ABB 01-2014 - Annual Report 2013

Transcription

Annual Report
Alm Brand Bank
2013
Alm. Brand
report 2013
Alm. Brand Bank A/S / Midtermolen 7 / DK-2100 Copenhagen Ø / Registration (CVR)
no. 81Bank
75 35annual
12
1
2
Alm. Brand Bank annual report 2013
Contents
4
Company information
36
Auditors’ reports
5
Group structure
38
Financial statements
7
Management’s review
39
Income statement and
comprehensive income
40
Balance sheet
42
Statement of changes in equity
43
Cash flow statement
44
Segment information
46
Overview of notes
47
Notes to the financial statements
94
Definitions of ratios
8
Financial highlights and key ratios
9
Alm. Brand Bank
22Customers
24
Human resources
26
Corporate governance
30
Capitalisation
33
Investor information
35
Statement by the management board
and the board of directors
96
Directorships and special qualications
3
Company Information
Management board
Auditors
Chief Executive
Deloitte
Statsautoriseret Revisionspartnerselskab
Kim Bai Wadstrøm
Joined Alm. Brand in 2011
Chief Executive of Alm. Brand Bank A/S since 2011
Board of directors
Jørgen H. Mikkelsen, Chairman
Boris N. Kjeldsen, Deputy Chairman
Arne Nielsen
Jan Skytte Pedersen
Ebbe Castella
Søren Boe Mortensen
Christian Bundgaard, Elected by the employees
Torben Jensen, Elected by the employees
Pia Støjfer, Elected by the employees
Internal audit
Poul-Erik Winther, Group Chief Auditor
Registration
Alm. Brand Bank A/S
Company reg. (CVR) no. 81753512
Address
Midtermolen 7
DK-2100 Copenhagen Ø
Phone: +45 35 47 48 49
Telefax: +45 35 47 47 35
Internet: www.almbrand.dk
E-mail: bank@almbrand.dk
4
company information / group structure
Group Structure
Alm. Brand Bank
Alm. Brand Leasing
The bank has two subsidiaries:
•
•
Alm. Brand Leasing A/S
Alm. Brand Formue A/S
The group also comprises five wholly-owned subsidiaries, which have been established or acquired in connection with properties taken over temporarily.
Alm. Brand Formue
Ownership
The bank is wholly owned by the listed company Alm.
Brand A/S.
The consolidated financial statements of Alm. Brand Bank
A/S are a component of the consolidated financial statements of Alm. Brand A/S and Alm. Brand af 1792 fmba.
In addition, the bank acts as custodian for:
• Investeringsforeningen Alm. Brand Invest
5
Customers First
2013
6
Management’s
review
7
Group
Income
Statement
DKKm
201320122011
Continuing activities:
Net interest and fee income, Private
179 177 172
Trading income (excl. value adjustments)
240 172 224
Other income 89 63 55
Total income
508 412 451
Expenses –368 –364 –368
Depreciation and amortisation
Core earnings
Value adjustments
Profit/loss from investments
Alm. Brand Formue (the bank’s ownership interest)
Profit/loss before impairment writedowns
Impairment writedowns
Profit/loss before tax, continuing activities
–52 –33 88 –33 –2 –25 28 –118 –90 15 3
–6 –2 10 –57 –47 Winding-up activities:
–123 –49 Impairment writedowns
–256 –423 Profit/loss before tax, winding-up activities
–379 –472 Total profit/loss before tax and minority interests
Tax
Profit/loss for the year before minority interests
Minority interests
Consolidated profit/loss for the year
Balance Loans and advances, continuing activities
sheet Loans and advances, winding-up activities
Key ratios
Deposits
Shareholders’ equity
Share attributable to minority interests
Total assets
Average no, of employees (full-time equivalents)
Interest margin (%)
Inome / cost ratio
Impairment ratio
Solvency ratio
Return on equity before tax (%)
Return on equity after tax (%)
–469 –519 77 –392 26 –366 128 –391 39 –352 –18
65
–96
0
–28
–59
–105
–164
–101
–889
–990
–1,154
236
–918
–32
–950
2,568 2,754 3,158
4,772 5,642 7,059
10,936 11,325 7,995
1,696 1,169 1,234
193 173 141
16,296 17,903 21,393
263 275 286
1.6% 1.4% 1.6%
0.38 0.42 0.08
2.1% 2.8% 6.0%
18.4%
18.5% 16.8%
–33.8% –41.6% –94.5%
–27.9% –30.6% –75.8% The bank has introduced a new version of the financial highlights in the Annual Report 2013, showing a breakdown on continuing activities and winding-up activities. For registration reasons, it has not been possible to
show the breakdown until from 2011. In the management’s review, the items of the income statement and loans
and advances have been broken down by continuing activities and winding-up activities. This breakdown does
not apply to the rest of the annual report, as the conditions of IFRS 5 are not fully met, including the condition
on realisation within 12 months. Alm. Brand Formue is stated as the bank’s ownership interest including results
of equity risk hedging. See the accounting policies for a description of the contents of the individual line items.
Financial ratios are based on the definitions and guidelines of the Danish FSA and on “Recommendations & Financial Ratios 2010” issued by the Danish Society of Financial Analysts.
financial highlights and key ratios / alm. brand bank
Alm. Brand Bank
Alm. Brand Bank is a nation-wide bank with just over
50,000 private customers measured in terms of households.
The bank offers products that meet the financial needs
of private customers. In addition, the bank has activities
within car leasing for private and commercial customers,
bond, equity and currency trading and research (Markets)
and asset management services (Asset Management).
As a result of the declining trend in lending, a sluggish
housing market and tax payments on pension assets, earnings from the private customer banking market did not
improve to any great extent in 2013.
Financial Markets
Trading activity generally picked up in 2013, impacting
favourably on Alm. Brand’s activities in Financial Markets.
The bank also has a winding-up portfolio of loans and advances, consisting primarily of agricultural, commercial
and mortgage deed exposures.
However, trading income remains under pressure, and
the market for asset management services is extremely
competitive. At the same time, customers are increasingly
demanding more information and reporting services.
Market
Markets generally developed favourably in 2013. The financial markets were focused on whether growth would
pick up and whether the very lenient monetary policies
would be maintained. Economic indicators gradually improved during the year, driven mainly by the USA where
declining unemployment and growing consumer confidence characterised developments.
Private
The private customer market was characterised by consumer spending restraint again in 2013. Private customers
generally remain focused on reducing their bank debts
and increasing their savings.
The housing market was slightly upward trending in
2013, but the recovery is fragile with substantial geographical variations. The market remains sluggish, and actual
improvement is only seen in and around major towns and
cities.
