Interim Report -
Q1-Q3 2010
Contents
Financial Review
Group Financial Highlights 3
Summary 4
Financial Review 6
Financial Statements - Sydbank Group
Income Statement 11
Statement of Comprehensive Income 11
Balance Sheet 12
Financial Highlights - Quarterly 13
Capital 14
Cash Flow Statement 16
Segment Statements 17
Notes 18
Management Statement 27
Supplementary Information 28
Appendix 1 - Statement on inspection of Sydbank A/S 29
Appendix 2 - Sydbank's comments to “Statement on inspection of Sydbank A/S”
issued by the Danish FSA 32
Group Financial Highlights
Q1-Q3 Q1-Q3 Index Full year
2010 2009 10/09 2009
Income statement (DKKm)
Core income excl trading income 2,492 2,471 101 3,320
Trading income 1,051 970 108 1,266
Total core income 3,543 3,441 103 4,586
Costs, core earnings 1,869 1,874 100 2,466
Core earnings before impairment 1,674 1,567 107 2,120
Impairment of loans and advances etc 944 849 111 1,195
Core earnings 730 718 102 925
Profit on investment portfolios 235 361 65 430
Profit before non-recurring items 965 1,079 89 1,355
Non-recurring items, net - - - 86
Profit before contribution to Private Contingency Association
etc 965 1,079 89 1,441
Contribution to Private Contingency Association etc 384 327 117 443
Profit before tax 581 752 77 998
Tax 145 188 77 217
Profit for the period 436 564 77 781
Balance sheet highlights (DKKbn)
Loans and advances at amortised cost 73.6 73.9 100 74.5
Loans and advances at fair value 6.5 9.1 71 12.9
Deposits and other debt 61.5 65.3 94 68.8
Bonds issued at amortised cost 16.1 10.1 159 8.6
Subordinated capital 3.1 3.2 97 3.1
Shareholders' equity 9.5 8.9 107 9.1
Total assets 153.7 153.4 100 157.8
Financial ratios per share (DKK per share of DKK 10)
EPS Basic ** 5.9 8.7 11.7
EPS Diluted ** 5.9 8.7 11.7
Share price at end of period 127.4 133.3 133.8
Book value 130.1 120.8 124.1
Share price/book value 0.98 1.10 1.08
Average number of shares outstanding (millions) 73.6 64.8 66.9
Other financial ratios and key figures
Solvency ratio 16.1 14.8 15.2
Core capital ratio 14.1 12.9 13.1
Pre-tax profit as % of average shareholders' equity ** 6.2 9.4 12.3
Post-tax profit as % of average shareholders' equity ** 4.7 7.1 9.6
Costs (core earnings) as % of core income 52.8 54.5 53.8
Interest rate risk 0.4 0.4 1.0
Foreign exchange position 1.4 1.4 1.1
Foreign exchange risk 0.0 0.0 0.0
Loans and advances relative to deposits * 1.1 1.0 1.0
Loans and advances relative to shareholders' equity * 7.7 8.4 8.2
Growth in loans and advances for the period * (1.3) (10.4) (9.6)
Excess cover relative to statutory liquidity requirements 126.3 93.8 94.4
Total large exposures 19.6 20.1 17.2
Accumulated impairment ratio excl PCA 2.4 1.5 1.7
Impairment ratio for the period excl PCA ** 1.15 1.01 1.34
Number of full-time staff at end of period 2,303 2,385 97 2,369
Financial ratios prepared according to “Recommendations & Financial Ratios
2010” published by the Danish Society of Financial Analysts.
* Financial ratios calculated on the basis of loans and advances at amortised
cost.
** Ratios for the period have not been converted to a full-year basis.
Summary
Considering the ongoing difficult economic situation, profit before tax of DKK
581m for the first nine months of 2010 is considered satisfactory. Pre-tax
profit equals a return of 8.3% p.a. on average shareholders' equity.
The Interim Report is characterised by:
• 1% increase in core income excl trading income
• 8% rise in trading income
• Total core income of DKK 3,543m - an all-time high so far
• Unchanged level of costs (core earnings)
• Impairment of loans and advances of DKK 944m
• Profit on investment portfolios of DKK 235m
• Contribution of DKK 384m to the Private Contingency Association etc
• Unchanged level of bank loans and advances - DKK 73.6bn
• 6% decline in deposits to DKK 61.5bn
• Core capital ratio of 14.1%
• Solvency ratio of 16.1%
• Upgrade of core earnings before impairment to DKK 2.1-2.2bn.
Income statement - Q1-Q3 (DKKm) 2010 2009
Core income excl trading income 2,492 2,471
Trading income 1,051 970
Total core income 3,543 3,441
Costs, core earnings 1,869 1,874
Core earnings before impairment 1,674 1,567
Impairment of loans and advances etc 944 849
Core earnings 730 718
Profit on investment portfolios 235 361
Profit before contribution to Private Contingency Association etc 965 1,079
Contribution to Private Contingency Association etc 384 327
Profit before tax 581 752
Tax 145 188
Profit for the period 436 564
Core earnings before impairment represent DKK 1,674m against DKK 1,567m in
Q1-Q3 2009. The increase of DKK 107m consists of a rise in core income excl
trading income of DKK 21m, an increase in trading income of DKK 81m and a
decline of DKK 5m in costs (core earnings).
Core earnings before impairment are above the level announced in the Interim
Report - First Half 2010. The improvement is chiefly ascribable to developments
in trading income.
Impairment of loans and advances etc represents DKK 944m (Q1-Q3 2009: DKK 849m).
Profit on investment portfolios amounts to DKK 235m and the expense to the
Private Contingency Association etc totals DKK 384m. Less a calculated tax
charge of DKK 145m, profit for the period stands at DKK 436m.
Profit for the period equals a return on average shareholders' equity of 6.2%
p.a. compared with 9.4% p.a. in 2009. Earnings per share stands at DKK 5.9
compared with DKK 8.7 in 2009.
Profit before tax totals DKK 246m in Q3 2010 compared with DKK 109m in Q2 2010.
The increase in profit is predominantly attributable to a decline in costs of
DKK 37m and a rise in investment portfolio earnings of DKK 103m.
In August 2010 the Bank raised a non state-guaranteed bond loan of EUR 1bn with
a maturity period of two years.
