Sparekassen Sjælland Fyn A/S : Interim Report Q1-2023

Q1 2023

Interim Report

Q1 2023 highlights

Contents

PROFIT BEFORE TAX

Totals DKK 175.2m

Pre-tax profit provides returns on the opening equity at a rate equivalent to 17.0% a year. Net profit stands at DKK 130.9m, equivalent to a return on opening equity of 12.7%.

NET INTEREST INCOME

Up 30%

Net interest income is up by DKK 44.0m and totals DKK 190.1m.

FEE AND COMMISSION INCOME

Down 6%

Fee and commission income is down by DKK 11.1m to stand at DKK 166.1m. The decline is attributable to lower activity in the housing market.

NET INTEREST AND FEE INCOME

Up 15%

Total net interest and fee income is up by DKK 47.0m and comes to DKK 371.5m.

RATE OF COST

Down to 58.9%

The rate of cost for Q1 2023 is 58.9% against 60.9% for the financial year 2022. According to the "Towards New Goals" strategy, the rate of cost is to be reduced continuously to below 50% no later than from the financial year 2026.

CORE EARNINGS

Up 20%

Recent years' highly satisfactory developments continue in Q1 2023.

DEPOSITS

Up 5%

Deposits have increased by DKK 1.0bn and total DKK 20.8bn. Since year-end 2022, deposits have gone up by 1%.

LOANS TO CORPORATE CUSTOMERS

Up 5%

Corporate customer loans have increased by 5% since Q1 2022. Since year-end 2022, total loans and advances have gone up.

IMPAIRMENT LOSSES ON LOANS AND ADVANCES ETC

Reversal of DKK 1.8m

The stable development in the credit quality of Sparekassen's customers continues. Total management add-ons have been increased by DKK 6.4m since 31 December 2022 to stand at DKK 227.3m at 31 March 2023.

CAPITAL RATIO

Is 24.7%

The capital ratio includes current profits. Sparekassen's capital position continues to develop quite satisfactorily.

UPWARD ADJUSTMENT OF EARNINGS EXPECTATIONS

To range between DKK 550m and DKK 650m before tax

Because of the increasing interest rate levels, ongoing influx of new customers and a very satisfactory development in the credit quality, earnings expectations have been adjusted upwardly, see company announcement no 9/2023 of 13 April 2023.

Sparekassen Sjælland-Fyn

Q1 2023 Interim Report | Management commentary

2

Contents

2 Management commentary

Q1 2023 highlights	page	2
Management commentary	page	4
Outlook for 2023	page	4
Financial highlights	page	6
Financial ratios	page	7
Core earnings	page	8
The Supervisory Diamond	page	9
Financial review of the Group	page	10
Towards New Goals -
Sparekassen's 2025 strategy	page	14
Capital structure and liquidity of the Group	page	18
Credit quality categories	page	21
Financial review of the Parent	page	22

Cover photo: The Sparekassen Sjælland-Fyn Group's head office in Holbæk.

Sparekassen Sjælland-Fyn

Contents

24 Interim financial statements

Statement by Management on
the Interim Report	page	25
Income statement	page	26
Statement of comprehensive income	page	26
Balance sheet	page	27
Statement of changes in equity	page	28
Cash flow statement	page	30
Notes	page	31
Parent	page	45
Definitions of official key ratios etc	page	55

This Interim Report has been prepared in Danish and English, with the Danish version being valid in the event of any inconsistencies.

For more information, please visit spks.dk or contact:

Lars Petersson	Lars Bolding	Morten Huse Eikrem-Jeppesen
Chief Executive Officer	Savings Bank Director	Press Officer
5948 1111	5948 1111	[phone]
[e-mail]	[e-mail]

Q1 2023 Interim Report | Management commentary

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Contents

Management commentary

Sparekassen has been off to a good start in 2023, producing a pre-tax profit of DKK 175.2m for Q1. Net of tax, profit stands at DKK 130.9m, providing a 12.7% return on opening equity. This satisfactory performance is a result of the increasing interest rate levels and a continuously stable development in our customers' credit quality, etc. This is also why Sparekassen has adjusted its pre-tax earnings expectations for the year upwardly to range between DKK 550m and DKK 650m.