After years of great restraint, the general investment appetite of ordinary private customers is gradually recovering. There are indications of budding optimism, but
they have yet to translate into a significant increase in the
bank’s brokerage income from private customers.
As expected, the introduction by the Danish government
of the new retirement pension (Alderspension) caused
many customers to exercise the option of early payment
of tax on capital pension deposits at a lower rate.
Long-term yields were generally upward trending over
the year, as were the major equity markets.
Leasing
The private car leasing market experienced fair growth in
2013. The market has yet to reach the level seen prior to
the change in the principles for calculating vehicle registration fees, but particularly private leasing of small and
mid-sized cars saw substantial growth in 2013.
The commercial car leasing market bounced back to a
reasonable level in 2012, and this level was maintained in
2013.
9
Strategy
The bank’s strategy is to support the Alm. Brand Group’s
aim of offering its selected customer segments comprehensive financial solutions across insurance, pension and
banking.
The bank’s strategy is focused on three segments:
•
•
•
Private customers
Financial Markets
Leasing
Alm. Brand Bank wants to be the primary banker of its
private customers. The bank focuses particularly on
customers who own their own homes or live in cooperative housing and customers with a major requirement for
investment and pension advisory services, as these customer segments would potentially benefit the most from
the bank’s advisory services. The private customer area
collaborates closely with Financial Markets on investment and asset management services.
By maintaining superior quality in its research and advisory services, Financial Markets aims to provide all customers with an optimum decision-making basis, whether
they are private or professional customers. The advisory
services are based on long-term strategies, fundamental
and quantitative research and focus on risk management
aligned with the risk profile of each individual customer.
The advisory services are furthermore founded on a holistic advisory approach based on a proprietary asset allocation model that provides guidelines on the most appropriate allocation of a customer’s assets.
In leasing, the strategy is to offer competitive lease solutions that cover the requirements of financially sound
businesses for leasing passenger and commercial cars. The
strategy also aims to intensify direct sales of car leases to
individuals, both to end customers and through partnerships with car importers and car dealers.
10
We want our customers to perceive Alm. Brand Bank as
one of the best providers of service and advice and as offering the best prices in the industry. Customers should be
offered financially attractive and value-creating solutions
supporting long-term customer relationships. The aim is
to have simple and uncomplicated procedures and offer
high-quality advisory services as and when required.
The bank has just over 50,000 customers (measured in
terms of households), who are served by some 80 banking, investment and pension advisers distributed on 11
branches. In addition, around 40 employees at the bank’s
head office deal direct with customer needs and enquiries
and with developing the private customer area. Financial Markets has some 50 employees working in front,
middle and back office functions, and Leasing has about
25 employees.
In addition to these segments, the bank has a portfolio of
winding-up activities consisting of agricultural, commercial and mortgage deed exposures. The bank is strongly
focused on minimising losses when winding up discontinued business areas.
In terms of organisational resources, the winding-up
portfolio is handled by close to 30 employees. Windingup activities are handled centrally at the head office, ensuring that the remaining organisation stays focused on
providing optimum service to the bank’s customers going
forward.
Strategic goals for 2013-2016
The bank has defined a number of goals to improve earnings so that it may deliver satisfactory results in future.
Target: Income/cost ratio of more than 1.1 by 2016
The income/cost ratio was 0.38 in 2013, being affected by
large impairment writedowns. The improvement to be
achieved by 2016 will be driven by higher core earnings
from continuing activities and by a reduction of total impairment writedowns.
alm. brand bank
Target: Increasing the interest margin by more than 1 percentage point by 2016
The goal is for the group’s interest margin to reach at least
2.4% by 2016. In 2013, the interest margin was 1.6%, up by
0.2 of a percentage point on 2012. The improvement was
driven by a fair inflow of new full-service customers and
by a reduction of funding costs.
Target: Reducing the winding-up portfolio by 10% annually
In 2013, the bank succeeded in reducing the winding-up
portfolio excluding writedowns by DKK 615 million, corresponding to 11% of the portfolio at 1 January 2013. The
reduction of the winding-up portfolio was in line with
expectations.
Target: Generating a return on equity of 5% plus the money
market rate by 2016
The return on equity was negative at 34% in 2013, being
affected by the loss before writedowns and large impairment writedowns. The return on equity will continue to
be affected by expenses and writedowns related to the
winding-up portfolio over the next couple of years.
Performance
The bank incurred a loss before tax and excluding minority interests of DKK 469 million, against a loss of DKK
519 million in 2012.
Total writedowns amounted to DKK 374 million, against
DKK 480 million in 2012. The writedowns were high but
within the expected range of DKK 350-400 million.
Before writedowns, the bank posted a consolidated loss of
DKK 95 million, which was not satisfactory. However, the
performance was in line with guidance provided for a loss
of DKK 100 million.
The loss before writedowns was composed of a profit of
DKK 28 million from continuing activities and a loss of
DKK 123 million from winding-up activities.
The 2013 interest margin was 1.5% for the parent company
(2012: 1.4%) and 1.6% for the banking group (2012: 1.4%).
The dedicated efforts made to increase the number of
full-service customers in the private customer segment
and reduce funding costs improved the interest margin in
2013 and will ensure that the interest margin continues
to increase.
The bank repaid hybrid core capital in a total amount of
DKK 630 million in 2013. On 27 February 2014, a decision
was made to repay the remaining DKK 226 million of state-funded hybrid core capital. Repayment will take place
when permission has been received. Moreover, the bank
repaid the remaining DKK 2 billion of issued governmentguaranteed bonds in 2013.
After repaying the DKK 226 million of state-funded hybrid core capital, the bank will have repaid all state-funded capital raised in connection with the financial crisis.
Continuing activities
The pre-tax results declined by DKK 43 million relative
to 2012 to a loss of DKK 90 million. The loss was attributable to significantly larger impairment writedowns. Writedowns amounted to DKK 118 million, against DKK 57
million in 2012.
Before writedowns, the bank posted a profit of DKK 28
million, marking an DKK 18 million improvement on
2012. The performance improvement was driven by higher core earnings, but value adjustments and the ownership of Alm. Brand Formue detracted from the performance.
11
Core earnings for 2013 were a profit of DKK 88 million,
against a profit of DKK 15 million in 2012. The positive
trend was driven by higher trading income, higher income from the bank’s leasing activities and an improved
performance in the private customer segment.
Income
Income from the bank’s continuing activities amounted
to DKK 508 million in 2013.
This marked an increase of DKK 96 million or 23% relative
to 2012. The increase was driven by higher trading income
and other income, primarily covering the bank’s leasing
activities.
Net fee and commission income from the bank’s private
customers was DKK 179 million, against DKK 177 million
in 2012. In spite of the year’s generally sluggish demand
from private customers resulting in a decline in lending,
the bank managed to keep its net interest and fee income
unchanged.