The Group's solvency ratio stands at 16.1%, including a core capital ratio of
14.1 percentage points compared with 15.2% and 13.1 percentage points,
respectively, at end-2009. Since the beginning of the year the core capital
ratio excluding hybrid core capital has risen from 11.5% to 12.4%.
The method for determining the Group's solvency need has been changed. In
future the solvency need will be determined on the basis of an economic capital
model and a buffer will be added to allow for model and rating uncertainty as
well as additional credit risks. The solvency need at 30 September 2010
represents 9.6%.
The Group's liquidity measured under the 15% and 10% statutory requirements
constitutes 41.2% and 22.7%, respectively, at 30 September 2010.
The Group projects core earnings before impairment of loans and advances in the
region of DKK 2.1-2.2bn for 2010. The estimate represents a positive change in
level compared with DKK 1.9-2.1bn as previously announced.
The Danish FSA has conducted an ordinary inspection of the Bank, including its
loans and advances. The Danish FSA did not find grounds to change the Bank's
total impairment charges. However, during its review of loan exposures and IRB
models, the Danish FSA noted that an increase in the solvency need was
required. Consequently the Bank raised its solvency need from 9.0% to 9.6%, as
mentioned above. It is the opinion of the Danish FSA that this takes other
existing risks into account.
On 7 October 2010 Peter Gæmelke announced that he wished to resign from the
Board of Directors of Sydbank.
Financial Review
Core income excl trading income
Total core income excl trading income grew by 1% to DKK 2,492m.
Core income excl trading income - Q1-Q3 (DKKm) 2010 2009
Interest margins etc 2,073 2,079
Mortgage credit 165 166
Payment services 113 108
Remortgaging and loan fees 70 61
Other commission 54 41
Other operating income 17 16
Total 2,492 2,471
Due to an unchanged level of bank loans and advances, a 6% drop in deposits and
the raising of new senior loans compared with one year ago, income from
interest margins etc continues to show significant robustness with a slight
decline of DKK 6m to DKK 2,073m.
After a set-off of loss of DKK 10m (2009: DKK 6m), net income from the
cooperation with Totalkredit represents DKK 129m (2009: DKK 117m). The
cooperation with DLR Kredit has generated an income of DKK 29m (2009: DKK 43m).
Total mortgage credit income amounts to DKK 165m (2009: DKK 166m).
The remaining income components of core income excl trading income have gone up
by a total of 12% compared with Q1-Q3 2009.
Trading income
Total trading income rose by 8% - from DKK 970m in 2009 to DKK 1,051m in 2010.
The positive trend in trading income is buoyed by favourable developments in
securities trading, a decent trend in the institutional segment of the fixed
income department, a stable, high market share in share trading and
market-driven volume rises within asset management. In contrast foreign
exchange and derivatives trading remains at a low level.
Trading income - Q1-Q3 (DKKm) 2010 2009
Bonds 257 243
Shares 211 192
Foreign exchange 169 185
Money market 104 138
Asset management 310 212
Total 1,051 970
Costs and depreciation
The Group's total costs and depreciation recorded DKK 2,104m (2009: DKK
2,082m). DKK 8m is ascribable to investment portfolio earnings and DKK 227m
(2009: DKK 200m) to the Private Contingency Association etc.
Costs and depreciation - Q1-Q3 (DKKm)
2010 2009
Staff costs 1,078 1,099
Other administrative expenses 744 698
Depreciation and impairment of property, plant and equipment 71 85
Other operating expenses 211 200
Total costs and depreciation 2,104 2,082
Distributed as follows:
Costs, core earnings 1,869 1,874
Costs, investment portfolio earnings 8 8
Costs, guarantee commission to Private Contingency Association etc 227 200
Costs (core earnings) of DKK 1,869m have decreased by DKK 5m compared with one
year ago. At the end of Q3 2010 the Group's staff numbered 2,303 (full-time
equivalent) against 2,385 at 30 September 2009. Five small branches were closed
in 2010, bringing the number of branches to 105 in Denmark and unchanged three
in Germany.
Core earnings before impairment of loans and advances
Core earnings before impairment of loans and advances represent DKK 1,674m - a
rise of DKK 107m or 7% compared with one year ago.
Impairment of loans and advances etc
Impairment of loans and advances constitutes DKK 944m (2009: DKK 849m). As at
30 September 2010 the impairment ratio (excluding the provision for the Private
Contingency Association) relative to bank loans and advances represents 1.28%
and 1.11% relative to bank loans and advances and guarantees. At end-September
accumulated impairment and provisions (excluding the provision of DKK 377m for
the Private Contingency Association) amount to DKK 1,995m - a rise of DKK 437m
compared with the beginning of the year.
Core earnings
Core earnings represent DKK 730m compared with DKK 718m in 2009.
Investment portfolio earnings
Less funding charges and less related costs of DKK 8m, profit on investment
portfolios constitutes DKK 235m (2009: DKK 361m).
The Group's interest rate risk stands at DKK 38m at 30 September 2010. The
Group's exchange rate risk continues to be very low and its equity position
remains modest.
Contribution to the Private Contingency Association etc
Guarantee commission and the provision for the guarantee to the Private
Contingency Association amount to DKK 211m and DKK 157m, respectively,
totalling DKK 368m for the first nine months of 2010. In addition DKK 16m has
been charged to income to cover the expected payment to the Deposit Guarantee
Fund regarding the bankruptcy of Capinordic Bank.
The Group's total expense to the Private Contingency Association etc since
autumn 2008 amounts to DKK 990m.
Subsidiaries
The subsidiary bank, Sydbank (Schweiz) AG, which conducts private banking
activities in St. Gallen, Switzerland, recorded a profit after tax of DKK 3m
(2009: loss of DKK 7m). Ejendomsselskabet recorded a profit after tax of DKK 0m
(2009: loss of DKK 1m).
Profit for the period
Profit before tax amounts to DKK 581m. Less a calculated tax charge of DKK
145m, profit for the period stands at DKK 436m compared with DKK 564m in 2009.
Return
Return on average shareholders' equity represents 6.2% p.a. against 9.4% p.a.
in 2009. Earnings per share stands at DKK 5.9 compared with DKK 8.7 in 2009.
Q3 compared with Q2
• Core income excl trading income rose by DKK 1m.
• Trading income declined by DKK 2m.
• Costs (core earnings) dropped by 6%.
• Impairment of loans and advances rose by DKK 1m.
