Interim Report - Q1 2011

Aabenraa, Denmark, 2011-04-26 14:03 CEST (GLOBE NEWSWIRE) -- Company Announcement No 08/2011 26 April 2011

Contents

Financial Review

Group Financial Highlights 3

Summary 4

Financial Review 6

Financial Statements – Sydbank Group

Income Statement 12

Statement of Comprehensive Income 12

Balance Sheet 13

Financial Highlights – Quarterly 14

Capital 15

Cash Flow Statement 17

Segment Statements 18

Notes 19

Statement

Management Statement 27

Supplementary Information 28

Group Financial Highlights

	Q1	Q1	Index	Full year
	2011	2010	11/10	2010

Income statement (DKKm)

Core income excl trading income	799	829	96	3,304
Trading income	299	399	75	1,290
Total core income	1,098	1,228	89	4,594
Costs, core earnings	650	656	99	2,479
Core earnings before impairment	448	572	78	2,115
Impairment of loans and advances etc	250	323	77	1,400
Core earnings	198	249	80	715
Profit on investment portfolios	75	116	65	227
Profit before contributions to deposit guarantee and PCA	273	365	75	942
Contributions to deposit guarantee and the Private Contingency Association (PCA)	98	139	71	384
Profit before tax	175	226	77	558
Tax	44	57	77	147
Profit for the period	131	169	78	411

Balance sheet highlights (DKKbn)
Loans and advances at amortised cost	71.4	73.3	97	73.0
Loans and advances at fair value	9.3	7.4	126	10.7
Deposits and other debt	64.6	62.2	104	64.2
Bonds issued at amortised cost	11.2	8.6	130	11.2
Subordinated capital	2.3	3.1	74	2.3
Shareholders’ equity	9.6	9.3	103	9.6
Total assets	140.6	149.0	94	150.8

Financial ratios per share (DKK per share of DKK 10)
EPS Basic **	1.8	2.3		5.6
EPS Diluted **	1.8	2.3		5.6
Share price at end of period	132.8	147.8		151.3
Book value	130.5	126.5		129.8
Share price/book value	1.02	1.17		1.17
Average number of shares outstanding (millions)	73.5	73.7		73.5
Dividend per share	-	-		1.0

Other financial ratios and key figures
Solvency ratio	15.4	15.3		15.4
Core capital ratio	14.4	13.1		14.3
Pre-tax profit as % of average shareholders’ equity **	1.8	2.4		6.0
Post-tax profit as % of average shareholders’ equity **	1.4	1.8		4.4
Costs (core earnings) as % of core income	59.2	53.4		54.0
Interest rate risk	1.1	1.0		1.5
Foreign exchange position	4.5	2.8		1.2
Foreign exchange risk	0.0	0.0		0.0
Loans and advances relative to deposits *	1.0	1.1		1.0
Loans and advances relative to shareholders’ equity *	7.5	7.9		7.6
Growth in loans and advances for the period *	(2.2)	(1.7)		(2.0)
Excess cover relative to statutory liquidity requirements	129.3	121.1		106.3
Total large exposures	23.9	13.6		54.4
Accumulated impairment ratio excl PCA	2.2	2.1		2.0
Accumulated impairment ratio for the period excl PCA **	0.30	0.39		1.70
Number of full-time staff at end of period	2,285	2,344	97	2,284

Financial ratios are 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.

Summary

The Sydbank Group recorded a pre-tax profit of DKK 175m. The result, which is adversely affected by a provision for the Deposit Guarantee Fund in connection with the bankruptcy of Amagerbanken, is considered acceptable given the weak growth in the economy. The development meets the expectations at the beginning of the year. Profit before tax equals a return of 7.3% p.a. on average shareholders’ equity.

The Interim Report is characterised by:

4% decrease in core income excl trading income
25% decline in trading income
Unchanged level of costs (core earnings)
Decrease in impairment charges for loans and advances of DKK 73m to DKK 250m
Profit on investment portfolios of DKK 75m
Provision for deposit guarantee etc of DKK 98m
3% reduction in bank loans and advances to DKK 71.4bn
4% growth in deposits to DKK 64.6bn
Core capital ratio of 14.4%
Solvency ratio of 15.4%.

Income statement – Q1 (DKKm)	2011	2010
Core income excl trading income	799	829
Trading income	299	399
Total core income	1,098	1,228
Costs, core earnings	650	656
Core earnings before impairment	448	572
Impairment of loans and advances etc	250	323
Core earnings	198	249
Profit on investment portfolios	75	116
Profit before contributions to deposit guarantee and PCA	273	365
Contributions to deposit guarantee and the Private Contingency Association (PCA)	98	139
Profit before tax	175	226
Tax	44	57
Profit for the period	131	169

Core earnings before impairment represent DKK 448m against DKK 572m for the first three months of 2010. The reduction of DKK 124m consists of a decline in core income excl trading income of DKK 30m, a decrease in trading income of DKK 100m and a decline in costs (core earnings) of DKK 6m.

Core earnings before impairment are in line with our announcement in the 2010 Annual Report.

Impairment charges for loans and advances etc represent DKK 250m (Q1 2010: DKK 323m).