Trading income excluding value adjustments increased
by 40% to DKK 240 million, against DKK 172 million in
2012. This improvement was driven by a strong performance of the bank’s asset management activities as well
as by an increased customer inflow and higher earnings
from the Markets department. The bank’s other activities
also contributed to the improvement.
Other income, which primarily covers leasing activities,
rose by 41% to DKK 89 million relative to 2012. The bank
experienced fair growth in its leasing portfolio in 2013,
driven by a trebling of car orders compared to 2012.
The growth in operating leases triggered a DKK 19 million
increase in the bank’s depriciation and amortisation to
DKK 52 million from DKK 33 million in 2012.
12
Costs
Costs amounted to DKK 368 million, which was on a par
with 2012. Costs were composed of staff costs and administrative expenses of DKK 354 million (2012: DKK 359
million) and other operating expenses, primarily to the
Danish Guarantee Fund for Depositors and Investors, of
DKK 14 million (2012: DKK 5 million).
Value adjustments
Value adjustments amounted to a loss of DKK 33 million,
against a gain of DKK 3 million in 2012.
Interest-related value adjustments amounted to a loss of
DKK 40 million, against a loss of DKK 29 million in 2012.
The loss was related to the bank’s bond portfolio, a part
of which was placed in high-yield bonds, and to value
adjustment losses as a result of the bond maturity effect.
Rising interest rates in 2013 also resulted in negative value adjustments. The bank’s bond portfolio produced a
return of 1.7% in 2013, which was satisfactory in light of
market developments.
Equity-related value adjustments amounted to a gain of
DKK 9 million, against a gain of DKK 25 million in 2012.
Currency-related value adjustments amounted to a loss
of DKK 2 million, against a gain of DKK 7 million in 2012.
Writedowns
Writedowns on the bank’s continuing activities amounted
to an expense of DKK 118 million, against an expense of
DKK 57 million in 2012. The writedowns were mainly attributable to an extraordinary credit review of the bank’s
private customers.
alm. brand bank
Business activities
Private
Private customer activities reported a loss of DKK 155 million, against a loss of DKK 102 million in 2012. The higher
loss was due to a DKK 63 million increase in impairment
writedowns to DKK 120 million, resulting from an extraordinary credit review in which private customers with
impaired financial strength were assessed on the basis of
repayment profile and interest rate level stress tests.
Although there was a fair gross increase in lending of
more than DKK 360 million in 2013, the bank’s lending to
private customers declined by DKK 29 million excluding
writedowns to DKK 2,293 million as a result of increased
demand for Totalkredit loans and the general trend of
customers repaying their loans.
Portfolio
DKKm
Private
DKKm
Income
4.500
2013
180177
Expenses –215
Core earnings
Value adjustments
2012
–222
00
– 35
– 45
0
0
– 35
– 45
–120
–57
Profit/loss before tax
–155
–102
4.000
3.500
3.000
2.500
2.000
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Loans and advances excluding impairment writedowns for the year
Totalkredit
The bank’s income from the private customer segment
increased by 1.7% to DKK 180 million relative to 2012. The
trend in income combined with lower costs resulted in a
DKK 10 million increase in core earnings to a DKK 35 million loss.
The bank achieved an increase of some 20% in the number of full-service customers who use Alm. Brand Bank as
their main banker. Growth in the number of full-service
customers is a key element in developing the private
customer segment going forward.
The portfolio of Totalkredit loans for which the bank
acted as intermediary increased by 12% to stand at DKK
4,163 million at 31 December 2013. As was the case in
2012, many customers not only converted their loans to
other interest and repayment terms in 2013; they also
raised supplementary mortgage loans with Totalkredit
which they used to reduce loans with the bank.
The bank’s pension activities delivered a satisfactory
performance in 2013. After the introduction of the new
retirement pension (Alderspension), which resulted in
a reduction of pension assets due to the payment of tax
on amounts transferred, the bank succeeded in growing
its total pension assets by close to 2%. This increase was
driven in particular by the bank’s portfolio management
product, the Alm. Brand Investment Scheme, which reported growth of almost 13% in 2013.
In 2013, the bank saw greater interest from Non-life Insurance customers in getting the benefits offered if they
become full-service customers of the bank. This arrangement will also be a key focus area in 2014, and the positive
trend is expected to continue.
13
Financial results for Q4
•
•
•
•
Loss before tax and minority interests: DKK 104 million (2012: DKK 146 million loss)
• Continuing activities: DKK 20 million loss
(2012: DKK 12 million profit)
• Winding-up activities: DKK 84 million loss
(2012: DKK 158 million loss)
Loss/profit before impairment writedowns: DKK 6
million loss (2012: DKK 2 million profit)
Losses and writedowns: DKK 98 million (2012: DKK
148 million)
Reduction in lending in the winding-up portfolio:
DKK 296 million (2012: DKK 472 million)
The interest margin for the parent company was 1.6%,
against 1.4% in Q4 2012. For the banking group, the interest margin was also 1.6%, against 1.4% in Q4 2012.
Continuing activities
The continuing activities posted a profit before writedowns of DKK 24 million, against a profit of DKK 32 million in Q4 2012. This performance was driven by improved
core earnings and was offset by a decline in value adjustments.
- 104 DKKm
Loss before tax and minority interests: DKK 104 million
(2012: DKK 146 million loss)
14
Income
The bank’s income from continuing activities improved
by DKK 46 million to DKK 150 million, against DKK 104
million in Q4 2012. This increase was primarily driven by
higher trading income from Financial Markets and increased earnings from leasing activities.
Core earnings
Core earnings increased by DKK 14 million to DKK 30
million from 16 million in Q4 2012.
Value adjustments
Value adjustments amounted to a loss of DKK 2 million,
against a gain of DKK 16 million in Q4 2012. The loss in
2013 was attributable to the bank’s bond portfolio.
Writedowns
Writedowns amounted to DKK 44 million, against DKK
20 million in Q4 2012, and were attributable to the bank’s
private customers.
Winding-up activities
The bank’s winding-up activities posted a pre-tax loss of
DKK 84 million, against a loss of DKK 158 million in Q4
2012. Writedowns amounted to DKK 54 million, against
DKK 128 million in Q4 2012.
- 6 DKKm
Loss before impairment writedowns: DKK 6 million
(2012: DKK 2 million profit)
alm. brand bank
Leasing
Leasing activities generated a pre-tax profit of DKK 1 million, which was a DKK 3 million improvement on 2012.
Financial Markets
Financial Markets reported a pre-tax profit of DKK 87
million, against DKK 58 million in 2012.
