertain times

Last year was marked by contrast. The global economy, and especially the European economy, was characterised by turmoil in the financial markets, sovereign debt crises, low growth and high unemployment. There was good activity and low unemployment in the Norwegian economy throughout 2011, driven by low interest rates, good growth in private households’ income, a high level of activity in the oil industry and population growth.

The unstable global situation has, however, affected both the Norwegian economy and Norwegian banks in 2011. Weak global growth affected Norwegian export-oriented companies, which experienced reduced demand and falling prices for their products, while volatile financial markets led to a fall in share prices. In addition, a higher risk mark-up in the money market led to increased financing costs also for Norwegian banks.

Seen as a whole, 2011 was a good year for Sparebanken Vest. Sound banking operations in one of the country’s strongest growth regions combined with a conservative risk profile helped to achieve this.

Eiendomsmegler Vest has never sold more properties than it did in 2011. The development and sale of insurance products from Frende Forsikring was very positive. Frende Skade’s premiums increased by 39 per cent in 2011, while Frende Liv recorded a profit for the year as a whole for the second time.

In order to further strengthen its market position in Western Norway, Sparebanken Vest entered into an agreement concerning a merger with Sparebanken Hardanger in 2011. The merger gives the bank a better foothold in the Hardanger region and at Voss, and we have already seen positive effects from the merger. In 2011, Sparebanken Vest expanded its distribution network by opening a new branch office in the Jæren area. This new office in one of Norway’s most dynamic areas has been well received by the local market

and has strengthened the bank’s market position in Rogaland county.

At the same time, Sparebanken Vest takes the consequences of the fact that the customers’ use of the bank is changing. The customers use more self-service options in day-to-day banking, and it is first and foremost our advisory expertise that is in demand. Over time, the bank has made considerable investments in competence-raising, and we have developed and launched several electronic self-service solutions.

It is therefore particularly pleasing to see that our efforts to become Western Norway’s leading financial services group and the best bank for financial advice are paying off. In the annual customer satisfaction survey in 2011, we achieved the best ever score in the retail market. The already good level of satisfaction in the corporate segment was maintained from the previous year. For us in Sparebanken Vest, feedback like this is pleasing and entails a commitment.

What will 2012 bring? Sparebanken Vest expects the international turbulence and uncertainty to continue in 2012. The bank is prepared for the economic downturn becoming more severe and long-lasting than expected. It is therefore pleasing to note that the bank’s financial situation at the end of 2011 was robust and that the bank is well equipped to both meet turbulent times and take advantage of market opportunities.

ANNuAL REPORT 2011 PAGE 5

Stein Klakegg (1957)Managing Director since 9 January 2006. Master’s degree in business economics from the Norwegian School of Economics (NHH). Also holds qualifications in occupational psychology and management. Has previously worked for the Nevi group and Rieber & Søn ASA, lastly as Group Director of Rieber & Søn ASA. Member of the board of Nets Holding AS. He has also held various directorships with companies in Norway and abroad.

Jan Erik Kjerpeseth (1971)Deputy Managing Director since 19 June 2006. Joined the bank in 1999. Also responsible for business development, products, market, IT, banking systems and finances. Chair of the board of Frende Liv, Frende Skade and Eiendomsmegler Vest and deputy chair of Bergen Chamber of Commerce. Graduate in marketing from the Norwegian School of Marketing. Also holds an MBA from Heriot-Watt university and an Executive MBA in Brand Management from the Norwegian School of Economics (NHH). He has previous experience as marketing manager with Sparebanken Sogn og Fjordane.

Hallgeir Isdahl (1956)Director of SPV Markets with effect from 1 October 2011. Joined the bank in 2008 as chief economist. Has a Master’s degree in economics and a cand.mag. degree from the university of Bergen. He has previously worked as CEO of Finansbanken Bergen and held various positions in DNB, including bank manager for Discretionary Management in DnB Luxembourg, chief economist / investment strategist for DnB Investor AS and chief of analysis and portfolio manager for Realforvaltning.

Henning Nordgulen (1965)Director – Corporate Market since 19 June 2006. Joined the bank in 2003 as bank manager with responsibility for Marine Shipping in the Corporate Division. Bachelor of Business Administration from BI Norwegian Business School, with additional qualifications from IMD Lausanne. Broad professional experience from industry, shipping and finance, including the companies Gearbulk and Rikett. Chair of the board of Brage Finans AS.

Kate Henriksen (1960)Director – Retail Market since 19 June 2006. Joined the bank in 2003 as regional manager with responsibility for the Retail Division. Graduate engineer from Bergen College of Engineering and a degree in economics from the Norwegian School of Economics (NHH). She has broad professional experience including from DNB, Statoil, Vesta and Ementor. Board member of the Savings Banks’ Guarantee Fund and Sparebanken Vest Eiendomsforvaltning.

Siren Sundland (1971)Director of Corporate Communication since 15 April 2009. Joined the bank in 2007. Has a cand.philol. degree from the university of Bergen, majoring in Nordic literature. She has worked in the field of brand management and strategic communication for a number of companies in Western Norway. Wide-ranging experience from various professional environments, including Bergen National Academy of the Arts, the Norwegian Broadcasting Corporation (NRK) and the newspaper Bergens Tidende. Chair of the board of Den Nationale Scene and board member of Compact AS, owned by GC Rieber.

Pål Pedersen (1954)Director of the Legal Division since 2009 with responsibility for legal issues, potential bad debts relating to commercial engagements, depot and the Secretariat. Joined the bank in 1990. Legal Director from 1994. Law degree from the university of Bergen. Previous experience as an assistant judge and lawyer in private practice. Qualified as an advocate in 1984. Completed the Solstrand leadership programme in 2003. Broad experience from banking, finance and commercial law. Board member of Sparebanken Vest Boligkreditt AS.

Gro Hatleskog (1956)Director of Human Resources and Organisation from 2012. Director – Human Resources in Sparebanken Vest from 2007 to 2009. Holds a cand.polit. degree from the university of Bergen, majoring in Administration and Organisation Theory. Has extensive experience as Director of HR and Organisation from both the financial sector and from industry, in the companies Vesta Forsikring, Nera and Beerenberg. She also has experience from the public sector. Member of the board of Christian Michelsen Research and Hjelp24.

Sparebanken Vest’s management team has a clear ambition for the bank to achieve a position as the leading financial services group in Western Norway.

The corporate management


1800 1900 2000

Sparebanken Vest– local identity through generations

1823- Bergens Sparebank is established

1970- Os Sparebank (1926)

1964- Alvøen Sparebank (1877)- Herdla Sparebank (1899)

1982- Austrheim & Fedje Sparebank (1911)- Bremnes & Moster Sparebank (1975)- Bruvik Sparebank (1903)- Eid sokn Sparebank (1842)- Fusa Sparebank (1858)- Hosanger nye Sparebank (1928)- Samnanger Sparebank (1874)- Skånevik Sparebank (1863)- Stord Sparebank (1862)- Strandebarm Sparebank (1853)- Sund & Austevoll Sparebank (1896)- Vikøy Sparebank (1860)

2000- Acquisition of Vår Bank &

Forsikring, Bergen

2006- Establishment Haugesund- Establishment Etne

2007- Acquisition of Fokus Banks’

business in Sogn & Fjordane- Establishment Sandnes

2008- Establishment Stavanger

2009- Sauda Sparebank (1892)- Establishment Hinna- Establishment Sola

2011- Sparebanken Hardanger (1846)- Establishment Nærbø

1983- Fjære Sparebank (1875)

1986- Fitjar Sparebank (1865)

1989- Sparebanken Nordfjord (1852)- Sogndal Sparebank (1842)1973

- Odda Sparebank (1916)

1975- Lindås Sparebank (1865)

1971- Alversund Sparebank (1910)- Fjell Sparebank (1911)- Haus Sparebank (1866)- Hamre & Åsane

Sparebank (1904)- Manger Sparebank (1889)- Masfjorden Sparebank (1910)

SIDE 7 ÅRSRAPPORT 2011

The Sparebanken Vest Group recorded an operating profit before write-downs and tax of NOK 858 million in 2011, compared with NOK 927 million in 2010. The result reflects the fact that the economic development in Western Norway has been positive throughout the year. The financial performance is the result of good, sound operations in the bank, increased commission income from banking services and Frende Forsikring, as well as moderate losses. In 2011, the bank increased its nominal net interest despite increased financing costs resulting from unrest in the international financial markets and reduced lending margins for the bank. The bank has also strengthened its market position and improved customer satisfaction. The Board of Directors is satisfied with the profit for the year.

The year 2011 was characterised by uncertain and turbulent international macroeconomic factors. The financial markets were dominated by the sovereign debt problems in several European countries. uncertainty grew throughout the year and, despite the fact that various measures were implemented in the eurozone in 2011 to resolve the sovereign debt crisis, it does not seem that a solution will be in place any time soon. This means that it is highly likely that it

will take time for the economies of the heavily-indebted countries to improve.

The Norwegian economy and the macroeconomic framework for Western Norway have, however, been good in 2011. The development of the economy has been good, despite the fact that there have been more signs throughout the year that the Norwegian economy may also be affected by the slowdown in Europe, which can result in weaker growth

Board of Directors’ Report


prospects. Some industries exposed to competition and export industries, in particular, continued to experience market-related challenges.

The labour market in Western Norway has been characterised by high employment and therefore low unemployment in 2011. Sogn og Fjordane and Rogaland have had the lowest unemployment rates of all counties in Norway. High oil prices underpinned activity in the petroleum sector, housing investments were high, and the prospects of continued high oil prices are expected to maintain a high level of activity in the economy of Western Norway in the time ahead. In addition, two big oil discoveries in the North Sea renewed optimism in Norway and about Western Norway’s future as an international hub for oil and gas activities.

There was good activity in the housing market in 2011, and the low interest rate was one of the main drivers for the strong price growth. The rise in house prices showed a tendency to level out towards the end of the year, however.

The unrest in the global financial markets has affected Sparebanken Vest’s the financial situation in that it has become more difficult and more expensive for the bank to raise funding in the money market. Because of strong competition in the bank sector, we have not been able to pass on increased borrowing costs to the customers. This has therefore weakened the bank’s interest margins. The unrest in the securities market has also negatively affected the bank’s financial investments.

In 2011, Sparebanken Vest entered into an agreement concerning a merger with Sparebanken Hardanger.

The bank’s other operating expenses have increased slightly during 2011, primarily as a result of increased development

costs in connection with forward-looking IT services. The nature of the expenses mean that they will lead to cost savings for the bank in the longer term.

At the end of 2011, Sparebanken Vest met the capital requirements set by the Norwegian financial authorities by a good margin, and the bank is also working actively to find out how it can best adjust to Basel III, the new, future guidelines for capital requirements. The general picture, as it appears today, is that the authorities in Norway and abroad will introduce more stringent requirements with respect to banks’ liquidity, which means that it will become more expensive to engage in banking activities in future.

Targeted efforts are being made to strengthen the bank’s profitability in order to maintain healthy finances and ensure a good return on equity also in future.

The liquidity of the equity certificate improved in 2011 compared with 2010. This is mainly a result of the measures that were implemented in 2010, including an increase in outstanding market capital, a 1:2 split of the equity certificate and the signing of market-maker agreements with Norne Securities and Fondsfinans. The level of activity in the Norwegian stock market and on Oslo Børs was generally lower in 2011 than the previous year.

The Board of Directors’ proposal to the Supervisory Board is a cash dividend of NOK 2.00 (3.50) per equity certificate.

Pursuant to the bank’s dividend policy, the Board of Directors will recommend the meeting of the Supervisory Board in March to propose a capitalisation issue targeting equity certificate holders. The purchase price will be determined later.

The group’s return on equity is 8.7% (11.3) and its capital adequacy ratio is


11.6% (11.6), based on the Board of Directors’ proposal for allocation of the profit for the year in the parent bank.

The nature of the businessSparebanken Vest is an independent listed financial services group that is engaged in banking and financing activities in the counties of Hordaland, Rogaland and Sogn og Fjordane.

The group’s head office is in Bergen, and the bank has 68 sales outlets. The group is involved in estate agency activities through Eiendomsmegler Vest AS, property management through Sparebanken Vest Eiendom AS (formerly AS Filialbygg), and home mortgages through Sparebanken Vest Boligkreditt AS. These three limited liability companies are wholly-owned by the parent bank.

Sparebanken Vest is also the largest owner in the securities company Norne Securities AS with a holding of 44.93%, and the largest owner in the insurance company Frende Holding AS with a holding of 44.7%. These companies are owned together with 13 other savings banks. The housing credit company Verd Boligkreditt AS is owned together with eight independent savings banks and it is run by Sparebanken Vest Boligkreditt AS. Sparebanken Vest owns 40% of the shares. Sparebanken Vest owns 49.9% of the shares in the leasing company Brage Finans AS. The company is owned together with nine other savings banks.

In 2011, Sparebanken Vest merged with Sparebanken Hardanger. The merger has been approved by the Ministry of Finance, and it means that Sparebanken Vest takes over the assets, rights and liabilities of Sparebanken Hardanger. At the end of 2010, the latter had assets under management amounting to NOK 3.5 billion.

Strategic directionSparebanken Vest’s vision is for the bank, through professional banking operations, to be a driving force for social and economic development in Western Norway.

Sparebanken Vest’s strategic direction remains unchanged. The goal for the coming years is that the bank shall attain the position of Western Norway’s leading and preferred financial services group. There are four key strategic areas: to realise the goal of Sparebanken Vest as a financial services group, to strengthen the group’s culture and competence-building, to improve and rationalise distribution and operations, and to further develop the brand.

In March 2011, the bank concluded comprehensive strategic work that resulted in a decision by the Board of Directors to the effect that Sparebanken Vest will continue to be an equity certificate bank. The bank’s dividend policy was revised at the same time.

Sparebanken Vest is making determined efforts to develop and improve the bank’s competitiveness in the short and long term. This includes developing the bank’s staff, products and management systems. Sparebanken Vest has chosen to be independent in a sector where the prevailing trend is centralisation and greater distance to customers as a result of demanding mergers, alliances and acquisitions. Its independent position gives Sparebanken Vest freedom of manoeuvre. The bank emphasises closeness to its customers, know-how about the region’s business and industry and local decision-making authority.

Corporate governanceSparebanken Vest’s principles and policy for corporate governance are based on the Norwegian Code of Practice for Corporate


Governance drawn up by the Norwegian Corporate Governance Board (NuES). Reference is also made to the Financial Supervisory Authority of Norway’s module for the evaluation of overall management and control, which reflects the principles of the European Banking Authority (EBA). The bank adjusts to the frameworks mentioned to the extent that they are appropriate.

Sparebanken Vest’s principles and policy shall ensure that its corporate governance is in accordance with generally accepted and recognised perceptions and standards and in compliance with statutes and regulations. Moreover, the bank’s corporate governance shall ensure good cooperation between its different stakeholders, such as owners of equity certificates, lenders, customers, employees, governing bodies, management and society as a whole. In the board’s view, Sparebanken Vest’s corporate governance is satisfactory and in compliance with the principles and policy.

Fourteen board meetings were held in 2011. The Board of Directors’ main focus areas have been follow-up of operations, strategy, risk and capital management and the monitoring of markets and framework conditions. The board has drawn up a yearly plan for its work, and it focuses on ensuring that the members of the board have adequate knowledge and expertise. The board has carried out a self-evaluation of how it works, and of its expertise, priorities and cooperation between the board and the management.

The Board of Directors has appointed three committees as part of its work. The Audit Committee is charged with ensuring that Sparebanken Vest has an independent and effective external and internal audit function and financial and risk reporting in accordance with statutes and regulations. The Credit Committee deals with credit matters under the authorisations of the Board of Directors. The Compensation

Committee is tasked with ensuring that the bank practises a competitive, but not leading, pay policy that is seen as motivating by the bank’s management in relation to implementing the adopted strategy and achieving the goals set.

Statement concerning the annual accountsThe annual accounts have been prepared on the basis of the going concern assumption and based on forecasts for operations in 2012 and projections for three years thereafter.

Sparebanken Vest’s consolidated and company accounts for 2011 have been prepared in accordance with the Inter-national Financial Reporting Standards (IFRS), the Financial Supervisory Authority of Norway’s Regulations relating to annual reports and accounts, and the Regulations relating to the accounting treatment of lendings and guarantees. In the company accounts, the bank exercises its right to use a simplified form of IFRS. Consequently, dividend/group contributions from subsidiaries are included in the basis for the parent bank’s dividend in the same year as they are earned.

Sparebanken Vest has not changed its accounting principles in 2011. The annual financial statements have been prepared in accordance with the above-mentioned regulations and, in the Board of Directors’ view, they provide a true and fair view of the group’s financial position.

Financial performanceThe group’s pre-tax profit for 2011 was NOK 732 (800) million.

The change from 2010 was affected by nominal growth in net interest, growth in commission income and other income, and a reduction in income from financial instruments. Operating


expenses increased as a result of further development and growth, while write-down expenses were at the same level as in 2010.

Sparebanken Vest values fixed-interest loans to customers and fixed-interest debt at market value. This principle means that, in addition to changes in interest rates, changes in value as a result of a change in the credit spread are also recognised in the income statement. In accordance with this principle, the net credit spread effect was recognised in the income statement in the amount of NOK 2 (+ 35) million in 2011.

The group’s return on equity is 8.7% (11.3). The profit per equity certificate is NOK 4.55 (5.86). The diluted result is the same.

The parent bank’s profit after tax amounted to NOK 537 (616) million. Adjusted for changes in the reserve for unrealised gains, the basis for dividend is NOK 578 million. The Board of Directors proposes a cash dividend for 2011 of NOK 2.00 (3.50) per equity certificate, amounting to a total of NOK 52.2 million. This corresponds to a distribution percentage of 56.8%. The board also proposes that NOK 55.5 million be transferred to the equalisation reserve and that NOK 30 million be spent on donations for the public benefit. NOK 440.5 million will be transferred to the bank’s primary capital.

The group’s capital adequacy is 11.6% (11.6) based on the board’s proposal for allocation of the profit for the year in the parent bank. The capital adequacy after full implementation of Basel II is 15.6% (15.0).

RevenuesNet interest and credit commission incomeThe group’s net interest income in 2011

amounted to NOK 1,590 (1,516) million. The positive change of NOK 74 million is the result of higher interest income of NOK 443 million and higher interest expenses of NOK 369 million.

Sparebanken Vest did not pay a fee to the Norwegian Banks’ Guarantee Fund in 2011 (NOK 56 million in 2010).

Among other things, the higher interest rate means that the bank’s interest on equity increases.

In 2011, net interest was again affected by the bank having considerable investments in interest-bearing securities and a large proportion of long-term borrowings from the capital market. As of 31 December 2011, through Sparebanken Vest Boligkreditt AS, the group had issued covered bonds totalling NOK 28.3 (18.5) billion, NOK 3.6 billion of which was used in the swap agreement with Norges Bank.

Of the total operating income in 2011, net interest accounted for 72.5% (70.5). The net interest is 1.46% (1.49) of the average assets under management.

Nett other operating revenues The group’s total net other operating revenues in 2011 amounted to NOK 603 (635) million.

The return on shares and other equity investments in the form of dividends and changes in value amounted to NOK 90 (202) million in 2011.

In connection with the merger with Sparebanken Hardanger, the bank has recognised a badwill item of NOK 57 million in 2011, NOK 32 million of which consists of excess values in the share portfolio that were realised before the implementation date.

Net banking services show a positive


change of NOK 38 million, of which commission on insurance accounted for NOK 15 million.

The bank’s share of losses in associated companies has been incorporated in the amount of NOK 50 (42) million in the consolidated accounts for 2011.

Other income is up NOK 26 million, which is mainly due to increased activity in Eiendomsmegler Vest AS.

Operating expensesTotal expenses in 2011 amounted to NOK 1,335 (1,224) million. Adjusted for the effect of the AFP early-retirement scheme in 2010 (NOK 62 million) and operating expenses for Sparebanken Hardanger for November/December (NOK 6 million), the organic growth in expenses was 3.3%.

The bank’s level of expenses at the end of 2011 reflects a determined focus on developing and managing electronic self-service solutions.

The cost-income ratio for 2011 was 60.9% (56.9).

Operating expenses amounted to 1.22% (1.20) of average assets under management in 2011.

Write-downs of loans and guaranteeExpensed write-downs of loans and losses on guarantees amounted to NOK 126 (127) million NOK 26 (8) million of the write-downs is due to an increase in group write-downs, and NOK 9 (35) million to an increase in individual write-downs. The total confirmed losses amounted to NOK 107 (89) million, of which NOK 70 (49) million was covered by previous write-downs.

In 2011, recoveries on previously confirmed losses amounted to NOK 17 (10) million. Write-downs taken over

in connection with the acquisition of Sparebanken Hardanger amounted to NOK 29 million.

In 2011, the total loss expense amounted to 0.13% (0.15) of gross lendings. Potential bad debts not defaulted on amounted to NOK 966 (781) million. They largely related to commitments in industries exposed to cyclical fluctuations.

Capitalised group write-downs at year-end amounted to NOK 330 (291) million. Capitalised individual write-downs amounted to NOK 299 (275) million. The total percentage provided for was 0.63% (0.64) of lendings.

The nominal increase in write-downs is related to volume growth and a somewhat increased risk profile as a result of poorer prospects for the real economy.

At year-end, the bank had NOK 188 (200) million in defaulted loans (default of payment for more than 90 days) in the retail market, and NOK 212 (234) million in the corporate market. The default percentage was 0.26% (0.31) in the retail market and 0.79% (0.97) in the corporate market.

Volume developmentsThe group’s assets under management amounted to NOK 116.0 (105.3) billion. Sparebanken Vest maintains its high level of customer satisfaction and retains its position as the leading bank in Western Norway.

At year-end, deposits amounted to NOK 53.1 (48.7) billion. Of the total deposits, NOK 31.2 (27.6) billion was from retail customers and NOK 21.9 (21.1) billion was from corporate customers.

The growth in deposits for the year was 9.0% (8.6): 13.4% (5.5) from retail customers and 3.5% (12.8) from


corporate customers. The bank acquired a gross deposits portfolio of NOK 2.3 billion as a result of the merger with Sparebanken Hardanger. Excluding this, the growth in lendings in 2011 was 4.3%.

Net lendings amounted to NOK 99.3 (88.5) billion: NOK 73.0 (64.8) billion to retail customers and NOK 26.3 (23.7) billion to corporate customers. The growth in lendings for the year was 12.3% (7.5): 12.7% (7.8) to retail customers and 11.0% (6.6) to corporate customers. The bank acquired a gross lendings portfolio of NOK 3.6 billion as a result of the merger with Sparebanken Hardanger. Excluding this, the growth in lendings in 2011 was 8.1 %.

Loans at a fixed interest rate have increased by NOK 855 million in the retail market. For the bank as a whole, loans at a fixed interest rate have increased by NOK 572 million.

Risk and capital management Risk and capital management underpins the bank’s strategic development and ambitions and is one of the Board of Directors’ key focus areas. The main objective in this context is to ensure that the bank attains its goals within its financial and operational limits. Based on

quarterly reports, the Board of Directors evaluates the bank’s risk and capital situation in relation to adopted control parameters. The board considers the bank’s total risk exposure to be low. The exposure lies within the bank’s defined risk profile. In the Board of Directors’ view, the bank’s guidelines and processes for risk and capital management function well.

The bank’s risk and capital tolerance is specified through targets and parameters. Risk-adjusted capital is calculated for all main areas. Through the bank’s risk and capital assessments (ICAAP1), capital buffers and capital adequacy targets are set in order to safeguard the bank’s operations even under stressed market conditions.

Credit riskThe year 2011 was dominated by a reduction in growth in the global economy and volatile financial markets. The macroeconomic uncertainty continues into 2012. Activity is still good in the Norwegian economy, largely because of activity in the building and construction industry, the high oil price and the growth in oil investments and oil-related industries.

Finansieringsstruktur

Financing structure as of 31 Dec. 2011

0

2 000

7 000

12 000

Risk profile, expected loss, total portfolio

0%10%20%30%40%50%60%70%80%90%

100%

78,0

%

79,7

%

80,1

%

80,7

%

16,0

%

14,9

%

14,2

%

12,9

%

5,9% 5,4% 5,7% 6,4%

Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

< 0,2% 0,2%><0,75% > 0,75%

Capitalised write-downs

050

100150200250300350400450500550600 0,63%

0,60%

0,51%0,49%

0,43%

0,29%

0,24%0,23%

11,6%

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

Core capital

Additional capital

Capital adequacy – transitional

9,4%

15%

Core capital

Additional capital

Capital adequacy – Basel II

12,2% 12,9%

Capi

talis

ed w

rite-

dow

ns

Individual write-downs Group write-downs Write-downs as % of gross lendings

114

124

144

233

238

239

244 28

3

39

45

70

94

143

2008 2008 2008 2008 2009 2009 2009 2009

0,00%

0,10%

0,20%

0,30%

0,40%

0,50%

0,60%

Writ

e-do

wns

as

% o

f gro

ss le

ndin

gs0,70%

2010 2010 2010 20101Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

283

288

291

291

165

238 24

0

244

261 27

3

275

0,62%0,63% 0,64% 0,64%

0,9%

15,3%

1,7%

1,1%

Subordinated bond Subordinated bond

17 000

0-1 year 1-3 years 3-5 years Over 5 years

Millions

123456789

101112

123456789

101112

%

131415

80,5

%14

,1%

5,5%

79,9

%14

,1%

6,0%

78,8

%14

,7%

6,6%

78,9

%14

,3%

6,8%

0,80%650700

2011 2011 2011 20111Q 2Q 3Q 4Q

276

291

0,63%

282

298

0,63%

288

312

0,64%

299

330

0,63%

Liquidity risk

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2011 2012 2013 2014 2015 2016 2017 2018

Millions

22 000

13141516

1,4%0,8%

9,6%

1,3%

9,5%

1,2%0,8%

9,4%

1,3%0,8%

9,6%

1,2%0,8%

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

1,7%

1,2%

12,4% 12,7%

1,6%1,1%15,4%

12,4%

1,7%

1,1%15,2%

1,7%1,0%15,6%

Development of liquidity and structural liquidity

-4000

-2000

0

2000

4000

6000

8000

10000

12000

14000

Norwegian stateBanksCovered bondsInterbank

Municipalities and county authoritiesOthersSharesUse to loans in Norges Bank’

Q1 08 Q2 08 Q3 08

Q4 08 Q1 09 Q2 09 Q3 09

Q4 09

Mill Months

5

10

15

20

Q1 10 Q2 10 Q3 10 Q4 10

16000

18000 25

Q1 11Q2 11 Q3 11 Q4 11

%

11,6% 11,8% 11,5% 11,5%

Capital market financing*Covered bonds in the marketSwap arrangement for covered bonds with the Norwegian authorieties

* Excl. covered bonds and the swap arrangementTier 1 capital equals the sum of core Tier 1 capital and subordinated bonds. Capital adequacy is based on the sum of Tier 1 capital and additional capital.

Structural liquidity

1) Internal Capital Adequacy Assessment Process


More than 70% of the credit portfolio in Sparebanken Vest consists of loans to the retail market. The retail market portfolio largely consists of loans secured by mortgage with a low loan-to-asset-value ratio. The credit quality in Sparebanken Vest is thereby good. The risk profile in the retail market portfolio is better than at the end of the previous year. The low interest rate level and low unemployment make positive contributions.

The risk profile in the corporate market is somewhat weaker than at the end of the previous year. The development in 2011 must be seen in conjunction with the situation in the global economy.

In the Board of Directors’ view, the bank’s risk profile is low in the retail market and moderate in the corporate market. Expected losses (based on debt-servicing ability and security coverage) show that almost 80% of the portfolio has a low risk profile in the Board of Directors’ assessment.

Liquidity risk Pursuant to the bank’s liquidity strategy, the bank shall ensure that it has an acceptable liquidity risk by ensuring a satisfactory spread of terms to maturity, instruments and markets. The bank’s maturity structure for financing from the

capital markets is well diversified. Almost 26% of the group’s capital market financing is in foreign currency.

The uncertainty in the financial markets underlines the importance of having a liquidity strategy that ensures access to long-term financing and diversified sources of financing. The Board of Directors emphasises having a liquidity strategy that is robust under stressed framework conditions. Sparebanken Vest’s liquidity situation was good at year-end 2011, with substantial liquidity reserves and the capacity to operate without access to funding from the capital market for 16 months (structural liquidity) under normal operations.

Financing through the bank’s wholly-owned subsidiary, Sparebanken Vest Boligkreditt AS, helps to reduce the group’s overall liquidity risk through greater diversification with respect to financing and on more favourable terms.

The company takes over well-secured home loans from the bank and issues covered bonds as financing. The bank’s relative share of covered bonds has increased during the last quarter and now accounts for more than 40% of the bank’s capital market financing.

Finansieringsstruktur


0

2 000

7 000

12 000


0%10%20%30%40%50%60%70%80%90%

100%

78,0

%

79,7

%

80,1

%

80,7

%

16,0

%

14,9

%

14,2

%

12,9

%

5,9% 5,4% 5,7% 6,4%

Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

< 0,2% 0,2%><0,75% > 0,75%


050

100150200250300350400450500550600 0,63%

0,60%

0,51%0,49%

0,43%

0,29%

0,24%0,23%

11,6%

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

Core capital

Additional capital


9,4%

15%

Core capital

Additional capital


12,2% 12,9%

Capi

talis

ed w

rite-

dow

ns


114

124

144

233

238

239

244 28

3

39

45

70

94

143

2008 2008 2008 2008 2009 2009 2009 2009

0,00%

0,10%

0,20%

0,30%

0,40%

0,50%

0,60%

Writ

e-do

wns

as

% o

f gro

ss le

ndin

gs0,70%

2010 2010 2010 20101Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

283

288

291

291

165

238 24

0

244

261 27

3

275

0,62%0,63% 0,64% 0,64%

0,9%

15,3%

1,7%

1,1%


17 000


Millions

123456789

101112

123456789

101112

%

131415

80,5

%14

,1%

5,5%

79,9

%14

,1%

6,0%

78,8

%14

,7%

6,6%

78,9

%14

,3%

6,8%

0,80%650700

2011 2011 2011 20111Q 2Q 3Q 4Q

276

291

0,63%

282

298

0,63%

288

312

0,64%

299

330

0,63%

Liquidity risk

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2011 2012 2013 2014 2015 2016 2017 2018

Millions

22 000

13141516

1,4%0,8%

9,6%

1,3%

9,5%

1,2%0,8%

9,4%

1,3%0,8%

9,6%

1,2%0,8%

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

1,7%

1,2%

12,4% 12,7%

1,6%1,1%15,4%

12,4%

1,7%

1,1%15,2%

1,7%1,0%15,6%


-4000

-2000

0

2000

4000

6000

8000

10000

12000

14000



Q1 08 Q2 08 Q3 08

Q4 08 Q1 09 Q2 09 Q3 09

Q4 09

Mill Months

5

10

15

20

Q1 10 Q2 10 Q3 10 Q4 10

16000

18000 25

Q1 11Q2 11 Q3 11 Q4 11

%

11,6% 11,8% 11,5% 11,5%





As of 31 December 2011, the parent bank Sparebanken Vest had transferred NOK 31.1 billion in housing loans to Sparebanken Vest Boligkreditt AS, which has issued covered bonds in the amount of NOK 28.3 billion. New issues of covered bonds in the first quarter 2012 will mean that these securities will soon account for 50% of the bank’s capital market financing.

Among other things, the new Capital Requirements Directive (CRD IV) will entail new liquidity regulations. New liquidity indicators have been introduced that measure short-term liquidity, Liquidity Coverage Ratio (LCR) and long-term financing, Net Stable Funding Ratio (NSFR), respectively. It is expected that the indicators will be incorporated in the regulations in 2015 (LCR) and 2018 (NSFR). It is likely, however, that the market will adapt ahead of this. From the third quarter 2011, all Norwegian banks report the LCR to the Financial Supervisory Authority of Norway. For the time being, reporting is limited to the largest banks, including Sparebanken Vest.

The Board of Directors has ensured that the bank has initiated work on how the

indicators can best be implemented in relation to control parameters. New control parameters to support and gradually adjust to the LCR have been introduced in 2012.

Market risk Interest rate risk relates to the bank’s holding of interest-bearing securities, fixed-interest loans and fixed-interest deposits. The bank has managed its operations within the frameworks set for credit spread risk and asset items in 2011. The positions are moderate.

The uncertain situation in the global economy, particularly the sovereign debt crisis in the eurozone, has led to volatile markets and increased credit spreads in 2011. The Foreign Exchange Regulations stipulate the maximum exposure limits permitted for the bank’s currency risk. Sparebanken Vest’s limits for currency risk and its aggregate currency position are moderate. Its total exposure corresponded to NOK 51 million at the turn of the year.

The bank’s share portfolio consists of investments in subsidiaries/associated companies, shares held for sale and shares that are traded on a continuous basis.


-4000

-2000

0

2000

4000

6000

8000

10000

12000

14000

Norwegian stateBanksCovered Interbank

Municipalities and county authoritiesOthersShares’Use to loans in Norges Bank’

Q1 09 Q2 09 Q3 09

Q4 09

Mill Months

5

10

15

20

Q1 10 Q2 10 Q3 10 Q4 10

16000

18000 25

Q1 11Q2 11 Q3 11 Q4 11



The total portfolio (excluding subsidiaries and associated companies) at the end of the fourth quarter amounted to NOK 738 million. The limits and exposure are based on commercial considerations and on the bank’s ambition of playing an active role in social and economic development in Western Norway. The board considers the overall risk in the bank’s share portfolio to be acceptable, taking into account the bank’s other earnings and financial strength.