Investment portfolio earnings constitute DKK 75m and the provision for the Deposit Guarantee Fund etc amounts to DKK 98m. Less a calculated tax charge of DKK 44m, profit for the period stands at DKK 131m.

Profit for the period equals a return on average shareholders’ equity of 5.5% p.a. against 7.3% p.a. in 2010. Earnings per share stands at DKK 1.8 compared with DKK 2.3 in 2010.

Since year-end 2010, risk-weighted assets have increased by DKK 0.5bn to DKK 74.2bn.

Sydbank and 89 other banks are undergoing an EU-wide stress test conducted at the request of the European Banking Authority (EBA). The stress test includes more than 65% of bank assets within the EU. The results of the stress test are expected to be released in June 2011.

The Group’s solvency ratio stands at 15.4%, of which 14.4 percentage points is ascribable to core capital, compared with 15.4% and 14.3 percentage points, respectively, at end-2010. The core capital ratio excluding hybrid core capital is unchanged at 12.7% compared with the beginning of the year.

The Group’s liquidity measured under the 15% and 10% statutory requirements constitutes 35.9% and 21.7%, respectively, at 31 March 2011.

Sydbank’s number of clients grew in the first three months – which is a highly satisfactory development.

The Group continues to project core earnings before impairment charges for loans and advances in the region of DKK 1.7-2.0bn in 2011 – unchanged compared with previous announcements.

Financial Review

Core income excl trading income

Total core income excl trading income declined by 4% to DKK 799m.

Core income excl trading income – Q1 (DKKm)	2011	2010
Interest margins etc	668	692
Mortgage credit	43	49
Payment services	37	40
Remortgaging and loan fees	21	23
Other commission	25	20
Other operating income	5	5
Total	799	829

Income from interest margins went down by DKK 24m due to a decline in bank loans and advances of 3% and a rise in deposits of 4% compared with 31 March 2010.

Net income from the cooperation with Totalkredit represents DKK 36m (2010: DKK 42m). Total mortgage credit income amounts to DKK 43m (2010: DKK 49m).

The remaining income components of core income excl trading income are unchanged compared with Q1 2010.

Trading income

Total trading income decreased by 25% – from DKK 399m in 2010 to DKK 299m in 2011.

The development must be seen in light of the fact that income in Q1 2010 was exceptionally high in a favourable market whereas income in Q1 2011 was adversely affected by lower trading activity.

Trading income – Q1 (DKKm)	2011	2010
Bonds	54	107
Shares	66	81
Currency	50	56
Money market	16	50
Asset management	113	105
Total	299	399

Costs and depreciation

The Group’s total costs and depreciation recorded DKK 746m, which is unchanged compared with 2010. This includes DKK 3m which can be ascribed to investment portfolio earnings and DKK 93m for the provision for the Deposit Guarantee Fund. In Q1 2010 costs included a guarantee commission of DKK 86m to the Private Contingency Association.

Costs and depreciation – Q1 (DKKm)	2011	2010
Staff costs	382	377
Other administrative expenses	345	275
Depreciation and impairment of property, plant and equipment	19	23
Other operating expenses	0	70
Total costs and depreciation	746	745
Distributed as follows:
Costs, core earnings	650	656
Costs, investment portfolio earnings	3	3
Costs, deposit guarantee and the Private Contingency Association	93	86

Costs (core earnings) of DKK 650m decreased by DKK 6m compared with one year ago. At end-Q1 2011 the Group’s staff numbered 2,285 (full-time equivalent) compared with 2,344 at 31 March 2010. In 2011 Sydbank has closed one small branch, bringing the number of branches to 101 in Denmark and unchanged three in Germany.

As part of the continuing expansion in Zealand two new branches have been/will be opened in Amager – in Amagerbrogade and in Dragør – as well as a new branch in Hørsholm.

Core earnings before impairment of loans and advances

Core earnings before impairment of loans and advances represent DKK 448m – a decrease of DKK 124m or 22% compared with one year ago.

Impairment of loans and advances etc

Impairment charges for loans and advances constitute DKK 250m (2010: DKK 323m). The impairment ratio represents 0.35% relative to bank loans and advances at 31 March 2011 and 0.31% relative to bank loans and advances and guarantees. At end-March 2011 accumulated impairment and provisions amount to DKK 1,814m. A rise of DKK 51m compared with the beginning of the year.

Compared with 31 March 2010 impaired bank loans and advances before impairment charges went down by DKK 413m to DKK 3,142m. During the same period individually impaired bank loans and advances after impairment charges declined by DKK 440m. Impairment charges for bank loans and advances subject to individual impairment constitute 52.0% at 31 March 2011 compared with 45.2% one year ago and 51.8% at year-end 2010.

Individually impaired bank loans and advances (DKKm)	31 Mar 2011	31 Mar 2010
Non-defaulted bank loans and advances	1,786	1,815
Defaulted bank loans and advances	1,356	1,740
Impaired bank loans and advances	3,142	3,555
Impairment charges for bank loans and advances subject to individual impairment	1,635	1,608
Impaired bank loans and advances after impairment charges	1,507	1,947
Impaired bank loans and advances as %
of bank loans and advances before impairment charges	4.3	4.7
Impairment charges as % of bank loans and advances before impairment charges	2.2	2.1
Impaired as % of impaired bank loans and advances	52.0	45.2

Core earnings

Core earnings represent DKK 198m compared with DKK 249m in 2010.