Leasing
Financial markets
DKKm
Income
2013
2012
8660
DKKm
Income
Expenses
– 33
– 30
Expenses
– 52
– 32
Core earnings
1
–2
Value adjustments
0
0
1
–2
0
0
1
–2
Value adjustments
As a result of the portfolio growth, income increased by
DKK 26 million to DKK 86 million compared with 2012.
Writedowns increased by DKK 20 million due to the increased portfolio.
2012
204158
– 105
Core earnings
The portfolio of leasing activities grew by more than DKK
100 million in 2013, and more than three times as many
cars were ordered as in 2012. The positive portfolio developments were driven in particular by private customer leasing, but the commercial segment also reported
growth.
2013
– 105
0
0
99
53
– 15
4
1
1
85
58
2
0
87
58
The income generated by Financial Markets grew by 29%
to DKK 204 million from DKK 158 million in 2012. Greater
risk appetite and activity among Alm. Brand’s customers
in 2013 served to increase revenue and a fair inflow of new
customers helped lift core earnings by DKK 46 million to
DKK 99 million.
Alm. Brand’s asset management activities delivered a
strong performance in 2013. The performance was supported in particular by mortgage bonds, which had a positive effect on the results of Financial Markets.
Financial Markets currently has some DKK 31 billion of
assets under management, of which external funds represent close to DKK 8 billion, and the department aims
to increase the volume of external assets under management in the coming years.
The collaboration between the Financial Markets and Private segments was strengthened in 2012, and the positive
effects fed through to the 2013 results. The inflow of high
net worth private customers who have an adviser in Markets is at the highest level ever recorded. Asset Management has also developed a structured deposit product for
private customers, which was very well received.
15
Other
Other activities comprise the bank’s treasury function
and the ownership interest in Alm. Brand Formue A/S.
Other activities reported a pre-tax loss of DKK 23 million,
against a loss of DKK 1 million in 2012.
Other
DKKm
Income
Expenses
Core earnings
Value adjustments
Alm. Brand Formue
2013
2012
3817
– 15
–7
0
–1
23
9
– 18
–1
– 3
–7
– 25
–2
– 23
–1
(the bank’s ownership interest)
0
0
– 23
–1
Value adjustments amounted to a loss of DKK 18 million in 2013, against a loss of DKK 1 million in 2012. The
loss was mainly due to the maturity effect on high-yield
bonds and to the effect of rising interest rates.
The bank’s share of the results of Alm. Brand Formue and
its equity risk hedging in this respect amounted to a loss
of DKK 25 million. The performance was due to the loss
on interest-bearing instruments and to the hedging of
equity risk by means of indices that did not match the
composition of the portfolio.
The bank’s winding-up activities are primarily composed
of agricultural, commercial and mortgage deed exposures.
16
As part of the implementation of a controlled winding up
of the individual exposures, there are cases in which the
bank will grant additional loans as part of its credit defence efforts to protect assets the bank holds as collateral.
This means that lending may increase in individual segments, even though the lending segment is being wound
up.
In 2013, the bank’s winding-up activities reported a loss
of DKK 379 million, against a loss of DKK 472 million in
2012. The winding-up activities are subject to substantial
impairment writedowns, totalling DKK 256 million in
2013, against DKK 423 million in 2012.
Total loans and advances provided to the winding-up
portfolio declined by DKK 870 million to DKK 4,772 million in 2013, representing 65% of the bank’s overall lending portfolio. Adjusted for losses and writedowns, loans
and advances were reduced by DKK 615 million, which
was in line with the expected level.
Agriculture
In general, times are still difficult for the bank’s agricultural customers. The risk of default is high, and the market
value of agricultural land and property is under pressure.
The bank values customers’ agricultural land at an average price of DKK 130,000-140,000 per hectare.
The bank’s agricultural portfolio breaks down into around
50% pig farming, around 45% dairy farming and around
5% arable farming. The bank had close to 80 agricultural
customers at 31 December 2013. The portfolio declined by
DKK 135 million in 2013 to stand at DKK 820 million at 31
December 2013. Less losses and writedowns, the agricultural lending portfolio declined by DKK 34 million.
Losses and writedowns remain high, which is due to additional drawings on existing credit facilities and to reduced values of the underlying collateral.
alm. brand bank
Commercial
The portfolio consists of loans for financing of investment
properties, loans provided to small businesses and syndicated loans provided to medium-sized Danish businesses.
Mortgage deeds inherently run off as a result of regular
payments and redemptions. Such natural run-off accounted for about 8% of the mortgage deed portfolio in
2013 net of credit writedowns and interest rate impacts.
The bank closed down its largest exposure in 2013, which
consisted of guarantee commitments and derivative instruments. The close-down did not result in a reduction
of the lending portfolio. The exposure was closed without
a loss and resulted in a reduction of the bank’s capital reservation of approximately DKK 50 million.
Credit writedowns amounted to DKK 177 million in 2013,
corresponding to an impairment ratio of 6.5% of the average portfolio.
The total portfolio declined by DKK 229 million in 2013 to
stand at DKK 1,044 million at 31 December 2013. Losses
and writedowns amounted to a reversal of DKK 24 million. Adjusted for losses and writedowns, the commercial
lending portfolio declined by DKK 253 million.
Mortgage deeds
This segment comprises the bank’s own portfolio of private and commercial mortgage deeds. The mortgage deed
portfolio amounted to DKK 2,497 million at 31 December
2013, which was DKK 433 million less than at 31 December 2012. Adjusted for losses and writedowns, the portfolio declined by DKK 256 million.
Compared with the banking sector in general, the bank
has fairly high exposure to mortgage deeds relative to
the overall lending portfolio. See note 47 to the financial
statements for a description of significant accounting estimates, assumptions and uncertainties.
Private mortgage deeds
The bank’s portfolio of private mortgage deeds amounted
to DKK 1,847 million, comprising the bank’s portfolio of
mortgage deeds secured primarily against single-family
houses, commonhold flats and summer houses. The properties are located throughout Denmark.
Credit-related writedowns of private mortgage deeds
amounted to DKK 96 million in 2013.
Lending year-end
DKKm
Agriculture
Commercial
Mortage deeds Other loans and advances
Shares b)
2012 2013
Total losses and writedowns
Share of portfolio % 955 820 11.2%
Q1
Q2
Q3
Q4
Total 2013
26 1847 10
Loss ratioa)
101
11.4%
1,273
1,044
14.2%
– 15
– 2
– 9
2
– 24
2,930
2,497
34.0%
50
47
37
43
177
6.5%
484
411
5.6%
2
-
-
– 1
1
0.2%
- -
5,642
4,772
-
65.0%
- 1--
63
64
75
54
1
256
– 2.1%
4.9%
a)
Losses and writedowns as a percentage of the average portfolio in 2013. The percentage is not comparable with the impairment ratio in the bank’s financial highlights
and key ratios
b)
Shareholding taken over in connection with the winding up of a former credit exposure. Value adjustment of the shareholding is recognised under value adjustments
17
Private mortgage deeds are still adversely affected by the
weak general economic conditions, and the number of
private mortgage deed delinquencies remains high as a
result.