Operational risk and complianceThe identification of operational risk is based on expert assessments, management confirmations and events registered in the bank’s events database. Major events are reported to the bank’s Board of Directors. The bank’s actual operating losses were small in 2011, and no material matters have been uncovered that are critical to the bank’s operations. There are a few challenges associated with the general operating situation of the bank’s ICT systems, and the Board of Directors calls for the bank’s management to have a strong focus on finding good solutions in collaboration with external suppliers of ICT services.

New requirements and guidelines are continuously set in relation to banking activity, which increases the banks’ compliance risk. It is the Board of Directors’ opinion that Sparebanken Vest has processes in place to ensure that changes to regulations are identified and taken into account. In 2011, there has been a special focus on the new, upcoming capital adequacy directive CRD IV.

Equity and capital adequacyThe Board considers the bank’s risk and capital adequacy assessments (ICAAP) annually. This analysis forms the basis for stipulating risk targets/limits, including the bank’s capital adequacy targets, and it must be seen in connection with the bank’s other business processes. The bank’s capital adequacy targets are intended to ensure that the bank has sufficient capital buffers over and above the minimum requirement in a stressed economic situation that is realistic, but not very probable. Pursuant to Basel II, the group’s targets for core capital and own funds are 10% and 13%, respectively. Pursuant to the transitional arrangement, the bank shall maintain both Core Tier 1 capital and total capital


0

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Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

Core capital

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2008 2008 2008 2008 2009 2009 2009 2009

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2010 2010 2010 20101Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

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261 27

3

275

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Millions

123456789

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2011 2011 2011 20111Q 2Q 3Q 4Q

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282

298

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288

312

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299

330

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Liquidity risk

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2011 2012 2013 2014 2015 2016 2017 2018

Millions

22 000

13141516

1,4%0,8%

9,6%

1,3%

9,5%

1,2%0,8%

9,4%

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Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011

1,7%

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-4000

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2000

4000

6000

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Q1 08 Q2 08 Q3 08

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Q1 10 Q2 10 Q3 10 Q4 10

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on a par with the third quarter 2011. These analyses and the bank’s actual financial strength show that the bank is sufficiently capitalised.

Financial strength/capital adequacy The group’s equity at year-end amounted to NOK 6,691 (5,929) million. The group also has subordinated bonds and subordinated loan capital of NOK 1,418 (1,410) million. Qualifying own funds amounted to NOK 7,191 million at 31 December 2011.

The group is IRB-approved pursuant to the Basel II regulations, and it reports regulatory capital adequacy pursuant to both Basel II and the transitional rules. It has been decided that the transitional regulations shall continue to apply.

In 2011, risk and capital management has otherwise been dominated by the commencement of the work on adjusting to the new capital requirement regulations (CRD IV). At the end of 2011, the bank’s capital situation showed that the bank meets the new capital requirements by a good margin.

The Financial Supervisory Authority of Norway has made a recommendation that all Norwegian banks and financing companies should have Core Tier 1 capital of at least 9% as of 30 June 2012. Sparebanken Vest has submitted a plan with an overview of how this minimum level, calculated pursuant to the applicable transitional rules, will be met to the Financial Supervisory Authority. Sparebanken Vest’s own capital adequacy target is above the 9% requirement, and the regulatory requirement therefore does not affect the bank’s business plans

The retail marketCustomer satisfaction surveys carried out in 2011 show an increase in retail

customers’ level of satisfaction with Sparebanken Vest. Surveys have been carried out over a number of years, and customer satisfaction has never been higher than in 2011. Other surveys confirm this development, and Sparebanken Vest ranks above the average for the industry as a whole.

The market position in the retail market has also improved, and the market shares for lendings and deposits were 16.5% and 18.2%, respectively, in the bank’s market area. The growth in lendings largely follows market developments, while the growth in deposits has improved in 2011. Sparebanken Vest had more than 247,000 retail customers at the end of 2011. Around 10,000 of the 15,700 new retail customers for the year are a result of the merger with Sparebanken Hardanger.

Increased income diversification in the retail market is still a strategic goal for Sparebanken Vest. Important business areas in this connection are savings/investments and insurance. The development in savings/investments was dominated by the turbulent market situation in 2011. In general insurance, Sparebanken Vest’s share of the total premiums in Frende Skadeforsikring amounted to NOK 352 million at the end of 2011. During the third quarter 2011, the bank recouped the level of premiums it had when it withdrew from SpareBank 1 Forsikring.

Another important goal in the retail market is more time for advice and a higher degree of self-service. In 2011, Sparebanken Vest reorganised its customer activities in this area. The role of adviser has been specialised with the focus on customer advice and cross sales, while case processing and document handling tasks have been assigned to a joint business centre. This will contribute


to increased customer focus and to more rational processes and case processing in the longer term.

In a market dominated by high competitive intensity, the Board of Directors is very happy with developments in the retail market.

The corporate marketSparebanken Vest’s corporate market segment recorded more than 1,700 new customers in 2011. The growth in net lendings in this segment in 2011 was NOK 2.6 billion, or 7.8%. Lending to the corporate market segment now accounts for almost 27% of the bank’s lendings. Corporate deposits remained stable throughout the year and represent 41% of the bank’s deposits. The market shares for lendings and deposits were 7.6% and 15.4%, respectively, in the bank’s market area.

The bank continued its good cooperation with business and industry in Western Norway in 2011, particularly in the SME segment. The bank further strengthened its advisory capacity with eight new members of staff taken on in different regions. Nineteen of the bank’s 68 branches have corporate advisers. In addition, many branches are visited by advisers on certain days of the week. The positive development in Rogaland has continued and a new branch office was opened in the Jæren area in October 2011, with three new corporate advisers. The bank improved both its market share and the level of customer satisfaction in 2011. In total, the bank had 121 members of staff in the corporate segment as of 31 December 2011.

The leasing company Brage Finans AS had its first full year of operations in 2011, and it had 17 employees at year-end. Brage Finans has enjoyed great success

in the market, and it is expected that the company, in close collaboration with its distributors, will have a wide appeal to corporate customers that require financing for operating assets also in 2012. Together with Frende Forsikring, Norne Securities and the bank’s own professional expertise, this completes the range of services available to demanding corporate customers. The potential for further developing these areas in 2012 is deemed to be good. The prospects for business and industry are generally positive, and moderate credit growth is expected in 2012.

The capital marketThe Capital Market Division attends to activities in connection with customer-related trading in the interest and foreign currency area, proprietary trading in the same areas and payment services. The division also attends to the bank’s equity investments.

up until the fourth quarter 2011, the division also attended to the bank’s treasury function. The treasury function has been moved and is now organised under the CFO along with finances.

Following the separation of the treasury function, the Capital Market Division is now known as Sparebanken Vest Markets.

Liquidity and financing Sparebanken Vest’s liquidity has also been managed well within the control parameters in 2011. The bank’s liquidity situation was good at year-end 2011, with substantial additional reserves and the capacity to operate without access to financing from the capital market for 16 months (structural liquidity). A significant proportion of the bank’s funding needs have been met by issuing covered bonds via the bank’s wholly-owned


subsidiary Sparebanken Vest Boligkreditt also in 2011.

Sparebanken Vest Boligkreditt also carried out an issue in the euro market in 2011, raising EuR 500 million (corresponding to approximately NOK 4 billion). The objective was to take advantage of the potential for more reasonably-priced financing through covered bonds. The total volume of covered bonds issued by Sparebanken Vest Boligkreditt amounted to NOK 28.3 billion at the end of 2011. NOK 3.6 billion of this was used in the swap arrangement with Norges Bank, while the rest was sold in the market in Norway and abroad.

Norges Bank changed the key interest rate twice in 2011; first from 2.00% to 2.25% on 12 May, and then from 2.25% to 1.75% on 12 December. During 2011, Sparebanken Vest only made two general changes to customer interest rates, compared with a total of eight changes the year before.

The money market rate (3-month NIBOR) was 74 basis points above the key interest rate in 2011. The corresponding figure in 2010 was 59 basis points. Before the financial crisis, the money market rate was 25-30 basis points above the key interest rate.

During the first months of 2011, we saw a tightening of credit spreads (the interest rate mark-up on 3-month NIBOR) for the bank’s borrowings in the bond market. During the course of the summer, the turbulence in the sovereign debt market in Europe increased, which in turn led to a widening of the credit spreads for the bank’s financing. At the end of 2011, for example, the credit spread for five-year senior bond issues by Sparebanken Vest was at a considerably higher level than at the beginning of 2011 – a widening from 110 to around 190 basis points.

The group has a well-diversified bond portfolio that is primarily invested in Norwegian issuers, including covered bonds, bonds issued by municipalities and county authorities, bank bonds and bonds in large Norwegian enterprises. At the end of 2011, the gross bond portfolio amounted to NOK 11.5 billion.

Equity investmentsEquity investments amounted to NOK 738 (714) million. In addition, NOK 1,880 (1,077) million was paid into subsidiaries as equity. NOK 484 (454) million was invested in associated companies in which the bank had holdings of between 20% and 50%.

Sparebanken Vest’s equity investments have a twofold purpose. The investments shall make a positive contribution to the bank’s earnings by delivering a return on equity that, over time, is in accordance with the bank’s goals.

It is also Sparebanken Vest’s goal that the investments shall help to strengthen business and industry in the region. The bank’s investments in the local region are therefore mainly made in early-phase companies. Many of the companies in the bank’s portfolio have developed according to plan and are now operating in the market with interesting products that have good sales potential. In 2011, share investments have contributed NOK 89.5 million, NOK 67.8 million of which can be attributed to changes in value and dividend from Nets Holding.

Corporate social responsibilityThere has been an increasing awareness in recent years that the business community has a responsibility to society over and above making a profit.

Corporate social responsibility is an integral part of the business activities of

PAGE 20 ANNUAL REPORT 2011

Sparebanken Vest. Through Visjon Vest, which manages the bank’s donations for the public benefit, the bank cooperates on a number of projects relating to the challenges posed by climate change.

Sparebanken Vest’s social responsibility is expressed in the bank’s vision that it shall be a driving force for social and economic development in Western Norway.

Sparebanken Vest endeavours to display social responsibility in all its activities. Equity investments and the bank’s activities for the public benefit are described in the Board of Directors’ report.

Activities for the public benefitPursuant to the Savings Banks Act, savings banks may allocate part of their profits after tax and dividend to projects for the public benefit.

Over several years, Sparebanken Vest has defined such activities as a strategic priority area. When making awards to projects, the bank is concerned that the projects that receive such grants produce a social return. The projects should contribute to raising competence, sharing competence and stimulating interdisciplinary cooperation in Western Norway.

Through its activities for the public benefit, Sparebanken Vest gives high priority to climate issues and transport and communications in accordance with the Climate Recommendations (Klimaanbefalingen) from the Norwegian Savings Banks Association.In 2011, the awarding of funds for the public benefit targeted defined categories in business and social development, including research and competence, innovation, climate, culture-based businesses, children and adolescents, culture and humanitarian causes.

NOK 30 million from the accounts for 2010 was allocated to grants for the public benefit in 2011. For 2011, the board proposes to allocate NOK 30 million for such grants in 2012. The bank’s gift fund stands at NOK 175 million.

EmployeesThe number of full-time equivalents employed by the group was 886 at 31 December 2011. This is an increase of 48 full-time equivalents compared with 2010.

Considerable effort has been put into developing employees into authorised financial advisers in recent years. We are proud that we have met the deadline for the national authorisation scheme in an expedient manner and have a thorough system in place for further authorisations and recertifications. The authorisation scheme has given us a competence boost from which we wish to reap further benefits in the form of a clear competence strategy. In 2011, we have made further efforts in this connection and continued development by rationalising training through the use of e-learning and webcast.

The Board of DirectorsØyvind A Langedal and Tone Mattsson (employee representative) were re-elected for two years at the election in 2011. Sivert Sørnes and Arild Bødal were elected as new board members for two years. Marit Solberg was elected Deputy Chair for one year at the supplementary election.

Working environmentIn Sparebanken Vest, we shall have a good working environment where each employee feels secure and has the opportunity to use his/her skills. We therefore make continuous efforts to ensure this is the case in all parts of the organisation.

Our annual organisational survey shows that our employees enjoy their work. The

PAGE 21 ANNUAL REPORT 2011

feedback on employee satisfaction has remained at a high and stable level for the past four years, which we are very happy about. In addition, the feedback shows that we make the most of each employee’s competence and that they have good opportunities to influence their work situation. The overall picture is one of a good and stable working environment.

The contribution that managers make to the growth and development of individual employees is beyond question. In Sparebanken Vest, we wish to have managers who are generous, have the ability to carry things through, recognise opportunities and see the big picture. In general, our managers also receive good feedback on management principles.

The bank wishes to develop managers at all levels of the organisation through continuous management development and practical training. Dedicated employees and a good working environment are crucial to reaching our goal of becoming the leading financial services group and most dedicated bank in Western Norway.

Sparebanken Vest spends a substantial amount on various joint activities that aim to encourage and promote team spirit in the bank. We want our employees to be active in their spare time to promote their own health. In 2010, we introduced Vestiaden – a sporting and social activity that aims to increase the level of employees’ physical activity. This was a success and was continued in 2011. The bank has an active company sports association and walking group. During 2011, a number of walks and activities were organised in Western Norway’s magnificent scenery.

EthicsSparebanken Vest facilitates and monitors that employees have good knowledge of and comply with the bank’s ethical

guidelines. This is followed up through the introduction programme for new employees and in annual performance appraisal and development interviews. The ethical guidelines are evaluated and renewed on a continuous basis. No breaches of the bank’s Code of Ethics were reported in 2011. In the Board of Directors’ view, the bank has high ethical standards both internally and in its dialogue with customers.

Sickness absence and inclusive workplaceIn 2011, overall sickness absence in Sparebanken Vest was 4.1%, which is a welcome fall of 4.4% compared with 2010. Of the total, 2.1% (2.2% in 2010) was long-term absence and 2.0% (2.2% in 2010) short-term absence.

The bank runs annual health campaigns for the bank’s employees in close collaboration with the corporate health service. The aim is to offer professional guidance in the areas of exercise and diet, and to give employees an opportunity to check their BMI, blood pressure and cholesterol level.

The bank works systematically to reduce sickness absence through its commitment to the IW (inclusive workplace) agreement. The bank’s managers have been trained to ensure that new guidelines and requirements for following up employees on sickness absence are complied with. The bank’s objective is to have a work attendance rate of at least 97%.

The bank adapts the work situation of employees who need it for various health-related reasons, and focuses on reducing the percentage of employees on long-term sickness absence. The average retirement age of the bank’s employees in 2011 was just over 62. Gender equalitySparebanken Vest works actively and purposefully to promote gender equality and prevent discrimination. The bank’s Board of Directors consists of nine


members. Four of the elected members are women. The corporate management team consists of a total of eight members; three women and five men.

The natural environment and climate changeSparebanken Vest does not use input factors or production methods that directly pollute the natural environment. The bank endeavours to be environmentally conscious in relation to its use of paper, waste management and recycling.

The bank has a broadly differentiated corporate portfolio. Several enterprises to which the bank has furnished loans are engaged in business activities that will have an impact on the natural environment.

Through its extending of credit, the bank has an indirect opportunity to influence the natural environment. This factor will therefore be considered in connection with the bank’s credit assessments.

The bank’s offices in Kaigaten, Straume and Korskirkeallmenningen are certified as Eco-lighthouses, and an action plan is in place to ensure that all offices will, over time, be certified.Being certified as an Eco-lighthouse means that Sparebanken Vest meets many requirements in relation to reducing energy, handling waste, sorting waste at source, HSE procedures, and focusing on the environment with respect to procurements, transport and travel.

It is also the bank’s explicit goal that the planned new building in Jonsvoll shall successfully integrate good architecture and environmentally friendly/energy-efficient solutions. The plan is that the building will be environmentally certified and that a separate plan for environmental goals, including main goals and sub-goals, will be implemented.

OutlookThe year 2011 was dominated by a marked reduction in growth in the global economy and great turbulence in the financial markets. The prospects for 2012 entail an expectation of further weakened growth and continued high macroeconomic uncertainty.

The decline is strongest in the industrialised parts of the world, and the downturn in the eurozone has become more pronounced. Reduced public demand as a result of the need for a reduction in debt growth and high unemployment negatively affect private consumption. A clear weakening of growth in the new emerging economies, of which China is the most important, also leads to a reduction in export growth. There is a high probability of a recession in Europe in 2012. The sovereign debt situation in Europe will result in continued unstable financial markets. The handling of the debt situation in Europe is a long-term project and it will contribute to prolonged uncertainty with respect to economic development and the potential for financial volatility.

Developments in the uSA are also weak, although we saw a certain increase in private consumption towards the end of 2011. The level is still low, however, and high unemployment and a weak property market make a robust recovery unlikely in the uSA, even if a recession is avoided.The slowdown in the new emerging economies will continue in 2012, and will therefore entail a reduced contribution to growth in the industrialised part of the world.

The activity in the Norwegian economy is still good, powered by the petroleum sector and a high level of construction activity. The recession in Europe will obviously have an impact on Norway’s economy and contribute to a reduction in growth as a result of weakened export from mainland


Norway. Sustained high oil prices will, however, ensure good activity levels in the Norwegian economy. The unemployment rate is low and is expected to increase somewhat as the growth in employment is expected to be slightly weaker than the growth in the workforce. The savings rate in Norway is high and therefore offers the potential for growth in private consumption if consumer confidence develops positively throughout the year. In addition to this, we have relatively high population growth in Norway, which also contributes to growth in private consumption.

Norway’s strong government finances mean that we have the option of introducing stimulus measures in the event of a European recession having a major negative impact on the Norwegian economy. We expect monetary policy to be kept loose.

We expect high oil prices to be sustained through 2012, with a certain risk of an increase if an embargo of Iran leads to an increase in the level of tension in the Middle East.

Western Norway will be dominated by a continuing high level of activity in the petroleum sector, so that, even in the event of a certain weakening in traditional export items, the region is nonetheless expected to see economic development that is stronger than the average for the country as a whole and a lower unemployment rate than the national average.

The development of property prices is expected to follow the national average, with the exception of Rogaland. Powered by developments in Stavanger and Sandnes, Rogaland is expected to see stronger development.

Thanks to customers, business associates, officers of the company, management and employeesThe year 2011 was a hectic and challenging year for Sparebanken Vest. A united organisation has demonstrated great work capacity, the ability to see things through and the ability to deliver.

The Board of Directors would like to thank customers, business associates, officers of the company, management and employees for constructive cooperation and the good results achieved.


Trygve Bruvik Richard RettedalChair of the Board

Yvonne Torgersen Øyvind A. Langedal

Sivert Sørnes Tone Mattsson

Bergen, December 31 2011/February 22 2012The Board of Directors of Sparebanken Vest

Marit SolbergDeputy Chair

Arild Bødal

Anne-Marit Hope

Stein KlakeggManaging Director


Trygve Bruvik - Chairman of the BoardChair and member of the board since 2008. Currently manages a family-owned property and investment company. Mr Bruvik was Managing Director/CEO of Vesta from 1994 to 2002. Holds directorships in G.C. Rieber AS (deputy chair) and several smaller companies. Among other offices, he was previously chair of the main board of the Norwegian Financial Services Association and chair of the main board of the Norwegian Insurance Association. He has a degree in business economics from BI Norwegian Business School and an engineering degree from Bergen Engineering College.

Marit Solberg - Deputy Chair of the BoardMember of the board since April 2008. Chief Operating Officer Farming of Marine Harvest ASA. Currently holds directorships in Eksportutvalget for fisk AS (the Norwegian Seafood Export Council AS). Graduate from the university of Bergen with a Master’s degree in microbiology.

Øyvind Atle LangedalMember of the board since May 2007. Deputy Managing Director of Coast Center Base AS, Ågotnes. Graduate of the Bank Academy and has studied economics and management at NHHK (NHH continuing and further education). Has been CFO/Deputy Managing Director of Coast Center Base AS since 1998. Has previous experience from Økonomipartner Bergen AS, Rieber Skinn AS and Jebsens Rederi AS. Currently chair of the board of Vardø Barents Base AS and Maritime Waste Management AS and member of the board of Sambygg AS, Kirkenesbase AS and Helgelandsbase Holding AS.

Richard RettedalMember of the board since April 2008. CFO of Skanem AS. Previously head of finance and administration at Roxar. Mr Rettedal also worked in Dubai for a prolonged period. Holds an MBA with specialisation in finance from the university of Wisconsin – Madison, Florida International university and the university of Stavanger.

Yvonne Torgersen HetlevikMember of the board since April 2010. Managing Director of Magnus M. Thunestvedt. Many years’ experience of finance/accounting from various enterprises. Degree in business economics from BI Norwegian Business School. Chair of the board of Strukturplast AS and Mikromekanikk AS.

Arild BødalMember of the board since May 2011. Founder and general manager of Septik24 AS since 2003. Qualified as an authorised accountant at BI Norwegian Business School, has a university college degree in business and administration, studied business economics at NKS and took part of a Master’s degree in business administration (MBA) at Heriot-Watt university. Has completed various management development courses at BI Norwegian Business School, the Norwegian School of Economics (NHH) and the Norwegian university of Science and Technology (NTNu). General manager/business developer in Isco AS from 1998 to 2003, general manager of Karstad Stryn from 1996 to 1998 and CFO of Karstad from 1989 to 1996. Chair of the board of Smartek AS, Miljøservice AS, Johny Birkeland Transport, HØST Valuable Waste AS, Fjord Invest Såkorn, Gode Busser Holding AS, Vidre AS and NSM Bygginvest AS.

Sivert SørnesMember of the board since May 2011. General manager of Sparebankstiftelsen Sauda. MSc in Business and Economics from BI Norwegian Business School. Managing Director of Sauda Sparebank from 1995 to 2009. Previous experience as chief accountant in Elkem Sauda and CFO of Hardanger Energi AS.

Anne-Marit HopeMember of the board since April 2010. Customer adviser in Sparebanken Vest, Ågotnes. Employee representative. Has worked for Sparebanken Vest since 1977. Qualified financial adviser from BI Norwegian Business School. Authorised financial advisor. Member of the board of the Hordaland branch of the Finance Sector union of Norway.

Tone MattssonMember of the board since 2003 as an employee representative. Chief employee representative for the Finance Sector union of Norway. Joined Sparebanken Vest in 1986. Holds a Bachelor of Management (Banking and Finance) from BI Norwegian Business School.

The Board of Directors of Sparebanken Vest

The board manages the bank’s activities and is responsible for ensuring that the funds at the bank’s disposal are managed securely and expediently.


INCOME STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29CASH FLOW STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31CHANGE IN EQuITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32General informationNote 1 Accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Note 2 Accounting estimates and discretionary

assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Note 3 Segment information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Note 4 Classification of financial instruments . . . . . . . . . . . . . 40Note 5 Fair value of financial instruments . . . . . . . . . . . . . . . . . . . 42Note 6 Valuation hierarchy, financial instruments at fair

value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Note 7 Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Credit riskNote 8 Risk classification of the credit portfolio . . . . . . . . . . . 48Note 9 Loans broken down by market, geographical area

and type of receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Note 10 Net loans and guarantees broken down by

industries and retail market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Note 11 Capitalised write-downs on commitments . . . . . . . 54Note 12 Losses, commitments in default and other

potential bad debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Note 13 Secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56Note 14 Loans to and receivables from

credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Note 15 Guarantees and secured debt . . . . . . . . . . . . . . . . . . . . . . . . . . 57Note 16 Certificates and bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Note 17 Shareholdings in group companies and associated

companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Market riskNote 18 Sensitivity analysis, market risk . . . . . . . . . . . . . . . . . . . . . . . . 61Note 19 Interest rate sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62Note 20 Currency positions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Note 21 Financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Note 22 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Liquidity riskNote 23 Liquidity risk / remaining time to maturity . . . . . . . 68The income statementNote 24 Net interest and credit commission income . . . . . 69Note 25 Interest on individual balance sheet items . . . . . . 69Note 26 Net other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70Note 27 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71Note 28 Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72Note 29 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76Other balance sheet itemsNote 30 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77Note 31 Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79Note 32 Debt to credit institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Note 33 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Note 34 Deposits broken down by customer groups . . . . . 82Note 35 Securitised debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83Note 36 Subordinated loan capital and subordinated

bond loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Note 37 Capital adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86Note 38 The equity certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88Other informationNote 39 Transactions with related parties . . . . . . . . . . . . . . . . . . . . . 91Note 40 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Note 41 Integration of Hardanger Sparebank . . . . . . . . . . . . . . 95

Accounts and notes

Income statement

PARENT BANK

1/1-31/12

GROUP

1/1-31/122010 2011 Notes 2011 20103 672 3 646 Interest income and similar income 4 390 3 9472 273 2 211 Interest expenses and similar expenses 2 800 2 4311 399 1 435 Net interest and credit commission income 24 1 590 1 516

382 417 Commission income and income from banking services 417 38285 82 Commission expenses and expenses relating to banking services 82 85

109 125 Income from shareholdings in group companies and associated companies (50) (42)177 74 Net gain/(loss), financial instruments 124 212

4 4 Other operating revenues 194 168587 538 Net other operating revenues 26 603 635

1 986 1 973 Net operating revenues 2 193 2 151

841 909 Payroll and general administration expenses 28 1 058 96284 93 Depreciation 30,31 107 98

144 132 Other operating expenses 170 1641 069 1 134 Total operating expenses 27 1 335 1 224

917 839 Profit before write-downs and tax 858 927

127 126 Write-downs of loans and losses on guarantees 12 126 127790 713 Pre-tax profit/loss 732 800

174 176 Tax expense 29 184 189616 537 Profit for the financial year 548 611

Majority share of the profit for the period 548 611Minority share of the profit for the period 0 0

Allocations(76) (52) Dividend on equity certificates50 42 Transferred to/from the reserve for unrealised gains

(531) (441) Transferred to primary capital(29) (56) Transferred to the equalisation reserve(30) (30) Transferred to gifts

(616) (537) Total allocations

5.91 4.46 Equity certificates' share of profits divided by the number of equity certificates 4.55 5.865.91 4.46 Diluted profit per equity certificate 4.55 5.86

Statement of comprehensive income1/1-31/12 1/1-31/12

2010 2011 2011 2010616 537 Profit for the period 548 611

(105) 0 Financial assets available for sale 22 0 (105)511 537 Total profit for the period 548 506

Majority share of the total profit for the period 548 506Minority share of the total profit for the period 0 0


Balance sheet

PARENT BANK GROUP

31/12-10 31/12-11 Notes 31/12-11 31/12-10Assets

361 668 Cash in and receivables from central banks 668 3615 034 2 968 Loans to and receivables from credit institutions 14 481 368

66 958 68 421 Net lending 9,10,11,12,13 99 304 88 465714 738 Shares at fair value through profit or loss 22 738 714

21 082 16 341 Certificates and bonds 16 11 537 13 406709 1 208 Financial derivatives 21 1 695 709

1 077 1 880 Shareholdings in group companies 17 0 0454 484 Shareholdings in associated companies 17 349 326

0 0 Deferred tax asset 29 0 2301 307 Other intangible assets 30 330 323

94 123 Tangible fixed assets 31 496 469141 162 Prepaid expenses 56 5039 280 Other assets 331 82

96 964 93 580 Total assets 115 985 105 275

Liabilities and equity12 956 8 882 Debt to credit institutions 32 7 971 10 52948 801 53 216 Deposits 33,34 53 142 48 71926 381 21 395 Securitised debt 35 44 606 37 064

644 920 Financial derivatives 21 1 089 795134 116 Accrued expenses and pre-paid income 116 134142 182 Pension commitments 28 187 147

1 108 Deferred tax 29 109 020 21 Other provision for commitments 28 24

120 109 Tax payable 29 113 1261 495 1 613 Subordinated loan capital 36 1 613 1 495

335 308 Other liabilities 320 31391 029 86 870 Total liabilities 109 294 99 346

539 765 Equity certificates 38 765 539(10) (12) Own equity certificates (12) (10)

465 562 Premium reserve 564 46768 123 Equalisation reserve 176 144

1 062 1 438 Total equity certificate capital 1 493 1 140

4 607 5 048 Primary capital 5 078 4 637175 175 Gift fund 175 175

14 14 Compensation fund 14 144 796 5 237 Total primary capital 5 267 4 826

77 35 Reserve for unrealised gains 0 00 0 Other equity (70) (38)

Minority interests 1 1

5 935 6 710 Total equity 6 691 5 929

96 964 93 580 Total liabilities and equity 115 985 105 275



Trygve Bruvik Richard RettedalChair of the Board

Yvonne Torgersen Øyvind A. Langedal

Sivert Sørnes Tone Mattsson

Bergen, December 31 2011/February 22 2012The Board of Directors of Sparebanken Vest

Marit SolbergDeputy Chair

Arild Bødal

Anne-Marit Hope

Stein KlakeggManaging Director

Cash flow statement

PARENT BANK

1/1-31/12

GROUP

1/1-31/122010 2011 2011 2010

Cash flows from operations3 436 3 021 Interest, commission and customer fees received 4 254 4 1591 292 1 268 Interest, commission and customer fees paid 1 261 1 257

27 26 Payments received for previously written-off receivables 26 273 599 2 008 Net payments made/received relating to customer loans (7 356) (6 314)3 808 2 082 Net payments made/received relating to customer deposits 2 090 3 814

427 555 Payments to other suppliers for goods and services 608 433575 533 Payments to employees, pension schemes, employer's Nat. Ins. contr., tax withholdings etc. 653 701407 92 Payments of direct and indirect taxes 97 414

64 544 Net payments made/received on purchases/sales of securities for short-term trading purposes 544 648 233 5 233 Net cash flow from operations (3 061) (1 055)

Cash flows from investment activities15 0 Payments received from sales of long-term shares and shareholdings in other companies 0 15

740 72 Payments made on purchases of long-term shares and shareholdings in other companies 52 1961 386 4 706 Net payments made/received on other short-term securities 2 231 (502)

(107) (196) Net payments made/received on short-term shareholdings (153) (107)10 2 Payments received from sales of operating assets etc. 2 374 111 Payments made on purchases of operating assets etc. 122 97

0 (66) Net cash effect of takeover of Sparebanken Hardanger (66) 0490 4 263 Net cash flow from investment activities 1 840 (884)

Cash flows from financing activities(3 517) 2 206 Net payments made/received on loans to/receivables from other financing institutions (545) (211)(2 188) (4 783) Net payments received/made on deposits from Norges Bank and other financing institutions (2 780) (4 166)

394 0 Payments received relating to subordinated loan capital 0 3941 064 43 Payments made relating to subordinated loan capital 43 1 0646 240 6 152 Payments received relating to bond debt 17 749 15 8379 067 12 591 Payments made relating to bond debt 12 746 9 330

588 0 Net new equity certificate capital 0 58847 130 Dividends paid / donations for the public benefit 107 47

(8 661) (9 189) Net cash flows from financing activities 1 528 2 001

62 307 Net cash flow for the period 307 62

62 307 Net change in cash and cash equivalents 307 62299 361 Cash and cash equivalents at beginning of period 361 299361 668 Cash and cash equivalents at end of period 668 361


Changes in equityGROUP

Equity certificates

Own equity

certificatesPremium

reserv

Equali-sation-reserve

Primary-capital

Gift fund

Compen-sation

fund

Reserve for

unrealised gains

Other equity

Minority interests Total

Equity 31 Dec. 2009 398 0 10 52 4 108 175 14 105 22 1 4 885Purchase of own equity certificates (10) (8) (18)Distributed dividend and donations (13) (25) (38)Split of equity certificates (199) 199 0Issue of equity certificates 1) 340 273 613Issue costs (15) (15)Owner transactions and donations 141 (10) 457 (13) (33) 0 0 0 0 0 542

Profit for the financial year 105 562 (56) 611Comprehensive income (105) (105)Acquisitions in subsidiaries (3) (3)Equity at 31 Dec. 2010 539 (10) 467 144 4 637 175 14 0 (38) 1 5 929

Purchase/sale of own equity certificates (2) (1) (3)Distributed dividend and donations (75) (30) (105)Issue of equity certificates 2) 226 97 323Owner transactions and donations 226 (2) 97 (75) (31) 0 0 0 0 0 215

Profit for the financial year 107 471 (31) 548Comprehensive income 0Equity at 31 Dec. 2011 765 (12) 564 176 5 078 175 14 0 (70) 1 6 691

PARENT BANK

Equity certificates

Own equity certificates

Premium reserv

Equali-sationre-

servePrimary-

capital Gift fund

Compen-sation

fund

Reserve for unrealised

gains TotalEquity 31 Dec. 2009 398 0 8 39 4 083 175 14 232 4 949Purchase of own equity certificates (10) (8) (18)Split of equity certificates (199) 199 0Issue of equity certificates 1) 340 273 613Issue costs (15) (15)Owner transactions and donations 141 (10) 457 0 (8) 0 0 0 580

Allocation of profit for the year to equity 29 532 (50) 511Comprehensive income (105) (105)Equity at 31 Dec. 2010 539 (10) 465 68 4 607 175 14 77 5 935

Purchase/sale of own equity certificates (2) (1) (3)Issue of equity certificates 2) 226 97 323Owner transactions and donations 226 (2) 97 0 (1) 0 0 0 320

Allocation of profit for the year to equity 56 441 (42) 454Comprehensive income 0Equity at 31 Dec. 2011 765 (12) 562 123 5 048 175 14 35 6 710

1) Sparebanken Vest has issued new equity certificate capital through three share issues in the second quarter 2010. The total issued amount is NOK 598 million after the deduction of issue costs. The premium is transferred in its entirety to the premium reserve as a consequence of the subscription price being lower than the book value per equity certificate.

2) Sparebanken Vest issued 9,022,310 new equity certificates as part of the consideration for the takeover of Hardanger Sparebank in the fourth quarter 2011. See Notes 38 and 41.