Increasing net interest income

After some years with negative interest rates, Danmarks Nationalbank in 2022 raised interest rates again to curb inflation. Overall, the positive key interest rate has contributed to a positive development in Sparekassen's net interest income in that it has increased by DKK 44.0m to a total of DKK 190.1m in Q1 2023. Some of the increase is attributable to Sparekassen's placement of surplus liquidity with Danmarks Nationalbank, interest income from Sparekassen's bond portfolio, and increasing interest income from loans and advances. Expectations are that the increasing interest rate levels will support further positive development in both interest income and net interest income in the rest of 2023.

The higher interest rate levels have also spilled over on the housing market in that, for example, it has become more expensive for first-time buyers and trading activity has slowed down. The decline in activity in the housing market has resulted in a decrease in Sparekassen's fee and commission income. Moreover, the number of loan conversions has decreased to a more normal level after H2 2022 when many customers chose to make use of the considerable interest rate movements in the mortgage credit area to refinance their loans, which also has an effect on fee and commission income. So, this income has gone down by DKK 11.1m, or 6%, on Q1 2022.

Furthermore, financial performance for Q1 2023 should also be viewed in the light of positive market value adjustments of DKK 12.1m, among other factors. In 2022, the surging interest rates on mortgage credit bonds in Q1 led to DKK 35.7m in negative market value adjustments.

Inflow of new customers continues

Activity in the housing market has generally declined, and the massive refinancing incentive in 2022 obviously left its mark on Sparekas- sen's total loan volume. Many customers have decided - in line with Sparekassen's recommendations - to reduce their outstanding debts on loans with Sparekassen when refinancing their mortgage credit loans. There has therefore been a slight decline in loans and advances on Sparekassen's own books whereas total mortgage credit loans arranged to finance private homes and commercial property are maintained at DKK 60.2bn, which is consistent with the level at the end of Q1 2022.

So, the figures also reflect a continuously fine inflow of new customers, especially in the corporate customer area where, for example, the arrangement of mortgage credit loans through DLR Kredit has gone up by 5% over the past 12 months, even though there has also been a considerable refinancing incentive. Core business thus continues to develop positively.

Our customers are still doing well

The credit quality of Sparekassen's customers is also still fine. Our customers have been good at adapting their consumption to the increase in costs that the high rate of inflation has caused.

This is also reflected in Sparekassen's deposits balance which has gone up by 5% to a total of DKK 20.8bn, bearing witness of a continuously fine savings capacity with our customers.

Impairment losses on loans and advances too continued to develop positively, for which reason DKK 1.8m was reversed in Q1 2023.

However, total management add-ons for potential losses remain are a relatively high level and have been increased by DKK 6.4m on the balance at year-end 2022. We thus continue to pursue a conservative approach - due to the still high rate of inflation and the uncertainty of the economic forecasts caused, for example, by the geopolitical situation.

Towards New Goals

The execution of Sparekassen's "Towards New Goals" strategy is proceeding according to plan, and Sparekassen is working determinedly on a number of optimisation and development initia- tives, for example, to strengthen its operations, competitive power and earnings capacity in the short term as well as the long term.

This work is reflected in Sparekassen's rate of costs, among other factors, that has gone down by 2 percentage points from 60.9% at year-end 2022 to 58.9% at the end of Q1 2023. So, Sparekassen has taken yet another step towards meeting the objective of lowering the rate of costs to below 50% no later than from the financial year 2026.

Outlook for 2023

When the Annual Report for 2022 was published, the pre-tax earnings expectations for 2023 ranged between DKK 500m and DKK 600m. Seen through the light of the increasing interest rate levels, ongoing inflow of new customers and the sustainedly positive development in credit qu- ality, Sparekassen adjusted its pre-tax earnings expectations for the year upwardly in company announcement no 9/2023 of 13 April 2023 to range between DKK 550m and DKK 650m.

Lars Petersson

Chief Executive

Officer

Lars Bolding	Jan Kolbye Jensen
Savings Bank	Savings Bank
Director	Director

Sparekassen Sjælland-Fyn

Q1 2023 Interim Report | Management commentary

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	LARS BOLDING		LARS PETERSSON		JAN KOLBYE JENSEN
	Savings Bank Director		Chief Executive Officer		Savings Bank Director
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Sparekassen Sjælland-Fyn			Q1 2023 Interim Report | Management commentary