Commercial mortgage deeds
Commercial mortgage deeds amounted to DKK 650 million, comprising the bank’s portfolio of mortgage deeds
secured against residential rental property, commercial
property for office, trade and industrial use as well as land
and mixed residential/commercial property.
Credit-related writedowns of commercial mortgage deeds amounted to DKK 81 million in 2013.
The commercial property letting market was weak in
2013, and the pressure on rent levels was seen to be
mounting. Revaluations resulted in a high level of impairment writedowns.
Deposits
The bank had deposits of DKK 10.9 billion at 31 December 2013, against DKK 11.3 billion at the year-earlier date.
The decline was the result of the bank’s ongoing focus to
reduce its deposit balance in step with the reduction of
loans and advances in the winding-up portfolio.
In 2013, the bank experienced an increase of more than
15% in floating-rate deposits. This marked a positive shift
in the relationship between high-interest fixed-rate deposits and lower-interest floating-rate deposits. This trend is
expected to continue in 2014 and will have a positive effect on the bank’s interest margin.
It is a part of the bank’s strategy to further reduce deposits, while also increasing the share of floating-rate deposits.
Liquidity
Other loans and advances
Other loans and advances cover a portfolio of car finance
contracts and property development projects. At 31 December 2013, approximately 60% of lending in this segment related to a single property development project.
The bank will only finance the completion of ongoing
projects pursuant to existing agreements.
Other loans and advances declined by DKK 73 million in
2013 to stand at DKK 411 million at 31 December 2013. Losses and writedowns amounted to DKK 1 million in 2013.
Balance sheet
Loans and advances
The bank’s loans and advances totalled DKK 7.3 billion at
31 December 2013, against DKK 8.4 billion at 31 December
2012, corresponding to a decline of DKK 1.1 billion.
Excluding writedowns, loans and advances in the continuing activities declined by DKK 98 million and by DKK
615 million in the winding-up activities. The reduction of
the winding-up portfolio was in line with expectations.
18
At 31 December 2013, the bank had cash funds of DKK 4.5
billion and excess liquidity of DKK 3.0 billion, equivalent to an excess cover of 202% relative to the statutory
requirement. In line with expectations, repayment of
funding reduced the excess cover relative to the 256% reported at 31 December 2012.
Management monitors the bank’s liquidity closely, and it
is expected that the excess liquidity coverage will be reduced further in 2014.
Capitalisation
The bank’s equity stood at DKK 1.5 billion at 31 December 2013. The capital base totalled DKK 1.8 billion, and
the risk-weighted items amounted to DKK 8.7 billion at
31 December 2013.
Accordingly, the solvency ratio was 20.3, and the core capital ratio was 19.2. The bank’s individual solvency need
was calculated at 14.2%, which means that the solvency
ratio exceeded the individual solvency need by 6.1 percentage points.
alm. brand bank
The banking group’s equity stood at DKK 1.7 billion at 31
December 2013. The capital base totalled DKK 1.8 billion,
and the risk-weighted items amounted to DKK 9.6 billion
at 31 December 2013.
Accordingly, the banking group had a solvency ratio
of 18.4%, and a core capital ratio of 17.7%. The banking
group’s individual solvency need was calculated at 14.3%,
which means that the solvency ratio exceeded the individual solvency need by 4.1 percentage points.
Capital reservation for credit risk
The banking group’s total capital reservation for credit
risk declined by DKK 329 million in 2013 to stand at DKK
3,149 million at 31 December 2013, against DKK 3,478
million at 31 December 2012.
The capital reservation equalled 33% of gross loans and
advances and the residual debt on mortgage deeds at 31
December 2013, which was unchanged relative to 31 December 2012.
The capital reservation on the continuing portfolio represented 18% of gross loans and advances, and the capital reservation on the winding-up portfolio represented 39% of
gross loans and advances and residual debt on mortgage
deeds.
DKK 1,454 million, compared with DKK 1,557 million at
31 December 2012. Accumulated writedowns broke down
as follows at 31 December 2013: DKK 277 million on the
continuing portfolio and DKK 1,177 million on the winding-up portfolio. To this should be added DKK 747 million in fair value adjustments of mortgage deeds.
New capital adequacy rules (CRD IV)
New capital adequacy rules were introduced by the EU
with effect from 1 January 2014. Among other things, the
new rules define stricter requirements on the quality of
capital. The rules provide for a toughened scaling-down
of the inclusion of supplementary capital and a tightening of the requirements for hybrid capital. Moreover,
the rules governing the calculation of risk-weighted assets will change. The rules will be phased in from 2014 to
2019, but the most significant changes for the bank will
take place already in 2014.
Under the new rules, the value of the bank’s supplementary capital in the solvency calculation declined by DKK
160 million on 1 January 2014 and will be reduced by an
additional DKK 40 million in 2014. This is partly offset by
a capital injection made by Alm. Brand A/S on 27 February
2014.
The bank’s risk-weighted assets will not be affected to any
significant extent by the changed rules.
Of the banking group’s total capital reservation at 31 December 2013, accumulated writedowns amounted to
Capital reservation for credit risk
31.12.2013
31.12.2012
Reservation
Reservation
Gross lending/ Required
Total relative to gross
Total relative to gross
lending reservation
lending
DKKm
outstanding debt Balance Differencea) capitalreservation
Continuing portfolio
2,708
2,431
277
223
500
18%
515
Winding-up portfolio
6,696
4,772
1,924
701
2,625
39%
2,952
18%
38%
Total - excl. reverse transactions 9,404
7,203
2,201
924
3,125
33%
3,467
Reverse transactions including intercompany transactions
137137 0 24
24
18%
11
33%
Total group
33%
a)
9,541
7,340
2,201
948
3,149
33%
3,478
10%
Accumulated writedowns and value adjustments of mortgage deeds.
19
Supervisory diamond
At 31 December 2013, than bank was in compliance with
all five threshold values of the Danish FSA’s supervisory
diamond as shown in the figure below:
Large exposures
Growth in lending
Threshold value < 125 %
Threshold value < 20 %
2013 2012
2013 2012
32%
32%
- 11%
- 13%
Funding ratio
Property exposure
Threshold value < 1
Threshold value < 25%
2013 2012
2013 2012
0.57
0.62
15%
17%
Excess liquidity coverage
Threshold value > 50%
2013 2012
202%
256%
Prepayment of government-guaranteed bonds
On 22 March 2013, the bank repaid just over DKK 1 billion
of government-guaranteed bonds, and on 1 July 2013 the
remaining DKK 950 million of the bond issue was repaid.