Changes in equityGROUP

Equity certificates

Own equity

certificatesPremium

reserv

Equali-sation-reserve

Primary-capital

Gift fund

Compen-sation

fund

Reserve for

unrealised gains

Other equity

Minority interests Total

Equity 31 Dec. 2009 398 0 10 52 4 108 175 14 105 22 1 4 885Purchase of own equity certificates (10) (8) (18)Distributed dividend and donations (13) (25) (38)Split of equity certificates (199) 199 0Issue of equity certificates 1) 340 273 613Issue costs (15) (15)Owner transactions and donations 141 (10) 457 (13) (33) 0 0 0 0 0 542

Profit for the financial year 105 562 (56) 611Comprehensive income (105) (105)Acquisitions in subsidiaries (3) (3)Equity at 31 Dec. 2010 539 (10) 467 144 4 637 175 14 0 (38) 1 5 929

Purchase/sale of own equity certificates (2) (1) (3)Distributed dividend and donations (75) (30) (105)Issue of equity certificates 2) 226 97 323Owner transactions and donations 226 (2) 97 (75) (31) 0 0 0 0 0 215

Profit for the financial year 107 471 (31) 548Comprehensive income 0Equity at 31 Dec. 2011 765 (12) 564 176 5 078 175 14 0 (70) 1 6 691

Note 1 accounting principles

GENERAL INFORMATIONThe consolidated accounts for Sparebanken Vest comprise Sparebanken Vest, Sparebanken Vest Boligkreditt AS, Eiendomsmegler Vest AS and Sparebanken Vest Eiendomsforvaltning AS as wholly owned subsidiaries. Sparebanken Vest Eiendom AS and Eiendomsmegler Vest AS also have a number of subsidiaries. Frende Holding AS, Norne Eierselskap AS, Verd Boligkreditt AS and Brage Finans AS are also included as associated companies. Reference is made to Note 17 for more details. Sparebanken Vest was founded in 1823 as Bergens Sparebank. The bank’s equity certificates are listed on Oslo Børs. The bank is located in the counties of Hordaland, Sogn og Fjordane and Rogaland, and its head office is in Bergen. Its registered address is Kaigaten 4, 5016 Bergen.

The 2011 annual accounts for the Sparebanken Vest Group were considered and adopted at a board meeting on 22 February 2012.

unless otherwise specified, all amounts in the accounts and notes to the accounts are stated in NOK million. The individual notes also refer to both the parent bank and the group unless otherwise specified. The consolidated accounts have been prepared on the basis of the going concern assumption.

BASIS FOR THE PREPARATION OF THE ANNUAL ACCOUNTSThe consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the Eu and published by the International Accounting Standards Board (IASB), which is mandatory from 31 December 2011.

The consolidated accounts are based on the principles of historical cost accounting, with the exception of the following accounting items: financial instruments at fair value through profit or loss (including financial derivatives), loans and receivables and other financial commitments measured at amortised cost and, if applicable, financial instruments available for sale recognised at fair value. The consolidated accounts have been prepared on the basis of uniform accounting principles for similar transactions and events under otherwise identical circumstances.

Sparebanken Vest’s company accounts have been prepared in accordance with a simplified form of IFRS. The same principles apply when using simplified IFRS as under IFRS for the company accounts, with the exception of the recognition of dividends, group contributions and other distributions relating to the result for the financial year. In the company accounts, the proposed dividend and donations for distribution are recognised in the year that forms the basis for the distribution.

Preparing annual accounts and using IFRS means that the management has used estimates and made assumptions that have affected assets, liabilities, income, expenses and information relating to contingent liabilities. Future events may result in changes to these assumptions. Estimates and the underlying assumptions are continuously assessed. The effect of these changes will be recognised in the accounts when new estimates can be determined with sufficient certainty.

The group applied the following new standards and amendments in 2011• IAS 24 (revised) Related Party Disclosures. Compared with the current

IAS 24, the revised standard contains a clearer and simpler definition of related parties. The group has applied the revised IAS 24 since 1 January 2011. Reference is made to the note concerning transactions with related parties for details about the assessments made and the group’s definition of related parties.

• IFRS 7 Financial Instruments: Disclosure (improvement project 2010). Amendments have been made to the standard that emphasise the

interaction between quantitative and qualitative information and the nature and extent of risk arising from financial instruments. Among other things, disclosure of the maximum credit exposure is no longer required in the notes for instruments where the balance sheet amount represents the maximum credit exposure. The maximum credit exposure for the company’s lending portfolio is specified in Note 10.

• IAS 1 Presentation of Financial Statements (improvement project 2010). A specification has been included requiring the presentation of an analysis of other comprehensive income (OCI) for every equity component, either in the statement of comprehensive income or in the notes to the financial accounts.

New and amended standards/interpretations without relevance to the 2011 annual accounts• Amendments to IAS 32 Financial Instruments: Presentation. The

amendments to IAS 32 entail that subscription rights denominated in other currencies than the enterprise’s functional currency can be classified as equity instruments.

• Amendments to IFRIC 14 (to IAS 19) The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.

• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. The interpretation provides guidance on how to recognise transactions in the accounts when a company settles its financial liabilities in full or in part by issuing equity instruments, and applies when the debt restructuring takes place as a result of a renegotiation of the loan agreement.

• IFRS 3 Business Combinations (improvement project 2010). The amendments include a clarification of the relationship between IFRS 7, IAS 32 and IAS 39, in addition to limiting the scope of measurement alternatives for components of non-controlling shareholdings.

Standards, amendments and interpretations of existing standards that have not entered into force and where the group has not chosen early application• Amendments to IAS 19 Employee Benefits. Pursuant to the

amendments of 2011, IAS 19 does not allow the ‘corridor method’ to be used for recognising estimate variances. The amendment involves a new classification of pension expenses in the income statement in that the expenses are divided into three components (pension earnings, net interest expenses and change in value). The earned pension rights for the period and net interest expenses are presented under ordinary profit/loss, while estimate variances shall be recognised in their entirety in the statement of comprehensive income in the period in which they arise. Moreover, the disclosure requirements relating to defined-benefit pension schemes have changed. The amendments apply with effect from accounting years that start on or after 1 January 2013. The Eu has not approved the amendments. If the amendments had been implemented in the accounts, the pension expense for the year would have been reduced from NOK 105 million to NOK 93 million, while equity would have been reduced by NOK 607 million corrected for tax for the group. The year’s change in estimate variances would have been presented in the statement of comprehensive income in the amount of NOK 245 million.

• Amendments to IFRS 7 Financial Instruments: Disclosure. The amendments concern requirements for disclosures about transfers of financial assets in which the company is still involved, and they aim to give the users a better understanding of the exposure of the enterprise that transfers the financial assets. The amendments apply with effect from accounting years that start on or after 1 July 2011.

• IFRS 9 Financial Instruments. IFRS 9 will replace the present IAS 39. In IFRS 9, measurement is determined by the company’s business model and the characteristics of the individual financial asset. A financial asset is measured at amortised cost if the objective of the company’s business model is to hold the asset in order to receive the contractual cash flows, and the cash flows from the asset are solely payments of principal and interest on the principal outstanding. IFRS 9 applies with effect from accounting years that start on or after 1


January 2013. The Eu has not approved the standard. The group has not completed its evaluation of the effects of IFRS 9.• IFRS 10 Consolidated Financial Statements. IFRS 10 replaces the

parts of IAS 27 Consolidated and Separate Financial Statements that concern consolidated accounts, and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 is based on a single control model that is to be used for all entities. The content of the term ‘control’ has been changed somewhat in relation to IAS 27. Whether a company is to be included in the consolidated accounts in accordance with IFRS 10 depends on whether it is a controlled company. A controlled company is one in which the investor has power over the investee, is exposed or has rights to variable returns from the investee, and has the power to control the activities in the investee that materially affect the return. IFRS 10 applies with effect from accounting years that start on or after 1 January 2013. The Eu has not approved the standard.

• IFRS 12 Disclosure of Interests in Other Entities. IFRS 12 replaces the disclosure requirements that previously followed from IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associated Companies and IAS 31 Interests in Joint Ventures. In addition, a number of new disclosure requirements are introduced. IFRS 12 applies with effect from accounting years that start on or after 1 January 2013. The Eu has not approved the standard.

• IFRS 13 Fair Value Measurement. The standard stipulates principles and guidance for measuring the fair value of assets and liabilities for which other standards require or allow fair value measurement. IFRS 13 applies with effect from accounting years that start on or after 1 January 2013. The Eu has not approved the standard.

• Amendments to IAS 1 Presentation of Financial Statements. The amendments to IAS 1 concern the grouping of income and expenses presented in the statement of comprehensive income based on whether or not they may be reclassified to profit or loss. The amendments apply with effect from accounting years that start on or after 1 July 2012. The Eu has not approved the amendments.

• Amendments to IAS 27 (Revised) Separate Financial Statements. As a result of the introduction of IFRS 10, IFRS 11 and IFRS 12, amendments were made to IAS 27 that coordinate the standard with the new accounting standards. IFRS 10 Consolidated Financial Statements replaced the parts of IAS 27 that concern consolidated accounts. IAS 27 now only concerns company accounts. The amendments apply with effect from accounting years that start on or after 1 January 2013. The Eu has not approved the amendments.

• Amendments to IAS 28 (revised) Investment in Associates and Joint Ventures. IAS 28 has been extended to also apply to investments in joint ventures. The standard also describes principles for the recognition of investments in associated companies and joint ventures, and stipulates how the equity method is to be applied. The amendments apply with effect from accounting years that start on or after 1 January 2013. The Eu has not approved the amendments.

CONSOLIDATION PRINCIPLESThe consolidated accounts include the parent bank, subsidiaries and associated companies, including underlying subsidiaries and associated companies. The consolidated accounts are prepared on the basis of uniform principles, and the recognition of shareholdings in subsidiaries and associated companies is based on the same reporting periods as for the parent company. Intercompany transactions and accounts, including internal profit and unrealised gains and losses, are eliminated when the consolidated accounts are prepared.

SubsidiariesSubsidiaries are defined as companies in which the parent bank has a controlling influence over operations. This is normally the case where the parent bank directly or indirectly owns more than 50% of the shares. For companies in which the shareholding is 50% or lower, Sparebanken Vest makes an assessment of whether other circumstances indicate actual control. Subsidiaries are included in the consolidated accounts from the date on which the group takes over control. Investments in subsidiaries are recognised in the company accounts in accordance with the cost method.

Associated companiesAn associated company is a unit in which the group has considerable influence but not a controlling interest. Considerable influence is deemed to exist when the group owns between 20% and 50% of the voting capital. Investments in associated companies are recognised in the consolidated accounts in accordance with the equity method, and in the company accounts in accordance with the cost method. On the acquisition date, the investment is recognised at acquisition cost.

Business combinationsBusiness combinations are recognised in accordance with the acquisition method. Transaction costs are recognised as they accrue, with the exception of issue costs and expenses relating to the raising of loans.

The consideration is measured at fair value on the acquisition date. In connection with the acquisition of an enterprise, all assumed assets and liabilities are assessed for classification and allocation in accordance with terms and conditions of contract, financial circumstances and relevant matters on the date of acquisition. Acquired assets and liabilities are recognised in the balance sheet at fair value in the group’s opening balance. If the consideration exceeds the value of identifiable assets and liabilities, the difference is recognised as goodwill. For more details relating to the accounting treatment of goodwill, see a separate section under intangible assets. If the acquisition cost is lower than identifiable assets and liabilities (badwill), the difference is recognised on the date of the transaction. Badwill is entered under the accounting line ‘Net gain/(loss), financial instruments’.

Contingent considerations are classified as a commitment pursuant to IAS 39 and recognised at fair value in subsequent periods. The adjustment of contingent considerations in subsequent periods is recognised in accordance with relevant standards.

SEGMENT INFORMATIONThe group’s activities are divided into the following segments: the Retail Market (RM), the Corporate Market (BM) and capital market activities in the banking business (Markets), as well as estate agency activities in the group. The bank’s investments and related depreciation are not assigned to the segments but are included under ‘unallocated by segment’. The classification is based on internal management reporting and resource allocation.

RECOGNITION OF INTEREST AND FEESInterest income is taken to income using the effective interest rate method. This entails recognition of nominal interest income and amortisation of establishment fees after the deduction of direct establishment costs, as they arise. The effective interest rate method is used for balance sheet items valued at amortised cost and balance sheet items valued at fair value through profit or loss.

Fees that are direct payment for services rendered are taken to income as the services are delivered. Loan establishment fees that exceed the direct external cost of establishing the loan are amortised over the expected life of the loan.

FINANCIAL ASSETS AND LIABILITIESFinancial assets and liabilities are valued and classified in accordance with IAS 39, and the presentation is in accordance with IFRS 7. Value changes during the period are recognised in the income statement, except where they relate to financial assets available for sale, in which case they are included in the statement of comprehensive income. Note 4 specifies the volume for each main group of financial instruments classified in the different measurement categories.

Recognition and derecognitionThe contract date has been chosen as the accounting date. Financial assets are removed from the balance sheet when the right to receive cash flows from the investment terminates or is transferred on realisation.


Financial instruments at fair value through profit or lossThis category has two sub-categories: financial instruments held for trading purposes, and financial instruments initially recognised at fair value through profit or loss.

Financial instruments held for trading purposesIn the financial instruments held for trading purposes category, the bank has classified shares acquired for short-term gain, or shares that are of such a nature that a sale would be considered in the event of an attractive offer. Derivatives are also classified in this category insofar as they are not an earmarked and effective hedging instrument.A derivative is a financial instrument with the following characteristics:

• The value of the instrument changes as a result of changes in the interest rate, the exchange rate or the price of an underlying object.

• The instrument requires no or little initial investment.• The profit or loss on the instrument is determined at a future date.

Derivatives are recognised in the balance sheet at fair value when the derivative contract is entered into, and thereafter at the current fair value. Derivatives in the balance sheet include forward foreign exchange transactions, forward rate agreements, interest rate swaps, foreign currency interest rate swaps, interest rate options and share options. Financial instruments recognised at fair valueFinancial instruments initially recognised at fair value through profit or loss are recognised in the balance sheet at fair value because this method of valuation eliminates or greatly reduces any inconsistent measurement and recognition that would otherwise have arisen had the asset been measured or gains/losses been calculated on the basis of different assumptions. This means that the effect of changes in value on financial instruments that are managed together is reflected at the same time in the accounts. Financial assets initially recognised at fair value through profit or loss include lendings at fixed rates, certificates and bonds and shares. Financial liabilities at fixed interest rates are also assigned to this category. This applies to debt to credit institutions, deposits, securitised debt and perpetual subordinated loans.

Financial assets recognised at fair value through profit or loss are recognised at fair value on acquisition, and transaction costs are charged to income. Subsequent measurement is at fair value. The fair value of listed investments is based on the year-end market price. In the case of unlisted securities where there is no active market, the group applies valuation techniques to determine fair value. The valuations are based on the last issue price, traded prices known to us and discounted cash flows. In the case of securities in which there is no trading, the value is based on available accounting information, mainly in order to assess the need for write-downs and any obvious excess values.The fair value of fixed-rate lendings is calculated by discounting the cash flow in the lendings using the required rate of return derived from the zero coupon curve, including the effect of the credit spread.

The fair value of financial instrument liabilities is calculated by discounting the cash flow from the loans using the required rate of return derived from the zero coupon curve. The credit spread on interest-bearing securities is changed on the basis of an overall assessment that takes account of observed trading in the market, credit margin reports from various brokers, and internal evaluations. A change in the credit spread will affect the required rate of return as the supplement added to the zero coupon curve will be changed. The buy-back of securities issued by the bank is netted against securities debt in the balance sheet.

Realised gains/losses and changes in the value of financial instruments at fair value through profit or loss, including dividends, are presented in the accounts under ‘Net gain/(loss), financial instruments’ in the period in which they arise.

Financial instruments valued at amortised costLendings and receivables at floating interest rates are valued at amortised cost. Lendings and receivables are defined as non-derivative financial assets with fixed or determinable payments that are not traded in an active market. Lendings are initially valued at fair value with the addition of direct transaction costs. In periods after the initial measurement, lendings are valued at amortised cost based on the effective interest rate method, as an expression of the fair value of the loan. If there is objective evidence of a decline in the value of an individual loan or groups of loans, the loans are written down. The amount of the write-down is calculated as the difference between the balance sheet value and the present value of future cash flows, based on the expected life of the loan. Write-downs are classified as a loss expense.

Interest income is recognised on the basis of the effective interest rate method. For commitments with individually determined write-downs, the effective interest rate is locked in cases where a) the loan is not in default, or b) the interest rate change is independent of the fact that the loan is in default and the interest rate change affects the expected cash flow.

Financial liabilities at floating interest rates are recognised in the balance sheet at amortised cost. Amortised cost is defined as the amount the instrument is initially measured at in the accounts (cost price) minus repayments of principal, with an addition or deduction for accumulated amortisation of all differences between cost price and the nominal amount, minus all write-downs. Amortisation is based on the effective interest rate method.

Financial instruments available for saleFinancial instruments available for sale are non-derivative financial assets that are assigned to this category or not classified in any other category. Financial assets available for sale are initially recognised in the balance sheet at fair value plus transaction costs. Subsequent measurements are made at fair value.

Changes in the value of equity instruments classified as available for sale are entered directly against equity. When securities classified as available for sale are derecognised, the aggregate value adjustment that has been entered against equity is recognised through profit or loss as a gain/loss on investments in securities. Dividends from shares classified as available for sale are recognised through profit or loss when the group’s right to the dividend is established.

At 31 December, the group had no shares classified in this category.

Financial instruments subject to hedge accountingThe group has established hedge accounting to manage interest rate risk and currency risk for long-term borrowings relating to the housing credit company. This is recognised as fair value hedging. A formal earmarking and documentation of the hedging relationship takes place when the hedging is established. There is a clear, direct and documented connection between fluctuations in the value of the hedged items that are due to the hedged risk and fluctuations in the value of the financial derivatives (hedging instruments). The hedging instruments comprise interest rate and currency swaps. The hedging is documented with reference to the group’s risk management strategy, clear identification of the hedged item and the hedging instrument, a clear description of the hedged risk and a description of why the hedging is expected to be effective. The hedging instruments are valued at fair value and entered under ‘Net gain/(loss), financial instruments’ in the income statement.

CURRENCYThe group’s presentation currency is Norwegian kroner. It is also the functional currency of the parent company, subsidiaries and associated companies.

The bank’s receivables and liabilities in foreign currency are translated at the exchange rate on the balance sheet date. Income and expenses in


foreign currency are translated into NOK at the rates on the transaction date. Currency items are largely hedged by matching them with corresponding items on the other side of the balance sheet, or through off-balance sheet hedging items.

TANGIBLE FIXED ASSETSAll of the group’s properties are considered to be operating assets for own use and the accounting treatment is in accordance with IAS 16. The properties are initially valued at historical cost and depreciated over their expected useful life. Different elements with different useful lives must be differentiated and depreciated separately. Other tangible fixed assets are recognised at acquisition cost minus accumulated ordinary depreciation.

Ordinary depreciation is based on the cost price, which is depreciated on a straight-line basis over the useful life of the asset. The depreciation period and method are assessed every year to ensure that they are in accordance with the economic realities of the fixed assets in question.

The ordinary depreciation for the year is included in operating expenses for the year.

On derecognition, any gains or losses are recognised under the accounting line for other operating income or other operating expenses.

INTANGIBLE ASSETSDeveloped softwareThe development of software is recognised in the balance sheet and classified as intangible assets when the amounts involved are deemed to be material and the items are expected to have lasting value. In connection with the development of software, the use of own resources is capitalised insofar as expenses incurred can be measured in a reliable manner. Costs relating to, among other things, pre-planning, implementation and training are expensed as they arise. Capitalised software that has been developed by the bank is depreciated using the straight-line method over its expected useful life. Depreciation commences on the date the software is available for use in the company, so that software under development is recognised at cost price until the production or development is completed.

Whether a write-down is necessary as a result of the expected economic benefits being less than the balance sheet value is continuously assessed.

GoodwillGoodwill is the difference between the acquisition cost of a business and the fair value of the group’s share of the net identifiable assets of the business on the acquisition date. Each goodwill item in the balance sheet is allocated to cash flow-generating units that benefit from the purchased asset. The choice of assessment unit is made on the basis of whether it is possible to identify and separate cash flows relating to the activity in question. Goodwill is tested annually for possible value depreciation and is recognised in the balance sheet at acquisition cost minus write-downs. The write-down test of capitalised goodwill is carried out by discounting expected future cash flows from the assessment units.

Customer portfolioThe value of the customer portfolio is part of the cost price of acquisitions. The value is set as the future cash flow, disregarding the customer’s right to renewal. The customer portfolio is depreciated using the straight-line method over the expected remaining contract period.

TAXATIONDeferred tax and deferred tax assets are recognised in the balance sheet in accordance with IAS 12 Deferred Tax. The tax expense in the income statement includes both the tax payable for the period and the change in deferred tax. The deferred tax/deferred tax asset is calculated at a rate of 28% of net temporary differences between accounting and tax values at year end. Tax-increasing and tax-reducing temporary differences that are reversed or can be reversed in the same period are offset and entered net.

The deferred tax asset is capitalised on the basis of expectations of taxable income through earnings in future years.

Tax payable in the balance sheet is the tax relating to the profit for the year, tax payable on capital assets, and tax payable on group contributions received.

PENSION COMMITMENTSPension commitments are calculated in accordance with IAS 19. Economic parameters used to calculate the pension commitments are updated on the balance sheet date, including the discount rate, which is based on market interest rates on the balance sheet date. IAS 19 permits the effect of differences between estimated and actual parameters to be entered in a ‘corridor’. Such deviations from estimates and assumptions are measured against the greater of gross pension commitments and total pension assets. If the deviations exceed 10% of the basis for the measurement, the difference is amortised over the average remaining period of service.

The net pension commitment is calculated and entered as a long-term liability in the accounts. The net pension commitment is the difference between the gross pension commitment, which is the present value of expected future pension benefits, and pension assets in the insurance fund and the pension premium fund. Furthermore, the net pension commitment entered in the balance sheet has been adjusted for accumulated deviations from estimates and the effect of changed assumptions, including employer’s National Insurance contributions. The pension expense for the year is stated net in the income statement under ‘Payroll and general administration expenses’.

The defined-benefit scheme was closed to new members in 2007 and a voluntary transition to a defined-contribution scheme was offered. The contributions are recognised in the accounts and accrued as payroll expenses. See the note on the breakdown between the two schemes.

COMMITMENTS / PROVISIONSA provision has been made for commitments in accordance with IAS 37. For a provision to be made, a commitment must exist as a result of a previous event, and there must be a high probability that the commitment will have to be met. The provision has been calculated as the present value of future payments required to meet the commitment.The proposed dividend and donations for distribution were not formally decided at year end and thus do not meet the criteria for a commitment under IAS 37.In the company accounts, dividends and donations are recognised in the financial year that forms the basis for the allocation.

POST BALANCE SHEET EVENTSEvents that occur after the balance sheet date are disclosed in accordance with IAS 10. The information concerns events that are not recognised in the consolidated financial accounts, but whose nature makes them material to assessing the business.

CASH FLOW STATEMENTThe cash flow statement has been prepared on the basis of gross cash flows from operations, and from investment and financing activities.Cash flows from operations are defined as ongoing interest relating to customer borrowings and deposits, net receipts/payments relating to lending and deposit activities, and payments relating to the cost of ordinary operations.Investment activities are defined as cash flows from securities transactions apart from the trading portfolio, as well as investments in operating assets and real property.Cash flows from other securities transactions, the raising and repayment of subordinated loans, bond debt and equity are defined as financing activities.

EQUITYEquity consists of equity certificate capital, primary capital, the reserve


for unrealised gains, other group equity and minority interests.

The equity certificate capital includes paid-up capital linked to equity certificates, own holdings of equity certificates, the premium reserve and the equalisation reserve. The primary capital includes paid-up and retained primary capital, the gift fund and compensation fund.

The reserve for unrealised gains relates to changes in the value of financial assets classified as available for sale. In the parent bank, the reserve for unrealised gains also includes changes in the value of financial instruments where the principles used for valuation in IFRS deviate from Norwegian GAAP.

Other group equity consists of retained equity in subsidiaries and associated companies after the establishment of the group, and the effect of equity eliminations in the consolidated accounts.

When buying own equity certificates, the purchase price including direct costs will be recognised as a reduction in equity. The nominal value of own equity certificates is entered as a negative amount on a separate line under equity certificate capital. Any purchase price in excess of nominal value is deducted from the bank’s primary capital.

The profit for the year is allocated to the owners of equity certificates and primary capital in proportion to the ratio between the equity certificate capital plus the premium reserve, and primary capital plus the compensation fund. The part of the year’s profit that is allocated to equity certificate capital and not distributed as dividend is allocated to the equalisation reserve.In the consolidated balance sheet, the proposed dividend and donations for distribution are classified as part of equity until the final resolutions have been adopted by the Supervisory Board.egenkapitalbevis føres opp som negativt beløp på egen linje under eierandelskapitalen. Kjøpesum ut over pålydende føres til fradrag i bankens grunnfondskapital.

Årets overskudd tilordnes eierne av egenkapitalbevis og grunnfondskapitalen etter forholdet mellom eierandelskapitalen med tillegg av overkursfondet og grunnfondskapitalen med tillegg av kompensasjonsfondet. Den del av årets overskudd som er tilordnet eierandelskapitalen og som ikke utbetales som utbytte tilføres utjevningsfondet.

Foreslått utbytte og gaver til utdeling klassifiseres i konsernbalansen som en del av egenkapitalen til endelig vedtak på representantskapsmøte.

When preparing the annual accounts in accordance with IFRS, the group management has used estimates and assumptions that affect the amounts recognised for assets, liabilities, equity and profit/loss. The estimates used are based on discretionary assessments and assumptions that were deemed to be realistic on the balance sheet date. New information and future events may lead to significant changes to estimates with pertaining changes to recognised amounts. The group’s most important estimates and assumptions are discussed below.

Losses on loans and guaranteesIf there is objective evidence of one or more events having occurred since the initial recognition of the asset that affect future cash flows, the commitment is written down. Objective events could be default of payment, illiquidity or other material financial problems on the part of the debtor.

Individual write-downs are carried out if there is objective evidence of a loss event relating to an individual commitment having occurred and that the loss event has reduced the estimated future cash flows from the loan. If there is objective evidence of loan impairment, the loss on the loan is calculated as the difference between the balance sheet value (loan principal + accrued interest on the valuation date) and the present value of future cash flows discounted on the basis of the effective rate of interest and the expected useful life of the loan. When estimating future cash flows, the credit loss caused by loss events that have occurred is taken into account. The estimation of future cash flows from a loan also takes into account security taken over and sold, including costs in this connection. When assessing security coverage, a model and regulations are used to calculate the expected value of various assets pledged as security in a realisation situation.

The need to write down the loan (the loss being booked against the customer’s loan) is confirmed once all security has been realised and it is certain that no further payments will be received on the loan. The claim on the customer remains and will be followed up, unless it has been agreed with the customer that the loan is to be written off.

Commitments that are not identified by individual valuations or commitments that have been subject to an individual assessment, where no individual write-down has been carried out, will be included in the assessment unit for group write-downs. When assessing the need for write-downs, the lendings are divided into groups with almost identical risk properties. The assessment is based on objective indications of a fall in value having occurred on the balance sheet date that can be linked to the group. Calculations of the need for write-downs are made per customer group based on estimates of the economic situation and the loss history of the respective customer groups.

Estimated losses on loans and guarantees will be a result of a process that involves the business areas and important credit environments, and represents a discretionary assessment. The assessments made will be based on a considerable degree of discretion, and uncertainty will therefore be attached to both the identification of loans in which value impairment has taken place and to estimating the amounts and dates of future cash flows, including the valuation of security.

Fair value of financial instruments, including derivativesThe fair value of financial instruments that are not traded in an active market is determined by using various valuation techniques. This is based on assumptions of what the market will use as a basis for the valuation of corresponding financial instruments and the information available on the balance sheet date. See the notes on financial instruments and the statement of accounting principles for a description of the techniques used. Considerable discretion must be exercised in the valuation of financial instruments that are not traded in an active market.

Impairment of goodwillGoodwill in the balance sheet is not depreciated. All assessment units are tested annually to verify that values are still intact. The choice of assessment unit is made on the basis of whether it is possible to identify and separate cash flows relating to the business in question. Future cash flows are based on historical results. The

Note 2 accounting estimates and discretionary assessments


Note 3 Segment informationThe management has considered which segments it is expedient to report for in relation to management and control. The segments are divided into the Corporate Market, the Retail Market, Markets and //estate agency activities//Real Estate Market . Operating revenues are allocated directly, with the exception of NOK 60 million, NOK 57 million of which is related to badwill in connection with the inte-gration of Sparebanken Hardanger. Operating expenses are allocated directly, with the exception of IT expenses, staff-related costs and depreciation. Net interest is allocated on the basis of internally calculated intragroup interest based on 3-month NIBOR.

Banking operations

Corporate market Retail market Markets

Real estate agency

Not allocated by segment Total

GROUP

2011Profit/lossNet interest income 569 799 9 3 209 1 590Operating revenues 120 230 4 190 60 603Operating expenses (143) (381) (41) (167) (602) (1 335)Losses (111) (15) 0 0 (126)Pre-tax profit 435 633 (28) 25 (333) 732Tax expense (184)Profit/loss for the year 435 633 (28) 25 (333) 548

Balance sheetNet lending 25 246 73 745 314 0 0 99 304Deposits 16 568 33 122 3 452 0 0 53 142

2010Profit/lossNet interest income 574 872 (16) 0 86 1 516Operating revenues 106 212 159 164 (6) 635Operating expenses (138) (384) (40) (133) (529) (1 224)Losses (102) (25) 0 0 0 (127)Pre-tax profit 440 675 103 30 (448) 800Tax expense (189)Profit/loss for the year 440 675 103 30 (448) 611

Balance sheetNet lending 23 165 64 966 334 0 0 88 465Deposits 15 936 28 898 3 885 0 0 48 719

Required rate of return/discount rate is based on an assessment of the required rate of return in the market for the type of business the assessment unit involves. The required rate of return reflects the risk attached to the activity. The estimation of future cash flows includes assumptions and estimates relating to highly uncertain factors. The required rate of return is also based on discretionary assessment based on the information available on the balance sheet date.

Pension commitmentsThe present value of pension commitments depends on economic and actuarial assumptions. Key assumptions include the discount rate, future wage growth, pension adjustments, expected return on pension assets, plus demographic factors relating to disability and mortality. Any changes in these assumptions affect the pension commitment and pension expense amounts recognised in the balance sheet. The calculation is based on guidelines for assumptions issued by the Norwegian Accounting Foundation.

Material acquisitionsSparebanken Hardanger was taken over with accounting effect from 1 November 2011 by Sparebanken Vest taking over all the bank’s assets and liabilities.

In connection with the acquisition of Sparebanken Hardanger, a complete acquisition analysis was carried out in accordance with IFRS 3, with pertaining allocation of identified excess and negative values. The acquisition analysis was carried out with assistance from external experts. The completed analysis is based on the best possible mapping of complete information about existing assets and liabilities at the time of acquisition, and the application of discretionary assessment by Sparebanken Hardanger relating to discretionary items and estimates.

For more details concerning the fair value of the consideration for Sparebanken Hardanger, and the distribution of tangible and intangible assets in connection with the acquisition, reference is made to a separate note.

Note 2 accounting estimates and discretionary assessments (contd.)


Note 3 Segment information (contd.)

Banking operations

Corporate market Retail market Markets

Real estate agency

Not allocated by segment Total

PARENT BANK

2011Profit/lossNet interest income 568 709 9 148 1 435Operating revenues 120 230 129 59 538Operating expenses (143) (381) (41) (568) (1 134)Losses (111) (15) 0 0 (126)Pre-tax profit 434 543 97 (360) 713Tax expense (176)Profit/loss for the year 434 543 97 (360) 537

Balance sheetNet lending 25 463 42 645 314 0 68 421Deposits 16 642 33 122 3 452 0 53 216

2010Profit/lossNet interest income 573 793 (16) 49 1 399Operating revenues 106 212 269 0 587Operating expenses (138) (384) (40) (507) (1 069)Losses (102) (25) 0 0 (127)Pre-tax profit 439 596 213 (458) 790Tax expense (174)Profit/loss for the year 439 596 213 (458) 616

Balance sheetNet lending 23 050 43 574 334 0 66 958Deposits 16 018 28 898 3 885 0 48 801

Note 2 accounting estimates and discretionary assessments (contd.)


Note 4 Classification of financial instruments

GROUP

31/12-2011Financial instruments at fair

value through profit or loss

Held for trading purposes

Recognised at fair value

Financial instr. subject to hedge

accounting 1)Valued at

amortised cost TotalAssetsCash in and receivables from central banks 668 668Loans to and receivables from credit institutions 481 481Lending 11 705 87 599 99 304Shares 163 575 738Certificates and bonds 78 11 459 11 537Financial derivatives 1 208 487 1 695Total 1 449 23 739 487 88 748 114 423

LiabilitiesDebt to credit institutions 169 7 802 7 971Deposits 1 005 52 137 53 142Securitised debt 7 809 10 707 26 090 44 606Financial derivatives 920 169 1 089Subordinated loan capital 951 662 1 613Total 920 9 934 10 876 86 691 108 421

31/12-2010

AssetsCash in and receivables from central banks 361 361Loans to and receivables from credit institutions 368 368Lending 14 126 74 339 88 465Shares 241 473 714Certificates and bonds 13 406 13 406Financial derivatives 709 709Total 950 28 005 0 75 068 104 023

LiabilitiesDebt to credit institutions 152 10 377 10 529Deposits 1 054 47 665 48 719Securitised debt 9 514 4 450 23 100 37 064Financial derivatives 644 151 795Subordinated loan capital 831 664 1 495Total 644 11 551 4 601 81 806 98 602

The group has no financial instruments classified as held to maturity or available for sale. 1) The group has established hedge accounting to manage interest rate risk and currency risk for long-term borrowings relating to the housing credit company. The hedging instruments (financial derivatives) will be recognised at fair value, while the hedged item will be recognised at fair value for selected risk elements (interest rate risk and currency risk).