Investment portfolio earnings

Less funding charges and less related costs of DKK 3m, investment portfolio earnings constitute DKK 75m (2010: DKK 116m).

The Group’s interest rate risk comprises DKK 119m at 31 March 2011. Moreover the Group’s exchange rate risk continues to be very low and its equity position remains modest.

Contributions to deposit guarantee/the Private Contingency Association

In connection with the bankruptcy of Amagerbanken a further provision of DKK 93m has been made to cover the Bank’s expected contribution to the Deposit Guarantee Fund bringing the contribution to a total of DKK 110m at the end of Q1 2011. Finally an amount of DKK 5m has been charged to income, representing the Group’s share of Amagerbanken’s outstanding payment of the guarantee to the Private Contingency Association. In Q1 2010 the guarantee commission and provision concerning the Private Contingency Association constituted DKK 70m and DKK 52m, respectively, and the provision for the Deposit Guarantee Fund in connection with the bankruptcy of Capinordic Bank amounted to DKK 17m, or a total of DKK 139m.

Subsidiaries

The subsidiary bank, Sydbank (Schweiz) AG, which conducts private banking activities in St. Gallen, Switzerland, recorded a profit after tax of DKK 1m (2010: DKK 3m). Profit after tax of Ejendomsselskabet is unchanged at DKK 1m compared with 2010.

Profit for the period

Profit before tax amounts to DKK 175m. Less a calculated tax charge of DKK 44m, profit for the period stands at DKK 131m compared with DKK 169m in 2010.

Return

Profit for the period equals a return on average shareholders’ equity of 5.5% p.a. against 7.3% p.a. in 2010. Earnings per share stands at DKK 1.8 compared with DKK 2.3 in 2010.

Q1 2011 compared with Q4 2010

Profit before tax rose by DKK 198m and reflected:

A decrease in core income excl trading income of DKK 13m, ascribable in part to lower lending volume and mortgage credit income.
An increase in trading income of DKK 60m, due to more normal interest rate conditions compared with Q4 2010.
A rise in costs (core earnings) of DKK 40m, which corresponds to an unchanged seasonal level.
A decline in impairment charges for loans and advances of DKK 206m as a result of the cautious assessment of impairment charges for Q4 2010.
An increase in investment portfolio earnings from minus DKK 8m in the preceding quarter to DKK 75m.
An additional provision for the Deposit Guarantee Fund etc of DKK 93m where the amount for Q4 2010 represented DKK 0.

Profit for the period (DKKm)	2011	2010
	Q1	Q4	Q3	Q2	Q1
Core income excl trading income	799	812	832	831	829
Trading income	299	239	325	327	399
Core income	1,098	1,051	1,157	1,158	1,228
Costs, core earnings	650	610	588	625	656
Core earnings before impairment	448	441	569	533	572
Impairment of loans and advances etc	250	456	311	310	323
Core earnings	198	(15)	258	223	249
Profit/(Loss) on investment portfolios	75	(8)	111	8	116
Profit before contributions to deposit guarantee and PCA	273	(23)	369	231	365
Contributions to deposit guarantee and the Private Contingency Association (PCA)	98	-	123	122	139
Profit before tax	175	(23)	246	109	226
Tax	44	2	61	27	57
Profit for the period	131	(25)	185	82	169

Balance sheet

The Group’s total assets made up DKK 140.6bn at 31 March 2011 against DKK 150.8bn at year-end 2010.

Assets (DKKbn)	31 Mar 2011	31 Dec 2010
Amounts owed by credit institutions etc	8.6	8.4
Loans and advances at fair value (reverse transactions)	9.3	10.7
Loans and advances at amortised cost (bank loans and advances)	71.4	73.0
Securities and holdings etc	33.4	37.2
Assets related to pooled plans	7.9	7.9
Other assets etc	10.0	13.6
Total	140.6	150.8

The Group’s bank loans and advances total DKK 71.4bn – a decline of DKK 1.6bn compared with year-end 2010 and DKK 1.9bn compared with 31 March 2010.

Shareholders’ equity and liabilities (DKKbn)	31 Mar 2011	31 Dec 2010
Amounts owed to credit institutions etc	33.3	40.2
Deposits and other debt	64.6	64.2
Deposits in pooled plans	7.9	7.9
Bonds issued	11.2	11.2
Other liabilities etc	11.4	15.1
Provisions	0.3	0.3
Subordinated capital	2.3	2.3
Shareholders’ equity	9.6	9.6
Total	140.6	150.8

The Group’s deposits make up DKK 64.6bn against DKK 64.2bn at year-end 2010 and DKK 62.2bn at end-March 2010.

Capital

At end-Q1 2011, shareholders’ equity constitutes DKK 9,579m – an increase of DKK 25m since year-end 2010. The change comprises additions from dividends on own shares of DKK 4m and profit for the period of DKK 131m as well as disposals deriving from dividend distribution etc of DKK 84m and net purchase of own shares of DKK 26m.