Partner agreement with the Danish Swimming Union
On 2 December 2013, Alm. Brand Bank concluded a partner agreement with the Danish Swimming Union, which
is intended to attract more full-service customers to the
bank as well as more funds for member activities in local
swimming clubs in Denmark.
Changes to the Board of Directors
At the bank’s annual general meeting held on 17 April
2013, Ebbe Castella was elected as a new member of the
Board of Directors. Moreover, new employee representatives were elected in 2013.
Events after the balance sheet date
The changes to the bank’s supervisory diamond values
are in line with expectations.
Major events
Capital injection
On 26 February 2013, Alm. Brand A/S injected DKK 700
million into Alm. Brand Bank A/S as equity. The capital
injection was used to make a DKK 430 million repayment
of the state-funded hybrid core capital on 19 March 2013.
On 22 August 2013, Alm. Brand A/S injected DKK 200 million into Alm. Brand Bank A/S as equity. The capital injection was used to make a DKK 200 million additional
repayment of the state-funded hybrid core capital on 11
September 2013.
20
Capital injection and repayment of state-funded hybrid core capital
million into Alm. Brand Bank A/S as equity. The capital injection will be used to repay the remaining DKK 226 million of state-funded hybrid core capital. Repayment will
take place when permission has been received. Moreover,
a part of the capital injection will be used to offset the effect of the new capital adequacy rules in 2014.
Alm. Brand Formue
After the balance sheet date, the Board of Directors of the
subsidiary Alm. Brand Formue A/S has submitted a proposal for a solvent liquidation of the company.
The reason for the proposal is that, as a result of a number
of years of weak demand and low liquidity in the shares,
the market capitalisation of Alm. Brand Formue is not
deemed to reflect the company’s values. Moreover, the
Danish act on on alternative investment fund managers
introduces new regulatory obligations on the company,
which will entail increased administrative expenses.
alm. brand bank
For additional information on the proposal for a solvent liquidation of Alm. Brand Formue, see separate announcement no. 2 issued by Alm. Brand Formue on 21
February 2014.
Uncertainty in recognition and measurement
The most significant uncertainties in recognition and
measurement relate to impairment writedowns on loans,
provisions for guarantees, measurement of financial instruments which are not traded in an active market, valuation of loans and advances at fair value, and deferred tax
assets. Management believes that the level of uncertainty in
the financial reporting for 2013 is acceptable.
See note 47 for a further description of uncertainty in recognition and measurement.
Outlook
The continuing activities are expected to generate pre-tax
profit of around DKK 40 million in 2014, of which writedowns are expected to amount to approximately DKK 35
million.
The bank’s winding-up activities are expected to report a
loss of DKK 375-425 million.
The bank’s winding-up portfolio excluding losses and
writedowns is expected to be reduced by around DKK
500 million in 2014.
The guidance is subject to substantial uncertainty, and the
actual performance will depend on economic developments, market conditions in general and other factors.
21
Customers
Customers first – strategy 2013–2016
Alm. Brand’s believes that the combination of providing
a supreme service and having the most satisfied customers is key to the group’s and the bank’s future success.
The strategy is therefore focused on ensuring that we have
very satisfied and loyal customers by offering high quality, professional skills and accessibility, good products at
the right price and superior customer service.
An important part of the strategy is to develop and sharpen our employees’ customer focus and the tools they use
to provide optimum customer experiences.
In addition to achieving a higher customer satisfaction
rate, a number of distribution and customer service targets have been defined, all of which support the overall
strategy for the bank.
In addition to launching the CUSTOMERS FIRST strategy,
the Alm. Brand Group has redefined its identity, called
“Alm. Brand for the customers – since 1792”, which expresses in words the qualities that set Alm. Brand apart
from the competition and makes it clear what customers
can expect from Alm. Brand.
In order to communicate these positive changes in Alm.
Brand, the group has changed its logo, typeface as well
as its colour and image style. The new visual look, which
we call “Klædt på til kunden”, we want to showcase Alm.
Brand as a modern, open and service-minded company,
while emphasising proper financial conduct and honouring our legacy dating back to 1792.
Lastly, the group launched a new marketing campaign at
the beginning of 2014. Under the slogan “Pas godt på de
gode værdier”, the campaign comprises advertisements
portraying situations, things or animals and people that
22
we want to take good care of. We have also launched a TV
commercial campaign portraying Danes as people with
strong values and stressing the importance of preserving
those values.
Organisation
Alm. Brand has generally allocated distribution responsibilities to five regional organisations, each being responsible for sales and service targeting its local customer
segment. This ensures that Alm. Brand’s employees have
detailed knowledge of customers and local matters as well
as the support of specialists in centralised staff functions
working across the regions, all to ensure that customers
receive optimal service.
Each regional sales organisation is divided according to
business area with the focus on cross sales and referrals
between the individual sales channels. Physical locations
are also shared to a significant extent.
Financial Markets and Leasing each have independent distribution responsibilities.
Branches
The bank has 11 bank branches across Denmark. The
branches offer a full-service concept, including advisory
services and sales of a full range of banking products targeting the private customer segment. The bank also offers investment advice, and each branch has designated
pension advisers. It is a key priority for the bank to offer
competent advisory services to each individual customer.
Through centralised Asset Management and Markets departments, the bank offers more complex investment solutions for customers requiring such services.
customers
Customer service center
Banking customers are also served through a centralised
customer service centre, which advises customers on
all regular banking products and handles customer enquiries. If necessary, customers are referred to their personal advisers.
Group sales
About 43% of the bank’s just over 50,000 customers are
also customers of Non-life Insurance or Life and Pension.
The bank will remain focused on explaining the extra benefits customers get when they pool their financial products with Alm. Brand.
Leasing
The bank offers car leasing through the subsidiary Alm.
Brand Leasing. Distribution takes place directly to private
customers through the website www.almbrandleasing.dk
and through partnerships with car importers and car dealers all over Denmark. Distribution to commercial customers takes place through in-house consultants.
Our private leasing activities developed very favourably
in 2013, and we achieved good results, among other things
from a very intense online marketing campaign.
Sales and service through online solutions
In recent years, Alm. Brand has significantly expanded
its sales and service activities through electronic media.
Customers continue to demand more self-service, and we
aim to have more than one third of all customer-facing
processes in the group digitalised by the end of 2016. The
digital processes will ensure faster and simpler customer
service, while improving quality at the same time.
In addition to information, service and sales through
electronic media, we interact with our customers and
other stakeholders through social media such as Facebook, Trust Pilot and LinkedIn etc.
www.almbrand.dk
The Alm. Brand Group’s website contains a wide range of
information about Alm. Brand Bank and its products.