Note 4 Classification of financial instruments (contd.)

PARENT BANK

31/12-2011Financial instruments at fair

value through profit or lossHeld for trading

purposesRecognised at

fair valueValued at

amortised cost TotalAssetsCash in and receivables from central banks 668 668Loans to and receivables from credit institutions 2 968 2 968Lending 9 811 58 610 68 421Shares 163 575 738Certificates and bonds 78 16 263 16 341Financial derivatives 1 208 1 208Total 1 449 26 649 62 246 90 344

LiabilitiesDebt to credit institutions 169 8 713 8 882Deposits 1 005 52 211 53 216Securitised debt 7 809 13 586 21 395Financial derivatives 920 920Subordinated loan capital 951 662 1 613Total 920 9 934 75 172 86 026

31/12-2010

AssetsCash in and receivables from central banks 361 361Loans to and receivables from credit institutions 5 034 5 034Lending 12 844 54 114 66 958Shares 241 473 714Certificates and bonds 21 082 21 082Financial derivatives 709 709Total 950 34 399 59 509 94 858

LiabilitiesDebt to credit institutions 152 12 804 12 956Deposits 1 054 47 747 48 801Securitised debt 9 514 16 867 26 381Financial derivatives 644 644Subordinated loan capital 831 664 1 495Total 644 11 551 78 082 90 277

The bank has no financial instruments classified as held to maturity, earmarked for hedging purposes or available for sale.


Note 5 Fair value of financial instruments

GROUP 31/12-11 31/12-10

NotesBalance

sheet value Fair valueBalance

sheet value Fair valueAssetsCash in and receivables from central banks 668 668 361 361

Loans to and receivables from credit institutions 14 481 481 368 368

Loans valued at fair value 11 705 11 705 14 126 14 126Loans valued at amortised cost 87 599 87 546 74 339 74 222Lending 9 99 304 99 251 88 465 88 348

Shares at fair value through profit or loss 22 738 738 714 714

Certificates and bonds 16 11 537 11 537 13 406 13 406

Financial derivatives 21 1 695 1 695 709 709Total 114 423 114 370 104 023 103 906

LiabilitiesDebt to credit institutions valued at fair value 169 169 152 152Debt to credit institutions valued at amortised cost 7 802 7 508 10 377 10 335Debt to credit institutions 32 7 971 7 677 10 529 10 487

Deposits valued at fair value 1 005 1 005 1 054 1 054Deposits valued at amortised cost 1) 52 137 52 137 47 665 47 665Deposits 33 53 142 53 142 48 719 48 719

Securities debt valued at fair value 7 809 7 809 9 514 9 514Securities debt subject to hedge accounting 10 707 10 710 4 450 4 459Securities debt valued at amortised cost 26 090 26 153 23 100 23 097Securitised debt 35 44 606 44 672 37 064 37 070

Financial derivatives 22 1 089 1 089 795 795

Subordinated loan capital valued at fair value 951 951 831 831Subordinated loan capital valued at amortised cost 662 656 664 621Subordinated loan capital 36 1 613 1 607 1 495 1 452Total 108 421 108 187 98 602 98 523

See note 15 for guarantee liability and off-balance-sheet secured debt.

1) These are deposits with floating interest rates whose fair value is virtually identical to the amortised cost.


Note 5 Fair value of financial instruments (contd.)

PARENT BANK 31/12-11 31/12-10

NotesBalance

sheet value Fair valueBalance

sheet value Fair valueAssetsCash in and receivables from central banks 668 668 361 361

Loans to and receivables from credit institutions 14 2 968 2 968 5 034 5 034

Loans valued at fair value 9 811 9 812 12 844 12 844Loans valued at amortised cost 58 610 58 556 54 114 53 997Lending 9 68 421 68 368 66 958 66 841

Shares at fair value through profit or loss 22 738 738 714 714

Certificates and bonds 16 16 341 16 341 21 082 21 082

Financial derivatives 21 1 208 1 208 709 709Total 90 344 90 291 94 858 94 741

LiabilitiesDebt to credit institutions valued at fair value 169 169 152 152Debt to credit institutions valued at amortised cost 8 713 8 419 12 804 12 762Debt to credit institutions 32 8 882 8 588 12 956 12 914

Deposits valued at fair value 1 005 1 005 1 054 1 054Deposits valued at amortised cost 1) 52 211 52 211 47 747 47 747Deposits 33 53 216 53 216 48 801 48 801

Securities debt valued at fair value 7 809 7 809 9 514 9 514Securities debt valued at amortised cost 13 586 13 627 16 867 16 861Securitised debt 35 21 395 21 436 26 381 26 375

Financial derivatives 22 920 920 644 644

Subordinated loan capital valued at fair value 951 951 831 831Subordinated loan capital valued at amortised cost 662 656 664 621Subordinated loan capital 36 1 613 1 607 1 495 1 452Total 86 026 85 767 90 277 90 186

See Note 15 for guarantee liability and off-balance-sheet secured debt.

1) These are deposits with floating interest rates whose fair value is virtually identical to the amortised cost.


Note 6 Valuation hierarchy for financial instruments at fair value

GROUP AND PARENT BANKValuation of fair value

Level 1 Financial instruments traded in active markets are classified as level 1. A market is deemed to be active if the market prices are easily and regularly available from a stock exchange, broker, industry group, pricing service or regulatory authority, and these prices represent actual and regularly occurring market transactions at arm’s length. The market price used for financial assets is the applicable purchase price, while the applicable sales price is used for financial commitments. The instruments included in level 1 primarily comprise equity and interest rate instru-ments listed on Oslo Børs. Level 2 The fair value of financial instruments that are not traded in an active market (e.g. certain over-the-counter derivatives) is determined by using valuation methods. These valuation methods maximise the use of observable data where available and, as far as possible, are not based on the group’s own estimates. If all the material data required to determine the fair value of an instrument are observable data, the instrument is included in level 2. Level 3 If one or more data items are not based on observable market information, the instrument is included in level 3.

GROUP

31/12-2011 Level 1 Level 2 Level 3 TotalAssetsLoans to customers 11 705 11 705Shares valued at fair value through profit or loss 227 25 485 738Certificates and bonds 9 11 528 11 537Financial derivatives 1 208 1 208Financial derivatives earmarked for hedge accounting 487 487Total 236 24 953 485 25 675

LiabilitiesDebt to credit institutions 169 169Deposits from and debt to customers 1 005 1 005Securitised debt 7 809 7 809Financial derivatives 920 920Financial derivatives earmarked for hedge accounting 169 169Subordinated loan capital 951 951Total 0 11 023 0 11 023

Financial instruments valued pursuant to level 3 at 1 January 2011 346Purchase of shares classified as level 3 58Sale of shares classified as level 3 (10)Reclassifications 25Value adjustment relating to shares classified as level 3 66Financial instruments valued pursuant to level 3 at 31 December 2011 485


Note 6 Valuation hierarchy for financial instruments at fair value (contd.)

GROUP

31/12-2010 Level 1 Level 2 Level 3 TotalAssetsLoans to customers 14 126 14 126Shares valued at fair value through profit or loss 320 48 346 714Certificates and bonds 3 937 9 469 13 406Financial derivatives 709 709Total 4 257 24 352 346 28 955

LiabilitiesDebt to credit institutions 152 152Deposits from and debt to customers 1 054 1 054Securitised debt 9 514 9 514Financial derivatives 644 644Financial derivatives earmarked for hedge accounting 151 151Subordinated loan capital 831 831Total 0 12 346 0 12 346

Financial instruments valued pursuant to level 3 at 1 January 2010 333Purchase of shares classified as level 3 131Sale of shares classified as level 3 (131)Reclassifications 0Value adjustment relating to shares classified as level 3 12Financial instruments valued pursuant to level 3 at 31 December 2010 346

The parent bank and the group have different holdings of loans, certificates and bonds, plus financial derivatives subject to hedge accountingvalued at fair value. All of these differences relate to level 2. They amount to NOK 2.6 billion for 2011 and NOK 6.5 billion for 2010.


Note 7 Financial risk management

Risk and capital management Good risk and capital management is a key strategic instrument in Sparebanken Vest’s value creation process. Sparebanken Vest’s goal is for the bank to have a moderate risk profile. The bank’s ability to balance its ambitions against its ability and willingness to take risk will have both quantitative and qualitative effects. The bank has a strong risk culture characterised by a strong focus on risk and profitability. Together, this will strengthen the bank’s profitability and rating and ensure good access to the capital market.

Sparebanken Vest has established its own risk strategies that specify control parameters for the individual risk areas. These strategies are reviewed at least once a year in connection with the bank’s general planning process. The control parameters are intended to help to ensure the bank’s profitability, financial strength and liquidity through the diversification of risk in the short and long term.

The Board of Directors delegates authority to the Managing Director within each of the risk areas. Decision support and portfolio management systems have been established for both the retail market and corporate market.

Organisation and responsibility Responsibility for and the exercise of the bank’s risk and capital management and control are divided between the bank’s Board of Directors, management and business units.

The Board of Directors of Sparebanken Vest is responsible for stipulating the bank’s overall risk tolerance. The Board shall also ensure that the bank has sufficient own funds in relation to the bank’s operations and ensure that it is sufficiently capitalised in relation to regulatory requirements. The Board also defines the bank’s targets and limits in all risk areas, including adopting guidelines for the bank’s risk and capital management. Reporting in relation to targets and limits takes place quarterly to the Board of Directors.

The Board’s Credit Committee deals with credit matters under the authorisation of the Board of Directors.

The Audit Committee is charged with ensuring that Sparebanken Vest has an independent and effective external and internal audit function, and financial and risk reporting that is in accordance with statutes and regulations.

The Managing Director is responsible for the bank’s overall risk and capital management, including the development of good models and frameworks for management and control. Normally, unless the matter is considered by the bank’s Board of Directors, all decisions relating to risk and capital management are made by the Managing Director in consultation with other members of the bank’s management.

Risk Management and Compliance covers important functions relating to management, control, reporting and analysis. Risk Management and Compliance is also responsible for the bank’s model and framework for risk and capital management. The head of this function reports to the Managing Director.

The Validation Committee, which is chaired by the Managing Director, deals with both model variation and validation relating to the application of the bank’s credit systems and regulations. The bank uses internal measurement methods (IRB) to calculate capital in relation to credit risk. Validation is a cornerstone of IRB that is intended to ensure that the IRB system is adapted to the portfolios to which it is applied. An annual validation report is prepared for the Board of Directors.

The Credit Committee, which is chaired by the Managing Director, deals with major commitments and matters of an unusual nature. Major commitments that involve risk are reviewed by the Managing Director’s Credit Committee quarterly.

All managers in Sparebanken Vest are responsible for managing risk and for ensuring good internal control in their own areas of responsibility in accordance with the bank’s adopted risk profile. In order to ensure good financial and administrative management, all managers must have the required knowledge about risk within their own areas.

The role of the Internal Audit Function is to monitor the bank’s overall risk and capital management and internal control on behalf of the Board of Directors. The internal audit function is also tasked with checking that procedures and guidelines are complied with and with assessing whether the bank’s models for risk and capital management provide a correct picture of the bank’s overall risk and capital situation. The internal audit function prepares an annual internal control report that also contains assessments of the bank’s IRB system and capitalisation process (ICAAP).


Note 7 Financial risk management (contd.)

Risk areas The bank’s risk and capital management mainly relates to four risk areas.

Credit risk is the risk of losses if the bank’s customers/counterparties are unable to meet their commitments relating to loans, credit facilities, guarantees and similar. For a more detailed description of credit risk, see Note 8.

Market risk is defined as the risk of losses on open positions in financial instruments as a result of changes in market variables and/or market conditions within a specified timeframe. This includes share, interest-rate, currency and credit spread risk. The risk can be of both a linear and non-linear nature (options etc.). For a more detailed description of credit risk, see Note 18.

Liquidity risk consists of two elements – refinancing risk and price risk. By refinancing risk is meant the risk of not being able to refinance debt and not being able to finance an increase in assets. By price risk is meant the risk of being unable to refinance commitments without incurring material extra costs in the form of unusually expensive financing or a fall in the value of assets that must be realised. For a more detailed description of liquidity risk, see Note 23.

Operational risk is the risk of losses as a result of inadequate or deficient internal processes or systems, human error or external events.

other risk areas: Strategic risk is defined as the current or future risk relating to profits and capital due to changes in framework conditions for business and adverse business decisions, incorrect implementation of decisions or an inability to respond to changes in framework conditions for business.

Strategic risk is managed and dealt with through the bank’s strategy processes, and the strategy is evaluated annually. The business strategy sets the parameters for the bank’s risk strategies, while the assessment and management of risk guide the business strategy.

Insurance risk / pension risk. The associated company Frende is exposed to insurance risk. Sparebanken Vest is affected by this through its holding in the company. For more detailed information about shareholdings in Frende, reference is made to Note 17.

As regards pension commitments, life insurance companies’ interest guarantee and meeting of pension commitments are deemed to entail a risk. The risk relating to the bank’s capitalised pension commitment (the bank’s defined-benefit scheme for employees) rests with the life insurance company Vital.


Note 8 Risk classification of the credit portfolio

Credit risk Credit risk is the risk of losses if the bank’s customers fail to meet their commitments to the group.

Credit risk arises through loans, credit facilities, guarantees, letters of credit and various derivative transactions with retail market and corporate market customers. Credit risk relating to derivative transactions is quantified using conversion factors that depend on contract type and term to maturity. Risk classification of loans and guarantees Measurement of credit risk is based on the following main components: i) probability of default (PD), ii), expected exposure at default (EAD) and iii) loss given default (LGD).

i) Probability of default (PD) is defined as the probability of a customer defaulting on a loan within the next 12 months. A default may be default of payment in excess of 90 days or other concrete circumstances (‘unlikely to pay’, cf. Basel II), affecting the customer’s ability to service the debt. The default probability is calculated using statistical models (score cards) based on logistic regression. Eleven risk classes from A to K are used in order to group the credit portfolio in Sparebanken Vest by debt-servicing ability. ii) Expected exposure at default (EAD) is a calculated amount that shows the total exposure in relation to the customer in the event of default. EAD is estimated as the expected utilisation of credit plus the expected utilisation of unutilised drawing rights. iii) Loss given default (LGD) indicates the degree of loss on a commitment in default expressed as a percentage of EAD. For the retail market, it is calculated on the basis of internal models. The type and value of loan security and the probability of recovery are key parameters in calculating the degree of loss. In addition to calculating the expected degree of loss, it is adjusted for periods of economic downturn by calculating a ‘downturn LGD’. The latter is used for capital adequacy purposes. Where the bank uses the basic IRB method for the corporate market, LGD rates from the Capital Adequacy Regulations are used. For economic capital, LGD is calculated using internal models for both the retail and corporate markets. The models combine internal and external data to predict statistical relationships. The results are interpreted and form the basis for logical key figures. A risk classification of all commitments is carried out each month in which data from internal and external sources is retrieved automati-cally. There is also manual follow-up of corporate commitments. The frequency of these assessments depends on the size of and risk associated with the commitment.

Commitments are priced to reflect the level of risk exposure, so that those with highest risk exposure are priced highest.

Risk classification in Sparebanken Vest

Probability of defaultRisk class From and incl. Up toA 0.00 0.15B 0.15 0.30C 0.30 0.45D 0.45 0.62E 0.62 0.78F 0.78 1.01G 1.01 1.41H 1.41 2.59I 2.59 4.48J 4.48 100.00K 100.00


Note 8 Risk classification of the credit portfolio (contd.)

PARENT BANK GROUP

CommitmentIndividual

write-downs 1) CommitmentIndividual

write-downs 1)

Loans broken down by risk class 31/12-11 31/12-10 31/12-11 31/12-10 31/12-11 31/12-10 31/12-11 31/12-10Corporate marketA-D 6 508 7 084 0 0 7 010 6 829 0 0E-H 17 660 16 235 0 0 17 660 16 235 0 0I-J 7 353 5 847 0 0 7 353 5 847 0 0K 1 224 1 133 282 258 1 224 1 133 282 258Total – corporate market 32 745 30 298 282 258 33 247 30 043 282 258

Retail marketA-D 29 444 31 110 0 0 57 509 51 139 0 0E-H 10 708 11 705 0 0 15 798 15 222 0 0I-J 3 807 4 538 0 0 4 648 5 049 0 0K 231 250 17 17 247 261 17 17Total – retail market 44 190 47 604 17 17 78 202 71 671 17 17Total 2) 76 935 77 902 299 275 111 449 101 714 299 275

1) All individual write-downs are allocated to the highest risk class.2) The definition of a customer’s commitment on calculating risk classification will deviate somewhat from the definition of credit exposure pursuant to IFRS in a few areas. The total amount in this note will therefore not tally completely with total commitments in Note 10.


Note 9 Loans broken down by market, type of receivable and geographical area

PARENT BANK GROUP

31/12-10 31/12-11 31/12-11 31/12-10Loans broken down by market

43 368 42 370 Wage earners 72 950 64 74023 939 26 438 Industries/sectors 26 708 24 054

5 19 Public sector 19 5153 179 Accrued interest 213 175(21) (24) Amortisation (fees etc.) (24) (22)79 68 Adjustment to fair value 68 79

67 523 69 050 Gross loans and receivables 99 934 89 031(275) (299) Individual write-downs, loans (299) (275)(290) (330) Group write-downs, loans (330) (291)

66 958 68 421 Loans to and receivables from customers 99 304 88 465

Of which subordinated loan capital43 43 Own funds in other financing institutions 43 4343 43 Subordinated loan capital entered under loans 43 43

Loans broken down by type of receivable, nominal principal11 133 9 958 Overdraft facilities 22 722 20 0771 675 1 694 Building loans 1 694 1 675

41 770 47 450 Instalment loans 63 642 53 03054 578 59 102 Gross loans to customers 88 058 74 782

(275) (299) Individual write-downs, loans (299) (275)54 303 58 803 Loans to customers after individual write-downs 87 759 74 507

124 161 Accrued interest 195 146(23) (24) Amortisation (fees etc.) (24) (23)

(290) (330) Group write-downs, loans (330) (291)54 114 58 610 Loans to and receivables from customers at amortised cost 87 599 74 339

12 739 9 725 Loans to and receivables from customers, nominal principal 11 619 14 02126 18 Accrued interest 18 2679 68 Adjustment to fair value 68 79

12 844 9 811 Loans to and receivables from customers, fair value 11 705 14 12666 958 68 421 Loans to and receivables from customers 99 304 88 465

Loans to customers recognised at fair value13 028 12 844 Balance sheet value at 1 January 14 126 13 028

(154) (2 996) Net additions/disposals (2 384) 1 128(14) (11) Value change in period (11) (14)(16) (26) Value change in credit spread in period (26) (16)

12 844 9 811 Book value at 31 Dec. 11 705 14 126

The net gain/(loss) on loans recognised at fair value is included in the item net gain/(loss), financial instruments recognised at fair value (Note 26).


Note 9 Loans broken down by market, type of receivable and geographical area (contd.)

GROUP

31/12-11 31/12-10Proportion Gross lending Ind. write-down Loans broken down by geographical area Proportion Gross lending Ind. write-down

74.2 74 116 213 Hordaland 74.8 66 565 1789.7 9 726 16 Sogn og Fjordane 10.3 9 151 17

10.4 10 427 16 Rogaland 9.6 8 503 335.4 5 382 34 Rest of Norway 5.1 4 535 32

99.7 99 651 280 Total Norway 99.7 88 754 2600.3 282 19 Abroad 0.3 277 15

100.0 99 934 299 Total geographical areas 100.0 89 031 275

PARENT BANK

31/12-11 31/12-10

Proportion Gross lending Ind. write-down Loans broken down by geographical area Proportion Gross lending Ind. write-down

68.1 47 000 213 Hordaland 69.7 47 067 17810.8 7 428 16 Sogn og Fjordane 11.4 7 682 1713.0 9 009 16 Rogaland 11.8 7 997 33

7.7 5 343 34 Rest of Norway 6.7 4 509 3299.6 68 781 280 Total Norway 99.6 67 255 260

0.4 269 19 Abroad 0.4 268 15100.0 69 050 299 Total geographical areas 100.0 67 523 275


Note 10 Commitments broken down by industries and retail market

2011

LoansUnused credit

facilities GuaranteesTotal

commitmentsDefaults and other potential bad debt

GROUP

Primary industries 2 563 204 25 2 792 13Manufacturing and mining 1 926 783 205 2 914 28Building and construction, power and water supply 2 651 618 499 3 768 181Commerce, hotels and restaurants 1 240 500 187 1 926 144International shipping and pipeline transport 3 252 28 211 3 491 514Other transport, post and telecommunications 1 397 145 87 1 629 8Property management 10 189 300 117 10 606 168Insurance and finance 1 762 270 201 2 234 17Services 1 606 153 93 1 852 36Municipal/public sector 19 67 0 87 0Abroad 269 0 113 113 51Total – business and industry 26 875 3 069 1 738 31 413 1 160Retail customers 73 058 6 547 19 79 625 206Total gross commitments 99 934 9 616 1 757 111 038 1 366 - Individual write-downs (299) 0 (21) (320) - Group write-downs (330) 0 0 (330)Total net commitments 99 304 9 616 1 736 110 387

PARENT BANK

Primary industries 2 520 135 25 2 680 13Manufacturing and mining 1 915 494 205 2 613 28Building and construction, power and water supply 2 535 396 499 3 430 181Commerce, hotels and restaurants 1 178 323 187 1 688 144International shipping and pipeline transport 3 252 18 211 3 481 514Other transport, post and telecommunications 1 273 92 87 1 451 8Property management 10 394 196 147 10 737 167Insurance and finance 1 726 170 201 2 098 17Services 1 514 102 93 1 708 36Municipal/public sector 19 42 0 62 0Abroad 269 0 113 113 51Total – business and industry 26 596 1 968 1 768 30 063 1 159Retail customers 42 454 4 201 19 46 675 203Total gross commitments 69 050 6 169 1 787 76 737 1 362 - Individual write-downs (299) 0 (21) (320) - Group write-downs (330) 0 0 (330)Total net commitments 68 421 6 169 1 766 76 087


Note 10 Commitments broken down by industries and retail market (contd.)

2010

LoansUnused credit

facilities GuaranteesTotal

commitmentsDefaults and other potential bad debt

GROUP

Primary industries 2 058 624 12 2 694 13Manufacturing and mining 1 564 1 704 208 3 476 45Building and construction, power and water supply 2 164 1 331 429 3 924 41Commerce, hotels and restaurants 1 055 659 136 1 850 152International shipping and pipeline transport 3 226 310 280 3 816 474Other transport, post and telecommunications 1 244 253 80 1 577 10Property management 9 607 135 84 9 826 196Insurance and finance 1 499 529 163 2 191 20Services 1 458 220 88 1 766 6Municipal/public sector 5 96 0 101 0Abroad 280 0 0 0 51Total – business and industry 24 161 5 861 1 480 31 222 1 008Retail customers 64 870 6 823 16 71 709 207Total gross commitments 89 031 12 684 1 496 102 931 1 215 - Individual write-downs (275) 0 (20) (295) - Group write-downs (291) 0 0 (291)Total net commitments 88 465 12 684 1 476 102 345

PARENT BANK

Primary industries 2 038 624 12 2 674 13Manufacturing and mining 1 558 1 704 208 3 470 45Building and construction, power and water supply 2 078 1 299 429 3 806 41Commerce, hotels and restaurants 1 024 659 136 1 819 152International shipping and pipeline transport 3 226 310 280 3 816 474Other transport, post and telecommunications 1 168 253 80 1 501 10Property management 9 815 390 114 10 319 196Insurance and finance 1 499 529 163 2 191 20Services 1 363 220 88 1 671 6Municipal/public sector 5 96 0 101 0Abroad 270 0 0 0 51Total – business and industry 24 045 6 084 1 510 31 369 1 008Retail customers 43 478 4 295 16 47 789 206Total gross commitments 67 523 10 379 1 526 79 158 1 214 - Individual write-downs (275) 0 (20) (295) - Group write-downs (290) 0 0 (290)Total net commitments 66 958 10 379 1 506 78 573


Note 11 Capitalised write-downs of commitments

Changes in individual and group write-downs and provision for bad debt relating to guarantees for the period.

PARENT BANK GROUP

31/12-10 31/12-11 31/12-11 31/12-10

Individual write-downs241 275 Individual write-downs of loans at 1 January (nominal values) 275 241(49) (70) Confirmed loss on commitment previously provided for (70) (49)24 44 Increased write-downs on previous individual write-downs 44 2463 62 Write-downs of loans not previously written down 62 63(2) (27) Reduction in previous years' write-downs of individually assessed loans (27) (2)0 15 Write-downs acquired through the takeover of Hardanger Sparebank 15 0

275 299 Individual write-downs 299 275

Group write-downs282 290 Write-downs of groups of loans at 1 January (nominal values) 291 283

8 26 Change in group write-downs for the period 26 80 14 Write-downs acquired through the takeover of Hardanger Sparebank 14 0

290 330 Write-downs of groups of loans 330 291565 629 Total write-downs of loan commitments 630 566

Provision for bad debt rel. to guarantees16 20 Provision for bad debt to cover losses on guarantees at 1 January 20 16

4 1 Changes in write-downs on guarantees for the period 1 40 0 Confirmed losses on guarantees covered by previous provision for bad debt 0 0

20 21 Specified provision for bad debt to cover losses on guarantees 21 20

All commitments that are subject to an individual valuation shall be assessed in order to determine whether there is objective evidence showing that a loss event has occurred and whether the loss event has reduced the estimated future cash flows from the loan.

If there is objective evidence of loan impairment, the loss on the loan is calculated as the difference between the balance sheet value (balance + accrued interest on the valuation date) and the present value of future cash flows. When estimating future cash flows, account is only taken of the credit loss caused by the loss events that have occurred. The estimation of future cash flows from a loan shall also take account of the taking over and sale of security for the loan, including costs in this connection.

When the best estimate of the future cash flow is estimated and recorded, the system will calculate the new value of the loan (amortised cost) and the difference will be the amount of the write-down. Confirmation of the loss write-down (entered against the customer’s commitment takes place when all security has been realised and it is certain that the bank will receive no further payments on the loan. The claim on the customer remains and will be followed up, unless it has been agreed with the customer that the loan is to be written off.


Note 12 Losses, commitments in default and other potential bad debt

PARENT BANK GROUP

31/12-10 31/12-11 Losses on loans, guarantees etc. 31/12-11 31/12-10 35 9 Change in individual write-downs for the period 1) 9 35 49 70 Confirmed losses on loans previously provided for 70 49 40 37 Confirmed losses on loans not previously provided for 37 40 (10) (17) Recoveries in previously confirmed write-downs (17) (10) 115 99 Net effect on profits/loss from individual write-downs 99 115

8 26 Change in group write-downs for the period 26 8 123 124 Write-downs and losses on loans 124 123

0 0 Confirmed losses on guarantees 0 0 4 1 Changes in write-downs on guarantees for the period 1 4 4 1 Losses on guarantees 1 4

127 126 Total losses on loans, guarantees etc. 126 127

1) The change as of 31 December 2011 does not include additional provision related to taking over the portfolio on the acquisition of Sparebanken Hardanger (see Note 11).

31/12-10 31/12-11 Commitments in default > 90 days 31/12-11 31/12-10433 396 Gross commitments in default 400 434(98) (70) Write-down (70) (98)

335 327 Net commitments in default 330 33623% 18% Percentage provided for 17% 23%

The above table shows potential bad debt and defaults (in excess of 90 days) where the balance in default exceeds NOK 1.000 in one of the commitment’s accounts.

31/12-10 31/12-11 Age distribution of commitments in default 31/12-11 31/12-10

Retail market93 181 31-60 days 190 9627 32 61-90 days 33 27

199 185 More than 90 days 188 200319 398 Total retail market 412 323

Corporate market24 27 31-60 days 27 2420 24 61-90 days 24 20

234 211 More than 90 days 212 234278 262 Total corporate market 263 278

117 208 31-60 days 217 12047 56 61-90 days 58 47

433 396 More than 90 days 400 434597 661 Total 675 601

The table shows defaults on payments exceeding 30 days where the amount in default exceeds NOK 1,000 in one of the commitment’s accounts.

31/12-10 31/12-11 Potential bad debt not defaulted on 31/12-11 31/12-10781 966 Gross commitments assessed for impairment 966 781

(177) (230) Write-down (230) (177)

604 737 Net commitments assessed for impairment 737 60423% 24% Percentage provided for 24% 23%

The group’s net loss expense in 2011 corresponded to 0.13% of average gross loans of NOK 94,483 million. Expected losses for the next 12 months are estimated to exceed the long-term average, which is estimated to be 0.25% of commitments.


Note 13 Secured debt

Gross lending is largely secured by mortgage. Security in the retail market largely consists of real property. In the corporate market, security mainly consists of tangible fixed assets The table below shows the commitments broken down into the percentages relating to different levels of secured debt. For example, the line 0-50% denotes that the commitments are lower than 50% of the value of the hedged item, while 100% means that the loan amount exceeds the value of the hedged item.

PARENT BANK GROUP

31/12-11 31/12-11Retail

marketCorporate

market Total Security levelRetail

marketCorporate

market Total

21.6% 28.4% 24.3% 0% - 50% 27.2% 28.4% 27.5%34.2% 33.7% 34.0% 50% - 75% 40.7% 33.7% 38.8%18.7% 8.7% 14.9% 75% - 90% 15.8% 8.7% 13.9%12.5% 4.4% 9.4% 90% - 100% 7.8% 4.4% 6.9%

6.6% 20.1% 11.7% 100% - 4.6% 20.1% 8.8%2.6% 0.0% 1.6% Other security 1.6% 0.0% 1.2%3.8% 4.7% 4.1% unsecured 2.3% 4.7% 2.9%

100.0% 100.0% 100.0% Total 100.0% 100.0% 100.0%

31/12-10 31/12-10Retail

marketCorporate

market Total Security levelRetail

marketCorporate

market Total

19.9% 25.9% 22.1% 0% - 50% 29.7% 25.9% 28.6%34.4% 31.9% 33.5% 50% - 75% 38.2% 31.9% 36.3%23.4% 11.7% 18.9% 75% - 90% 16.7% 11.7% 15.3%10.1% 3.8% 7.7% 90% - 100% 6.9% 3.8% 6.0%

6.1% 14.9% 9.5% 100% - 4.4% 14.9% 7.5%3.1% 0.0% 1.9% Other security 2.1% 0.0% 1.5%3.0% 11.8% 6.4% unsecured 2.0% 11.8% 4.8%

100.0 % 100.0% 100.0% Total 100.0% 100.0% 100.0%


Note 14 Loans to and receivables from credit institutions

MORBANK KONSERN

31/12-10 31/12-11 31/12-11 31/12-104 676 2 610 Loans to and receivables from credit institutions with no agreed term or period of notice

358 358 Loans to and receivables from credit institutions with an agreed term or period of notice5 034 2 968 Netto utlån til og fordringer på kredittinstitusjoner 481 368

Geographical areas4 697 2 462 Hordaland 19 31

65 0 Sogn og Fjordane 0 65120 435 Rest of Norway 390 120152 72 Abroad 72 152

5 034 2 968 Total geographical areas 481 368

Note 15 Guarantees and secured debt

PARENT BANK GROUP

31/12-10 31/12-11 Breakdown of guarantee types 31/12-11 31/12-10850 799 Payment guarantees 799 850415 543 Contract guarantees 543 415

0 0 Loan guarantees 0 02 2 Guarantees for taxes 2 2

259 443 Other guarantee liabilities 413 2291 526 1 787 Total customer guarantees 1 757 1 496

82 0 Guarantee on behalf of the Saving Banks' Guarantee Fund 0 821 608 1 787 Total guarantee liability 1 757 1 578

Secured debt11 480 10 650 Bonds and certificates – as security for overnight loans from Norges Bank, with a value of 10 650 11 48011 480 10 650 Total secured debt 10 650 11 480


Note 16 Certificates and bonds

PARENT BANK GROUP

31/12-10 31/12-11 31/12-11 31/12-100 78 Trading portfolio 78 0

21 082 16 263 Recognised at fair value 11 459 13 40621 082 16 341 11 537 13 406

1 049 565 of which foreign 565 1 049

GROUP

31/12-10Average interest rate Acquisition cost 31/12-11Listed 1) 3.94% 6 524 6 484 7 365unlisted 3.97% 5 008 5 004 6 002Total 11 488 13 367

Accrued interest 49 39Certificates and bonds 11 537 13 406

The Sparebanken Vest Group’s investments in certificates and bonds amount to approx. NOK 11.5 billion. Of this amount, about 4.8% is invested in public sector issues (state, county and municipal). A further 89.5% is invested in securities issued by financing institutions. The remaining approx. 5.7% is invested in securities issued by publicly owned enterprises or industrial enterprises.

PARENT BANK

Average interest rate Acquisition cost 31/12-11 31/12-10Listed 1) 3.70% 11 401 11 378 15 099unlisted 3.97% 4 898 4 895 5 927Total 16 273 21 026

Accrued interest 68 56Certificates and bonds 16 341 21 082

The Sparebanken Vest Group’s investments in certificates and bonds amount to approx. NOK 16.3 billion. Of this amount, about 3.4% is invested in public sector issues (state, county and municipal). A further 92.6% is invested in securities issued by financing institutions. The remaining approx. 4.0% is invested in securities issued by publicly owned enterprises or industrial enterprises.

The average interest rate is calculated by identifying the discount rate that results in a calculated value equal to the market value.