• Profit on investment portfolios increased from DKK 8m to DKK 111m.
• Contribution to the Private Contingency Association went up by DKK 1m.
Profit for the period (DKKm) 2010 2009
Q3 Q2 Q1 Q4 Q3 Q2 Q1
Core income excl trading income 832 831 829 849 830 819 822
Trading income 325 327 399 296 329 369 272
Core income 1,157 1,158 1,228 1,145 1,159 1,188 1,094
Costs, core earnings 588 625 656 592 586 629 659
Core earnings before impairment 569 533 572 553 573 559 435
Impairment of loans and advances etc 311 310 323 346 284 295 270
Core earnings 258 223 249 207 289 264 165
Profit on investment portfolios 111 8 116 69 150 139 72
Profit before non-recurring items 369 231 365 276 439 403 237
Non-recurring items, net - - - 86 - - -
Profit before contribution to PCA etc 369 231 365 362 439 403 237
Contribution to Private Contingency Association etc 123 122 139 116 113 142
72
Profit before tax 246 109 226 246 326 261 165
Tax 61 27 57 29 81 66 41
Profit for the period 185 82 169 217 245 195 124
After tax, profit for Q3 amounts to DKK 185m compared with a Q2 profit of DKK
82m.
Balance sheet
The Group's total assets made up DKK 153.7bn at 30 September 2010 against DKK
157.8bn at year-end 2009.
Assets (DKKbn) 30 Sep 2010 31 Dec 2009
Amounts owed by credit institutions etc 13.5 14.5
Loans and advances at fair value (reverse transactions) 6.5 12.9
Loans and advances at amortised cost (bank loans and advances) 73.6 74.5
Securities and holdings etc 37.3 38.5
Assets related to pooled plans 7.6 6.7
Other assets etc 15.2 10.7
Total 153.7 157.8
The Group's bank loans and advances total DKK 73.6bn - a decline of DKK 0.9bn
compared with year-end 2009 and DKK 0.3bn compared with 30 September 2009.
Shareholders' equity and liabilities (DKKbn) 30 Sep 2010 31 Dec 2009
Amounts owed to credit institutions etc 37.8 45.4
Deposits and other debt 61.5 68.8
Deposits in pooled plans 7.6 6.7
Bonds issued 16.1 8.6
Other liabilities etc 17.4 15.6
Provisions 0.7 0.5
Subordinated capital 3.1 3.1
Shareholders' equity 9.5 9.1
Total 153.7 157.8
The Group's deposits make up DKK 61.5bn against DKK 68.8bn at year-end 2009 and
DKK 65.3bn at end-September 2009. The decline in deposits is predominantly
ascribable to time deposits.
In August 2010, in the space of a few hours, the Bank raised a non
state-guaranteed bond loan of EUR 1bn with a maturity period of two years on
the international market, broadly diversified across countries as well as
investors.
Capital
On 21 October 2010 the Bank prepaid supplementary capital of EUR 100m and a
further EUR 8m will be prepaid on 29 October 2010, equivalent to a total of DKK
800m.
At end-Q3 2010 shareholders' equity constitutes DKK 9,534m - an increase of DKK
416m since year-end 2009. The change appears as net purchase of own shares of
DKK 20m and profit for the period of DKK 436m.
Since year-end 2009, risk-weighted items have decreased by DKK 2.3bn to DKK
75.6bn.
The Group's solvency ratio stands at 16.1%, including a core capital ratio of
14.1 percentage points compared with 15.2% and 13.1 percentage points,
respectively, at year-end 2009. During the same period the core capital ratio
excluding hybrid core capital rose from 11.5% to 12.4%. Other things being
equal, the solvency ratio will be reduced by 1.0 percentage point as a result
of the repayment of supplementary capital.
The Group's solvency need was previously determined on the basis of the
regulatory requirement of 8.0% and for precautionary reasons an estimated
buffer of one percentage point was added to the regulatory requirement. The
Group's solvency need was previously set at 9.0%.
The method for determining the Group's solvency need has been changed. In
future the solvency need will be determined on the basis of an economic capital
model and a buffer will be added to allow for model and rating uncertainty as
well as additional credit risks. The solvency need at 30 September 2010
represents 9.6%.
Liquidity
The Group's liquidity measured under the 15% and 10% statutory requirements
constitutes 41.2% and 22.7%, respectively, at 30 September 2010.
Rating
Sydbank's rating - A1 (long-term debt), P-1 (short-term debt) and C+ (financial
strength) - remained unchanged in Q3 2010.
Statement issued by the Danish FSA
The Danish FSA has conducted an ordinary inspection of the Bank, including its
loans and advances. The Danish FSA did not find grounds to change the Bank's
total impairment charges. However, during its review of loan exposures and IRB
models, the Danish FSA noted that an increase in the solvency need was
required. Consequently the Bank raised its solvency need from 9.0% to 9.6%, as
mentioned above. It is the opinion of the Danish FSA that the new method of
determination takes other existing risks into account.
The statement on inspection of Sydbank issued by the Danish FSA and the Bank's
comments are enclosed as appendices.
Board of Directors
On 7 October 2010 Peter Gæmelke announced that he wished to resign from the
Board of Directors of Sydbank.
IT cooperation between Bankdata and Jyske Bank
As previously announced, Jyske Bank will become a member of Bankdata. As a
result of the agreement, the volume behind Bankdata will grow by two thirds,
which will enable Bankdata to increase its systems development resources
significantly and to lower future IT costs. Bankdata will be among the biggest
units in terms of development within the financial institutions market.
Outlook for 2010
The Group projects core earnings before impairment of loans and advances in the
region of DKK 2.1-2.2bn for 2010. The estimate represents a positive change in
level compared with DKK 1.9-2.1bn as previously announced.
Appendices
- The Danish FSA's statement on inspection of Sydbank A/S - pages 29-31
- Sydbank's comments to “Statement on inspection of Sydbank A/S” issued by the
Danish FSA - page 32.