Easy overview for customers
Through the website, private customers can log onto their
own, personalised page using their NemID. This page provides the customer with an overview of all the arrangements he or she has with Alm. Brand, including insurance
agreements with policies, pension agreements or banking
products.
Netbank
Netbank, Alm. Brand’s online banking site, allows customers to conduct their banking business, including making transfers, paying bills, trading securities, etc.
Mobile phone services
Using a smartphone, customers can track securities prices
and trade securities directly. Moreover, customers can access their accounts and make transfers, etc.
In 2013, the bank recorded a net increase of more than
3,000 active mobile banking users. The bank thus had
close to 9,500 active mobile banking users at 31 December 2013.
23
Human resources
Hr strategy and objectives
Alm. Brand Bank wants its employees to be committed
and to seek influence and assume responsibility for the
planning and performance of their own job. Moreover,
the bank wants resourceful and dynamic managers who
are focused on continual business, employee and personal development. The bank aims to stand out from the
competition in the eyes of the customers by helping each
individual employee to develop professionally and to focus on providing supreme customer service.
Greater job satisfaction
High job satisfaction is key in being able to provide optimum customer service. High job satisfaction is reflected
in how much energy the employees invest in the company
and the extent to which their motivation translates into
efficient, business-oriented action and is used to provide
optimum customer service.
A key aim and focus of the group’s strategy, CUSTOMERS
FIRST, is to ensure and expand the solid foundation developed for the job satisfaction of each individual employee.
Over a number of years, a scoring tool has been used,
which, based on a wide variety of parameters, expresses
job satisfaction as an index figure on a scale of 0 to 100.
For the bank, the January 2014 survey showed that job satisfaction has increased by 2 points to 77, which is at the
upper end of the category “high job satisfaction”. For the
current strategy period, running until end-2016, we have
defined a job satisfaction target of 78.
Compared with most other major companies in the financial sector, the bank scores relatively high, so this is quite
an ambitious target, and meeting it will require a considerable effort. The aim is to maintain the high job satisfaction rate among the bank’s employees, while seeking
to increase job satisfaction in areas scoring in the bottom
quartile of the index.
24
Job satisfaction is measured twice annually. Once a year,
the group conducts an extensive survey, comprising a
number of questions related to management, corporate
culture, image, development and commitment. The second survey is a smaller-scale, follow-up survey.
As a supplement to our efforts to increase job satisfaction,
we are working to reduce the sickness absence rate.
Executing leadership
Competent management is crucial for employee welfare
and job satisfaction and, by extension, for the company’s
financial performance.
In 2013, we launched a new management training programme which supports our target of providing supreme customer service. Concurrently with the management training programme, we have launched an
initiative to structure the group’s management development programme so as to ensure that all managers work
from the same solid management platform that supports
the group’s strategy and the requirements of each individual manager for specific management skills. The structure is based on a number of mandatory modules as well as
a number of more specific elements tailored to individual
requirements. In addition, a separate programme is being
developed to prepare new managers of the bank to take
on the role as managers.
Corporate values tailored to our customers
For years, our corporate values have provided a solid foundation for the views and conduct applied by our employees internally and externally, and they have now come to
truly permeate Alm. Brand.
human resources
Ordinary common sense
We identify with the customer
We keep our promises
We manage rules using common sense
Mutual respect
We listen to our customers
We respect our customers’ experiences
We draw on each other’s knowledge and
experience
Holism and proximity
We care for our customers
We take a holistic approach to the customer’s
situation
We are accessible
Will to succeed
We set ambitious and realistic goals
We develop professionally and personally
We create results together
The alm. Brand academy
The Alm. Brand Academy is the anchor point of the
group’s development of employee and management skills.
The range and complexity of financial products has grown
significantly in recent years and the legislative framework
is constantly changing. This puts pressure on the group’s
employees to continuously develop their skills to be able
to provide superior customer service and advice.
Alm. Brand Bank invests considerable resources in inhouse training of new and existing employees. The Alm.
Brand Academy is intended to consolidate the opportunities for training in the group in order to build a visible
platform for the group’s training initiatives and to act as a
showcase for the opportunities for development and training available to each individual employee.
From 2014 onwards, the bank will be strongly focused on
training all its employees in the part of the new strategy
involving customer service.
Remuneration policy
Board of Directors
Members of the Board of Directors receive a fixed annual
remuneration reflecting the scope of the board work and
the responsibility related to serving on the board. Each
board member received DKK 150,000. The total remuneration to the Board of Directors was DKK 1.1 million in
2013.
In accordance with the company’s remuneration policy,
board members are not remunerated by way of incentive
plans.
Management Board
The members of the Management Board of Alm. Brand
Bank are remunerated by way of a salary which is intended to be competitive with the remuneration of other,
comparable positions in the financial sector. In addition
to this salary, the company provides a pension contribution, and the remuneration also includes a company car,
paid telephone subscription and other customary salary
substitutes. The remuneration of the Management Board
is adjusted every two years.
The members of the Management Board received remuneration in the amount of DKK 3.1 million in 2013.
The Management Board received no bonus in 2013.
Other executives and specialists
Markets and Asset Management have set up bonus schemes for the 2013 financial year based on performance.
In 2012, the company complied with the remuneration
policy described in the Annual Report 2012, and in 2013 it
complied with the remuneration policy described above.
This scheme will continue in 2014.
25
Corporate governance
In accordance with a request from the Danish Bankers
Association of 24 June 2013, the Board of Directors of
Alm. Brand Bank has considered the corporate governance recommendations prepared by the Committee on
Corporate Governance applying the “comply or explain”
principle. The recommendations are publicly available at
www.corporategovernance.dk.
The Board of Directors of Alm. Brand Bank believes that
corporate governance should be based on a holistic approach that considers relations and the interaction with
all stakeholders. Alm. Brand Bank agrees with the basic
principles of the corporate governance recommendations.
This is reflected in the company’s management approach,
which generally complies with the recommendations on
corporate governance, however, with the exceptions following from the fact that Alm. Brand Bank only has one
shareholder. A detailed review of Alm. Brand Bank’s position on each recommendation and a description of the
remuneration policy applicable to members of the Management Board and the Board of Directors are provided
on the Alm. Brand Group’s website (www.almbrand.dk/
english/corporategovernance).
The few areas in which Alm. Brand Bank has opted not to
comply with the recommendations are discussed below.
The main elements of the company’s internal control and
risk management systems in relation to the financial reporting process, the composition of the company’s management bodies and its position on corporate social responsibility are also described below.
Explanation of non-compliance with corporate governance recommendations
Takeover bids
The committee recommends that the company set up
contingency procedures in the event of takeover bids. The
bank has not set up contingency procedures, as it believes
that takeover bids are not realistic given the current ownership structure.