Since year-end 2010, risk-weighted assets have increased by DKK 0.5bn to DKK 74.2bn. The increase consists of a decrease in credit risk of DKK 2.6bn, a rise in market risk and operational risk of DKK 2.4bn and DKK 0.7bn, respectively. The decrease in credit risk is ascribable to a decline in loans and advances and guarantees as well as a positive trend in the average rating of the exposures comprised by the IRB approach. The development in the distribution at 31 March 2010, 31 December 2010 and 31 March 2011 appears below.

At 31 March 2011 the individual solvency need represented 9.6%, unchanged from 31 December 2010.

Liquidity

The Group’s liquidity measured under the 15% and 10% statutory requirements constitutes 35.9% and 21.7%, respectively, at 31 March 2011.

Rating

Sydbank’s rating – A1 (long-term debt), P-1 (short-term debt) and C+ (financial strength) – was maintained in Q1 2011 with a negative outlook for long-term debt.

Clients

Sydbank’s number of clients grew in Q1 2011 – which is a highly satisfactory development.

Outlook for 2011

The Group continues to project core earnings before impairment charges for loans and advances in the region of DKK 1.7-2.0bn in 2011 – unchanged compared with previous announcements.

Income Statement – Sydbank Group

		Q1	Q1	Full year
DKKm	Note	2011	2010	2010

Interest income	2	1,007	1,098	4,189
Interest expense	3	261	261	971
Net interest income		746	837	3,218

Dividends on shares		7	9	22
Fee and commission income	4	344	331	1,330
Fee and commission expense		50	40	184
Net interest and fee income		1,047	1,137	4,386

Market value adjustments	5	124	204	420
Other operating income		5	5	23
Staff costs and administrative expenses	6	727	652	2,353
Depreciation and impairment of property, plant and equipment		19	23	153
Other operating expenses		0	70	211
Impairment of loans and advances etc	8	255	376	1,556
Profit on holdings in associates and subsidiaries		0	1	2
Profit before tax		175	226	558

Tax	9	44	57	147
Profit for the period		131	169	411

EPS Basic (DKK) *		1.8	2.3	5.6
EPS Diluted (DKK) *		1.8	2.3	5.6
Dividend per share (DKK)				1.0
* Based on average number of shares outstanding, see page 15.

Statement of Comprehensive Income – Sydbank Group


Profit for the period	131	169	411

Other comprehensive income:
Translation of foreign entities	(10)	8	40
Hedge of net investment in foreign entities	10	(8)	(40)
Property revaluation	-	-	(1)
Other comprehensive income after tax	0	0	(1)
Comprehensive income after tax	131	169	410

Balance Sheet – Sydbank Group

		31 Mar	Full year	31 Mar
DKKm	Note	2011	2010	2010

Assets
Cash and balances on demand at central banks		844	855	813
Amounts owed by credit institutions and central banks	10	7,704	7,527	9,020
Loans and advances at fair value		9,324	10,724	7,388
Loans and advances at amortised cost		71,447	73,028	73,277
Bonds at fair value		31,578	35,021	35,745
Shares etc		1,551	1,894	1,961
Holdings in associates etc		306	307	310
Assets related to pooled plans		7,920	7,923	7,154
Intangible assets		12	13	13
Total land and buildings		1,047	1,045	1,045
investment property		-	-	2
owner-occupied property		1,047	1,045	1,043
Other property, plant and equipment		95	105	128
Current tax assets		85	82	62
Deferred tax assets		11	11	11
Assets held for sale		1	1	-
Other assets	11	8,662	12,256	12,024
Prepayments		63	51	61
Total assets		140,650	150,843	149,012

Shareholders’ equity and liabilities
Amounts owed to credit institutions and central banks	12	33,264	40,250	42,958
Deposits and other debt	13	64,609	64,161	62,178
Deposits in pooled plans		7,920	7,923	7,154
Bonds issued at amortised cost		11,247	11,242	8,627
Current tax liabilities		21	8	8
Other liabilities	14	11,394	15,084	15,096
Deferred income		8	11	9
Total liabilities		128,463	138,679	136,030

Provisions	15	278	281	531
Subordinated capital	16	2,330	2,329	3,126
Shareholders’ equity:
Share capital		742	742	742
Revaluation reserves		110	110	112
Other reserves:
Reserves according to articles of association		423	423	418
Other reserves		26	26	33
Retained earnings		8,278	8,169	8,020
Proposed dividend		-	84	-
Total shareholders’ equity		9,579	9,554	9,325
Total shareholders’ equity and liabilities		140,650	150,843	149,012

Group Financial Highlights – Quarterly

	Q1	Q4	Q3	Q2	Q1	Full year
	2011	2010	2010	2010	2010	2010

Income statement (DKKm)

Core income excl trading income	799	812	832	831	829	3,304
Trading income	299	239	325	327	399	1,290
Total core income	1,098	1,051	1,157	1,158	1,228	4,594
Costs, core earnings	650	610	588	625	656	2,479
Core earnings before impairment	448	441	569	533	572	2,115
Impairment of loans and advances etc	250	456	311	310	323	1,400
Core earnings	198	(15)	258	223	249	715
Profit/(Loss) on investment portfolios	75	(8)	111	8	116	227
Profit before contributions to deposit guarantee and PCA	273	(23)	369	231	365	942
Contributions to deposit guarantee and the Private Contingency Association (PCA)	98	-	123	122	139	384
Profit before tax	175	(23)	246	109	226	558
Tax	44	2	61	27	57	147
Profit for the period	131	(25)	185	82	169	411