Income Statement - Sydbank Group
Q1-Q3 Q1-Q3 Q3 Q3
DKKm Note 2010 2009 2010 2009
Interest income 2 3,156 4,543 1,007 1,281
Interest expense 3 706 1,982 222 413
Net interest income 2,450 2,561 785 868
Dividends on shares 20 32 3 1
Fee and commission income 4 996 808 329 279
Fee and commission expense 137 120 44 38
Net interest and fee income 3,329 3,281 1,073 1,110
Market value adjustments 5 435 494 190 198
Other operating income 17 16 7 5
Staff costs and administrative expenses 6 1,822 1,797 566 561
Depreciation and impairment of property, plant and equipment 71 85 24 28
Other operating expenses 211 200 70 71
Impairment of loans and advances etc 8 1,101 976 364 327
Profit on holdings in associates and
subsidiaries 9 5 19 1 0
Profit before tax 581 752 247 326
Tax 10 145 188 62 82
Profit for the period 436 564 185 244
EPS Basic (DKK) * 5.9 8.7 2.5 3.7
EPS Diluted (DKK) * 5.9 8.7 2.5 3.7
Dividend per share (DKK) - - - -
* Based on average number of shares outstanding, see page 14.
Statement of Comprehensive Income - Sydbank Group
Profit for the period 436 564 185 244
Other comprehensive income
Translation of foreign entities 25 (2) 0 2
Hedge of net investment in foreign entities (25) 2 0 (2)
Other comprehensive income for the period 0 0 0 0
Comprehensive income for the period 436 564 185 244
Balance Sheet - Sydbank Group
30 Sep 31 Dec 30 Sep
DKKm Note 2010 2009 2009
Assets
Cash and balances on demand
at central banks 713 862 687
Amounts owed by credit institutions and central banks 11 12,769 13,637 13,865
Loans and advances at fair value 6,524 12,930 9,058
Loans and advances at amortised cost 73,597 74,544 73,941
Bonds at fair value 35,254 36,642 36,673
Shares etc 1,755 1,552 1,196
Holdings in associates etc 310 310 307
Assets related to pooled plans 7,576 6,735 6,364
Intangible assets 13 14 14
Total land and buildings 1,045 1,046 1,024
investment property 2 2 8
owner-occupied property 1,043 1,044 1,016
Other property, plant and equipment 109 139 128
Current tax assets 36 32 54
Deferred tax assets 11 11 10
Other assets 12 13,889 9,316 10,002
Prepayments 58 51 55
Total assets 153,659 157,821 153,378
Shareholders' equity and liabilities
Amounts owed to credit institutions and central banks 13 37,791 45,406 45,097
Deposits and other debt 14 61,519 68,780 65,281
Deposits in pooled plans 7,576 6,735 6,364
Bonds issued at amortised cost 16,080 8,622 10,090
Current tax liabilities 61 8 10
Other liabilities 15 17,323 15,524 14,256
Deferred income 3 27 6
Total liabilities 140,353 145,102 141,104
Provisions 16 643 477 246
Subordinated capital 17 3,129 3,124 3,175
Shareholders' equity:
Share capital 742 742 742
Revaluation reserves 112 112 90
Other reserves:
Reserves according to articles of association 418 418 411
Reserve for net revaluation according to the equity method 33 33 20
Retained earnings 8,229 7,813 7,590
Total shareholders' equity 9,534 9,118 8,853
Total shareholders' equity and liabilities 153,659 157,821 153,378
Group Financial Highlights - Quarterly
Q3 Q2 Q1 Q4 Q3 Q2 Q1
2010 2010 2010 2009 2009 2009 2009
Income statement (DKKm)
Core income excl trading income 832 831 829 849 830 819 822
Trading income 325 327 399 296 329 369 272
Total core income 1,157 1,158 1,228 1,145 1,159 1,188 1,094
Costs, core earnings 588 625 656 592 586 629 659
Core earnings before impairment 569 533 572 553 573 559 435
Impairment of loans and advances etc 311 310 323 346 284 295 270
Core earnings 258 223 249 207 289 264 165
Profit on investment portfolios 111 8 116 69 150 139 72
Profit before non-recurring items 369 231 365 276 439 403 237
Non-recurring items, net - - - 86
- - -
Profit before contribution to Private Contingency Association
etc 369 231 365 362 439 403 237
Contribution to Private Contingency Association etc 123 122 139 116 113 142 72
Profit before tax 246 109 226 246 326 261 165
Tax 61 27 57 29 81 66 41
Profit for the period 185 82 169 217 245 195 124
Balance sheet highlights (DKKbn)
Loans and advances at amortised cost 73.6 74.1 73.3 74.5 73.9 75.6 78.2
Loans and advances at fair value 6.5 6.6 7.4 12.9 9.1 12.9 15.8
Deposits and other debt 61.5 64.9 62.2 68.8 65.3 71.6 73.5
Bonds issued at amortised cost 16.0 8.6 8.6 8.6 10.1 10.1 10.1
Subordinated capital 3.1 3.1 3.1 3.1 3.2 3.5 4.2
Shareholders' equity 9.5 9.4 9.3 9.1 8.9 7.5 7.2
Total assets 153.7 154.4 149.0 157.8 153.4 160.1 161.4
Financial ratios per share (DKK per share of DKK 10)
EPS Basic ** 2.5 1.1 2.3 3.0 3.7 3.0 2.0
EPS Diluted ** 2.5 1.1 2.3 3.0 3.7 3.0 2.0
Share price at end of period 127.4 124.8 147.8 133.8 133.3 122.3 71.5
Book value 130.1 127.5 126.5 124.1 120.8 116.2 114.0
Share price/book value 0.98 0.98 1.17 1.08 1.10 1.05 0.63
Average number of shares outstanding
(millions) 73.4 73.7 73.7 73.3 67.0 64.3 63.0
Other financial ratios and key figures
Solvency ratio 16.1 15.7 15.3 15.2 14.8 13.8 15.0
Core capital ratio 14.1 13.5 13.1 13.1 12.9 11.4 11.3
Pre-tax profit as % of average shareholders' equity
** 2.6 1.2 2.4 2.7 4.0 3.5 2.3
Post-tax profit as % of average shareholders' equity
** 2.0 0.9 1.8 2.4 3.0 2.7 1.7
Costs (core earnings) as % of core income 50.9 54.0 53.4 51.7 50.6 52.9 60.2
Interest rate risk 0.4 0.2 1.0 1.0 0.4 2.2 2.3
Foreign exchange position 1.4 1.5 2.8 1.1 1.4 3.4 1.5
Foreign exchange risk 0.0 0.0 0.0 0.0 0.0 0.1 0.0
Loans and advances relative to deposits * 1.1 1.0 1.1 1.0 1.0 1.0 1.0
Loans and advances relative to shareholders' equity
* 7.7 7.9 7.9 8.2 8.4 10.1 10.8
Growth in loans and advances for the period
* (0.7) 1.1 (1.7) 0.8 (2.2) (3.3) (5.2)
Excess cover relative to statutory liquidity requirements
126.3 96.8 121.1 94.4 93.8 106.8 66.6
Total large exposures 19.6 0.0 13.6 17.2 20.1 34.6 21.4
Accumulated impairment ratio excl PCA ** 2.4 2.1 2.1 1.8 1.5 1.3 1.3
Impairment ratio for the period excl PCA ** 0.38 0.38 0.39 0.39 0.34 0.33 0.28
Number of full-time staff at end of
period 2,303 2,323 2,344 2,369 2,385 2,414 2,429
Financial ratios prepared according to “Recommendations & Financial Ratios
2010” published by the Danish Society of Financial Analysts.