1) Including subordinated loans of NOK 59.4 (7.8) million.


Note 17 Shareholdings in group companies and associated companies

Balance sheet value in sub-group

Balance sheet value in parent bank

Group companies (balance sheet value, parent bank)

Number of shares Holding (%) 31/12-11 31/12-10 31/12-11 31/12-10

Sparebanken Vest Boligkreditt AS 1 700 000 100 1 700 900Sparebanken Vest Eiendomsforvaltning AS 1 100 124 124

Sparebanken Vest Eiendom Jonsvollskvartalet AS 100 100 110 110Sparebanken Vest Eiendom Dale AS 1 100 1 1Sparebanken Vest Eiendom Kaigaten AS 1 100 6 6Sparebanken Vest Eiendom Lonevåg AS 1 100 1 1Sparebanken Vest Eiendom Nedre Korskirkealmenning AS

1 100 21 21

Sparebanken Vest Eiendom Nordfjordeid AS 1 100 1 1Sparebanken Vest Eiendom Norheimsund AS 1 100 2 2Sparebanken Vest Eiendom Sogndal AS 1 100 2 2Sparebanken Vest Eiendom Stord AS 1 100 3 3Sparebanken Vest Eiendom Sauda AS 1 100 2 2

Eiendomsmegler Vest AS 1 200 100 53 53Kyte Næringsmegling AS 1 350 90 7 7Advokat Stein Herland Eiendomsmegling AS 147 70 9 9

Kyrkjebøkvartalet AS 10 000 100 3Vestlandskonferansen AS 100 100Total group companies in parent bank 1 880 1 077

Associated companies (balance sheet value, parent bank)

Number of shares Holding (%) 31/12-11 31/12-10

Frende Holding AS 1 899 604 44.70 340 340Norne Eierselskap AS 22 050 000 49.00 16 44Verd Boligkreditt AS 60 000 40.00 60 40Brage Finans AS 24 950 000 49.90 67 30Total shares in associated companies 484 454

Norne Eierselskap AS has been written down in Sparebanken Vest’s company accounts by NOK 42 million in 2011. On 4 January 2012, the bank participated in a share issue relating to Norne Eierselskap AS of which the bank’s share amounted to NOK 17.7 million.

Associated companies (company information – 2010*) Assets Liabilities Income

Profit after tax

Frende Holding AS, Bergen 2 014 1 493 856 (66)Norne Eierselskap AS, Bergen 45 0 0 0Verd Boligkreditt AS, Bergen 2 000 1 901 33 0Brage Finans AS, Bergen 55 2 0 (7)

*) Last official accounts (31 Dec. 2010).


Note 17 Shareholdings in group companies and associated companies (contd.)

Associated companies (balance sheet value, group) 2011

Frende Holding AS

Norne Eierselskap AS

Verd Bolig-kreditt AS

Brage Finans AS Total

Balance sheet value at start of period 231 29 39 27 326Additions 0 0 0 0 0Capital increase 0 15 20 37 72Share of profit/loss (19) (27) 1 (5) (50)Balance sheet value at end of period 212 16 61 60 349

Associated companies (balance sheet value, group) 2010Balance sheet value at start of period 130 36 19 0 185Additions 0 0 0 5 5Capital increase 134 0 20 25 179Share of profit/loss (32) (7) 0 (3) (42)Balance sheet value at end of period 231 29 39 27 326

Frende Holding AS is a holding company that owns 100% of the shares in Frende Livsforsikring AS and Frende Skadeforsikring AS. The company was formed in June 2007. In 2008, Sparebanken Vest formed the securities company Norne Securities AS together with Fondsfinans and 13 independent savings banks. The securities company was established through the holding company Norne Eierselskap AS, of which Sparebanken Vest owns 49%. Norne Eierselskap AS owns 91.7% of Norne Securities AS, while Erik Must AS owns 8.3%.

Verd Boligkreditt AS was formed in 2009 as a collaboration between Sparebanken Vest and eight independent savings banks with the object of financing housing loans by issuing covered bonds. The company is managed by Sparebanken Vest. The bank will not transfer its own loan portfolios to Verd Boligkreditt AS. Sparebanken Vest has an ownership interest of 40%. The remaining 60% is owned by the other eight savings banks in proportion to their assets under management. Brage Finans AS was formed at the end of 2010 as a collaboration between Sparebanken Vest and nine independent savings banks. The company offers customised financing products with the main emphasis on the leasing of all types of operating assets, plus loans secured by the purchased object. Sparebanken Vest owns 49.9% of the company’s shares.


Note 18 Market risk

Assumptions used to calculate market risk

Sparebanken Vest defines market risk as the risk of a loss on a financial instrument as a result of changes in market variables and/or market con-ditions within a specified timeframe. Market risk arises as a result of the bank holding open positions in various financial instruments. It can be subdivided into the following main groups: i) interest rate risk is the risk of loss as a result of changes in the interest rate markets; ii) stock market risk is the risk of loss as a result of changes in share prices; iii) currency risk is the risk of loss as a result of changes in foreign exchange rates; and iv) credit spread risk is the risk of loss as a result of changes in credit spreads. The bank’s market risk is managed through defined position limits in each risk area. The bank’s investments shall be justified on the basis of the banking operations’ needs or the goal of increasing other income. However, the limits are set so that it will not be possible for any negative effects to have a material detrimental effect on the bank’s financial strength. The management of market risk is set out in the bank’s market risk strategy and market risk policy. The market risk strategy, which is adopted by the Board of Directors, sets out overriding guidelines for the bank’s operations in the capital markets, including limits on the bank’s total exposure in relation to currency, shares, credit spread and interest rates. The bank expresses market risk as risk-adjusted capital and with a confidence level of 99.9%, the capital shall cover all potential losses relating to the market risk associated with the balance sheet date’s positions over a period of one year. The bank bases its calculations of the risk-adjusted capital requirements on historical volatility and adopted limits. The model has a one-year timeframe, and the calculation does not take into account the correlation between the defined portfolios. No diversifi-cation effects are calculated between the types of risks. The total capital requirement relating to market risk can be summed up as follows:

31/12-11 31/12-10Market risk 1 110 1 000


Note 19 Interest rate sensitivity

Interest rate risk is the risk of loss as a result of changes in the interest rate. Sparebanken Vest incurs interest rate risk, both passively – through ordinary banking operations (fixed-interest borrowings and lending) – and actively – through taking market positions. Sparebanken Vest has holdings of bonds and certificates mainly for the purpose of meeting the bank’s requirements relating to liquidity reserves and deposits required as security for payment settlements and loans from Norges Bank. In managing its interest rate exposure, the bank takes account of the fact that different maturities can develop differently (yield curve shift). Bonds issued at a fixed interest rate account for part of the bank’s borrowings in the bond market. in order to reduce the interest rate risk, the bank has entered into interest swap agreements. These interest swap agreements are valued at fair value in the balance sheet in the consoli-dated accounts. In order to give a balanced picture of the consolidated balance sheet, bonds issued at a fixed interest rate are classified as recognised at fair value. The interest risk associated with the bank’s fixed-interest loans to customers is partly reduced through interest swap agreements. In order to give a balanced picture of the consolidated balance sheet, fixed-interest rate loans to customers are recognised at fair value. The table below shows the potential losses in the event of a parallel interest rate increase of one percentage point for the bank’s overall positions.

Interest rate sensitivity by period

GROUP0-3

months3-12

months1-3

years3-5

years

More than

5 years

Total31/12-2011Change in value, balance sheet total (NOK million) (23.4) 34.3 (19.1) (0.1) 12.9 4.631/12-2010Change in value, balance sheet total (NOK million) (14.0) (8.8) (7.6) (0.2) (13.7) (44.3)

PARENT BANK31/12-2011Change in value, balance sheet total (NOK million) (8.4) 28.4 (19.1) (0.1) 12.9 13.731/12-2010Change in value, balance sheet total (NOK million) (3.7) (8.8) (7.6) (0.2) (13.7) (34.0)

Interest rate sensitivity broken down by between balance sheet item

PARENT BANK GROUP

31/12-10 31/12-11 Balance sheet (NOK million) 31/12-11 31/12-10(62.0) (81.7) Fixed-interest loans (81.7) (62.0)

(103.9) (99.5) Other loans (150.5) (114.2)(48.3) (36.9) Bonds/certificates (37.2) (48.3)

(0.3) (0.7) Other (2.1) (0.3)(214.5) (218.8) Total assets (271.5) (224.8)

1.0 4.9 Fixed-interest deposits 4.9 1.076.6 79.8 Other deposits. customers 79.8 76.6

316.4 311.0 Bonds/certificates 348.7 316.43.9 5.4 Other borrowings 11.3 3.9

397.9 401.1 Total liabilities 444.7 397.9(217.4) (168.6) Derivatives (168.6) (217.4)(34.0) 13.7 Total 4.6 (44.3)


Note 20 Currency positions

The table show Sparebanken Vest’s net currency exposure at 31 December including financial derivatives as defined by Norges Bank. An institution’s open net positions in each individual foreign currency cannot account for more than 15% of the institution’s own funds. The total net currency position (including positions in NOK) cannot account for more than 30% of the institution’s own funds.

VALUTA USD EUR GBP CHF DKK JPY Other AggregateNet currency exposure at 31 Dec. 2011 41 (8) 4 12 94 (12) 10 141Effect on profit and equity of changes in exchange rates of 5% 2 0 0 1 5 (1) 1 7Net currency exposure at 31 Dec. 2010 15 12 8 (13) (12) 14 6 30Effect on profit and equity of changes in exchange rates of 5% 1 1 0 (1) (1) 1 0 2


Note 21 Financial derivatives

Sparebanken Vest uses financial derivatives to manage interest rate and currency risk. Financial derivatives are agreements entered into with financing institutions or customers to stipulate interest terms, exchange rates and the value of equity instruments for specific periods. Method of valuation and accounting principles All derivatives are valued at fair value and exchange rate gains/losses are classified as net gain/(loss), financial instruments. Interest from derivatives entered into to manage the interest rate risk attached to the bank’s ordinary portfolios is classified as interest income and recognised as an adjustment of the bank’s other interest income/ interest expenses. Sparebanken Vest has used the following financial derivatives during the year. Forward currency transactions These are agreements to purchase or sell specific amounts of currency at an agreed exchange rate on a future date. Interest rate agreements • Forward Rate Agreements (FRA), which stipulate a rate of interest on a nominal amount for a future period of time. • Interest swaps, which are agreements to exchange interest rate terms (fixed for floating) for a specific amount over a given period of time. • Interest rate options (call) entitle the buyer to receive from the seller the difference between the market rate and the agreed rate of interest, if the market rate is higher than the agreed rate of interest for a specific amount over a given period. • Interest rate options (put) entitle the buyer to receive from the seller the difference between the market rate and the agreed rate of interest, if the market rate is lower than the agreed rate of interest for a specific amount over a given period. Portfolio guarantee The bank participates in a guarantee that guarantees against risk relating to the volatility of the value of Eksportfinans’ liquidity portfolio. The bank’s share is NOK 50 million. Options The bank’s holding of options relate to the interest rate ceiling on housing loans for young people (BSu). The table below shows the nominal value of financial derivatives broken down by the type of derivative in addition to positive and negative market values. Positive market values are recognised in the balance sheet as assets, while negative market values are recognised as liabilities.

31/12-11 31/12-10 Credit-

equivalent Nominal-

value Positive

market value Negative

market value Credit-

equivalent Nominal-

value Positive

market value Negative

market value FRA 0 1 8 7 000 1 1Interest swap agreements 1 047 27 065 1 143 779 752 24 963 573 295Options/Cap/Floor/Collar/Swaption 2 206 3 4 4 010 19 16Total interest rate instruments 29 271 1 146 791 35 973 593 312

interest rate derivatives earmarked for hedging purposes

8 342 487 0 0 0 0

interest rate and currency derivatives earmarked for hedging purposes 7 942 0 169 6 462 0 151Total derivatives earmarked for hedging purposes 16 284 487 169 6 462 0 151

Portfolio guarantee 50 0 3 50 0 8

Options 0 0 0 0 17 210 0 1Total equity-related contracts 0 0 0 210 0 1

Instalments 144 15 362 62 126 237 11 778 116 323Total currency-related contracts 15 362 62 126 11 778 116 323

Total OTC derivatives 60 967 1 695 1 089 54 473 709 795 See Note 18 for a description of the bank’s management of market risk. See Notes 19 and 20 for a further description of the bank’s interest rate and currency management. The parent bank’s exposure to derivatives corresponds to that of the group with the exception of interest rate and currency derivatives earmarked for hedge accounting, which only concerns the subsidiary Sparebanken Vest Boligkreditt AS.


Note 22 Shares

Shares are classified at fair value through profit or lossCost price 31/12-11 31/12-10

Shares valued at fair value through profit or loss are divided into the following portfolios Trading portfolio (listed) 182 163 241 Recognised at fair value 566 575 473Total shares valued at fair value through profit or loss 738 714Valuation method Listed 192 242 Shares valued on the basis of the OTC list 25 55 Fund investments as priced by the investment management company 35 78 The companies' own valuations on the basis of EVCA1) 55 47 Shares valued on the basis of other valuation techniques 2) 430 292Shares valued at fair value through profit or loss 738 714

1) The bank’s investments in venture shares are mainly related to fund investments (or participation in investment companies). Some of the funds/companies prepare price assessments on the basis of the underlying portfolio value, which is used for valuation purposes.

2) Value assessments are based on the last issue price, traded prices known to us and/or available accounting information if the share has not been

traded. Obvious excess values are accounted for through a value adjustment, while smaller items are written down where necessary.

The group has a commitment to pay further equity relating to the following ordinary share limits and venture investments in 2011. The committed amount relating to share investments for 2010 amounted to NOK 161 million.

Comm. amount Paid

HitecVision Private Equity IV L.P 9 8Borea Opportunity II AS 50 25Sarsia Life Science Fund 12 11Fjord Invest SørVest AS (Såkorn) 12 6Vekstfondet 5 3Sarsia Seed 5 3Norgesinvestor Opportunity AS 10 8Incitia Ventures II AS 5 3Icon Capital III AS 5 3Committed amounts relating to share investments 113 68


Note 22 Shares (contd. )

Specification of shares, units, funds and primary capital certificates at 31 Dec. 2011

Balance sheet value in NOK 1.000 Number of shares Holding (%) Balance sheet valueNorwegian companiesAker Solutions ASA 60 000 0.02% 3 711 Awilco lng AS 111 900 0.17% 2 909 Bergensavisen Konsern AS 315 840 9.84% 6 317 Borea Opportunity II AS 14 000 9.58% 18 200 Borea Noterte III AS 100 000 2.12% 6 050 Bipper Communication AS 367 683 13.98% 9 927 Bro og Tunnelselskapet A/S 36 6.55% 3 600 Christian Michelsen Research AS 1 400 5.00% 5 600 Comcom AS 100 000 0.00% 3 000 Cool Flame Technologies AS 127 000 6.50% 11 430 Creacon International Holding AS 2 213 5.12% 8 188 Det Norske Oljeselskap ASA 30 000 0.02% 2 610 DNB ASA 115 000 0.01% 6 699 Eidesvik Offshore ASA 101 501 0.34% 2 903 Eiendomskreditt AS 240 500 10.00% 26 936 Eksportfinans AS 2 638 1.00% 50 122 ez Systems AS 230 822 0.00% 8 822 Filmfondet Fuzz AS 2 942 905 29.17% 2 794 Fjord Line AS 400 000 0.75% 6 000 Fjordinvest AS 17 000 13.40% 8 500 Fjordinvest Sørvest AS 5 610 647 14.90% 5 050 Gjensidige Forsikring AS 40 000 0.01% 2 750 Helgeland Sparebank 200 000 1.10% 6 100 Hordaland Maritime Miljøselskap AS 44 832 7.43% 5 000 It's Learning AS 6 700 4.23% 20 770 K.F.S. Egenkapitalbevis 4 140 8.28% 4 140 Nordito Property AS 387 366 3.81% 8 871 Norgesinv. Opp. AS 76 800 6.50% 6 912 Norsk Hydro ASA 100 000 0.01% 2 750 Norsk Innovasjonskapital II AS 769 1.08% 4 000 Novel Diagnostics AS 930 000 10.13% 4 464 Orkla ASA 80 000 0.01% 3 528 Oslo Børs Vps Holding ASA 200 000 0.47% 11 800 Osmolife AS 22 250 000 11.00% 4 450 Petroleum Geo-Services 75 000 0.03% 4 811 Pinovo AS 45 000 8.87% 9 000 Rieber & Søn ASA 200 000 0.00% 7 740 Sarsia Development AS 201 851 10.60% 7 670 Sarsia Seed AS 3 113 261 12.00% 3 113 Schibsted ASA 25 000 0.02% 3 705 Seagarden ASA 1 479 938 6.63% 4 440 Sea-Hawk Navigation AS 51 768 13.03% 3 106 Sorbwater Technology AS 51 500 7.90% 6 489 Sparebank1 Næringskreditt 52 909 0.56% 6 614 Sparebanken Nord-Norge 86 159 0.13% 2 731 Statoil ASA 45 000 0.00% 6 885 Storebrand ASA 135 000 0.03% 4 173 TGS-NOPEC Geophysical Company ASA 30 000 0.03% 4 038 Tide ASA 2 175 600 9.64% 45 035 Voss Veksel- og Landmandsbank 9 499 10.00% 19 093 Wellis AS 6 600 3.69% 5 500 Weyland AS 61 469 14.96% 10 204 Yara International ASA 30 000 0.01% 7 089 Other norwegian companies 53 697

500 036


Note 22 Shares (contd. I)Note 22 Shares (contd. )

Specification of shares, units, funds and primary capital certificates at 31 Dec. 2011

Balance sheet value in NOK 1.000 Number of shares Holding (%) Balance sheet valueNorwegian companiesAker Solutions ASA 60 000 0.02% 3 711 Awilco lng AS 111 900 0.17% 2 909 Bergensavisen Konsern AS 315 840 9.84% 6 317 Borea Opportunity II AS 14 000 9.58% 18 200 Borea Noterte III AS 100 000 2.12% 6 050 Bipper Communication AS 367 683 13.98% 9 927 Bro og Tunnelselskapet A/S 36 6.55% 3 600 Christian Michelsen Research AS 1 400 5.00% 5 600 Comcom AS 100 000 0.00% 3 000 Cool Flame Technologies AS 127 000 6.50% 11 430 Creacon International Holding AS 2 213 5.12% 8 188 Det Norske Oljeselskap ASA 30 000 0.02% 2 610 DNB ASA 115 000 0.01% 6 699 Eidesvik Offshore ASA 101 501 0.34% 2 903 Eiendomskreditt AS 240 500 10.00% 26 936 Eksportfinans AS 2 638 1.00% 50 122 ez Systems AS 230 822 0.00% 8 822 Filmfondet Fuzz AS 2 942 905 29.17% 2 794 Fjord Line AS 400 000 0.75% 6 000 Fjordinvest AS 17 000 13.40% 8 500 Fjordinvest Sørvest AS 5 610 647 14.90% 5 050 Gjensidige Forsikring AS 40 000 0.01% 2 750 Helgeland Sparebank 200 000 1.10% 6 100 Hordaland Maritime Miljøselskap AS 44 832 7.43% 5 000 It's Learning AS 6 700 4.23% 20 770 K.F.S. Egenkapitalbevis 4 140 8.28% 4 140 Nordito Property AS 387 366 3.81% 8 871 Norgesinv. Opp. AS 76 800 6.50% 6 912 Norsk Hydro ASA 100 000 0.01% 2 750 Norsk Innovasjonskapital II AS 769 1.08% 4 000 Novel Diagnostics AS 930 000 10.13% 4 464 Orkla ASA 80 000 0.01% 3 528 Oslo Børs Vps Holding ASA 200 000 0.47% 11 800 Osmolife AS 22 250 000 11.00% 4 450 Petroleum Geo-Services 75 000 0.03% 4 811 Pinovo AS 45 000 8.87% 9 000 Rieber & Søn ASA 200 000 0.00% 7 740 Sarsia Development AS 201 851 10.60% 7 670 Sarsia Seed AS 3 113 261 12.00% 3 113 Schibsted ASA 25 000 0.02% 3 705 Seagarden ASA 1 479 938 6.63% 4 440 Sea-Hawk Navigation AS 51 768 13.03% 3 106 Sorbwater Technology AS 51 500 7.90% 6 489 Sparebank1 Næringskreditt 52 909 0.56% 6 614 Sparebanken Nord-Norge 86 159 0.13% 2 731 Statoil ASA 45 000 0.00% 6 885 Storebrand ASA 135 000 0.03% 4 173 TGS-NOPEC Geophysical Company ASA 30 000 0.03% 4 038 Tide ASA 2 175 600 9.64% 45 035 Voss Veksel- og Landmandsbank 9 499 10.00% 19 093 Wellis AS 6 600 3.69% 5 500 Weyland AS 61 469 14.96% 10 204 Yara International ASA 30 000 0.01% 7 089 Other norwegian companies 53 697

500 036

Specification of shares. units. funds and primary capital certificates at 31 Dec. 2011

Balance sheet value in NOK 1.000 Number of shares Holding (%) Balance sheet valueForeign companiesHitecvision Priv. EQ. IV L.P. 1 176 981 0.42% 6 382 Nets Holding AS 3 199 540 1.76% 154 811 Royal Caribbean Cruise LTD 40 000 0.02% 6 040 Subsea 7 S.A. 65 000 0.02% 7 248 Transeuro Energy Corp 12 603 764 3.98% 5 546 Visa INC 19 988 0.00% 12 302 Other foreign companies 9 923

202 250 Shares in unit trustsFondsfinans Farmasi-Bioteknologi 433 0.01% 4 956 Fondsfinans Spar 2 065 0.08% 9 421 Holberg Global 96 962 0.01% 9 139 Holberg Norden 22 463 0.01% 3 817 Holberg Rurik 84 993 0.01% 8 023

35 357

Total investments in shares. units and funds 737 642


Note 23 Liquidity risk/ remaining time to maturity

Liquidity risk is the risk of the bank being unable to service its debt as it falls due or being unable to finance increases in assets. The bank’s liquidity risk is assessed on the basis of an evaluation of the bank’s balance sheet structure, including the bank’s dependence on financing from sources other than its customers, and the extra costs involved in raising long-term financing from the capital market. Sparebanken Vest manages liquidity risk in accordance with a number of targets and parameters. The most important of these are structural liquidity (time without access to financing from the capital market), liquidity indicator (stable financing with maturity later than one year hence in relation to illiquid assets) and financing ratio (deposits in relation to lending).

Most of the bank’s long-term financing with final due date later than one year hence is related to agreements in which the interest terms are tied to fixed short-term interest rates. This is done in order to reduce the interest rate risk associated with long-term borrowings. In the following table, bond debt and deposits are included at nominal value and placed in the time band for final maturity. The earliest time band (0- 1 month) includes sight deposits, loan approvals and unused credit. Interest due later than one month hence is specified in order to distinguish between the loan principal and future interest payments.

GROUP

Residual time to maturity at 31 DEC. 2011 0-1 month 1-3 months 3-12 months 1-5 yearsMore than

5 years TotalDebt to credit institutions 2 006 1 088 584 3 549 701 7 928Interest payments 0 37 122 187 101 447

Customer deposits 52 220 194 692 36 0 53 142Interest payments 0 1 16 2 0 19

Securitised debt 130 2 573 5 925 29 418 5 665 43 711Interest payments 26 367 1 019 3 169 492 5 073

Loan approvals and unused credit facilities 9 643 0 0 0 0 0

Subordinated loan capital and subordinated bonds 0 0 0 0 1 452 1 452Interest payments2) 0 0 68 286 1 533 1 887

Financial derivatives, gross settlement (outflows)1) 3 591 2 176 2 504 9 692 786 18 749Total payments 57 973 6 436 10 930 46 339 10 730 132 408

1) Financial derivatives, gross settlement (outflows) 3 478 2 284 2 429 9 778 1 336 19 3052) Interest payments are included for subordinated bonds up to 2034 and 2040.

Through Sparebanken Vest Boligkreditt AS, Sparebanken Vest issued a new covered bond in the European market in February 2012 with a nominal value of EuR 500 million. The bond falls due in 2017.

GROUP

Residual time to maturity at 31 DEC. 2010 0-1 month 1-3 months 3-12 months 1-5 yearsMore than

5 years TotalDebt to credit institutions 700 0 4 094 5 362 156 10 312Interest payments 0 81 186 261 78 606

Customer deposits 47 848 266 605 0 0 48 719Interest payments 0 1 13 0 0 14

Securitised debt 366 1 250 7 339 24 228 3 495 36 678Interest payments 16 216 812 2 272 173 3 489

Loan approvals and unused credit facilities 12 256 0 0 0 0 12 256

Subordinated loan capital and subordinated bonds 1 416 1 416Interest payments2) 0 0 65 268 1 682 2 015

Financial derivatives, gross settlement (outflows)1) 6 307 4 749 1 709 6 704 319 19 788Total payments 67 493 6 563 14 823 39 095 7 319 135 293

1) Financial derivatives, gross settlement (outflows) 6 517 4 724 1 838 6 867 751 20 6972) Interest payments are included for subordinated bonds up to 2034 and 2040.


Note 24 Net interest and credit commission income

PARENT BANK GROUP

2010 2011 2011 201089 140 Interest and similar income from loans to and receivables from credit institutions 20 13

Interest and similar income from loans to and receivables from customers2 504 2 403 - valued at amortised cost

495 462 - valued at fair value584 641 Interest and similar income from certificates, bonds and other interest-bearing securities 441 352

3 672 3 646 Interest income and similar income 4 390 3 947

Interest and similar expenses on debt to credit institutions300 251 - valued at amortised cost 216 283

47 7 - valued at fair value 7 47Interest and similar expenses on deposits from and debt to customers

1 002 1 170 - valued at amortised cost 1 162 99518 36 - valued at fair value 36 18

Interest and similar expenses on issued securities408 336 - valued at amortised cost 968 590416 365 - valued at fair value 365 416

Interest and similar expenses on subordinated loan capital37 12 - valued at amortised cost 12 3743 35 - valued at fair value 35 43

(54) (1) Other interest expenses etc.1) (1) (54)56 0 Fee to the Saving Banks’ Guarantee Fund 0 56

2 273 2 211 Interest expenses and similar expenses 2 800 2 4311 399 1 435 Net interest and credit commission income 1 590 1 516

1) Interest from derivatives entered into to manage the interest rate risk attached to the bank’s ordinary portfolios is classified as interest income and recognised as an adjustment of the bank’s other interest income / interest expenses.

Note 25 Interest on individual balance sheet items

GROUP Average interest rate as percentage1) Average volume

2011 2010 2011 2010Assets Loans to and receivables from credit institutions 1.95 1.69 975 838Loans to customers 4.28 4.19 91 178 85 466Certificates and bonds 3.43 2.84 12 866 12 387

Liabilities Debt to credit institutions 2.82 2.68 7 833 12 302Customer deposits 2.34 2.13 50 823 47 261Securities debt 3.28 3.26 40 573 33 426

SECURITIES DEBT

Assets Loans to and receivables from credit institutions 2.77 2.28 5 047 3 912Loans to customers 4.49 4.49 63 143 69 852Certificates and bonds 3.35 2.88 19 109 20 267

Liabilities Debt to credit institutions 2.73 2.56 9 354 13 524Customer deposits 2.35 2.13 50 901 47 341Securities debt 3.08 3.29 22 723 27 608

1) The average rate of interest is calculated as the interest as a percentage of the average volume. ANNuAL REPORT 2011 PAGE 69

Note 26 Net other operating revenues

PARENT BANK GROUP

2010 2011 2011 201031 35 Guarantee commission 35 31

240 256 Fees from payment transfers/interbank fee credit 256 240111 126 Other commissions and fees 126 111382 417 Commission income and income from banking services 417 382

46 43 Fees from payment transfers/BBS/EFTPOS 43 4620 21 Fees payment transfers/interbank fee debit 21 2019 18 Other commissions and fees 1985 82 Commission expenses and expenses relating to banking services 82 85

109 125 Income from shareholdings in group companiesIncome from shareholdings in associated companies (50) (42)

109 125 Income from shareholdings in group companies and associated companies (50) (42)

69 31 Dividend 31 690 (42) Write-downs of associated companies 0 0

(68) (55) Gain/(loss) on certificates and bonds (42) (33)133 59 Gain/(loss) on shares 59 13388 148 Gain/(loss) on financial derivatives 148 8834 26 Gain/(loss) on currency 26 34

Net gain/(loss), financial instruments, recognised at fair value 2)

(13) 24 - lending 24 (13)(100) (31) - deposits (31) (100)

(1) (19) - debt to credit institutions (19) (1)39 (28) - securitised debt (28) 39

(27) (108) - subordinated loan capital (108) (27)35 2 - gain/loss, change in credit spread 2 35

Net gain/(loss), financial instruments, recognised at amortised cost (20) 10 - securitised debt 5 (20)

Net gain/(loss), financial instruments, relating to hedge accounting- derivatives earmarked for hedge accounting 344 (204)- securitised debt (344) 204

0 57 Badwill relating to the acquisition of Sparebanken Hardanger 57 08 0 Product margin, amortised 0 8

177 74 Net gain/(loss), financial instruments 1) 124 212

Brokerage commission 189 1274 4 Other operating revenues 5 414 4 Other operating revenues 194 168

587 538 Net other operating income 603 635

1) Of which trading portfolio:3 5 Dividend 5 3

13 (8) Gain/(loss) on shares (8) 13(13) (10) Gain/(loss) on financial derivatives (10) (13)13 7 Gain/(loss) on currency 7 13

2) See Notes 9, 32, 33, 35 og 36.


Note 27 Operating expenses

Payroll and general administration expensesPARENT BANK GROUP

2010 2011 2011 2010428 413 Pay 526 526

35 98 Pensions1) 105 3676 71 Non-wage costs 72 77

166 188 IT expenses 188 166136 139 Administration expenses 167 157841 909 Payroll and general administration expenses 1 058 962

84 93 Depreciation 107 98

0 1 Operating expenses, real property 18 1998 100 Rent and other operating expenses for rented premises 50 49

7 7 Expensed fixed assets 10 823 8 Other operating expenses 76 7216 16 Wealth tax 16 16

144 132 Other operating expenses 170 1641 069 1 134 Total operating expenses 1 335 1 224

1) See Note 28

the average number of employees in 2011 was 748 (732) for the parent bank and 856 (827) for the group.

Fees to elected auditor (noK 1,000)

PARENT BANK GROUP

2010 2011 2011 20101 155 551 audit fee 1 042 1 448

299 285 attestation services1) 533 7990 0 tax advice 0 0

439 216 other services 304 5551 893 1 052 Total fees 1 878 2 802

1) Fees for attestation services for 2010 include NOK 143,000 debited to the premium reserve as issue costs.


Note 28 Pension commitments

Pursuant to the Act relating to mandatory occupational pensions, the Sparebanken Vest Group is required to have an occupational pension scheme, and the group’s pension scheme meets the requirements of the Act. The pension scheme includes the following:

1. A company pension scheme with a life insurance company. The full retirement pension corresponds to almost 70% of the final salary based on the present National Insurance basic amount (G) limited to maximum 12G. The scheme covers 1,005 (parent bank 956) individuals, 373 of whom (parent bank 349) receive pensions under the scheme. Disability benefit is covered by the scheme. The defined-benefit scheme was closed to new members in 2007.

2. A defined-contribution scheme covering 300 (parent bank 234) employees. All new employees are registered in the defined-contribution scheme. 3. The collective early retirement (AFP) scheme with supplementary benefits from 62 to 67 years. Pensions are currently being paid to 75 (parent bank 74) persons under the scheme. The scheme is unsecured and is covered through operations. 4. A scheme for executive personnel covering 11 (parent bank 8) employees, with the option of retiring at the age of 65. The Managing Director is entitled to, and at the request of the Board of Directors obliged to, take early retirement at the age of 60.

The pension benefits correspond to 70% of the final salary up to the age of 67. The Managing Director and employees who can retire at the age of 65 have an additional agreement that ensures 66% of pay in excess of 12 times the National Insurance basic amount from the age of 67. under other early retirement schemes than AFP, employees are withdrawn from the company pension scheme but will be compensated from the ordinary retirement age for the reduction in pension entitlements. The scheme for executive personnel is unsecured and is covered through operations.

Financial assumptions used to calculate pension expenses and commitmentsExpenses Commitments

Percentage 2011 2010 31/12-11 31/12-10Discount rate 4.00 4.50 2.60 4.00Expected return on pension assets 5.40 5.70 4.10 5.40Annual wage growth 4.00 4.50 3.50 4.00Annual pension adjustment 2.88 3.38 2.63 2.88Adjustment of National Insurance basic amount (G) 3.75 4.25 3.25 3.75Voluntary termination (over/under 40 years) 0-8.00 0-8.00 0-8.00 0-8.00Tendency to take early retirement under AFP 50.00 50.00 50.00 50.00

Investment of pension assets

Percentage 2011 2010Bonds 49 50Shares 12 15Money market etc. 21 19Real property 18 16

The value-adjusted return on pension assets at 30 September 2011 was 0.4%. The value-adjusted return for 2010 was 6.6%. The expected premium for 2012 amounts to NOK 35 million (parent bank NOK 32 million). The expected return on pension assets is calculated by assessing the expected return on assets that is included in the current investment strategy.


Note 28 Pension commitments (contd.)