Balance sheet highlights (DKKbn)
Loans and advances at amortised cost	71.4	73.0	73.6	74.1	73.3	73.0
Loans and advances at fair value	9.3	10.7	6.5	6.6	7.4	10.7
Deposits and other debt	64.6	64.2	61.5	64.9	62.2	64.2
Bonds issued at amortised cost	11.2	11.2	16.1	8.6	8.6	11.2
Subordinated capital	2.3	2.3	3.1	3.1	3.1	2.3
Shareholders’ equity	9.6	9.6	9.5	9.4	9.3	9.6
Total assets	140.6	150.8	153.7	154.4	149.0	150.8

Financial ratios per share (DKK per share of DKK 10)
EPS Basic	1.8	(0.3)	2.5	1.1	2.3	5.6
EPS Diluted	1.8	1.1	2.5	1.1	2.3	5.6
Share price at end of period	132.8	151.3	127.4	124.8	147.8	151.3
Book value	130.5	129.8	130.1	127.5	126.5	129.8
Share price/book value	1.02	1.17	0.98	0.98	1.17	1.17
Average number of shares outstanding (millions)	73.5	73.5	73.4	73.7	73.7	73.5
Dividend per share	-	1.0	-	-	-	1.0

Other financial ratios and key figures
Solvency ratio	15.4	15.4	16.1	15.7	15.3	15.4
Core capital ratio	14.4	14.3	14.1	13.5	13.1	14.3
Pre-tax profit as % of average shareholders’ equity	1.8	(0.2)	2.6	1.2	2.4	6.0
Post-tax profit as % of average shareholders’ equity	1.4	(0.3)	2.0	0.9	1.8	4.4
Costs (core earnings) as % of core income	59.2	58.0	50.9	54.0	53.4	54.0
Interest rate risk	1.1	1.5	0.4	0.2	1.0	1.5
Foreign exchange position	4.5	1.2	1.4	1.5	2.8	1.2
Foreign exchange risk	0.0	0.0	0.0	0.0	0.0	0.0
Loans and advances relative to deposits *	1.0	1.0	1.1	1.0	1.1	1.0
Loans and advances relative to shareholders’ equity *	7.5	7.6	7.7	7.9	7.9	7.6
Growth in loans and advances for the period *	(2.2)	(0.8)	(0.7)	1.1	(1.7)	(2.0)
Excess cover relative to statutory liquidity requirements	129.3	106.3	126.3	96.8	121.1	106.3
Total large exposures	23.9	54.4	19.6	0.0	13.6	54.4
Accumulated impairment ratio	2.2	2.0	2.4	2.1	2.1	2.0
Impairment ratio for the period	0.30	0.40	0.38	0.38	0.39	1.70
Number of full-time staff at end of period	2,285	2,284	2,303	2,323	2,344	2,284

Capital – Sydbank Group

				Reserve for
			Reserves	net revaluation
		Re-	acc to	according
	Share	valuation	articles of	to equity	Retained	Proposed
DKKm	capital	reserves	association	method	earnings	dividend etc	Total

Shareholders’ equity at 1 Jan 2011	742	110	423	26	8,169	84	9,554

Changes in equity in 2011
Purchase of own shares	-	-	-	-	(973)	-	(973)
Sale of own shares	-	-	-	-	947	-	947
Adopted dividend etc	-	-	-	-	-	(84)	(84)
Dividends, own shares	-	-	-	-	4	-	4
Comprehensive income for the period	-	-	-	-	131	-	131
Total changes in equity	-	-	-	-	109	(84)	25
Shareholders’ equity at 31 Mar 2011	742	110	423	26	8,278	-	9,579


Shareholders’ equity at 1 Jan 2010	742	112	418	33	7,813	-	9,118

Changes in equity in 2010
Purchase of own shares	-	-	-	-	(466)	-	(466)
Sale of own shares	-	-	-	-	504	-	504
Comprehensive income for the period	-	-	-	-	169	-	169
Total changes in equity	-	-	-	-	207	-	207
Shareholders’ equity at 31 Mar 2010	742	112	418	33	8,020	-	9,325

	Q1	Full year	Q1
The Sydbank share	2011	2010	2010

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 (number)	73,421,876	73,588,089	73,737,003
Average number of shares outstanding (number)	73,451,336	73,522,284	73,661,441

Capital – Sydbank Group

	31 Mar	31 Dec	31 Mar
DKKm	2011	2010	2010


Solvency
Solvency ratio	15.4	15.4	15.3
Core capital ratio	14.4	14.3	13.1

Capital base after deductions
Shareholders’ equity	9,579	9,554	9,325
Revaluation reserves	(110)	(110)	(112)
Proposed dividend	-	(84)	-
Intangible assets and capitalised tax assets	(23)	(24)	(25)
Core capital (excluding hybrid core capital)	9,446	9,336	9,188
Hybrid core capital	1,385	1,384	1,382
50% of holdings > 10%	(157)	(161)	(119)
50% of total holdings etc > 10%	-	-	(5)
Core capital (including hybrid core capital) after deductions	10,674	10,559	10,446
Subordinated loan capital	945	945	1,744
Revaluation reserves	110	110	112
Difference between expected losses and impairment charges	-	-	114
Capital base before deductions	11,729	11,614	12,416
50% of holdings > 10%	(157)	(161)	(119)
50% of total holdings etc > 10%	-	-	(5)
Holdings in associates	(120)	(124)	(131)
Capital base after deductions	11,452	11,329	12,161