* Financial ratios calculated on the basis of loans and advances at amortised
cost.
** Quarterly ratios have not been converted to a full-year basis.
Capital - Sydbank Group
Reserve for
Reserves net reval.
acc to acc to
Share Revaluation articles of equity Retained
DKKm capital reserves association method earnings Total
Shareholders' equity at 1 Jan 2010 742 112 418 33 7,813 9,118
Changes in equity in 2010
Purchase of own shares - - - - (1,757) (1,757)
Sale of own shares - - - - 1,737 1,737
Comprehensive income for the period - - - - 436 436
Total changes in equity - - - - 416 416
Shareholders' equity at 30 Sep 2010 742 112 418 33 8,229 9,534
Shareholders' equity at 1 Jan 2009 675 91 411 20 5,891 7,088
Changes in equity in 2009
Purchase of own shares - - - - (2,223) (2,223)
Sale of own shares - - - - 2,631 2,631
Share issue * 67 - - - 788 855
Adjustment concerning property sold - (1) - - 1 -
Tax on equity items - - - - (62) (62)
Comprehensive income for the period - - - - 564 564
Total changes in equity 67 (1) - - 1,699 1,765
Shareholders' equity at 30 Sep 2009 742 90 411 20 7,590 8,853
* Shares issued in connection with the capital increase of Sydbank A/S of DKK
67,499,990 nominal (6,749,999 shares of DKK 10 nominal).
30 Sep Full year 30 Sep
The Sydbank share 2010 2009 2009
Share capital (DKK) 742,499,990 742,499,990 742,499,990
Shares issued (number) 74,249,999 74,249,999 74,249,999
Shares outstanding at end of period 73,276,673 73,471,636 73,295,694
Average number of shares outstanding 73,571,386 66,926,690 64,771,336
The Bank has only one class of shares as all shares carry the same rights.
Capital - Sydbank Group
30 Sep 31 Dec 30 Sep
DKKm 2010 2009 2009
Solvency
Solvency ratio 16.1 15.2 14.8
Core capital ratio 14.1 13.1 12.9
Capital base after deductions
Shareholders' equity 9,534 9,118 8,853
Revaluation reserves (112) (112) (90)
Proposed dividend - -
-
Intangible assets and capitalised tax assets (25) (25) (24)
Core capital (excl hybrid core capital) 9,397 8,981 8,739
Hybrid core capital 1,384 1,386 1,388
50% of holdings > 10% (155) (105) (106)
50% of difference between expected losses and
accounting provisions and accounting value adjustment -
(33) (187)
50% of value of transferred payments etc with delivery risk -
(5) -
Core capital (incl hybrid core capital) after deductions 10,626 10,224 9,834
Subordinated loan capital 1,746 1,744 1,794
Revaluation reserves 112 112 90
Difference between expected losses and impairment charges -
- -
Capital base before deductions 12,484 12,080 11,718
50% of holdings > 10% (155) (105) (106)
50% of difference between expected losses and
accounting provisions and accounting value adjustment -
(33) (187)
50% of value of transferred payments etc with delivery risk -
(5) -
Holdings in associates (126) (128) (125)
Capital base after deductions 12,203 11,809 11,300
Credit risk 60,850 62,608 62,608
Market risk 7,336 8,764 7,113
Operational risk 7,378 6,537 6,537
Risk-weighted items 75,564 77,909 76,258
Regulatory solvency requirement 6,045 6,233 6,101
Adequate capital base 7,254 7,012 6,083
Cash Flow Statement - Sydbank Group
Q1-Q3 Full year Q1-Q3
DKKm 2010 2009 2009
Operating activities
Pre-tax profit for the period 581 998 752
Taxes paid (80) 86 (103)
Adjustment of non-cash operating items 1,331 1,867 1,185
Cash flows from working capital (13,058) (193) (2,075)
Cash flows from operating activities (11,226) 2,758 (241)
Investing activities
Purchase/sale of holdings in associates 4 (67) (57)
Purchase/sale of property, plant and equipment (39) (128) (69)
Cash flows from investing activities (35) (195) (126)
Financing activities
Purchase/sale of own holdings (20) 371 347
Share issue - 855 855
Raising of subordinated capital 5 (1,095) (1,044)
Issue of bonds 7,458 (1,473) (6)
Cash flows from financing activities 7,443 (1,342) 152
Cash flows for the period (3,818) 1,221 (215)
Cash equivalent positions at 1 Jan 7,421 6,200 6,200
Cash flows for the period (3,818) 1,221 (215)
Total cash equivalent positions at end of period 3,603 7,421 5,985
Segment Statements - Sydbank Group
Sydbank
DKKm Banking Markets Treasury Other Total
Business segments Q1-Q3 2010
Core income excl trading income 2,509 (19) - 2 2,492
Trading income 587 464 - - 1,051
Core income 3,096 445 - 2 3,543
Costs, core earnings 1,598 224 8 47 1,877
Core earnings before impairment 1,498 221 (8) (45) 1,666
Impairment of loans and advances etc 945 (1) - - 944
Core earnings 553 222 (8) (45) 722
Investment portfolio income - - 233 10 243
Profit before non-recurring items 553 222 225 (35) 965
Contribution to Private Contingency Association etc - - - 384 384
Profit before tax 553 222 225 (419) 581
Business segments Q1-Q3 2009
Core income excl trading income 2,506 (56) - - 2,450
Trading income 465 505 - - 970
Core income 2,971 449 - - 3,420
Costs, core earnings 1,613 222 8 39 1,882
Core earnings before impairment 1,358 227 (8) (39) 1,538
Impairment of loans and advances etc 846 3 - - 849
Core earnings 512 224 (8) (39) 689
Investment portfolio income - - 388 2 390
Profit before non-recurring items 512 224 380 (37) 1,079
Contribution to Private Contingency Association etc - - - 327 327
Profit before tax 512 224 380 (364) 752
Notes - Sydbank Group
Note 1
Accounting policies
The Interim Report has been prepared in accordance with IAS 34 “Interim
Financial Reporting” as adopted by the EU and in compliance with additional
Danish disclosure requirements for interim reports. As a result of the use of
IAS 34, the presentation is less complete compared with the presentation of an
annual report and the recognition and measurement principles are in compliance
with IFRS.