GROUP2011 2010

Pension expenses Secured Unsecured Total Secured Unsecured TotalYear's pension earnings 36 5 41 39 5 44Interest expense on pension commitments 45 2 47 47 3 50Expected return on pension assets (41) 0 (41) (40) 0 (40)Administration expenses 4 0 4 4 0 4Recognised plan change 1) 0 0 0 0 (127) (127)Recognised estimate variances, plan change 1) 0 0 0 0 65 65Other recognised estimate variances 26 8 34 24 3 27Net pension expense 71 14 85 73 (52) 22Employer’s National Insurance contributions 6 1 7 6 1 7Recognised pension expense 76 15 91 79 (51) 29

Recognised premiums paid to the defined-contribution scheme, incl. AFP 1) 14 7Total pension expenses 105 36

31/12-11 31/12-10Pension commitment Secured Unsecured Total Secured Unsecured TotalPresent value of earned pension commitment 1 441 49 1 489 1 141 61 1 202Fair value of pension assets (794) 0 (794) (745) 0 (745)Net pension commitment 647 49 696 396 61 457Employer’s National Insurance contributions 91 7 98 56 9 64Estimate variances not recognised (606) (1) (607) (367) (8) (374)Estimate variances not recognised 133 55 187 86 61 147

Change in pension commitment during the year 2011 2010Pension commitment at 1 Jan. 1 202 1 241Year's pension earnings 41 44Interest expense on pension commitments 47 50Plan change1) 0 (112)Estimate variances 212 25Other changes in the balance sheet 0 0Acquisition of enterprise 31 0Pension payments (43) (45)Pension commitment at 31 Dec. 1 489 1 202

Change in pension assets during the yearPension assets (market value) at 1 Jan. 745 698Return on pension assets 41 40Estimate variances (20) (7)Premiums paid/ paid to premium fund 30 38Administration expenses (4) (3)Acquisition of enterprise 27 0Pension payments (24) (21)Pension assets (market value) at 31 Dec. 794 745


Note 28 Pension commitments (contd. II)

GROUP

Historical development31/12-11 31/12-10 31/12-09 31/12-08 31/12-07 31/12-06

Gross pension commitments2) 1 587 1 266 1 317 1 326 1 158 1 273Gross pension assets (794) (745) (698) (670) (619) (559)Estimate variances not recognised (607) (375) (430) (512) (353) (484)Net capitalised pension commitments 187 146 189 144 186 230

1) The Act concerning state contributions to employees who take early retirement in the private sector (the AFP Contributions Act) entered into force on 19 February 2010. Employees who take early retirement with effect from 2011 or later will receive benefits under the new scheme. For accounting purposes, the new AFP scheme is deemed to be a defined-benefit scheme. This means that each enterprise must enter its proportional share of the scheme’s commitment, assets and pension expenses in the accounts. If there are no available calculations of the individual elements in the scheme or a consistent and reliable basis for allocation, the new AFP scheme is recognised as a defined-contribution scheme. No such basis currently exists, and the new AFP scheme is therefore recognised as a defined-contribution scheme. The new AFP scheme will be recognised as a defined-benefit scheme when reliable measurement and allocation can be carried out. When the new Act entered into force, the previous AFP scheme was, for accounting purposes, considered to be closed and in the process of being discontinued. It will be treated in accordance with the rules regarding curtailment and settlement. As a result, the group took a one-off effect of NOK 62 million to income in the annual accounts for 2010. 2) Gross pension commitments include employer’s National Insurance contributions.

PARENT BANK2011 2010

Pension expenses Secured Unsecured Total Unsecured Total SumYear's pension earnings 33 4 37 36 4 41Interest expense on pension commitments 44 2 46 45 3 48Expected return on pension assets (39) 0 (39) (39) 0 (39)Administration expenses 4 0 4 3 0 3Recognised plan change1) 0 0 0 0 (121) (121)Recognised estimate variances, plan change1) 0 0 0 0 63 63Other recognised estimate variances 25 7 33 23 3 26Net pension expense 67 13 80 69 (48) 21Employer’s National Insurance contributions 5 1 6 6 1 7Recognised pension expense 72 14 86 75 (48) 28Recognised premiums paid to the defined-contribution scheme, incl. AFP 1) 12 6Total pension expenses 98 34

31/12-11 31/12-10Pension commitment Secured Total Sum Unsecured Total SumPresent value of earned pension commitment 1 380 45 1 426 1 103 59 1 162Fair value of pension assets (763) 0 (763) (718) 0 (718)Net pension commitment 617 45 662 385 59 443Employer’s National Insurance contributions 87 6 93 54 8 63Estimate variances not recognised (573) (1) (574) (356) (8) (364)Capitalised pension commitment 131 51 182 83 59 142


Note 28 Pension commitments (contd. III)

PARENT BANK

Change in pension commitment during the year 2011 2010Pension commitment at 1 Jan. 1 162 1 200Year's pension earnings 37 41Interest expense on pension commitments 45 48Plan change 1) 0 (106)Estimate variances 194 24Acquisition of enterprise 31 0Pension payments (43) (45)Pension commitment at 31 Dec. 1 426 1 162

Change in pension assets during the yearPension assets (market value) at 1 Jan. 718 675Return on pension assets 39 39Estimate variances (19) (7)Premiums paid/ paid to premium fund 25 35Administration expenses (4) (3)Acquisition of enterprise 27 0Pension payments (24) (21)Pension assets (market value) at 31 Dec. 763 718

Historical development31/12-11 31/12-10 31/12-09 31/12-08 31/12-07 31/12-06

Gross pension commitments2) 1 519 1 224 1 274 1 279 1 121 1 235Gross pension assets (763) (718) (675) (648) (598) (542)Estimate variances not recognised (574) (364) (417) (494) (343) (468)Net capitalised pension commitments 182 142 182 137 180 226

1) The Act concerning state contributions to employees who take early retirement in the private sector (the AFP Contributions Act) entered into force on 19 February 2010. Employees who take early retirement with effect from 2011 or later will receive benefits under the new scheme. For accounting purposes, the new AFP scheme was deemed to be a defined-benefit scheme. This means that each enterprise must enter its proportional share of the scheme’s commitment, assets and pension expenses in the accounts. If there are no available calculations of the individual elements in the scheme or a consistent and reliable basis for allocation, the new AFP scheme is recognised as a defined-contribution scheme. No such basis currently exists, and the new AFP scheme is therefore recognised as a defined-contribution scheme. The new AFP scheme will be recognised as a defined-benefit scheme when reliable measurement and allocation can be carried out.

The Act concerning state contributions to employees who take early retirement in the private sector (the AFP Contributions Act) entered into force on 19 February 2010. Employees who take early retirement with effect from 2011 or later will receive benefits under the new scheme. For accounting purposes, the new AFP scheme was deemed to be a defined-benefit scheme. This means that each enterprise must enter its proportional share of the scheme’s commitment, assets and pension expenses in the accounts. If there are no available calculations of the individual elements in the scheme or a consistent and reliable basis for allocation, the new AFP scheme is recognised as a defined-contribution scheme. No such basis currently exists, and the new AFP scheme is therefore recognised as a defined-contribution scheme. The new AFP scheme will be recognised as a defined-benefit scheme when reliable measurement and allocation can be carried out. 2) Gross pension commitments include employer’s National Insurance contributions.


Note 29 Tax

PARENT BANK GROUP

2010 2011 Tax expense for the year 2011 2010105 93 Tax payable 1) 97 111

(7) Tax payable acquired as a result of acquisitions with tax continuity (7) 069 90 Change in deferred tax 95 78

174 176 Tax expense for the year 184 1891) Tax payable in the balance sheet also includes wealth tax in the amount of NOK 16 million

790 713 Pre-tax profit/loss 732 80028% tax on

221 200 Accounting pre-tax profit 205 2240 12 Share of profit from association companies 14 125 4 Expensed wealth tax, non-deductible 4 5

(77) (60) Non-taxable income (60) (77)25 20 Non-deductible expenses 20 26

0 0 Correction of deferred tax asset previous year 1 00 0 Insufficient/excess provision for tax payable 0 0

174 176 Tax expense 184 18922% 25% The effective tax rate is 25% 24%

2010 2011 Change in capitalised deferred tax: 2011 2010(62) 1 Capitalised deferred tax (tax asset) at 1 Jan. (2) (74)69 90 Recognised through profit or loss in the period 95 78(1) (5) Purchase/(-) sale of deferred tax as result of acquisitions with tax continuity (5) 00 0 Group contribution paid 0 00 0 Repayment of loss carryforward – the Government's stimulus package 0 00 21 Correction of deferred tax previous year 21 0

(6) 0 Changes entered against equity 0 (6)1 108 Capitalised deferred tax (tax asset) at 31 Dec. 109 (2)

The deferred tax and tax asset in the balance sheet relate to the following temporary differences

31/12-10 31/12-11 Deferred tax asset 31/12-11 31/12-100 0 Profit and loss account 0 07 6 Tangible fixed assets 0 0

40 106 Financial instruments 19 3940 51 Pension commitments 52 41

2 3 Other liabilities 4 30 0 Tax loss carryforward 10 9

90 166 Total deferred tax asset 85 91

31/12-10 31/12-11 Deferred tax 31/12-11 31/12-100 0 Profit and loss account 1 10 0 Tangible fixed assets 7 7

14 14 Goodwill 14 137 7 Other intangible assets 7 7

70 253 Financial instruments 165 6090 274 Total deferred tax 194 89

1 108 Net deferred tax (tax asset) 109 (2)

Deferred tax in the income statement relates to the following temporary differences

2010 2011 Deferred tax recognised through profit or loss 2011 20100 0 Profit and loss account (1) 11 1 Tangible fixed assets 0 (1)3 0 Goodwill 0 3

55 99 Financial instruments 107 6711 (10) Pension commitments (10) 12(1) 0 Other liabilities 1 (2)0 0 Tax loss carryforward (2) (2)0 0 Deferred tax asset from subsidiaries not previously capitalised 0 0

69 90 Total change deferred tax 95 78

In accordance with the exception provided for in IAS 12, the deferred tax liability relating to the takeover of excess value on a property in Jonsvollskvartalet AS is not recognised. It amounts to NOK 33 million.


Note 30 Intangible assets

PARENT BANK GROUP

Software and

licences

Excess value

customer portfolio Goodwill Total

Software and

licences

Excess value

customer portfolio Goodwill Total

At 31 December 2009164 167 109 440 Acquisition cost 168 167 123 458106 31 0 137 Accumulated depreciation 108 31 0 14058 136 109 303 Balance sheet value at 31 Dec. 2009 60 136 123 318

Financial year 201058 136 109 303 Balance sheet value at 1 Jan. 2010 60 136 123 31852 0 0 52 Year's additions 52 0 7 5939 15 0 54 Year's depreciation 40 15 0 5571 121 109 301 Balance sheet value at 31 Dec. 2010 72 121 130 323


Financial year 201171 121 109 301 Balance sheet value at 1 Jan. 2011 72 121 130 32368 0 0 68 Year's additions 69 0 0 6947 15 0 62 Year's depreciation 48 15 0 6392 106 109 307 Balance sheet value at 31 Dec. 2011 93 106 130 330


Software/licences are depreciated on a straight-line basis over their expected useful life, which is estimated to be three years.

Excess value in the customer portfolio is depreciated over the expected contract period, which is estimated to be 12 years.


Note 30 Intangible assets (contd.)

Goodwill The individual goodwill items in the balance sheet of the Sparebanken Vest parent bank and group are allocated to cash flow generating units that benefit from the purchased asset. The choice of assessment unit is made on the basis of whether where? it is possible to identify and separate cash flows relating to the activity in question. The table below shows the different assessment units and the balance sheet value of goodwill in each unit.

PARENT BANK GROUP

31/12-10 31/12-11 Assessment unit Grounds for the choice of assessment unit 31/12-11 31/12-10

82 82Retail and corporate market, Region Sogn og Fjordane

Goodwill from the takeover of Fokus Bank in Sogn og Fjordane is included in the total activity of Region Sogn og Fjordane. 82 82

27 27Retail and corporate market, Sauda

Goodwill from the takeover of Sauda Sparebank is included in the total activity of Region Sunnhordland 27 27

0 0 Kyte Næringsmegling ASKyte Næringsmegling AS has continued as a separate subsidiary of the Eiendomsmegler Vest group, and it is a natural assessment unit. 8 8

0 0 Ottesen & Dreyer AS Ottesen & Dreyer (part of Eiendomsmegler Vest AS) 6 6

0 0 Stein Herland Eiendom AS

Adv. Stein Herland Eiendom AS has continued as a separate subsidiary of the Eiendomsmegler Vest Group, and it is a natural assessment unit. 7 7

109 109 Total goodwill 130 130

Testing of valuesThe write-down test of capitalised goodwill is arrived at by discounting expected future cash flows from the assessment units. Cash flows are based on historical results from each assessment unit. The discount factor is based on an assessment of what the required rate of return is in the market for the type of activity that is included in the assessment unit. The required rate of return reflects the risk attached to the activity. The write-down tests are performed on the cash flows after tax. The tests have not uncovered the need to write down goodwill in the parent bank or Group at 31 Dec. 2011 Key write-down test preconditions

Key write-down test preconditions Required rate of return after taxPerson- og bedriftsmarked Region Sogn og Fjordane 8.50%Person- og bedriftsmarked Region Sunnhordland 8.50%Kyte Næringsmegling AS 12.50%Ottesen & Dreyer 12.50%Adv. Stein Herland Eiendom AS 12.50%


Note 31 Tangible fixed assets

PARENT BANK GROUP

Machinery, FFE and means of transport

Land and buildings Total

Machinery, FFE and means of transport

Land and buildings Total

At 31 December 2009489 15 504 Acquisition cost 516 465 981391 0 391 Accumulated depreciation 405 107 51298 15 113 Balance sheet value at 31 Dec. 2009 111 358 469

Financial year 201098 15 113 Balance sheet value at 1 Jan. 2010 111 358 46922 0 22 Year's additions 25 21 46

1 8 9 Year's disposals 2 0 231 0 31 Year's depreciation 34 10 4487 7 94 Balance sheet value at 31 Dec. 2010 100 369 469

At 31 December 2010509 7 516 Acquisition cost 539 486 1 025422 0 422 Accumulated depreciation 439 117 556

87 7 94 Balance sheet value at 31 Dec. 2010 100 369 469

Financial year 201187 7 94 Balance sheet value at 1 Jan. 2011 100 369 46945 0 45 Year's additions 47 6 53

5 11 16 Additions on the takeover of Hardanger Spb 5 13 181 0 1 Year's disposals 1 0 1

31 0 31 Year's depreciation 34 10 44105 18 123 Balance sheet value at 31 Dec. 2011 118 378 496

At 31 December 2011506 18 524 Acquisition cost 535 510 1045401 0 401 Accumulated depreciation 417 132 549105 18 123 Balance sheet value at 31 Dec. 2011 118 378 496

10-33% 0-10% Percentage rate for accounting depreciation 10-33% 0-10%


Note 32 Debt to credit institutions

Debt to credit institutions is classified as valued at amortised cost or recognised at fair value.

PARENT BANK GROUP

31/12-10 31/12-11 31/12-11 31/12-102 593 1 620 No agreed term 709 166

10 211 7 093 With agreed term1) 7 093 10 21112 804 8 713 Valued at amortised cost 7 802 10 377

152 169 With agreed term 169 152152 169 Recognised at fair value 169 152

12 956 8 882 Debt to credit institutions 7 971 10 529

31/12-10 1/1 - 31/12-11 31/12-11

Recognised at fair valueBalance

sheet valueAdditions/

disposalsChange in value

Balance sheet value

Cost value of debt in CuRRENCY 165 165Change in exchange rate (8) (1) (9)Value adjustment, interest rate 13 20 33Value adjustment, credit spread (19) (2) (21)

151 17 168

Accrued interest 1 0 1Recognised at fair value 152 169

Nominal value in CuRRENCY EuR 20 20

The net gain/(loss) on debt recognised at fair value is included in the accounting item net gain/(loss), financial instruments recognised at fair value (Note 26).

1) Including repurchase agreement (scheme whereby government securities are swapped for covered bonds) with a book value of NOK 3.448 million. Repurchase agreements (Repo) involve a transfer of assets whereby the bank retains the risk and the return, and therefore does not meet the requirements for derecognition. The transferred asset is recognised in its entirety with a counter entry for a financial commitment for the consideration received.


Note 33 Deposits

Customer deposits are classified as valued at amortised cost or recognised at fair value.

PARENT BANK GROUP

31/12-10 31/12-11 31/12-11 31/12-1047 747 52 211 Valued at amortised cost 52 137 47 6651 054 1 005 Recognised at fair value 1 005 1 054

48 801 53 216 Total deposits 53 142 48 719

31/12-10 1/1 - 31/12-11 31/12-11


Balance sheet value

Additions/disposals

Change in value

Balance sheet value

Fixed-interest deposits 924 64 988Value adjustment, interest rate 1 0 1

925 989

Indexed deposits 1) 98 (98) 0Value adjustment, interest rate 17 (17) 0

115 0

Accrued interest 14 2 16Recognised at fair value 1 054 1 005

Pålydende fastrenteinnskudd NOK 924 988Pålydende indekserte innskudd NOK 115 0

The net gain/(loss) on deposits recognised at fair value is included in the accounting item net gain/(loss), financial instruments recognised at fair value (Note 26). 1) These are savings products comprising a deposit element and a derivative element, and where the customer’s return depends on the development of defined market variables. Each element of the product is treated separately for accounting purposes.


Note 34 Deposits broken down by customer groups

Breakdown of deposits from and debt to customers

PARENT BANK GROUP

31/12-10 31/12-11 31/12-11 31/12-10NOK % NOK % Breakdown by sector NOK % NOK %

1 130 2.32 1 323 2.49 Primary industries 1 323 2.49 1 130 2.321 158 2.37 1 137 2.14 Manufacturing and mining 1 137 2.14 1 158 2.381 883 3.86 1 616 3.04 Building and construction. power and water supply 1 616 3.04 1 883 3.871 523 3.12 1 793 3.37 Commerce. hotels and restaurants 1 793 3.37 1 523 3.13

662 1.36 671 1.26 International shipping and pipeline transport 671 1.26 662 1.36724 1.48 770 1.45 Other transport. post and telecommunications 770 1.45 724 1.49

2 432 4.98 2 686 5.05 Property management 2 622 4.93 2 350 4.829 241 18.94 10 284 19.33 Services 10 275 19.33 9 241 18.972 161 4.43 1 345 2.53 Municipal/public sector 1 345 2.53 2 161 4.44

326 0.67 341 0.64 Abroad 341 0.64 326 0.6721 240 43.52 21 967 41.28 Total – business and industry 21 893 41.20 21 158 43.4327 561 56.48 31 249 58.72 Retail customers 31 249 58.80 27 561 56.5748 801 100.00 53 216 100.00 Total corporate and retail customers 53 142 100.00 48 719 100.00

Geographical breakdown36 601 75.00 39 769 74.73 Hordaland 39 696 74.70 36 519 74.96

5 134 10.52 5 647 10.61 Sogn og Fjordane 5 647 10.63 5 134 10.543 011 6.17 3 582 6.73 Rogaland 3 582 6.74 3 011 6.183 730 7.64 3 878 7.29 Rest of Norway 3 877 7.29 3 730 7.66

48 476 99.33 52 875 99.36 Total Norway 52 801 99.36 48 394 99.33325 0.67 341 0.64 Abroad 341 0.64 325 0.67

48 801 100.00 53 216 100.00 Total geographical breakdown 53 142 100.00 48 719 100.00

under the Act on guarantee schemes for banks and public administration etc. of financing institutions, all savings banks are required to be members of the Savings Banks’ Guarantee Fund. The Fund guarantees to cover losses incurred by a depositor on deposits with a member institution for an amount not exceeding NOK 2 million of the depositor’s total deposits. By deposit is meant any credit balance with the bank in an account registered by name, as well as commitments under certificates of deposit registered by name. The fee payable to the Savings Banks’ Guarantee Fund is deter-mined in accordance with the provisions of the Guarantee Schemes Act.


Note 35 Securitised debt

Securitised debt is classified as valued at amortised cost, subject to hedge accounting or recognised at fair value.

GROUP31/12-11 31/12-10

Valued at amortised cost Nominal value Balance sheet valueBalance sheet

valueNOK 21 861 21 839 15 320EuR 529 4 114 7 739CHF 12 77 0

accrued interest 60 4126 090 23 100

Subject to hedge accountingNOK 2 400 2 529 581EuR 1 000 7 953 3 807

Accrued interest 225 6210 707 4 450

Recognised at fair valueNOK 7 320 7 316 9 105EuR 20 157 0

Change in value, interest rate and exchange rate 145 117Value adjustment, credit spread – opening balance 26 62Value adjustment, credit spread – this period (28) (36)Accrued interest 193 266

7 809 9 514Securitised debt 44 606 37 064

Change in securities debt

Balance sheet

31/12-10Issued

2011

Matured/ redeemed

2011

Change in exchange rate 2011

Other changes

2011

Balance sheet

31/12-11Certificates, nominal value 1 550 1 500 (1 550) 1 500Bonds, nominal value 35 128 16 240 (9 078) (79) 42 211Value adjustments 386 509 895Total securities 37 064 17 740 (10 628) (79) 509 44 606

The net gain/(loss) on securitised debt recognised at fair value is included in the accounting item net gain/(loss), financial instruments recognised at fair value (Note 26).


Note 35 Securitised debt (contd.)

Valued at amortised cost or subject to hedge accounting


Maturity date securities debt: NOK Valuta NOK Valuta Totalt2012 3 406 3 015 550 156 7 1272013 4 575 747 2 000 7 3222014 6 725 428 2 170 9 3232015 1 390 3 892 600 5 8822016 3 000 3 892 500 7 3922017 3 665 3 6652018201920202021 1 000 1 0002022 500 500Total securities debt, nominal value 42 211

PARENT BANK

31/12-11 31/12-10

Valued at amortised costNominal

valueBalance

sheet valueBalance

sheet valueNOK 9 372 9 369 9 102EuR 529 4 114 7 739CHF 12 77 0


Recognised at fair valueNOK 7 320 7 459 9 248EuR 20 157 0


Securitised debt 21 395 26 381


Note 36 Subordinated loan capital and subordinated bond loans

Balance sheet value

Issue year Nominal value Interest Redemption right 31/12-11 31/12-10Ordinary subordinated loans2007 Subordinated loans EuR 85 mill 3-mth. EuRIBOR + 0.375% Call option 12/7-12 661 664Subordinated bond loans2004 Subordinated bond loans 1) uSD 60 mill Fixed interest 7.30% Call option 30/4-14 510 4122010 Subordinated bond loans NOK 400 mill Fixed interest 8.05% Call option 19/5-20 442 419Subordinated loan capital 1 613 1 495

Subordinated bonds are included in their entirety in the bank’s core capital.

Change in subordinated loans and subordinated bond loans 31/12-10 Issued

Matured/ redeemed

Change in exchange

rateOther

changes 31/12-11Ordinary subordinated loan capital, nominal value 664 (3) 661Subordinated bond loans, nominal value 752 0 0 10 762Value adjustments 79 111 190Total subordinated loans and subordinated bond loans 1 495 0 0 7 111 1 613

Accumulated 31/12-10 1/1 - 31/12-11 31/12-11

Valued at amortised costOriginal book

value NOKChange in

exchange rate Change in value

Change in exchange rate

Change in value

Balance sheet value

Subordinated loan EuR 85 million 677 (15) (3) 659Amortised interest and charges 2 2

661

Recognised at fair value Subordinated bond loan uSD 60 million 429 (77) 10 362Value adjustment 50 87 137Value adjustment, credit spread 5 2 7Subordinated bond loans 395 5 22 422Accrued interest 24

952

Total 1 501 (90) 60 7 111 1 613

Effective rate of interest for the subordinated loan recognised at fair value in 2011: 4.53% and 7.44% (2010: 6.11% and 8.42%

The net gain/(loss) on subordinated loan capital recognised at fair value is included in the accounting item net gain/(loss), financial instruments recognised at fair value (Note 26). 1) The interest rate on the loan is fixed until 2034, after which a floating rate of interest will apply.


Note 37 Capital adequacy

Banking operations entail risk in many areas. Good risk and capital management is a key strategic element instrument in Sparebanken Vest’s value creation process. The goal of Sparebanken Vest’s Board of Directors is for the bank to have a moderate risk profile. The bank’s ability to balance its ambitions against its ability and willingness to take risk will have both quantitative and qualitative effects. A strong risk culture is characteristic of an organisation with a strong focus on risk and profitability. This will strengthen the bank’s rating and ensure good access to the capital market. Risk-adjusted capital is used to express the bank’s risk measurement and risk tolerance.

Although expected losses are taken into account in its pricing, Sparebanken Vest must have capital reserves to cover unexpected losses. Risk-adjusted capital is calculated for all risk areas. This capital shall correspond to the capital required to run banking operations. The risk-adjusted capital and the statutory minimum requirements must be seen in conjunction with the bank’s actual equity.

The bank’s processes relating to capital assessment are based on quantification of the capital needs for the individual risk areas. Stress tests are carried out in order to stimulate the effects of situations that are unlikely to arise but could result in large unexpected losses. The quantitative analyses are also supplemented by qualitative assessments.

At the start of 2007, the Financial Supervisory Authority of Norway granted Sparebanken Vest approval to use basic IRB methods. The approval was subject to certain conditions, all of which were met by Sparebanken Vest in 2011. Status as an IRB bank entails follow-up activities that are part of the Authority’s supervision of the bank. For regulatory capital purposes, there are transitional regulations for the calculation of capital.

All of the bank’s customers who are covered by the IRB system are scored in the bank’s internal score models. The bank also calculates values for Loss Given Default (LGD) for retail market customers and small corporate customers. For corporate customers, LGD rates set out in the Capital Adequacy Regulations are used. No external rating is used by the bank, and nor does it have self-determined risk parameters beyond those that are used to set the basis for the calculation of and the sum of expected losses. Any values used for commitment security are taken into account when calculating LGD and in the scoring of retail market customers.

The framework and processes used by the bank to manage and control the IRB system follow from its credit strategy, policy and procedures. Sparebanken Vest has also drawn up a validation mandate to ensure verification of model tools (PD, LGD, EAD) and their application. An annual validation report is drawn up for the Board of Directors.

The bank classifies all commitments covered by the IRB system every month. Quantification of the risk parameters takes place in the same operation, and they are also updated each month. In the retail market, the commitment security values are adjusted annually or when a new commitment starts. In the corporate market, the updating of commitment security values is part of the procedure for monitoring commitments. The bank applies the definition of default used in the Capital Adequacy Regulations, which is when an account has been overdrawn for 90 days or more or for amounts of NOK 500,000 or more. Default can also be deemed to exist based on an ‘unlikely to pay’ criterion, such as insolvency, if information to this effect is received.

Validation is carried out annually for PD, EAD and LGD. The bank has outcome data for eight years.

Definitions:

EAD (exposure at default): risk parameter representing the commitment amount on default.

LGD (loss given default): risk parameter representing a commitment’s loss percentage on default.

PD (probability of default): risk parameter representing the likelihood of default within a period of one year.


Note 37 Capital adequacy (contd.)

PARENT BANK GROUP

31/12-10 31/12-11 31/12-11 31/12-10Minimum requirement for own funds, Basel II

1 529 1 670 Corporate exposure (excl. SL) 1 670 1 529318 332 Specialised lending exposure (SL) 332 318

20 16 Mass market exposure, SME 20 23534 477 Mass market exposure, secured by mortgage on real property 655 655162 149 Other mass market exposure 149 162373 271 Equity positions 0 140

2 937 2 915 Total credit risk, IRB 2 826 2 827

10 30 Position risk, debt instruments 30 1029 26 Position risk, equity instruments 26 29

0 13 Currency risk 13 0260 264 Operational risk 303 273488 941 Exceptional commitments pursuant to IRB 494 269

(3) (3) Deductions (3) (3)3 722 4 186 Minimum requirement pursuant to IRB 3 689 3 406

117 70 Correction to transitional scheme 1 287 9833 839 4 256 Minimum requirement for own funds 4 976 4 389

Own funds540 765 Equity certificate capital 765 539(10) (12) - Own equity certificates (12) (10)

465 562 Premium reserve 564 4674 606 5 047 Primary capital 5 078 4 607

14 14 Compensation fund 14 14175 175 Gift fund 175 17568 123 Equalisation reserve 176 6877 35 Other equity / reserve for unrealised gains (70) 68

0 0 Minority interests 1 15 935 6 710 Total book equity 6 691 5 929

(301) (307) Deferred tax, goodwill and other intangible assets (412) (387)0 0 unrealised gains on tangible fixed assets (29) (32)

746 756 Subordinated bonds 756 7469 (12) Value adjustment, own liabilities (12) 9

(224) (197) 50% deduction for expected loss IRB and own funds financ. inst. (198) (225)0 0 Deduction for provision for dividend/gifts (82) (106)0 0 Interim results that are not part of the core capital 0 0

6 164 6 951 Total core capital 6 714 5 933

664 662 Perpetual own funds 662 6640 0 45% addition for net unrealised gain on tangible fixed assets 13 14

(224) (197) 50% deduction for expected loss IRB and own funds financ. inst. (198) (225)440 465 Total supplementary capital 476 453

6 604 7 416 Net own funds 7 191 6 387

13.8% 13.9% Capital adequacy. transitional scheme 11.6% 11.6%12.8% 13.1% of which core capital 10.8% 10.8%

0.9% 0.9% of which supplementary capital 0.8% 0.8%

14.2% 14.2% Capital adequacy. Basel II fully implemented 15.6% 15.0%13.2% 13.3% of which core capital 14.6% 13.9%

0.9% 0.9% of which supplementary capital 1.0% 1.1%


Note 38 Equity certificates

Equity certificate capital at 31 December 2011 consists of 30,607,452 equity certificates with a nominal value of NOK 25.

Dividend and donationsAs a result of the amendments to the Act on financing activity and financing institutions, the regulations for the calculation of dividend on equity certificate capital and donations for the public benefit were changed with effect from 2009. Pursuant to the new regulations, the year’s dividend funds are divided between the equity certificate capital and primary capital, in proportion to the ratio between the equity certificate capital plus the premium reserve and the primary capital plus the compensation fund.

Owner fractionFigures for parent bank (NOK 1,000) 31/12-11 31/12-10Equity certificates 765 186 539 629Own equity certificates (12 301) (9 844)Premium reserve 561 915 464 831Equalisation reserve 123 214 67 679Total equity certificate capital (A) 1 438 014 1 062 295

Primary capital 5 047 405 4 606 439Compensation fund 14 379 14 379Gift fund 175 000 175 000Total primary capital (B) 5 236 784 4 795 818

Reserve for unrealised gains 35 293 76 890Equity 6 710 091 5 935 003

Owner fraction (A /(A + B) 21.5% 18.1%

Weighted owner fraction 18.8% 15.9%

Dividend per equity certificate 2,00 3,50

Total dividend on 21,585,142 equity certificates (NOK 1,000) 43 170 75 548Total dividend on 9,022,310 equity certificates (NOK 1,000) 1) 9 022

1) Equity certificates issued to Sparebankstiftinga Hardanger on the acquisition of Hardanger Sparebank have, by agreement, entitlement to fifty per cent dividend for 2011.

Own equity certificates When buying own equity certificates, the purchase price including direct costs will be recognised as a deduction from equity. The nominal value of the bank’s own equity certificates is recognised as a negative amount on a separate line under equity certificate capital. Any purchase price in excess of the nominal value is deducted from primary capital.

2011 2010The number of equity certificates at 1 January 393 768 3 384Split of equity certificates 0 3 384Equity certificates purchased 154 760 487 000Equity certificates sold 56 475 100 000

The number of equity certificates at 31 December 492 053 393 768

Effective return per equity certificate2011 2010

Listed price at 31 December 31.70 47.00Dividend paid in year 3.50 2.00Listed price at 1 January 47.00 51.00Effective return in NOK (11.80) (2.00)Effective return as a percentage (25.11) (3.92)


Note 38 Equity certificates (contd.)

The twenty biggest owners No of ECsProportion of

EC capital %Sparebankstiftinga Hardanger 9 022 310 29.48Sparbankstiftelsen Sauda 2 976 227 9.72MP Pensjon 1 425 000 4.66Frank Mohn AS 1 085 078 3.55Skagen Vekst 995 506 3.25Bergen Kommunale Pensjonskasse 950 000 3.10Odin Norge 804 656 2.63Herfo Finans AS 757 222 2.47Fondsfinans 682 800 2.23Sparebanken Vest 492 053 1.61Holberg Norge Verdipapirfondet 485 000 1.58Kommunal Landpensjonkasse 444 988 1.45VPF Nordea Norge 366 023 1.20KLP Aksje Norden VPF 328 889 1.07KLP Aksje Norge VPF 326 668 1.07Terra utbytte VPF 324 572 1.06Helgeland Sparebank 197 333 0.64VPF Nordea Kapital 193 000 0.63VPF Nordea Avkastning 168 111 0.55Skudenes & Aakra Sparebank 164 444 0.54Total 22 189 880 72.50


Note 38 Equity certificates (contd.II)

Equity certificates owned by the Managing Director, executive personnel, members of the Board of Directors, members of the Supervisory Board and Control Committee, and persons closely related to the aforementioned, defined in section 7-26 of the Accounting Act and section 8-20 of the Supplementary Regulations to the Act.