Credit risk	55,391	58,040	63,609
Market risk	10,741	8,298	8,514
Operational risk	8,071	7,378	7,378
Risk-weighted assets	74,203	73,716	79,501

Capital requirement under Pillar I	5,936	5,897	6,360

Cash Flow Statement – Sydbank Group

	Q1	Full year	Q1
DKKm	2011	2010	2010

Operating activities
Pre-tax profit for the period	175	558	226
Taxes paid	(46)	(187)	(81)
Adjustment of non-cash operating items	271	1,519	451
Cash flows from working capital	2,044	(8,344)	(3,481)
Cash flows from operating activities	2,444	(6,454)	(2,885)

Investing activities
Purchase and sale of holdings in associates	1	(4)	0
Purchase and sale of property, plant and equipment	(10)	(119)	(11)
Cash flows from investing activities	(9)	(123)	(11)

Financing activities
Purchase and sale of own holdings	(22)	26	38
Dividend etc	(84)	-	-
Raising of subordinated capital	1	(795)	2
Issue of bonds	5	2,620	5
Cash flows from financing activities	(100)	1,851	45

Cash flows for the period	2,335	(4,726)	(2,851)

Cash equivalent positions at 1 Jan	2,695	7,421	7,421
Cash flows for the period	2,335	(4,726)	(2,851)
Total cash equivalent positions at end of period	5,030	2,695	4,570

Segment Statements – Sydbank Group


DKKm	Banking	Sydbank Markets	Treasury	Other	Total
Business segments Q1 2011
Core income excl trading income	775	24	-	-	799
Trading income	193	106	-	-	299
Core income	968	130	-	-	1,098
Costs and depreciation	549	86	3	15	653
Impairment of loans and advances etc	251	(1)	-	-	250
Core earnings	168	45	(3)	(15)	195
Investment portfolio income	-	-	69	9	78
Profit before contributions to deposit guarantee and PCA	168	45	66	(6)	273
Contributions to deposit guarantee and the Private Contingency Association (PCA)	-	-	-	98	98
Profit before tax	168	45	66	(104)	175


DKKm	Banking	Sydbank Markets	Treasury	Other	Total
Business segments Q1 2010
Core income excl trading income	835	(6)	-	-	829
Trading income	197	202	-	-	399
Core income	1,032	196	-	-	1,228
Costs and depreciation	555	89	3	12	659
Impairment of loans and advances etc	323	-	-	-	323
Core earnings	154	107	(3)	(12)	246
Investment portfolio income	-	-	113	6	119
Profit before contributions to deposit guarantee and PCA	154	107	110	(6)	365
Contributions to deposit guarantee and the Private Contingency Association (PCA)	-	-	-	139	139
Profit before tax	154	107	110	(145)	226

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 measurement principles are in compliance with IFRS.

The accounting policies are consistent with those adopted in the 2010 Annual Report, to which reference is made.

The 2010 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 2010.

The Group’s significant risks and the external elements which may affect the Group are described in detail in the 2010 Annual Report.

Notes – Sydbank Group

	Q1	Q1	Full year
DKKm	2011	2010	2010


Note 2

Interest income
Reverse transactions with credit institutions and central banks	4	8	23
Amounts owed by credit institutions and central banks	20	20	96
Reverse loans and advances	18	26	79
Loans and advances and other amounts owed	759	803	3,157
Bonds	196	214	752
Derivatives	0	26	68
Other interest income	10	1	14
Total	1,007	1,098	4,189


Note 3

Interest expense
Repo transactions with credit institutions and central banks	31	35	110
Credit institutions and central banks	38	48	191
Repo deposits	0	1	2
Deposits and other debt	126	142	481
Bonds issued	51	19	125
Subordinated capital	14	16	61
Other interest expense	1	0	1
Total	261	261	971


Note 4

Fee and commission income
Securities trading and custody accounts	198	183	748
Payment services	53	47	199
Loan fees	20	24	95
Guarantee commission	26	29	116
Other fees and commission	47	48	172
Total	344	331	1,330


Note 5

Market value adjustments
Other loans and advances and amounts owed at fair value	1	0	0
Bonds	(114)	215	302
Shares etc	(23)	100	81
Investment property	-	-	0
Currency	45	68	238
Total derivatives	215	(179)	(207)
Assets related to pooled plans	130	260	459
Deposits in pooled plans	(130)	(260)	(459)
Other assets/liabilities	0	0	6
Total	124	204	420

Notes – Sydbank Group

	Q1	Q1	Full year
DKKm	2011	2010	2010


Note 6

Staff costs and administrative expenses
Salaries and emoluments to:
Group Executive Management	3	3	21
Board of Directors	1	1	4
Shareholders’ Committee	1	1	2
Total	5	5	27

Staff costs:
Wages and salaries	310	308	1,187
Pensions	35	34	131
Social security contributions	4	3	15
Payroll tax etc	28	27	93
Total	377	372	1,426