The accounting policies are consistent with those adopted in the 2009 Annual
Report, to which reference is made.
The 2009 Annual Report provides a comprehensive description of the accounting
policies applied.
The measurement of certain assets and liabilities requires managerial estimates
as to how future events will affect the value of such assets and liabilities.
The significant estimates made by the management in the use of the Group's
accounting policies and the inherent considerable uncertainty of such estimates
used in the preparation of the condensed interim report are identical to those
used in the preparation of the annual report as at 31 December 2009.
The Group's significant risks and the external elements which may affect the
Group are described in detail in the 2009 Annual Report.
Notes - Sydbank Group
Q1-Q3 Q1-Q3 Q3 Q3
DKKm 2010 2009 2010 2009
Note 2
Interest income
Reverse transactions with credit institutions and central banks 18 41 4 13
Amounts owed by credit institutions and central banks 70 146 27 32
Reverse loans and advances 62 273 17 45
Loans and advances and other amounts owed 2,372 2,958 787 883
Bonds 565 953 159 299
Derivatives 55 163 10 5
Other interest income 14 9 3 4
Total 3,156 4,543 1,007 1,281
Note 3
Interest expense
Repo transactions with credit institutions and central banks 77 4 15 (9)
Credit institutions and central banks 145 555 49 127
Repo deposits 1 6 0 -
Deposits and other debt 366 1,162 110 241
Bonds issued 69 161 32 32
Subordinated capital 47 93 16 21
Other interest expense 1 1 0 1
Total 706 1,982 222 413
Note 4
Fee and commission income
Securities trading and custody accounts 555 433 186 154
Payment services 146 120 51 42
Loan fees 73 61 27 22
Guarantee commission 89 67 28 24
Other fees and commission 133 127 37 37
Total 996 808 329 279
Note 5
Market value adjustments
Other loans and advances and amounts owed at fair value (1) (5) (2) (3)
Bonds 480 334 129 136
Shares etc 51 110 132 69
Foreign exchange 196 198 63 65
Derivatives (291) (142) (132) (69)
Assets related to pooled plans 386 653 118 378
Deposits in pooled plans (386) (653) (118) (378)
Other assets/liabilities 0 (1) 0 0
Total 435 494 190 198
Notes - Sydbank Group
Q1-Q3 Q1-Q3 Q3 Q3
DKKm 2010 2009 2010 2009
Note 6
Staff costs and administrative expenses
Salaries and emoluments to:
Group Executive Management:
Salaries 11 8 2 3
Pensions 0 1 0 0
Severance pay 8 - - -
Board of Directors 3 3 1 1
Shareholders' Committee 1 1 1 0
Total 23 13 4 4
Staff costs:
Wages and salaries 869 898 271 281
Pensions 97 107 32 37
Social security contributions 3 6 0 4
Payroll tax etc 86 75 27 20
Total 1,055 1,086 330 342
Other administrative expenses:
IT 374 364 116 112
Rent etc 104 100 38 35
Marketing and entertainment expenses 57 50 17 14
Other expenses 209 184 61 54
Total 744 698 232 215
Total 1,822 1,797 566 561
Note 7
Staff
Average number of staff (full-time equivalent) 2,374 2,471 2,358 2,445
Notes - Sydbank Group
Q1-Q3 Q1-Q3 Q3 Q3
DKKm 2010 2009 2010 2009
Note 8
Impairment of loans and advances recognised in the income statement
Impairment and provisions 882 621 331 191
Write-offs 241 376 40 144
Recovered from debt previously written off 22 21 7 8
Impairment of loans and advances etc 1,101 976 364 327
Impairment and provisions at end of period
Individual impairment and provisions 2,219 1,209 2,219 1,209
Collective impairment and provisions 153 196 153 196
Impairment and provisions at end of period 2,372 1,405 2,372 1,405
Individual impairment of loans and advances and provisions for guarantees
Impairment and provisions at 1 Jan 1,637 954 1,955 1,136
Exchange rate adjustment 4 0 0 1
Impairment and provisions during the period 885 597 320 186
Other movements 94 - 0 -
Write-offs covered by impairment and provisions 401 342 56 114
Impairment and provisions at end of period 2,219 1,209 2,219 1,209
Individual impairment of loans and advances 1,813 1,016 1,813 1,016
Individual provisions for guarantees 406 193 406 193
Impairment and provisions at end of period 2,219 1,209 2,219 1,209
Collective impairment of loans and advances and provisions for guarantees
Impairment and provisions at 1 Jan 141 152 137 194
Impairment and provisions during the period 12 44 16 2
Impairment and provisions at end of period 153 196 153 196
Individual impairment of loans advances subject to objective evidence of
impairment
Balance before impairment of individually assessed loans and
advances 3,634 2,116 3,634 2,116
Impairment of individually assessed loans and advances 1,813 1,016 1,813 1,016
Balance after impairment of individually assessed loans and
advances 1,821 1,100 1,821 1,100
Note 9
Profit on holdings in associates and
subsidiaries
Profit on holdings in associates etc 5 19 1 0
Total 5 19 1 0
Note 10
Effective tax rate
Current tax rate of Sydbank Group 25.0 25.0 25.0 25.0
Adjustment of prior year tax charges 0.0 0.1 0.0 0.1
Total 25.0 25.1 25.0 25.1
Notes - Sydbank Group
30 Sep 31 Dec 30 Sep
DKKm 2010 2009 2009
Note 11
Amounts owed by credit institutions and central banks
Amounts owed at notice by central banks 900 3,554 560
Amounts owed by credit institutions 8,733 5,091 8,291
Reverse transactions 3,136 4,992 5,014
Total 12,769 13,637 13,865
