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.