Other administrative expenses:
IT	128	125	513
Rent etc	34	31	145
Marketing and entertainment expenses	18	18	84
Other expenses	72	84	141
Deposit Guarantee Fund	93	17	17
Total	345	275	900
Total	727	652	2,353


Note 7

Staff
Average number of staff (full-time equivalent)	2,326	2,396	2,364




















Notes – Sydbank Group

	Q1	Q1	Full year
DKKm	2011	2010	2010


Note 8

Impairment of loans and advances recognised in the income statement
Impairment and provisions	240	330	709
Write-offs	31	53	880
Recovered from debt previously written off	16	7	33
Impairment of loans and advances etc	255	376	1,556

Impairment and provisions at end of period
Individual impairment and provisions	1,652	1,903	1,597
Collective impairment and provisions	162	136	166
Impairment and provisions at end of period	1,814	2,039	1,763

Individual impairment of loans and advances and provisions for guarantees
Impairment and provisions at 1 Jan	1,597	1,637	1,637
Exchange rate adjustment	0	1	7
Impairment and provisions during the period	251	339	705
Other movements	-	94	94
Write-offs covered by impairment and provisions	196	168	846
Impairment and provisions at end of period	1,652	1,903	1,597

Individual impairment of loans and advances	1,635	1,608	1,565
Individual provisions for guarantees	17	295	32
Impairment and provisions at end of period	1,652	1,903	1,597

Collective impairment of loans and advances and provisions for guarantees
Impairment and provisions at 1 Jan	166	141	141
Impairment and provisions during the period	(4)	(5)	25
Impairment and provisions at end of period	162	136	166

Sum of loans and advances and amounts owed
subject to collective impairment and provisions	11,604	20,993	12,231
Collective impairment and provisions	162	136	166
Loans and advances and amounts owed after collective impairment and provisions	11,442	20,857	12,065

Individual impairment of loans and advances subject to objective evidence of impairment
Balance before impairment of individually assessed loans and advances	3,142	3,555	3,020
Impairment of individually assessed loans and advances	1,635	1,608	1,565
Balance after impairment of individually assessed loans and advances	1,507	1,947	1,455


Note 9

Effective tax rate
Current tax rate of Sydbank	25.0	25.0	25.0
Permanent differences	-	-	2.3
Adjustment of prior year tax charges	-	-	(0.9)
Effective tax rate	25.0	25.0	26.4

Notes – Sydbank Group

	31 Mar	31 Dec	31 Mar
DKKm	2011	2010	2010


Note 10

Amounts owed by credit institutions and central banks
Amounts owed at notice by central banks	1,365	215	-
Amounts owed by credit institutions	3,902	5,063	5,786
Reverse transactions	2,437	2,249	3,234
Total	7,704	7,527	9,020


Note 11

Other assets
Positive market value of derivatives etc	7,154	9,363	10,108
Sundry debtors	248	263	351
Interest and commission receivable	410	563	450
Collateral provided, CSA agreements	845	2,066	1,113
Other assets	5	1	2
Total	8,662	12,256	12,024


Note 12

Amounts owed to credit institutions and central banks
Amounts owed to central banks	3,747	2,700	2,626
Amounts owed to credit institutions	17,682	18,864	25,760
Repo transactions	11,835	18,686	14,572
Total	33,264	40,250	42,958


Note 13

Deposits and other debt
On demand	38,411	38,357	39,722
At notice	584	603	678
Time deposits	20,806	19,923	15,727
Special categories of deposits	4,808	5,278	5,531
Repo transactions	-	-	520
Total	64,609	64,161	62,178


Note 14

Other liabilities
Negative market value of derivatives etc	6,507	9,138	9,373
Sundry creditors	1,518	1,886	1,208
Negative portfolio, reverse transactions	2,774	3,437	4,187
Interest and commission etc	139	97	134
Collateral received, CSA agreements	453	520	191
Other liabilities	3	6	3
Total	11,394	15,084	15,096

Notes – Sydbank Group

	31 Mar	31 Dec	31 Mar
DKKm	2011	2010	2010


Note 15

Provisions
Provisions for pensions and similar obligations	4	4	3
Provisions for deferred tax	225	225	209
Provisions for guarantees *	17	32	295
Other provisions	32	20	24
Total	278	281	531
* Of which the Private Contingency Association	-	-	272

Note 16

Subordinated capital

Interest rate		Nominal (m)	Maturity
Repaid loans				-	-	800
2.60 (floating)	Bond loan	DKK 200	14.11.14	200	200	200
1.36 (floating)	Bond loan	EUR 100	04.04.15	745	745	744
Total supplementary capital				945	945	1,744

2.13 (floating)	Bond loan	EUR 100	Perpetual	741	740	739
3.24 (floating)	Bond loan	EUR 75	Perpetual	559	559	558
6.36 (fixed)	Bond loan	DKK 85	Perpetual	85	85	85
Total hybrid core capital				1,385	1,384	1,382

Total				2,330	2,329	3,126

Note 17

Contingent liabilities and other obligating agreements

Contingent liabilities
Financial guarantees	3,361	3,037	2,900
Mortgage finance guarantees	707	1,628	2,646
Registration and remortgaging guarantees	2,772	3,643	5,236
Loss guarantee/guarantee, the Private Contingency Association	-	-	479
Other contingent liabilities	1,387	1,443	1,488
Total	8,227	9,751	12,749