Note 12
Other assets
Positive market value of derivatives etc 13,121 8,330 8,905
Sundry debtors 324 336 334
Interest and commission receivable 443 649 761
Other assets 1 1 2
Total 13,889 9,316 10,002
Note 13
Amounts owed to credit institutions and central banks
Amounts owed to central banks 543 12,522 20,668
Amounts owed to credit institutions 19,454 18,928 20,146
Repo transactions 17,794 13,956 4,283
Total 37,791 45,406 45,097
Note 14
Deposits and other debt
On demand 39,268 40,645 38,961
At notice 647 697 732
Time deposits 16,257 21,526 19,987
Special categories of deposits 5,347 5,912 5,601
Total 61,519 68,780 65,281
Note 15
Other liabilities
Negative market value of derivatives etc 12,708 7,488 8,205
Negative portfolio, reverse transactions 3,193 6,728 4,493
Sundry creditors 1,208 1,158 1,069
Interest and commission etc 211 146 489
Other liabilities 3 4 0
Total 17,323 15,524 14,256
Notes - Sydbank Group
30 Sep 31 Dec 30 Sep
DKKm 2010 2009 2009
Note 16
Provisions
Provisions for pensions and similar obligations 3 3 4
Provisions for deferred tax 208 208 25
Provisions for guarantees * 406 240 193
Other provisions 26 26 24
Total 643 477 246
* Of which Private Contingency Association 377 220 175
Note 17
Subordinated capital
Interest rate Nominal (m) Maturity
Floating Bond loan DKK 50 29.10.12 - - 50
Floating Bond loan EUR 100 21.10.13 745 744 744
Floating Bond loan DKK 200 14.11.14 200 200 200
Floating Bond loan EUR 100 04.04.15 745 743 744
Floating Bond loan EUR 8 31.10.15 56 56 55
Total supplementary capital 1,746 1,743 1,793
Floating Bond loan EUR 100 Perpetual 739 738 738
Floating Bond loan EUR 75 Perpetual 559 558 559
6.36 Bond loan DKK 85 Perpetual 85 85 85
Total hybrid core capital 1,383 1,381 1,382
Total 3,129 3,124 3,175
Note 18
Contingent liabilities and other obligating agreements
Contingent liabilities
Financial guarantees 1,859 2,702 2,668
Mortgage finance guarantees 2,615 2,343 1,363
Registration and remortgaging guarantees 5,002 5,057 3,824
Loss guarantee/guarantee, Private Contingency Association 374 531 576
Other contingent liabilities 1,354 1,420 1,358
Total 11,204 12,053 9,789
Other obligating agreements
Irrevocable credit commitments 6 14 10
Other liabilities 55 61 55
Total 61 75 65
Notes - Sydbank Group
Note 18 - continued
A group of minority shareholders (“Foreningen af Minoritetsaktionærer i
bankTrelleborg”) has filed a class action regarding the legality of the
compulsory redemption against Fonden for bankTrelleborg, Sydbank and the Danish
FSA. In continuation of the compulsory redemption of the shares in
bankTrelleborg, the shares were priced by appraisers in accordance with section
144 (4) of the Danish Financial Business Act. A few shareholders have brought
the findings of the appraisers before the courts as regards Fonden for
bankTrelleborg and Sydbank.
Moreover, in 2009 the group of minority shareholders (“Foreningen af
Minoritetsaktionærer i bankTrelleborg”) filed an action against Sydbank
regarding an inadequate prospectus in connection with the conversion of
sparTrelleborg to bankTrelleborg.
In addition, the Group is party to a number of legal actions. These actions are
under continuous review and the necessary provisions made are based on an
assessment of the risk of loss. Pending legal actions are not expected to have
any significant impact on the financial position of the Group.
Note 19
Repo and reverse transactions
In connection with repo transactions, which involve selling securities to be
repurchased at a later date, the securities remain on the balance sheet, and
consideration received is recognised as a deposit. Repo transaction securities
are treated as assets provided as collateral for liabilities. At 30 September
2010, the fair value of such securities stood at DKK 17,685m.
In connection with reverse transactions, which involve buying securities to be
resold at a later date, the Group is entitled to sell the securities or deposit
them as collateral for other loans. The securities are not recognised on the
balance sheet and consideration paid is recognised as a loan. At 30 September
2010, the fair value of such securities stood at DKK 9,528m.
Assets received as collateral in connection with reverse transactions may be
resold to a third party. In such instances a negative portfolio may exist as a
result of accounting rules. Any negative portfolio is recognised under “Other
liabilities”.
Note 20
Collateral
As at 30 September 2010, the Group had deposited as collateral securities at a
market value of DKK 2,733m with Danish and foreign exchanges and clearing
centres etc in connection with margin calls and securities settlements etc.
Note 21
Related parties
Sydbank is the bank of a number of related parties. Transactions with related
parties are settled on an arm's length basis.
No unusual transactions took place with related parties in Q1-Q3 2010.
Reference is made to the Group's 2009 Annual Report for a detailed description
of transactions with related parties.
Note 22
Reporting events occurring after the balance sheet date
After the expiry of Q3 no matters of significant impact on the financial
position of the Sydbank Group have occurred.