No of ECsErling Syvertsen, Chair of the Supervisory Board 23 333Ove Ellingsen, member of the Supervisory Board 2 000Jostein Valen, member of the Supervisory Board 367Ingrid Tjørhom, member of the Supervisory Board 300Kristin Axelsen, member of the Supervisory Board 567Bodil Digranes, member of the Supervisory Board 1 020Kirsten Guldbrandsen, member of the Supervisory Board 828Lisbeth Ormevik, member of the Supervisory Board 1 262Rune Pedersen, member of the Supervisory Board 600Linda K. Nordeide, member of the Supervisory Board 1 871Liv Erstad, member of the Supervisory Board 250Morten Monsen, member of the Supervisory Board 628Johnny Iden, member of the Supervisory Board 1 192Karen Dahle, member of the Supervisory Board 1 000Bjørn Berland, member of the Supervisory Board 400Trond Mohn, member of the Supervisory Board 22 856Eivind Lunde, member of the Supervisory Board 10 108Siri Birkeland, member of the Supervisory Board 228Jan Øvrebø, member of the Supervisory Board 5 200Arne Buanes, member of the Supervisory Board 4 044Trygve Bruvik, Chair of the Board of Directors 36 200Anne Marit Hope, member of the Board of Directors 1 225Øyvind Atle Langedal, member of the Board of Directors 3 000Tone Mattsson, member of the Board of Directors 800Sivert Sørnes, member of the Board of Directors 2 325Kjell Steinsbø, member of the Control Committee 1 000Stein Norvald Klakegg, Managing Director 6 306Jan Erik Kjerpeseth, Deputy Managing Director 2 634Henning Nordgulen, Director – Corporate Market 1 725Kate Henriksen, Director – Retail Market 367Pål Pedersen, Legal Director 1 000Frank Johannesen, Director – Risk Management 820Siren Sundland, Director of Corporate Communication 2 000

137 456

Breakdown by numberNo of ECs No of ECs Percentage No of owners Percentage

1 - 100 15 779 0.05 253 8.68 101 - 1 000 754 447 2.46 1 675 57.44

1 001 - 5 000 1 548 290 5.06 694 23.80 5 001 - 10 000 961 532 3.14 132 4.53

10 001 - 31 000 000 27 327 404 89.28 162 5.56 Total 30 607 452 100.00 2 916 100.00


Note 39 Transactions with related parties

The information provided is in accordance with IAS 24 ‘Related Party Disclosures’.

Sparebanken Vest defines subsidiaries, associated companies, board members and the group management as related parties in relation to this accounting standard. Information about remuneration of the Supervisory Board and the Control Committee is stated pursuant to the requirements of the Accounting Act.

Shareholdings in group companies and associated companies are specified in Note 16. Transactions with related parties are conducted on generally accepted business terms and in accordance with accepted business principles.

Intragroup transactions 2011 (NOK 1.000) SubsidiariesAssociated companies

Key personnel

Profit/lossInterest from loans to customers 132 776 4 054Interest from interest-bearing securities (issued by the housing credit company) 206 919 0Interest and similar expenses on deposits from customers (43 374) (10 652)Commission income received relating to distribution 0 54 669Gain/loss on financial instruments (15 286) 0Group dividend/contributions received 125 000 0Pay, pension and fees to executive personnel and officers of the company 0 0 25 949Rent (98 294) 0Management fees 37 359 0Fees received for the sale of services 1 890 3 156

Balance sheetShares in subsidiaries, associated companies: Capital increases 800 000 72 125Group contributions receivable 131 029 0Transferred loans to housing credit company, present year 9 374 239 0Transferred loans to housing credit company, accumulated 31 101 470 0Loans to related parties at 31 Dec. 2 704 213 222 327Deposits from related parties 984 675 417 390The parent bank's holding of covered bonds 5 096 544 282 000


Note 39 Transactions with related parties (contd.I)

Intragroup transactions 2010 (NOK 1,000) SubsidiariesAssociated companies

Key personnel

Profit/lossInterest from loans to customers 88 207 732Interest from interest-bearing securities (issued by the housing credit company) 233 213 0Interest and similar expenses on deposits from customers (23 331) (10 374)Commission income received relating to distribution 0 38 500Gain/loss on financial instruments (35 176) 0Group dividend/contributions received 110 000 0Pay, pension and fees to executive personnel and officers of the company 0 0 22 884Rent (98 485) 0Management fees 22 903 0Fees received for the sale of services 1 800 3 156

Balance sheetShares in subsidiaries, associated companies: Capital increases 556 000 179 000Group contributions receivable 116 753 0Transferred loans to the housing credit company, present year 9 837 129 0Transferred loans to housing credit company, accumulated 21 727 231 0Loans to related parties at 31 Dec. 4 885 478 0Deposits from closely-related parties 2 509 364 356 112The parent bank's holding of covered bonds 7 826 623 217 000

Subsidiaries mainly refer to Eiendomsmegler Vest AS, Sparebanken Vest Boligkreditt and Sparebanken Vest Eiendomsforvaltning AS. Eiendomsmegler Vest AS is market leader in Hordaland in estate agency activities and number two in Rogaland. Internal transactions with the estate agency company are limited and mainly consist of interest on deposits and lending with pertaining balance sheet items. Sparebanken Vest Eiendomsforvaltning manages the group’s properties and receives rent from the parent company.Sparebanken Vest Boligkreditt AS is a wholly owned company that manages housing loans financed by the issuing of covered bonds. Sparebanken Vest sells loans to the company, which in turn finances its activities by issuing covered bonds. Sparebanken Vest owns part of the bonds issued by the housing credit company and receives interest income on these bonds. In addition, the subsidiary has both deposits and liabilities in relation to the parent company, on which interest is calculated in accordance with the arm’s length principle. Sparebanken Vest Boligkreditt pays management fees for transferred loans and buys administrative services from Sparebanken Vest.Associated companies consist of Frende Forsikring, Norne Securities, Brage Finans and Verd Boligkreditt. Sparebanken Vest sells general and life insurance through Frende Forsikring on a commission basis. Leasing products are sold through Brage Finans correspondingly.


Note 39 Transactions with related parties (contd.II)

Payroll and other remuneration of executive personnel Executive personnel are defined as members of the corporate management team. The information includes annual salaries at 31 December 2011, all taxable remuneration paid in 2011, the proportion of the overall remuneration that includes a bonus, and calculated, earned pension rights in 2011 (2010 figures in brackets). Earned pension comprises earned pension rights for the year in the bank’s company pension scheme and earned pension in the scheme for executive personnel. See Note 27 ‘Pension commitments’ for a description of the pension schemes.

At 31 December 2011, the Managing Director had an annual salary of NOK 2,567,000 and received total taxable remuneration of NOK 3,358,000 (2,566,000) in 2011. Bonuses accounted for NOK 587,000 of the remuneration paid. Earned pension rights in 2011 are calculated at NOK 2,345,000 (1,627,000). At 31 December 2011, the Deputy Managing Director had an annual salary of NOK 1,778,000 and received total taxable remuneration of NOK 2,375,000 (1,823,000) in 2011. Bonuses accounted for NOK 456,000 of the remuneration paid. Earned pension rights in 2011 are calculated at NOK 506,000 (407,000). The corresponding information, in the same order, for other executive personnel is as follows: Director – Corporate Market NOK 1,522,000, 2,024,000 (1,731,000), NOK 356,000 and NOK 554,000 (443,000); Director – Retail Market NOK 1,433,000, NOK 1,893,000 (1,639,000), NOK 288,000 and NOK 650,000 (501,000); Legal Director NOK 1,316,000, NOK 1,806,000 (1,597,000), NOK 298,000 and NOK 732,000 (540,000); Director of Corporate Communication NOK 1,142,000, NOK 1,546,000 (1,355,000), NOK 253,000 and NOK 389,000 (333,000); Director – Markets NOK 1,200,000, NOK 1,217,000, NOK 165,000 and NOK 57,000; Director of Human Resources NOK 1,285,000, NOK 1,738,000 (1,541,000), NOK 266,000 and NOK 287,000 (308,000) and Director of Risk Management NOK 1,208,000, NOK 1,643,000 (1,488,000), NOK 268,000 and NOK 486,000 (358,000). On the recommendation of the Compensation Committee, the Board of Directors sets the salary paid to the Managing Director and the Deputy Managing Director. The Managing Director determines remuneration for other executive personnel after consultation with the Compensation Committee. Provision of NOK 2 million has been made for the 2011 financial year for bonuses to be distributed among executive and key personnel, followingassessment. If, at the bank’s request, members of the corporate management resign their positions, they are entitled to severance pay corresponding to one year’s salary in addition to their ordinary salary during the period of notice (six months). Severance pay is only paid if the employee leaves his/her position at the bank’s request and complies with the provisions prohibiting competition. If the employee resigns at his/her own initiative, he/she is not entitled to severance pay. With respect to the Managing Director, there is a mutual period of notice of six months. The Board of Directors can decide to terminate employment earlier without a reduction in pay. If the bank terminates the employ-ment relationship, salary and additional benefits are paid for 18 months from the expiry of the period of notice after the deduction of any external pay received during the period.

Remuneration of officers of the company (in whole NOK) 2011 2010Styret Directors' fees Additional fees Total remuneration Total remuneration

Trygve Bruvik Chair of the Board 360 000 60 000 420 000 432 000Marit Solberg Deputy Chair 170 000 6 000 176 000 168 000Anne Kverneland Bogsnes until May 2011 60 000 6 000 66 000 198 000Øyvind A Langedal 150 000 60 000 210 000 213 000Tone Mattsson 150 000 0 150 000 150 000Richard Rettedal 150 000 51 000 201 000 210 000Gerd Kjellaug Berge until May 2011 50 000 0 50 000 159 000Yvonne Torgersen Hetlevik From May 2010 150 000 6 000 156 000 103 000Anne Marit Hope From May 2010 150 000 0 150 000 109 000Sivert Sørnes From May 2011 100 000 3 000 103 000Arild Bødal From May 2011 100 000 0 100 000

Jan O YttredalDeputy member from May 2010 53 000

Arne Havnerås until May 2010 50 000Total 1 590 000 192 000 1 782 000 1 845 000

Directors’ fees and additional fees for participating in committees are decided by the Supervisory Board.

Remuneration of the parent bank’s Supervisory Board amounted to NOK 174,168 (127,000). In addition to meeting fees of NOK 941,000 (631,000).

2011 2010Control Committee Remuneration Additional fees Total remuneration Total remunerationTom W Horne Chair 125 000 0 125 000 125 000 Kjell Steinsbø Deputy chair 95 000 0 95 000 95 000Magni Haugland 85 000 0 85 000 85 000Charlotte H. Lem From May 2010 85 000 0 85 000 56 667Liv Henjum until May 2010 0 0 0 28 333Total 390 000 0 390 000 390 000


Note 39 Transactions with related parties (contd.III)

Loans and security furnished to executive personnel, employees and officers of the company (NOK 1,000)

PARENT BANK GROUPLoans and security furnished to the Managing Director and Deputy Managing Director (NOK 1,000) 2011 2010 2011 2010

Managing Director Stein Klakegg 2 046 2 000 5 063 6 355Deputy Managing Director Jan Erik Kjerpeseth 24 7 237 7 074 7 237Loans are furnished on standard terms for employees

Loans and security furnished to officers of the company (NOK 1,000), parent bankBoard of DirectorsMarit Solberg, board member 0 0 965 1 702Geir Vindheim, board member 2 003 0 2 003 0Yvonne Torgersen Hetlevik, board member 14 0 2 414 2 360Arnulf Ingvaldsen, board member 0 0 253 0Sivert Sørnes, board member 518 0 518 0Øyvind A Langedal, board member 0 0 0 2 379Anne Marit Hope, employee representative 0 442 1 281 442Tone Mattsson, employee representative 777 0 777 1 320Loans are furnished on standard customer terms

Chair of the Supervisory BoardLillian Marie Torsvik (until May 2011) 0 170 0 131Loans are furnished on standard customer terms

Total loans and furnishing of security to employees (NOK 1,000) 1) 500 876 580 487 1 286 618 1 144 441

Total loans and furnishing of security to other members of the Supervisory Board and Control Committee (NOK 1,000)The Supervisory Board 2) 1 802 13 818 11 273 30 660Control Committee 0 0 0 0

1) Excluding the Managing Director, the Deputy Managing Director and employee representatives.

2) Excluding the Chair of the Supervisory Board, board members, Control Committee members and employee representatives.

The cost of subsidising the interest rate on loans to employees is not entered as an operating expense and affects the bank’s net interest. Loans to employees are subsidised by a 20% discount on standard customer terms.


Note 39 Transactions with related parties (contd.III)

Loans and security furnished to executive personnel, employees and officers of the company (NOK 1,000)

PARENT BANK GROUPLoans and security furnished to the Managing Director and Deputy Managing Director (NOK 1,000) 2011 2010 2011 2010

Managing Director Stein Klakegg 2 046 2 000 5 063 6 355Deputy Managing Director Jan Erik Kjerpeseth 24 7 237 7 074 7 237Loans are furnished on standard terms for employees

Loans and security furnished to officers of the company (NOK 1,000), parent bankBoard of DirectorsMarit Solberg, board member 0 0 965 1 702Geir Vindheim, board member 2 003 0 2 003 0Yvonne Torgersen Hetlevik, board member 14 0 2 414 2 360Arnulf Ingvaldsen, board member 0 0 253 0Sivert Sørnes, board member 518 0 518 0Øyvind A Langedal, board member 0 0 0 2 379Anne Marit Hope, employee representative 0 442 1 281 442Tone Mattsson, employee representative 777 0 777 1 320Loans are furnished on standard customer terms

Chair of the Supervisory BoardLillian Marie Torsvik (until May 2011) 0 170 0 131Loans are furnished on standard customer terms

Total loans and furnishing of security to employees (NOK 1,000) 1) 500 876 580 487 1 286 618 1 144 441

Total loans and furnishing of security to other members of the Supervisory Board and Control Committee (NOK 1,000)The Supervisory Board 2) 1 802 13 818 11 273 30 660Control Committee 0 0 0 0

1) Excluding the Managing Director, the Deputy Managing Director and employee representatives.

2) Excluding the Chair of the Supervisory Board, board members, Control Committee members and employee representatives.

The cost of subsidising the interest rate on loans to employees is not entered as an operating expense and affects the bank’s net interest. Loans to employees are subsidised by a 20% discount on standard customer terms.

Note 40 Disputes

As of 31 December 2011, Sparebanken Vest was not involved in any lawsuits or legal disputes of material financial significance to the group’s activities. The bank is otherwise subject to various claims relating to its activities at all times. Provision for bad debt has been made where it has been deemed necessary.

Note 41 Accounting integration – Hardanger Sparebank

Hardanger Sparebank was taken over with accounting effect from 1 November 2011. The pre-tax profit for the acquired company for the period November and December 2011 is incorporated in the consolidated accounts in the amount of NOK 6 million.

CompensationThe fair value of equity certificates issued (9,022,310) 323Cash compensation 78Total compensation 401

The fair value of the equity issued represents the listed share price on the date of the transaction.

The breakdown of the takeover’s tangible and intangible values are as follow:

Assignment of acquisition costCash in and receivables from central banks 12Loans to and receivables from credit institutions 1Gross loans to and receivables from customers 3 624Provision for bad debt (29)Securities 337Shareholdings in group companies 2Tangible fixed assets 16Identifiable intangible excess values 8Other assets 21Debt to credit institutions (451)Deposits from and debt to customers (2 314)Securitised debt (699)Pension commitments (5)Other liabilities (65)Badwill (57)

Total acquired assets and liabilities 401

Excess value in connection with the takeover was primarily linked to the shareholding and property values. Negative value is linked to pension commitments and other liabilities. Badwill arises in the accounts as a result of a fall in the value of the consideration between the date the agreement was entered into (28 April) and the date on which the transaction was implemented (1 November). In addition, the acquired bank has, prior to the transaction, realised excess value relating to the shareholding over and above what formed the basis for the negotiated conversion ratio. The acquired equity is therefore higher than at the time of acquisition.

If the merger had taken place on 1 January 2011, the figures would have been as follows:

Net interest and credit commission income 1 650Net operating income 2 275Pre-tax profit 765


THE SUPERVISORY BOARD OF SPAREBANKEN VEST

Statement from the Control Committee for 2011The Control Committee has carried out the control activities deemed necessary to ensure compliance with the guidelines and orders laid down for the committee in the Savings Bank Act, and in the instructions adopted for the Control Committee.

The committee has been in contact with both the internal and external auditors. In the course of its work, the committee has held meetings with the Chair of the Supervisory Board, the Chair of the Board of Directors, the Managing Director and the directors of different business units.

The committee has not found the bank’s activities to be in breach of the Savings Bank Act, the Financial Institutions Act, the Securities Trading Act, the bank’s Articles of Association, the decisions of the Supervisory Board or other relevant provisions.

In the committee’s view, the Board of Directors’ assessment of the bank’s financial situation, as stated in the annual report, is accurate.

In the committee’s opinion, the annual accounts have been prepared in accordance with the provisions of the Savings Bank Act and of the requirements of the Financial Supervisory Authority of Norway. The committee recommends the Supervisory Board to adopt the Board of Directors’ proposed income statement and balance sheet as Sparebanken Vest and the group’s accounts for 2011.

Bergen, 22 February 2012


Group key figures – 5 years

PROFIT DEVELOPMENT 2011 2010 2009 2008 2007

Interest income and similar income 4 390 3 947 3 955 5 548 3 642Interest expenses and similar expenses 2 800 2 431 2 502 4 240 2 516Net interest and credit commission income 1 590 1 516 1 453 1 308 1 126

Commission income and income from banking services 417 382 388 393 422Commission income and expenses relating to banking services 82 85 83 76 75Net banking services 335 297 305 317 347Income from shareholdings in group companies and associated companies (50) (42) (42) (37) (4)Net gain/(loss), financial instruments 124 212 77 (56) 212Other operating revenues 194 168 149 151 123Net other operating revenues 603 635 489 375 678Net operating expenses 2 193 2 151 1 942 1 683 1 804

Payroll and general administration expenses 1 058 962 945 844 767Depreciation 107 98 87 86 68Other operating expenses 170 164 140 138 138Total operating expenses 1 335 1 224 1 172 1 068 973Profit before write-downs and tax expense 858 927 770 615 831

Write-downs of loans and losses on guarantees 126 127 270 204 (34)Pre-tax profit 732 800 500 411 865

Tax expense 184 189 137 204 215Profit for the financial year 548 611 363 207 650

Majority share of the profit for the period 548 611 362 206 649Minority share of the profit for the period 0 0 1 1 1


Group key figures – 5 years (contd.I)

BALANCE SHEET DEVELOPMENT 31/12-11 31/12-10 31/12-09 31/12-08 31/12-07

Assets

Cash in and receivables from central banks 668 361 299 4 753 1 810Loans to and receivables from credit institutions 481 368 143 1 291 558Net lending 99 304 88 465 82 302 76 235 64 683Shares at fair value through profit or loss 738 714 604 463 560Bonds and certificates 11 537 13 406 11 808 8 565 5 109Shares available for sale 0 0 112 67 67Financial derivatives 1 695 709 605 2 368 1 140Holdings in associated companies 349 326 185 121 151Deferred tax asset 0 2 74 0 81Other intangible assets 330 323 318 266 263Tangible fixed assets 496 469 469 466 461Prepaid expenses 56 50 28 26 11Customer funds – defined-contribution pension agreements 0 0 0 43 33Other assets 331 82 714 229 121Total assets 115 985 105 275 97 661 94 893 75 048

Liabilities and equity

Debt to credit institutions 7 971 10 529 14 583 12 140 2 781Deposits 53 142 48 719 44 881 40 521 37 611Securitised debt 44 606 37 064 29 732 34 249 27 142Financial derivatives 1 089 795 458 1 338 1 419Costs incurred and prepaid income 116 134 90 102 141Pension commitments 187 147 189 144 186Deferred tax 109 0 0 162 0Other provision for commitment 28 24 19 14 10Tax payable 113 126 407 15 189Subordinated loan capital 1 613 1 495 2 062 1 437 1 042Other liabilities 320 313 355 399 234Total liabilities 109 294 99 346 92 776 90 521 70 755

Equity certificates 765 539 398 267 250Own equity certificates (12) (10) 0 (4) (3)Premium reserve 564 467 10 9 4Equalisation reserve 176 144 39 6 6Total equity certificate capital 1 493 1 140 447 278 257

Primary capital 5 078 4 637 4 083 3 684 3 573Gift fund 175 175 175 175 175Compensation fund 14 14 14Total primary capital 5 267 4 826 4 272 3 859 3 748

Reserve for unrealised gains 0 0 105 60 60Other equity (70) (38) 60 174 227Minority interests 1 1 1 1 1Total equity 6 691 5 929 4 885 4 372 4 293Total liabilities and equity 115 985 105 275 97 661 94 893 75 048

AVERAGE ASSETS UNDER MANAGEMENT (PRIMARY CAPITAL) 109 260 101 725 92 017 81 572 66 706


Group key figures – 5 years (contd.II)

PROFIT AS PERCENTAGE OF PRIMARY CAPITAL 2011 2010 2009 2008 2007

Interest income and similar income 4.02 3.88 4.30 6.80 5.46Interest expenses and similar expenses 2.56 2.39 2.72 5.20 3.77Net interest and credit commission income 1.46 1.49 1.58 1.60 1.69

Commission income and income from banking services 0.38 0.38 0.42 0.48 0.63Commission expenses and expenses relating to banking services 0.08 0.08 0.09 0.09 0.11Net banking services 0.31 0.29 0.33 0.39 0.52Income from shareholdings in group companies and associated companies (0.05) (0.04) (0.05) (0.05) (0.01)Net gain/(loss) from financial instruments 0.11 0.21 0.08 (0.07) 0.32Other operating revenues 0.18 0.17 0.16 0.19 0.18Net other operating revenues 0.55 0.62 0.53 0.46 1.02Net operating revenues 2.01 2.11 2.11 2.06 2.70

Payroll and general administration expenses 0.97 0.95 1.03 1.03 1.15Depreciation 0.10 0.10 0.09 0.11 0.10Other operating expenses 0.16 0.16 0.15 0.17 0.21Total operating expenses 1.22 1.20 1.27 1.31 1.46Profit before write-downs and tax expense 0.79 0.91 0.84 0.75 1.25

Write-downs of loans and losses on guarantees 0.12 0.12 0.29 0.25 (0.05)Pre-tax profit 0.67 0.79 0.54 0.50 1.30

Tax expense 0.17 0.19 0.15 0.25 0.32Profit for the financial year 0.50 0.60 0.39 0.25 0.97

Majority share of the profit for the period 0.50 0.60 0.39 0.25 0.97Minority share of the profit for the period 0.00 0.00 0.00 0.00 0.00

OTHER KEY FIGURES

Profitability, earnings and capital structure (percentage)1. Return on equity after tax 8.7 11.3 8.0 4.9 16.22. Total profitability before losses and tax 0.79 0.91 0.84 0.75 1.253. Total net profitability 0.50 0.60 0.39 0.25 0.974. Total operating expenses as percentage of net operating revenues (cost-income) 60.88 56.90 60.35 63.46 53.945. Deposits/loans ratio 53.51 55.07 54.53 53.15 58.15

Balance sheet development (percentage)6. Change in net lending 12.25 7.49 7.96 17.86 21.017. Change in certificates and bonds (13.94) 13.53 37.86 67.65 81.698. Change in deposits 9.08 8.55 10.76 7.74 20.869. Change in total assets 10.17 7.80 2.92 26.44 24.60

Defaults, provisions and losses on loans10. Loss percentage, loans 0.13 0.15 0.32 0.26 (0.06)11. Gross defaults as percentage 0.40 0.49 0.48 0.39 0.2112. Net defaults as percentage 0.33 0.38 0.40 0.36 0.2013. Percentage provided for defaulted loans 17.43 22.58 15.48 7.69 4.52

Capital adequacy14. Net own funds 7 191 6 387 6 111 4 858 4 59715. Calculation basis 62 200 54 862 51 875 53 612 47 54616. Capital adequacy 11.6 11.6 11.8 9.1 9.717. Core capital adequacy 10.8 10.8 10.5 7.7 8.3


Group key figures – 5 years (contd.III)

Equity certificates (parent bank) 2011 2010 2009 2008 200718. Equity certificate capital (NOK million) 765 539 398 267 25019. Dividend per equity certificate (NOK) 2.00 3.50 2.00 1.88 9.5020. Listed price at 31 Dec. 31.70 47.00 51.00 43.25 95.0021. Owner fraction, profit per equity certificate calculated pursuant to NRS 7 21.50 18.13 9.43 6.63 6.3422. Profit coverage (gross) per equity certificate (NOK) 70.20 114.29 114.82 93.26 262.8023. Share of profit per equity certificate (NOK) 4.55 5.86 4.53 3.23 9.5924. Diluted profit per equity certificate (NOK) 4.55 5.86 4.53 3.23 9.5925. Effective return per equity certificate (25.11) (3.92) 22.25 (44.47) (2.23)26. Direct return 6.31 7.45 3.92 4.34 10.0027. Payment percentage 2.85 3.06 1.74 2.01 3.6128. Dividend provision as a percentage of the equity certificates' share of the profit 43.94 59.68 44.13 58.13 99.02

PersonnelNumber of employees 920 873 868 879 845Number of full-time equivalents 886 838 835 841 803

Distribution networkSales outlets 68 63 63 59 60

Definitions:

1. The profit for the financial year as a percentage of the average equity through the year pursuant to IFRS + 50 per cent of the year's profit.

2. Operating profit before losses and tax as a percentage of average total assets.

3. Profit on ordinary operations after tax as a percentage of average total assets.

5. Deposits from and debt to customers as a percentage of loans to and receivables from customers.

6. Change in net lending at 31 December as a percentage of net lending the previous year.

7. Change in securities at 31 December as a percentage of securities the previous year.

8. Change in deposits at 31 December as a percentage of deposits the previous year.

10. Losses on loans and guarantees etc. as a percentage of gross loans at 31 December.

11. Gross defaults as a percentage of gross lending.

12. Defaulted loans with deductions for individual write-downs on such loans, as a percentage of net lending.

13. Individual write-downs on defaulted loans, as a percentage of the gross volume of such loans.

21. Equity certificate capital as a percentage of the parent bank's equity at 31 December calculated pursuant to NRS 7.

22. Profit for the financial year divided by the number of equity certificates.

23. Equity certificates' share of profits divided by the number of equity certificates.

25. Dividend paid plus change in exchange rate 1 January-31 December, as a percentage of the listed price at 1 Jan.

26. Provision for dividend as a percentage of the listed price at year end.

28. Dividend as a percentage of gross profit coverage per equity certificate.


Write-downs of loans and losses on guarantees 126 71 39 11 127 80 51 16Pre-tax profit/loss 732 533 398 215 800 632 443 206

Tax expense 184 146 96 52 189 144 100 57Profit for the period 548 387 302 163 611 488 343 149

Majority share of the profit for the period 548 387 302 163 611 488 343 149Minority share of the profit for the period 0 0 0 0 0 0 0 0

AVERAGE ASSETS UNDER MANAGE-MENT (PRIMARY CAPITAL) 109 260 107 882 107 504 108 150 101 725 100 553 99 174 98 175

PROFIT AS PERCENTAGE OF PRIMARY CAPITALInterest income and similar income 4.02 3.96 3.86 3.82 3.88 3.87 3.80 3.77Interest expenses and similar expenses 2.56 2.50 2.43 2.40 2.39 2.36 2.28 2.23Net interest and credit commission income 1.46 1.46 1.43 1.42 1.49 1.51 1.52 1.54

Commission income and income from banking services 0.38 0.38 0.37 0.37 0.38 0.38 0.38 0.38Commission expenses and expenses relating to banking services

0.08 0.08 0.08 0.08 0.08 0.08 0.08 0.07

Net banking services 0.31 0.30 0.30 0.29 0.29 0.30 0.30 0.30Income from shareholdings in group companies and associated companies (0.05) (0.03) (0.04) (0.07) (0.04) (0.05) (0.05) (0.07)Net gain/(loss), financial instruments 0.11 0.03 0.16 0.25 0.21 0.20 0.23 0.06Other operating revenues 0.18 0.18 0.20 0.17 0.17 0.16 0.17 0.13Net other operating income 0.55 0.49 0.61 0.64 0.62 0.62 0.64 0.41Net operating income 2.01 1.95 2.04 2.06 2.11 2.13 2.16 1.95

Payroll and general administration expenses 0.97 0.95 0.96 0.96 0.95 0.94 0.90 0.78Depreciation 0.10 0.10 0.10 0.09 0.10 0.10 0.10 0.10Other operating expenses 0.16 0.16 0.16 0.15 0.16 0.15 0.15 0.15Total operating expenses 1.22 1.20 1.22 1.21 1.20 1.18 1.16 1.03Profit before write-downs and tax 0.79 0.75 0.82 0.85 0.91 0.95 1.00 0.92

Write-downs of loans and losses on guarantees 0.12 0.09 0.07 0.04 0.12 0.11 0.10 0.07Pre-tax profit/loss 0.67 0.66 0.75 0.81 0.79 0.84 0.90 0.85

Tax expense 0.17 0.18 0.18 0.19 0.19 0.19 0.20 0.24Profit for the period 0.50 0.48 0.57 0.61 0.60 0.65 0.70 0.62

Majority share of the profit for the period 0.50 0.48 0.57 0.61 0.60 0.65 0.70 0.62Minority share of the profit for the period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Group key figures – per quarter for two years

PROFIT DEVELOPMENT (accumulated) 31/12-11 30/09-11 30/06-11 31/03-11 31/12-10 30/09-10 30/06-10 31/03-10Interest income and similar income 4 390 3 193 2 057 1 019 3 947 2 908 1 868 913Interest expenses and similar expenses 2 800 2 014 1 294 641 2 431 1 774 1 120 541Net interest and credit commission income 1 590 1 179 763 378 1 516 1 134 748 372

Commission income and income from banking services 417 304 199 99 382 287 185 91Commission expenses and expenses relating to banking services

82 62 41 21 85 60 37 18

Net banking services 335 242 158 78 297 227 148 73Income from shareholdings in group companies and associated companies (50) (26) (21) (18) (42) (34) (26) (18)Net gain/(loss), financial instruments 124 28 83 66 212 152 111 14Other operating revenues 194 149 104 45 168 124 82 31Net other operating income 603 393 324 171 635 469 315 100Net operating income 2 193 1 572 1 087 549 2 151 1 603 1 063 472

Payroll and general administration expenses 1 058 763 511 257 962 705 444 189Depreciation 107 79 52 25 98 73 49 24Other operating expenses 170 126 87 41 164 113 76 37Total operating expenses 1 335 968 650 323 1 224 891 569 250Profit before write-downs and tax 858 604 437 226 927 712 494 222


Group key figures – per quarter for two years (contd. I)

PROFIT DEVELOPMENT PER QUARTER (isolated) Q4 2011 Q3 2011 Q2 2011 Q1 2011 Q4 2010 Q3 2010 Q2 2010 Q1 2010

Interest income and similar income 1 197 1 136 1 038 1 019 1 039 1 040 955 913Interest expenses and similar expenses 786 720 653 641 657 654 579 541Net interest and credit commission income 411 416 385 378 382 386 376 372

Commission income and income from banking services 113 105 100 99 95 102 94 91Commission expenses and expenses relating to banking services 20 21 20 21 25 23 19 18Net banking services 93 84 80 78 70 79 75 73Income from shareholdings in group compa-nies and associated companies (24) (5) (3) (18) (8) (8) (8) (18)Net gain/(loss), financial instruments 96 (55) 17 66 60 41 97 14Other operating revenues 45 45 59 45 44 42 51 31Net other operating income 210 69 153 171 166 154 215 100Net operating income 621 485 538 549 548 540 591 472

Payroll and general administration expenses 295 252 254 257 257 261 255 189Depreciation 28 27 27 25 25 24 25 24Other operating expenses 44 39 46 41 51 37 39 37Total operating expenses 367 318 327 323 333 322 319 250Profit before write-downs and tax 254 167 211 226 215 218 272 222

Write-downs of loans and losses on guarantees 55 32 28 11 47 29 35 16Pre-tax profit/loss 199 135 183 215 168 189 237 206

Tax expense 38 50 44 52 45 44 43 57Profit for the period 161 85 139 163 123 145 194 149

Majority share of the profit for the period 161 85 139 163 123 145 194 149Minority share of the profit for the period 0 0 0 0 0 0 0 0

AVERAGE ASSETS UNDER MANAGEMENT (PRIMARY CAPITAL) (isolated) 113 750 108 716 106 891 108 150 105 217 103 923 100 163 98 175

PROFIT AS PERCENTAGE OF PRIMARY CAPITAL (isolated)Interest income and similar income 4.17 4.15 3.90 3.82 3.92 3.97 3.82 3.77Interest expenses and similar expenses 2.74 2.63 2.45 2.40 2.48 2.50 2.32 2.23Net interest and credit commission income 1.43 1.52 1.44 1.42 1.44 1.47 1.51 1.54

Commission income and income from banking services 0.39 0.38 0.38 0.37 0.36 0.39 0.38 0.38Commission expenses and expenses relating to banking services 0.07 0.08 0.08 0.08 0.09 0.09 0.08 0.07Net banking services 0.32 0.31 0.30 0.29 0.26 0.30 0.30 0.30Income from shareholdings in group companies and associated companies (0.08) (0.02) (0.01) (0.07) (0.03) (0.03) (0.03) (0.07)Net gain/(loss), financial instruments 0.33 (0.20) 0.06 0.25 0.23 0.16 0.39 0.06Other operating revenues 0.16 0.16 0.22 0.17 0.17 0.16 0.20 0.13Net other operating income 0.73 0.25 0.57 0.64 0.63 0.59 0.86 0.41Net operating income 2.17 1.77 2.02 2.06 2.07 2.06 2.37 1.95

Payroll and general administration expenses 1.03 0.92 0.95 0.96 0.97 1.00 1.02 0.78Depreciation 0.10 0.10 0.10 0.09 0.09 0.09 0.10 0.10Other operating expenses 0.15 0.14 0.17 0.15 0.19 0.14 0.16 0.15Total operating expenses 1.28 1.16 1.23 1.21 1.26 1.23 1.28 1.03Profit before write-downs and tax 0.89 0.61 0.79 0.85 0.81 0.83 1.09 0.92

Write-downs of loans and losses on guarantees 0.19 0.12 0.11 0.04 0.18 0.11 0.14 0.07Pre-tax profit/loss 0.69 0.49 0.69 0.81 0.63 0.72 0.95 0.85