Other obligating agreements
Irrevocable credit commitments	98	99	7
Other liabilities	51	51	58
Total	149	150	65

Notes – Sydbank Group

Note 17 – continued

In February 2008 a group of minority shareholders (“Foreningen af Minoritetsaktionærer i bankTrelleborg”) filed a class action against Fonden for bankTrelleborg, Sydbank and the Danish FSA. The lawsuit concerns the legality of the compulsory redemption and the pricing of the shares in connection with the compulsory redemption. The shares were priced by appraisers in accordance with section 144 (4) of the Danish Financial Business Act. In late summer 2008 Fonden for bankTrelleborg paid the difference to the minority shareholders. On 7 December 2010 the Eastern High Court ruled that the compulsory redemption was not legal as the conditions of section 144 of the Danish Financial Business Act had not been met. However the Eastern High Court did not find that the minority shareholders had suffered a loss exceeding the consideration they had already received in connection with the compulsory redemption. Consequently the court did not sustain the claim of the minority shareholders for payment of additional consideration. The minority shareholders have filed an appeal with the Supreme Court and have at the same time applied for free legal aid. Oral proceedings have been scheduled for early January 2012.

Moreover, in 2009 the group of minority shareholders – by three named shareholders – filed an action against Sydbank regarding an inadequate prospectus in connection with the conversion of sparTrelleborg to bankTrelleborg. Exchange of pleadings is still ongoing and oral proceedings have been scheduled for end-February 2012.

On 21 January 2011 two class action claims were filed with the City Court of Copenhagen against Sydbank A/S. Both claims concern a potential responsibility over a prospectus regarding bankTrelleborg, now Sydbank A/S, in connection with the conversion of sparTrelleborg to bankTrelleborg in Q2 2007.

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 18

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 debt. Repo transaction securities are treated as assets provided as collateral for liabilities. At 31 March 2011 the fair value of such securities stood at DKK 11,727m.

In connection with reverse transactions, which involve purchasing securities to be resold at a later date, the Group is entitled to sell or deposit them as collateral for other loans. The securities are not recognised in the balance sheet and consideration paid is recognised as a receivable. At 31 March 2011 the fair value of such securities stood at DKK 11,596m.

Assets received as collateral in connection with reverse transactions may be sold to a third party. In such cases a negative portfolio may arise as a result of the accounting rules. This is recognised under “Other liabilities”.

Note 19

Collateral

As of 31 March 2011 the Group had deposited as collateral securities at a market value of DKK 4,792m with Danish and foreign exchanges and clearing centres etc in connection with margin calls and securities settlements etc.

Note 20

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 2011. Reference is made to the Group’s 2010 Annual Report for a detailed description of related party transactions.

Note 21

Reporting events occurring after the balance sheet date

After the expiry of Q1, no matters of significant impact on the financial position of the Sydbank Group have occurred.

Notes – Sydbank Group

	Q1	Q1	Full year
DKKm	2011	2010	2010


Note 22

Large shareholders
Nykredit A/S, Copenhagen has announced that it owns at least 5% of
Sydbank’s share capital.


Note 23

Core income

Core income excl trading income
Interest margins etc	668	692	2,757
Mortgage credit	43	49	210
Payment services	37	40	153
Remortgaging and loan fees	21	23	90
Other commission	25	20	71
Other operating income	5	5	23
Total	799	829	3,304


Mortgage credit
Totalkredit cooperation	39	43	184
Totalkredit, set-off of loss	3	1	17
Totalkredit cooperation, net	36	42	167
DLR Kredit	6	4	34
Other mortgage credit income	1	3	9
Total	43	49	210


Trading income
Bonds	54	107	273
Shares	66	81	273
Currency	50	56	217
Money market	16	50	107
Asset management	113	105	420
Total	299	399	1,290

Management Statement

Today we have reviewed and approved the Interim Report – Q1 2011 of Sydbank A/S.

The Interim Report for Q1 2011 has been prepared in accordance with IAS 34 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.

In our opinion the accounting policies applied are appropriate and the interim report gives a true and fair view of the Group’s assets, shareholders’ equity and liabilities and financial position at 31 March 2011 and of the results of the Group’s operations and consolidated cash flows for the accounting period 1 January- ‑ 31 March 2011 as well as a description of the most significant risks and elements of uncertainty which may affect the Group.

Aabenraa, 26 April 2011

Group Executive Management

Karen Frøsig Preben L. Hansen Allan Nørholm

(CEO)

Board of Directors

Anders Thoustrup Hanni Toosbuy Kasprzak Svend Erik Busk

(Chairman) (Vice-Chairman)

Claus Christensen Peder Damgaard Harry Max Friedrichsen

Erik Bank Lauridsen Sven Rosenmeyer Paulsen Steen Tophøj

Jan Uldahl-Jensen Margrethe Weber

Supplementary Information

Financial calendar

In 2011 the Group’s preliminary announcement of financial statements will be released as follows:

- 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

DK-6200 Aabenraa

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 2010 Annual Report at sydbank.com.

Interim Report - Q1 2011

Attachments

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