Note 23
Large shareholders
Two shareholders have each reported a holding of at least 5% of Sydbank's share
capital:
ATP, Copenhagen
Nykredit A/S, Copenhagen
Notes - Sydbank Group
Q1-Q3 Q1-Q3 Index Full year
DKKm 2010 2009 10/09 2009
Note 24
Core income
Core income excl trading income
Interest margins etc 2,073 2,079 100 2,776
Mortgage credit 165 166 99 221
Payment services 113 108 105 159
Remortgaging and loan fees 70 61 115 83
Other commission 54 41 132 59
Other operating income 17 16 106 22
Total 2,492 2,471 101 3,320
Mortgage credit
Totalkredit cooperation 139 123 113 168
Totalkredit, set-off of loss 10 6 167 8
Totalkredit cooperation, net 129 117 110 160
DLR Kredit 29 43 67 52
Other mortgage credit income 7 6 117 9
Total 165 166 99 221
Trading income
Bonds 257 243 106 292
Shares 211 192 110 258
Foreign exchange 169 185 91 234
Money market 104 138 75 178
Asset management 310 212 146 304
Total 1,051 970 108 1,266
Notes - Sydbank Group
Q3 Q2 Q1 Q4 Q3 Q2 Q1
DKKm 2010 2010 2010 2009 2009 2009 2009
Note 24 - continued
Core income excl trading income
Interest margins etc 692 689 692 697 701 679 699
Mortgage credit 55 61 49 55 57 61 48
Payment services 40 33 40 51 33 43 32
Remortgaging and loan fees 26 21 23 22 21 21 19
Other commission 12 22 20 18 13 11 17
Other operating income 7 5 5 6 5 4 7
Total 832 831 829 849 830 819 822
Mortgage credit
Totalkredit cooperation 49 47 43 45 46 47 30
Totalkredit, set-off of loss 6 3 1 2 3 3 0
Totalkredit cooperation, net 43 44 42 43 43 44 30
DLR Kredit 10 15 4 10 12 15 16
Other mortgage credit income 2 2 3 2 2 2 2
Total 55 61 49 55 57 61 48
Trading income
Bonds 77 73 107 49 88 94 61
Shares 64 66 81 66 67 78 47
Foreign exchange 48 65 56 49 51 57 77
Money market 31 23 50 40 45 67 26
Asset management 105 100 105 92 78 73 61
Total 325 327 399 296 329 369 272
Management Statement
Today we have reviewed and approved the Interim Report - Q1-Q3 2010 of Sydbank
A/S.
The consolidated interim financial statements for Q1-Q3 2010 have been prepared
in accordance International Financial Reporting Standards as adopted by the EU.
Furthermore, the Interim Report has been prepared in compliance with additional
Danish disclosure requirements for interim reports of listed financial
companies. The Interim Report has not been audited or reviewed.
We consider the accounting policies applied to be appropriate and the Interim
Report gives a true and fair view of the Group's assets, shareholders' equity
and liabilities and financial position at 30 September 2010 and of the results
of the Group's operations and consolidated cash flows for the accounting period
1 January-30 September 2010 as well as a description of the most significant
risks and elements of uncertainty which may affect the Group.
Aabenraa, 26 October 2010
Group Executive Management
Karen Frøsig Preben L. Hansen Allan Nørholm
(CEO)
Board of Directors
Kresten Philipsen Anders Thoustrup Svend Erik Busk
(Chairman) (Vice-Chairman)
Otto Christensen Peder Damgaard Harry Max Friedrichsen
Hanni Toosbuy Kasprzak Sven Rosenmeyer Paulsen Steen Tophøj
Jan Uldahl-Jensen Margrethe Weber
Supplementary Information
Financial Calendar
In 2011 the Group's financial statements will be released as follows:
- 2010 Annual Report
15 February 2011
- General Meeting
10 March 2011
- Interim Report - Q1 2011
26 April 2011
- Interim Report - First Half 2011
16 August 2011
- Interim Report - Q1-Q3 2011
25 October 2011
Sydbank contacts
Karen Frøsig, CEO
Tel: +45 74 37 20 00
Mogens Sandbæk, CFO
Tel: +45 74 37 24 00
Niels Møllegaard, Group Executive Vice President
Tel: +45 74 37 20 50
Address
Sydbank A/S
Peberlyk 4
6200 Aabenraa
Denmark
Tel: +45 74 37 37 37
CVR No DK 12626509
Relevant links
sydbank.dk
sydbank.com
For further information reference is made to Sydbank's 2009 Annual Report at
www.sydbank.com/about/ir/finreports.
Appendix 1
Appendix 2
Sydbank's comments to “Statement on inspection of Sydbank A/S” issued by the
Danish FSA
The Danish FSA regularly conducts inspections of Danish financial and mortgage
credit institutions. After each inspection the Danish FSA prepares a statement
which the financial and mortgage credit institution must publish in accordance
with the Danish executive order on the duty of financial and mortgage credit
institution to publish the Danish FSA's assessment of the institution.
The statement must be published no later than on the last weekday of the
quarter in which it was received. Publication must take place on the bank's
website.
The Danish FSA's review of Sydbank comprises retail clients as well as
corporate clients. The Danish FSA inspected 247 retail client loan exposures
and 243 corporate client loan exposures - including loan exposures to the
bank's board of directors and executive management.
Sydbank has the following comments to “Statement on inspection of Sydbank A/S”
issued by the Danish FSA.
Sydbank notes with satisfaction that the Danish FSA did not find grounds to
order the bank to increase its impairment charges as regards loans and
advances.
Sydbank also notes with satisfaction that, in the assessment of the Danish FSA,
the bank's procedures generally support the identification of critical
exposures and that the bank's credit management of loans and advances to retail
clients and to ordinary enterprises is assessed by the Danish FSA to be better
than the average of major banks.
The Danish FSA has issued several orders.
The first order concerns ensuring compliance with the rules regarding the
determination of impairment charges with respect to individually assessed loans
and advances. Sydbank has tightened its practices to ensure that the rules are
observed.
The second order concerns adjusting the bank's models for collective impairment
charges or supplementing them with estimates of the board of directors and
executive management. Sydbank adjusts and develops the models for collective
impairment charges on an ongoing basis and the bank has supplemented the
model-calculated impairment charges as at 30 September 2010 with a management
estimate of an additional DKK 25m.
The third order concerns the board of directors, which is addressed separately
by the chairman of the board of directors.
The fourth order concerns the bank's credit-related treatment of retail clients
which differs in certain cases from that dictated by the models, without it
having any effect on solvency. The bank has adjusted the solvency need
accordingly.
The fifth order concerns the Danish FSA's opinion that the bank's IRB models
underestimate to a certain extent the risk of loss as regards the individual
client and that the bank has not allowed sufficiently for this by means of
manual adjustments, Sydbank has tightened its practices and business
procedures, for instance by increasing focus on data quality and adjusting the
solvency accordingly.
The sixth order concerns the fact that the bank must increase the extent of
written documentation and the level of reporting in the bank's internal
liquidity management. Sydbank has addressed the issues of increased written
documentation and reporting.
Comments by the board of directors of Sydbank to “Statement on inspection of
Sydbank A/S” issued by the Danish FSA
The board of directors of Sydbank takes note of the order of the Danish FSA
that the board of directors consider the bank's most significant risks to a
greater extent. Already in connection with the upcoming board meetings, the
board of directors has implemented a number of initiatives to comply with the
order.