Tax expense 0.13 0.18 0.17 0.19 0.17 0.17 0.17 0.24Profit for the period 0.56 0.31 0.52 0.61 0.46 0.55 0.78 0.62

Majority share of the profit for the period 0.56 0.31 0.52 0.61 0.46 0.55 0.78 0.62Minority share of the profit for the period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00


Group key figures – per quarter for two years (contd. II)

BALANCE SHEET DEVELOPMENT 31/12-11 30/09-11 30/06-11 31/03-11 31/12-10 30/09-10 30/06-10 31/03-10

Assets

Cash in and receivables from central banks 668 1 253 2 383 238 361 1 265 1 381 341Loans to and receivables from credit institutions 481 181 925 398 368 359 258 257Net lending 99 304 93 113 91 054 89 387 88 465 87 006 86 130 83 981Shares at fair value through profit or loss 738 648 690 740 714 691 654 656Certificates and bonds 11 537 13 684 12 874 13 899 13 406 13 959 13 756 10 557Shares available for sale 0 0 0 0 0 0 0 112Financial derivatives 1 695 1 298 533 521 709 882 796 709Shareholdings in associated companies 349 352 357 320 326 268 230 233Deferred tax asset 0 0 0 0 2 14 97 94Other intangible assets 330 324 325 319 323 307 314 319Tangible fixed assets 496 467 469 468 469 453 459 465Prepaid expenses 56 76 80 71 50 43 51 33Other assets 331 87 282 875 82 141 777 416Total assets 115 985 111 483 109 972 107 236 105 275 105 388 104 903 98 173


Debt to credit institutions 7 971 8 028 6 838 8 733 10 529 11 428 11 951 12 783Deposits 53 142 52 463 52 598 48 481 48 719 48 515 48 473 45 327Securitised debt 44 606 41 744 41 279 40 674 37 064 36 704 35 536 31 101Financial derivatives 1 089 601 820 628 795 528 809 651Accrued expenses and pre-paid income 116 127 121 148 134 215 159 109Pension commitments 187 147 147 147 147 118 122 126Deferred tax 109 73 0 22 0 0 0 0Other provision for commitments 28 33 25 25 24 22 23 20Tax payable 113 90 108 41 126 95 132 485Subordinated loan capital 1 613 1 598 1 446 1 480 1 495 1 562 1 564 2 068Other liabilities 320 370 465 871 313 383 455 508Total liabilities 109 294 105 274 103 847 101 250 99 346 99 570 99 224 93 178

Equity certificates 765 539 539 539 539 539 539 398Own equity certificates (12) (11) (10) (10) (10) (3) 0 0Premium reserve 564 467 467 467 467 467 467 10Equalisation reserve 176 68 68 68 144 39 39 39Total equity certificate capital 1 493 1 063 1 064 1 064 1 140 1 042 1 045 447

Primary capital 5 078 4 607 4 607 4 607 4 637 4 081 4 083 4 083Gift fund 175 175 175 175 175 175 175 175Compensation fund 14 14 14 14 14 14 14 14Total primary capital 5 267 4 796 4 796 4 796 4 826 4 270 4 272 4 272

Reserve for unrealised gains 0 0 0 0 0 0 0 105Other equity (70) 350 265 126 (38) 506 362 171Minority interests 1 0 0 0 1 0 0 0

Total equity 6 691 6 209 6 125 5 986 5 929 5 818 5 679 4 995

Total liabilities and equity 115 985 111 483 109 972 107 236 105 275 105 388 104 903 98 173


Group key figures – per quarter for two years (contd. II)

BALANCE SHEET DEVELOPMENT 31/12-11 30/09-11 30/06-11 31/03-11 31/12-10 30/09-10 30/06-10 31/03-10

Assets

Cash in and receivables from central banks 668 1 253 2 383 238 361 1 265 1 381 341Loans to and receivables from credit institutions 481 181 925 398 368 359 258 257Net lending 99 304 93 113 91 054 89 387 88 465 87 006 86 130 83 981Shares at fair value through profit or loss 738 648 690 740 714 691 654 656Certificates and bonds 11 537 13 684 12 874 13 899 13 406 13 959 13 756 10 557Shares available for sale 0 0 0 0 0 0 0 112Financial derivatives 1 695 1 298 533 521 709 882 796 709Shareholdings in associated companies 349 352 357 320 326 268 230 233Deferred tax asset 0 0 0 0 2 14 97 94Other intangible assets 330 324 325 319 323 307 314 319Tangible fixed assets 496 467 469 468 469 453 459 465Prepaid expenses 56 76 80 71 50 43 51 33Other assets 331 87 282 875 82 141 777 416Total assets 115 985 111 483 109 972 107 236 105 275 105 388 104 903 98 173


Debt to credit institutions 7 971 8 028 6 838 8 733 10 529 11 428 11 951 12 783Deposits 53 142 52 463 52 598 48 481 48 719 48 515 48 473 45 327Securitised debt 44 606 41 744 41 279 40 674 37 064 36 704 35 536 31 101Financial derivatives 1 089 601 820 628 795 528 809 651Accrued expenses and pre-paid income 116 127 121 148 134 215 159 109Pension commitments 187 147 147 147 147 118 122 126Deferred tax 109 73 0 22 0 0 0 0Other provision for commitments 28 33 25 25 24 22 23 20Tax payable 113 90 108 41 126 95 132 485Subordinated loan capital 1 613 1 598 1 446 1 480 1 495 1 562 1 564 2 068Other liabilities 320 370 465 871 313 383 455 508Total liabilities 109 294 105 274 103 847 101 250 99 346 99 570 99 224 93 178

Equity certificates 765 539 539 539 539 539 539 398Own equity certificates (12) (11) (10) (10) (10) (3) 0 0Premium reserve 564 467 467 467 467 467 467 10Equalisation reserve 176 68 68 68 144 39 39 39Total equity certificate capital 1 493 1 063 1 064 1 064 1 140 1 042 1 045 447

Primary capital 5 078 4 607 4 607 4 607 4 637 4 081 4 083 4 083Gift fund 175 175 175 175 175 175 175 175Compensation fund 14 14 14 14 14 14 14 14Total primary capital 5 267 4 796 4 796 4 796 4 826 4 270 4 272 4 272

Reserve for unrealised gains 0 0 0 0 0 0 0 105Other equity (70) 350 265 126 (38) 506 362 171Minority interests 1 0 0 0 1 0 0 0

Total equity 6 691 6 209 6 125 5 986 5 929 5 818 5 679 4 995

Total liabilities and equity 115 985 111 483 109 972 107 236 105 275 105 388 104 903 98 173

Group key figures – per quarter for two years (contd. III)

Profitability, earnings and capital structure (percentage) 31/12-11 30/09-11 30/06-11 31/03-11 31/12-10 30/09-10 30/06-10 31/03-10

Return on equity after tax 8.7 8.5 10.1 11.1 11.3 12.2 13.4 12.2Total profitability before losses and tax 0.79 0.75 0.82 0.85 0.91 0.95 1.00 0.92Total net profitability 0.50 0.48 0.57 0.61 0.60 0.65 0.70 0.62Total operating expenses as % of net oper-ating income, accumulated (cost-income) 60.88 61.58 59.80 58.83 56.90 55.58 53.53 52.97Total operating expenses as % of net operating income, isolated in the quarter (cost-income) 59.10 65.57 60.78 58.83 60.77 59.63 53.98 52.97Total operating expenses as % of net operating income, corrected for gain/loss in exchange rate, acc. (cost-income) 64.52 62.69 64.74 66.87 63.13 61.41 59.77 54.59Deposits/loans ratio 53.51 56.34 57.77 54.24 55.07 55.76 56.28 53.97

Financial strength (percentage)Capital adequacy 11.6 11.1 11.2 11.6 11.6 11.0 11.1 11.5

PersonnelNumber of full-time equivalents 886 846 847 846 838 835 826 823

Owner fractionEquity certificate capitals' share of profits divided by the number of equity certificates 4.55 3.31 2.58 1.39 5.86 4.79 3.60 1.77Diluted profit per equity certificate 4.55 3.31 2.58 1.39 5.86 4.79 3.60 1.77Owner fraction 21.50 18.13 18.13 18.13 18.13 19.59 19.63 9.43


1) www.nues.no2) www.eba.europa.eu

Policy for Corporate GovernanceSparebanken Vest has drawn up a corporate governance policy that has been adopted by the Board of Directors. It aims to ensure that the group’s corporate governance is in accordance with generally accepted and recognised perceptions and standards, and in compliance with statutes and regulations. The policy describes the general principles that apply. The goal is to ensure good cooperation between the bank’s different stakeholders, such as holders of equity certificates, lenders, customers, employees, governing bodies, management and society as a whole. The policy thus describes how the bank is managed and controlled in order to create value for the bank and its stakeholders.

The bank’s policy is specified in various governing documents that apply to Sparebanken Vest’s activities. They include the bank’s Articles of Association, strategies including the corporate social responsibility strategy, rules of procedure for the Board of Directors, the framework for management and control,

ethical guidelines and procedures for suitability, inside trading and proprietary trading. Among other sources, the governing documents are based on the Norwegian Code of Practice for Corporate Governance1 and the European Banking Authority’s2 principles for internal governance, which have been adapted to Norwegian conditions by the Financial Supervisory Authority of Norway in its module for the evaluation of internal governance.

Sparebanken Vest’s goal is to satisfy the recommendations in the above-mentioned documents as far as they are appropriate. In October 2011, the Norwegian Corporate Governance Board (NuES) updated the Norwegian Code of Practice for Corporate Governance, and Sparebanken Vest has incorporated relevant changes in its policy. The Articles of Association and the corporate governance policy are available on the bank’s website www.spv.no. In accordance with section 1 of the Norwegian Code of Practice, a report on the bank’s compliance with the Code of

Corporate governance


Practice follows below. The report shall also meet the disclosure requirements of the Norwegian Accounting Act section 3-3b.

The businessSparebanken Vest is a financial services group consisting of the parent bank and the subsidiaries Eiendomsmegler Vest AS, Sparebanken Vest Boligkreditt AS and Sparebanken Vest Eiendomsforvaltning AS. References to the bank and/or Sparebanken Vest in this article concern the Sparebanken Vest Group, unless otherwise is stated.

Pursuant to its Articles of Association, Sparebanken Vest’s object is to deliver financial services to the public, business and industry and the public sector in Western Norway. The business shall be run at a satisfactory profit and with acceptable risk.

The Board of Directors’ report contains a description of the bank’s goals and strategies. The strategic basis is evaluated at least once a year by the Board and the management, and the bank’s plans are adjusted and adapted continuously. The market is updated about the bank’s strategic agenda through the presentation of quarterly reports.

Sparebanken Vest has a customer-oriented organisation that focuses on the Retail Market, the Corporate Market and the Capital Market as business areas. The business areas are supplemented by support and staff functions. The bank’s organisational structure is dynamic, and it is assessed on the basis of changed needs and framework conditions.

Equity and dividendsSparebanken Vest is a self-owned institution. The infusion of external capital takes place through the issuing of equity certificates and subordinated bonds. Sparebanken Vest parent bank’s equity certificate capital amounted to NOK 1,438 million at 31 December 2011, divided between 30.6 million equity certificates.

Holders of equity certificates shall have a predictable framework with respect to equal treatment, return and influence on how the bank is run. The stock exchange listing of the equity certificates ensures that the bank accepts and complies with the market conditions that prevail at all times in the market for equity certificates, and it means that the bank accumulates historical data that can help it to utilise the stock market as a source of equity if the need should arise.

The Board of Directors evaluates the bank’s capital situation at least once a year. Such evaluation was carried out most recently at the end of 2011. The regulatory regime for financial strength (CRD IV3) is undergoing change. The bank continually assesses its capital adequacy against regulatory requirements.

Sparebanken Vest’s profit for the year is divided between equity certificate capital and primary capital in proportion to the owner fraction. The equity certificate capital’s share of the profit is divided between a cash dividend and the equalisation reserve. Sparebanken Vest endeavours to distribute an attractive cash dividend to equity certificate holders. Sparebanken Vest’s financial goal for its business is to achieve results that provide a satisfactory overall return in the form of dividend and an increase in value. The development of the bank’s equity situation and financial strength are emphasised when allocating profit.

On 28 April 2011, at the request of the bank’s Board of Directors, the Supervisory Board of Sparebanken Vest passed the following unanimous resolution concerning the acquisition of own equity certificates and their use as security:

The Board of Directors is hereby authorised to acquire and pledge as security own equity certificates for a total nominal value of NOK 100 million within the limits stipulated in statutes and regulations. The total holding of equity certificates that the bank owns and/or has a charge created by agreement on cannot exceed 10% of the equity

3) Capital Requirement DirectiveANNuAL REPORT 2011 PAGE 109

certificate capital stipulated in the Articles of Association. The minimum amount that can be paid for equity certificates is NOK 1 and the maximum amount NOK 150. This limit also applies to any charge created by agreement, so that the claim the charge is intended to secure must not exceed the amount that follows from these limitations.

The acquisition of equity certificates will take place through purchase in the securities market via Oslo stock exchange and disposals will take place through sales in the same market, or as private placements with employees within the limits provided for in applicable statutes and regulations. The authorisation is valid for 18 months from the date of the Supervisory Board’s resolution or until such time as the Financial Supervisory Authority of Norway revokes the authorisation.

Equal treatment of equity certificate holders and transactions with close associatesSparebanken Vest has one class of equity certificates. It is a goal that equity certificate holders shall be ensured equal treatment and the same possibility to exert influence in Sparebanken Vest. To safeguard the interests of owners of small holdings, the bank’s Articles of Association contain a limitation on voting rights that means that, at an election meeting for equity certificate holders, no one may vote for equity certificates that represent more than 15% of the total number of equity certificates issued by Sparebanken Vest.

The owner fraction at year-end 2011 is 21.5%. The biggest owner is Sparebankstiftelsen Hardanger, which represents 29.48% of the equity certificate capital. The bank’s ten biggest owners account for 62.7% of the equity certificate capital.

The rules of procedure for the Board of Directors contain provisions relating to ethics and impartiality. The bank’s ethical guidelines cover both officers of the company and employees. They contain guidelines relating to customer relations, benefits/gifts, the duty of confidentiality,

participation in other business activities and transactions with close associates. Provisions have been included in the rules of procedure for the Board of Directors that emphasise board members’ duty to exercise due care in relation to ethical conduct, impartiality and integrity. Moreover, board members must inform the Chair of the Board if they become aware of a possible conflict of interest.

Free negotiabilitySparebanken Vest’s equity certificate is listed on Oslo stock exchange (Oslo Børs) and it is freely negotiable. The only limitation on ownership is a statutory requirement that currently states that the acquisition of a qualified proportion of the equity certificate capital (10% or more) requires the consent of the Ministry of Finance (authorisation granted to the Financial Supervisory Authority of Norway).

Supervisory Board and Control CommitteeThe bank’s supreme body is the Supervisory Board, which is composed of equity certificate holders, customers, employees and representatives of the authorities. The Supervisory Board is tasked with ensuring that the bank acts in accordance with its object and in compliance with the law, its Articles of Association and decisions of the Supervisory Board.

The bank’s Articles of Association are in accordance with the Financial Supervisory Authority of Norway’s normal articles of association for savings banks that have issued negotiable equity certificates. Pursuant to the Savings Bank Act and the Financial Institutions Act, this means that the rules concerning the composition of and election of members to the Supervisory Board shall be stipulated in the Articles of Association. The Supervisory Board has 48 members, 12 of whom are elected by the holders of the equity certificates in accordance with detailed provisions set out in the Articles of Association. Equity certificate holders’ right to attend meetings of the Supervisory Board is thus limited compared with chapter 5 of the Public Limited Liability Companies Act.


Decisions are reached by ordinary majority decision. Amendments to the Articles of Association require a majority of two-thirds of those present, and at least 24 members must vote in favour of the proposal. Moreover, proposals for amendments to the Articles of Association must have been presented to the Supervisory Board at a prior meeting. Notices of and the conduct of ordinary meetings of the Supervisory Board shall be in accordance with the provisions of the Savings Banks Act and the Financial Institutions Act. Notices of and minutes of meetings of the Supervisory Board are sent to Oslo stock exchange and are made available on the bank’s website.

Pursuant to the Articles of Association, an annual meeting of the Supervisory Board shall be convened before the end of March every year for consideration of the annual accounts, annual report, auditor’s report and statement from the Control Committee. This meeting also considers proposals for dividend on the bank’s equity certificate and the allocation of donations/provisions to the gift fund. A meeting of the Supervisory Board is held before the end of April every year to elect members of the Board of Directors, the Control Committee etc. Separate elections are held among employees, equity certificate holders and customers to elect members of the Supervisory Board. Public representatives are appointed by the City of Bergen and the county councils of Sogn og Fjordane, Hordaland and Rogaland.

The Supervisory Board has elected a Nomination Committee, which nominates candidates to the Supervisory Board, the Board of Directors and the Control Committee to be elected by depositors. Separate elections are held for the Chair and Deputy Chair of the Supervisory Board. The Control Committee, which is also elected by the Supervisory Board, shall supervise and control the work of the Board of Directors and the bank’s management. Pursuant to the Articles of Association, the Control Committee shall have four members and two deputy members.

The Board of Directors, Managing Director, parts of the bank’s management and specialists also attend meetings of the Supervisory Board as required.

Nomination committeesPursuant to the Articles of Association, the main Nomination Committee in Sparebanken Vest shall consist of seven members elected by the Supervisory Board and have representatives of all groups represented on the Supervisory Board, plus a free-standing member who is elected from among former members of the Board of Directors (preferably a former Chair or Deputy Chair). Grounds must be stated for the Nomination Committee’s recommendations, and they shall contain relevant information about the candidates, including information about their expertise, capacity and independence. The recommendation shall also contain a description of the committee’s work. The Nomination Committee presents its proposals at a meeting of the Supervisory Board. Separate rules of procedure have been adopted for the Nomination Committee. Remuneration of the Nomination Committee is decided by the Supervisory Board.

The Nomination Committee submits proposals to the Supervisory Board for the remuneration of officers of the company. No members of the Board of Directors or representatives of the management are members of the Nomination Committee.

There is a separate nomination committee for elections by equity certificate holders. This committee prepares elections by equity certificate holders to the Supervisory Board. The committee has three members elected by the equity certificate holders.

The Board of Directors: composition and independencePursuant to Sparebanken Vest’s Articles of Association, the Board of Directors shall consist of nine members and four deputy members elected for two years and one year at a time, respectively. The Chair and Deputy Chair are elected by the Supervisory Board in separate


elections. At present, four of the full members of the Board of Directors are women. A presentation of the members of Sparebanken Vest’s Board of Directors is available on the bank’s website and in this annual report page 26.

The rules of procedure for the Board of Directors of Sparebanken Vest contain guidelines for the composition of the Board and terms of office. Important criteria for members of the Board and its composition are qualifications, gender, capacity and independence. The Board shall be composed such that it is capable of acting independently of special interests and the bank’s management. The Board’s overall competence shall be regularly assessed in relation to the challenges facing the bank. The Nomination Committee shall be informed about the results of the assessment. Pursuant to the rules of procedure for the Board, the members of the Board of Directors are encouraged to own equity certificates in the bank.

The work of the Board of DirectorsThe Board of Directors of Sparebanken Vest holds 12 to 14 regular meetings every year, as well as meetings in connection with strategy work. In addition, the Board organises thematic days with a view to developing its expertise. Rules of procedure have been drawn up and adopted for the Board, with a pertaining calendar for the Board’s work. The Board places particular emphasis on work on the annual rolling strategy plan. The Board also considers whether the bank’s capital situation and risk situation are commercially acceptable and within the statutory limits.

The Managing Director prepares matters for consideration by the Board in cooperation with the Chair of the Board. The Board of Directors has adopted job instructions for the Managing Director. The Board evaluates the work of the Managing Director, the Deputy Managing Director and the internal auditor in accordance with the Board’s annual plan.

The Board of Directors has overriding responsibility for the management of

Sparebanken Vest and for overseeing the day-to-day management of the bank’s activities. By the Board’s management responsibility is meant, among other things, responsibility for organising the bank in an adequate manner, responsibility for adopting plans and budgets for the bank, responsibility for keeping informed about the bank’s financial position and for ensuring that the bank’s business, asset management and accounts are subject to adequate control.

The Board of Directors shall act in accordance with the bank’s object as set out in its Articles of Association, and it shall comply with the guidelines and framework conditions stipulated by public bodies, the Financial Supervisory Authority of Norway, the Supervisory Board and the Control Committee.

The Board of Directors has appointed three committees as part of its work: • The Audit Committee is charged

with ensuring that Sparebanken Vest has an independent and effective external and internal audit function, and financial and risk reporting that is in accordance with statutes and regulations.

• The Board’s Credit Committee, which deals with credit matters under the authorisation of the Board of Directors.

• The Compensation Committee, which is tasked with ensuring that the bank has a competitive, but not leading, pay policy that is seen as a motivation by the bank’s management in relation to implementing the adopted strategy and achieving the goals set.

The bank’s internal auditor is subject to the Board’s authority and is entitled to attend board meetings. An annual report is submitted to the Board on internal control, the Capital Adequacy Regulations and the Securities Trading Act. The Board of Directors approves the internal audit function’s annual plan and resource needs.


Risk management and internal controlGood risk and capital management have a central role in Sparebanken Vest’s long-term value creation. The bank’s overriding goals follow from its strategic business basis. The target rate of return governs the bank’s activities and specification of sub-goals. Focus is on maintaining the bank’s competitiveness in the short and long term. Sparebanken Vest’s market and business goals must be balanced against the bank’s ability and willingness to take risk. Risk and capital adequacy assessments are an integral part of the bank’s strategic and business processes.

The bank’s risk management is related to four main areas:• Credit risk• Market risk• Liquidity risk• Operational risk

Sparebanken Vest’s goal is that the bank’s risk profile should be moderate. The Board of Directors of Sparebanken Vest requires

the bank to be well-capitalised. A review of the bank’s most important risk areas and capital adequacy assessments (ICAAP4) are carried out at least once a year and considered by the Board of Directors. The bank’s capital strategy must be based on the actual risk to which the business is exposed, supplemented by the effect of various stress scenarios.

In 2007, the Financial Supervisory Authority of Norway granted Sparebanken Vest approval to use internal measurement methods (IRB5) to calculate capital in relation to credit risk. This is an important stamp of approval for the bank’s risk and capital management.

Responsibility for implementing the bank’s risk and capital management and control is divided between the bank’s Board of Directors, management and business units.

The Board is also responsible for ensuring that the bank has sufficient own funds in relation to the desired risk and the

4) Internal Capital Adequacy Assessment Process5) Internal Ratings-Based


bank’s operations, and for ensuring that it is sufficiently capitalised in relation to regulatory requirements. The Board also defines the bank’s targets and limits in all risk areas, including adopting guidelines for the bank’s risk and capital management. Reporting to the Board of Directors in relation to targets and limits takes place quarterly.

The Managing Director is responsible for the bank’s overall risk management, including the development of good models and frameworks for management and control.

The bank’s Risk Management and Compliance department attends to important functions relating to management, control, reporting and analysis. It is also responsible for the bank’s models for risk and capital management. The head of Risk Management and Compliance reports to the Managing Director.

The bank’s overriding compliance function is organised under Risk Management and Compliance. The Legal Division has an overall responsibility for legal matters, and the managers of the various entities are responsible for ensuring that the business is run in accordance with applicable regulations. The securities business has its own compliance function, as required by statutes and regulations.

The Validation Committee, which is chaired by the Managing Director, deals with model validation and validation relating to the application of the bank’s credit systems. The Managing Director’s Credit Committee deals with major commitments and matters of an unusual nature.

All managers in Sparebanken Vest are responsible for managing risk and ensuring good internal control in their own areas in accordance with the bank’s adopted risk profile.

Sparebanken Vest has established a policy for internal control (IC policy) that defines the goals for and the organisation and implementation of its work on internal control. The policy also includes reporting

on the status of the bank’s risk situation and the quality of internal control, as well as follow-up of risk reduction measures.The main elements are the annual reviews of risk and internal control, and the registration of events and continuous risk assessment. The elements are described in the bank’s risk strategy and in the IC policy, which has been considered by the bank’s Board of Directors. Follow-up of identified risk areas and any material deviations found in the internal control of the bank’s financial reporting are also part of the bank’s system for risk management and internal control, including quarterly reports to management and Board.

The bank’s Finance/Accounting Department is responsible for the areas of financial reporting, internal financial management, direct and indirect taxes and internal control of financial reporting. This includes responsibility for quarterly financial reporting in accordance with applicable legislation, accounting standards and accounting principles adopted for the group. A template has been drawn up for group reporting, which is intended to ensure the completeness of the reporting basis and consistent application of principles.

In addition to reviewing the bank’s risk reporting, the Board of Directors’ Audit Committee reviews the bank’s accounts before they are approved by the Board. The Audit Committee’s tasks concern the process relating to the preparation of accounts and the prepared accounts, as well as auditing and the independence of the auditor. In addition to reviewing the accounts and risk reports, the corporate management team carries out monthly reviews of operating reports in relation to the budget for the banking operations, and briefs the Board of Directors. The bank’s ethical guidelines include a duty on the part of employees to report matters that warrant criticism, including breaches of internal guidelines, laws and regulations, and a procedure for how such notification is to be given.

Sparebanken Vest’s business is subject to the supervision of the Financial Supervisory Authority of Norway. In addition to supervisory visits, the Financial Supervisory


Authority reviews the bank’s annual and interim accounts and risk reports and capital adequacy assessments. The Board of Directors and the bank’s management endeavour to maintain an open and constructive dialogue with the Financial Supervisory Authority.

A more detailed description of the bank’s risk and capital management is available on the bank’s website.

Remuneration of the Board of DirectorsDirectors’ fees are decided by the Supervisory Board on the recommendation of the Nomination Committee. The remuneration is not performance-related, and options are not issued to members of the Board of Directors. As a rule, board members or companies with which they are associated shall not take on specific assignments for the bank in addition to their office as board member. Any additional fees shall be approved by the Supervisory Board. In urgent cases, however, the chairs of the Supervisory Board and the Nomination Committee may jointly make decisions concerning additional fees. An overview of the remuneration of the Board of Directors is provided in a note to the accounts.

Remuneration of executive personnelThe remuneration of the Managing Director, Deputy Managing Director and internal auditor is decided by the bank’s Board of Directors, while the remuneration of other executive personnel is decided by the Managing Director on the basis of principles adopted by the Board of Directors and following prior consultation with the Compensation Committee. The Managing Director can grant additional remuneration to employees based on the results achieved and work performance. Such additional remuneration is also intended to ensure the bank’s attractiveness in the employment market, while at the same time not being a risk driver. There are no option arrangements for the Managing Director and executive personnel.

The bank has adopted guidelines for remuneration systems. In accordance with the regulations and the Code of

Practice for Corporate Governance, they include provisions that set a ceiling on the performance-related remuneration of executive personnel, and a requirement that 50% of such remuneration shall be paid in the form of equity certificates in the bank, allocated over a period of three years. Executive personnel’s pay and benefits are described in the notes to the accounts. In addition, information about the bank’s remuneration arrangements is available in the Report for Risk and Capital management, and on the bank’s website.

Information and communicationsThe Board of Directors of Sparebanken Vest has adopted separate guidelines for financial information that are intended to ensure that the financial markets receive correct, relevant and timely information about the bank’s development and results. Information is given to the market through quarterly open investor presentations, stock exchange announcements and press releases, the bank’s website and accounting reports.

A financial calendar is available on the bank’s website that, among other things, announces the dates for quarterly presentations. The website also contains an activity calendar that includes information about elections to the bank’s Supervisory Board. In addition to the annual accounts, the Sparebanken Vest Group publishes quarterly financial reports. The annual accounts are audited by an external auditor.

Regular presentations are also held for international partners, lenders and investors, and the bank is rated by two international rating agencies.

TakeoversSparebanken Vest is an independent institution that cannot be taken over by others through acquisition. In the case of acquisitions on the bank’s part, emphasis is placed on satisfactorily safeguarding the interests of all stakeholders. Good information and equal treatment of shareholders/owners is paramount. It is a goal that such acquisitions shall have as


little negative effect as possible on day-to-day operations.

AuditorThe external auditor is elected by the Supervisory Board. The auditor submits an annual auditor’s report to the Supervisory Board and holds an annual meeting with the Board of Directors at which the ‘Management Letter’ is presented and commented on. The letter contains an assessment of the bank’s internal control, including areas in which the internal control should be improved. The auditor holds an annual meeting with the Control Committee at which the auditor’s report is reviewed and the Board of Directors’ report and annual accounts with notes are commented on.

The relationship with the auditor is regulated in a letter of assignment, which, among other things, describes the parties’ responsibilities, stipulates the auditor’s fee

and describes how other services are to be agreed and paid.

The external and internal auditors hold quarterly meetings with the Board’s Audit Committee. If necessary, the Managing Director is present during the consideration of certain matters. The minutes of the meetings of the Audit Committee are presented to the Board of Directors.

Supervisory Board

Governing bodies Control bodies

External auditor

Control Committee

NominationCommittee

Board of Directors

Board committees

Managing Director

Internal auditor

Ovierwiev of governing and control bodies in Sparebanken Vest


Frende Forsikring consists of the sister companies Frende Livsforsikring and Frende Skadeforsikring. The company was formed in 2007 and its head office is in Bergen. Sparebanken Vest has an ownership interest of 44.7% in the parent company Frende Holding AS. The remaining shareholding is owned by thirteen other independent savings banks.Read more: www.frende.no

Norne Securities AS was formed in 2008. It has established three business areas: online brokering, stockbroking and corporate finance. The company’s head office is in Bergen and Sparebanken Vest is the biggest owner with 44.9%. The remaining shareholding is owned by thirteen other independent savings banks.Read more: www.norne.no

Brage Finans AS is a financing company that was formed in 2010. Its head office is in Bergen. In addition to Sparebanken Vest, which is the biggest owner with an ownership interest of 49.9%, Brage Finans is owned by nine other independent savings banks. The company offers customised financing products with the main emphasis on the leasing of all types of operating equipment, plus loans secured by the purchased object.Read more: www.brage.no

Verd Boligkreditt AS is a housing credit company that is owned by Sparebanken Vest holding 40% and eight independent savings banks. Verd Boligkreditt became fully operational in 2010 and is licensed as a credit company with the right to issue covered bonds. The company is run by Sparebanken Vest Boligkreditt AS.Read more: www.verdboligkreditt.no

Sparebanken Vest Boligkreditt AS is wholly owned by Sparebanken Vest. It was formed in 2008 for the purpose of managing loans and issuing covered bonds.Read more

Eiendomsmegler Vest is wholly owned by Sparebanken Vest and it is a leading regional player in the real estate market in Western Norway. Kyte Næringsmegling AS and Herland Eiendom are also part of the company.Read more: www.emvest.no

Sparebanken Vest Eiendomsforvaltning AS is a wholly owned subsidiary of Sparebanken Vest. It is responsible for realising/developing and managing/operating all of the group’s buildings and premises. Formed in 1939. Sparebanken Vest Eiendomsforvaltning AS is responsible for managing/operating all of the group’s rented premises including contract signing/administration, maintenance/restoration, electricity/cleaning and other operating expenses relating to the premises (around 70 locations covering a total of 45,000 m3). The company also rents out premises to external tenants. The company has ten subsidiaries (‘single-purpose’ companies).

Subsidiaries and associated companiesSince 2006, Sparebanken Vest has worked systematically on strategic offshoots and this has resulted in the formation of several new companies in different areas of financial services and products.

EIENDOMSFORVALTNING


Organizational model

SIDE 118 ÅRSRAPPORT 2011

Retail Market Kate Henriksen

- Regions- Customer service- Business Center

Corporate Market Henning Nordgulen

- Regions - Customer service - Insurance - Business Center - Credit support

Division Business Support and Development Jan Erik Kjerpeseth

- ISP (info. systems and processes) - Business development and products

- Market- CFO - Investor Relations

Legal Division

Pål Pedersen

- Secretariat- Legal- Special commitments- Depot

SPV Markets Hallgeir Isdahl

- Asset management- Currency/interest- Shares

Managing Director Stein Klakegg

*Risk Management and Compliance Frank Johannesen

Corporate Communication Siren Sundland

*Risk Management and Compliance should be independent of the bank’s ongoing operations and meets the management team by case

Human Resources and Organisation Gro Hatleskog


Regional Map

Sogndal

Sandnes

Sauda

Klepp

Stavanger

Haugesund

BergenAskøy

Sotra

Arna

Os

Husnes

Odda

Stord

Knarvik

Førde Florø

Eid

MåløyStadlandetSeljeMåløyStrynDavikNordfjordeidFlorøFørdeÅrdalSogndalHøyanger

MasfjordenLindåsMastrevikFedjeMangerLonevågKnarvikFrekhaug

RongKleppestøÅgotnesStraumeSkogsvågOsStorebøBekkjarvik

FitjarHusnesSagvågBremnesMosterhamnLeirvikSveioHaugesundSæbøvikSkånevikEtneSaudaSand

StavangerHinnaSolaSandnesNærbø

DaleVossBjørkheimUlvikGranvinEidfjordUtneKinsarvikJondalNorheimsundStrandebarmOddaEikelandsosenRøldal

RegionHardanger/Midthordland/Voss

KaigatenKorskirkeallmenningenSlettenÅsaneArnaLoddefjordOasenNesttunLagunen

RegionBergen

RegionSogn &Fjordane

RegionNordhordland

Region Vest

RegionSunnhordland /Haugalandet

RegionRogaland

www.spv.no

EIENDOMSMEGLER VEST FRENDE FORSIKRING NORNE … · eiendomsmegler vest | frende forsikring | norne...

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