26
Composition and organisation of the Board of Directors
The committee recommends that the company’s articles
of association stipulate a retirement age for members of
the Board of Directors. For a number of years, the rules
of procedure of the Board of Directors have stipulated a
retirement age of 70 years for individual board members.
As a result, it has been deemed unnecessary to also fix a
retirement age in the articles of association.
As regards recruitment and election of board members,
the committee recommends that at least half of the board
members elected by the shareholders at the annual general meeting should be independent. Alm. Brand Bank
does not comply with this recommendation, as the composition of the Board of Directors reflects the fact that
Alm. Brand Bank is a wholly-owned subsidiary of Alm.
Brand A/S.
The committee recommends that the selection and nomination of candidates for the Board of Directors be carried
out through a thoroughly transparent process approved
by the overall Board of Directors. However, the composition of the members of the Board of Directors elected by
the shareholders in general meeting reflects that the bank
is a wholly-owned subsidiary, for which reason candidates are selected and nominated by the parent company’s
management.
The company does not provide information about the recommended candidates’ background, qualifications and
the criteria for recruitment ahead of the annual general
meeting, as the sole shareholder is thoroughly familiar
with the skills etc. of the nominated candidates. Information about the board members’ other executive positions
and directorships as well as their special qualifications is
included in the annual report. As regards new candidates,
information on other executive positions and directorships, etc. is also provided in the complete proposals sent
out prior to the annual general meeting.
corporate governance
Board committees
The Board of Directors of Alm. Brand Bank has set up an
audit committee. The Chairman and the Deputy Chairman of the Board of Directors, who cannot be deemed to
be independent, are members of the committee. The majority of the committee members are thus not independent. The Board of Directors has deliberately chosen this
structure and finds that it ensures a strong focus on the
work of the committee.
It is recommended that the Board of Directors should set
up a nomination committee and a remuneration committee. Considering the bank’s ownership, the Board of Directors believes that there is currently no need to set up
such committees. The bank’s parent company has set up
a remuneration committee, which undertakes the tasks
described at group level.
Remuneration of the Board of Directors and the Management Board
The committee recommends that the remuneration of the
Board of Directors for the current financial year is approved by the shareholders in general meeting. The Board of
Directors believes that it is sufficient that the shareholders
approve the remuneration paid to the Board of Directors
in respect of the past financial year when approving the
annual report and that the Chairman of the Board of Directors explains the expected remuneration payable to
the Board of Directors for the current financial year.
Overall, the Board of Directors believes that Alm. Brand
Bank complies with the corporate governance criteria and
that these few exceptions do not constitute a disadvantage or are contrary to the interests of the shareholders or
other stakeholders.
Financial reporting process
The primary responsibility for Alm. Brand Bank’s risk
management and control organisation in relation to the
financial reporting process rests with the Board of Directors and the Management Board, including compliance
with applicable legislation and other financial reporting
regulations.
Control environment
The Board of Directors has defined a working plan ensuring that the Board of Directors assesses, at least once a
year, the bank’s:
•
•
•
•
Organisation
Plans and budgets
Risk of fraud
In-house rules and guidelines
The Board of Directors and the Management Board are responsible for establishing and approving general policies,
procedures and controls in key areas in relation to the financial reporting process. The audit committee supports
the Board of Directors in this work.
The group’s internal audit department reports directly to
the Board of Directors and in compliance with the audit
plan presented by the internal audit department and
adopted by the Board of Directors. The internal audit department performs sample audits of business procedures
and internal controls in critical audit areas, including the
annual report and the financial reporting.
The Board of Directors and the Management Board have
adopted policies, manuals, procedures, etc. in key areas
in relation to financial reporting. On an ongoing basis, the
Management Board monitors compliance with relevant legislation and other financial reporting regulations and provisions and reports its findings to the Board of Directors.
27
Risk assessment
The working plan of the Board of Directors ensures that
the Board of Directors and the Management Board at least
once a year perform an overall assessment of risks in relation to the financial reporting process. In this connection,
the Board of Directors specifically assesses Alm. Brand
Bank’s organisation with respect to:
•
•
•
•
•
•
Risk measurement and risk management
Financial reporting and budget organisation
Internal controls
Rules on powers of procuration
Segregation of functions or compensatory measures
IT organisation and IT security
As part of the risk assessment, the Board of Directors considers the risk of fraud on an annual basis. This work includes:
•
•
A discussion of management’s potential incentive/
motive for committing fraudulent financial reporting or other types of fraud
A discussion of management reporting with a view
to preventing/identifying and responding to fraudulent financial reporting
The audit committee set up supports the Board of Directors in these assessments.
Risk management and the financial reporting process
Day-to-day risk management is handled at segment level on the basis of risk limits defined by the Management
Board and approved by the Board of Directors.
Risk management is coordinated by a cross-organisational risk committee consisting of the group’s Management
Board and the bank’s Management Board as well as the
persons in charge of the credit secretariat, the sales organisation, the finance department and the risk management department.
28
The finance department is responsible for preparing interim and full-year financial reports. The risk management department is responsible for calculating risks on
the bank’s financial assets and liabilities, while the credit
secretariat is a key contributor in relation to the bank’s
impairment writedowns on loans and advances.
The report is prepared by the investor relations department on the basis of information from a number of departments, including the finance department, the risk
management department and the individual business
areas.
Management bodies
In compliance with Danish legislation, Alm. Brand Bank
and the banking group’s subsidiaries (except from a few
single-purpose property companies) have a two-tier management system with a board of directors and a management board. A detailed presentation of the members
of the Board of Directors and the Management Board of
Alm. Brand Bank is provided in “Directorships and special
qualifications” below. The responsibilities and tasks of the
Board of Directors and the Management Board are defined, for example, in the rules of procedure for the Board
of Directors.
The Board of Directors consists of six members elected by
the shareholders in general meeting who are nominated
by the bank’s principal shareholder, Alm. Brand A/S. Five
of the six Board members elected by the shareholders in
general meeting are also members of the Board of Directors of Alm. Brand, while the sixth Board member elected
by the shareholders in general meeting is the Chief Executive Officer of Alm. Brand A/S. In addition, the Board
of Directors comprises three board members elected by
the employees. The age, seniority, other directorships and
special qualifications of the board members are set forth
in the list of “Directorships and special qualifications” at
the end of the annual report.
corporate governance
In connection with the nomination of new board members, the Board of Directors, with due consideration
being had to the partial duality of membership existing
between the board of the company’s principal shareholder, Alm. Brand, and the Board of Directors of Alm.
Brand Bank, emphasises representation of the following
qualifications on the Board of Directors as a whole: General management experience, experience from the Alm.
Brand Group’s customer segments, experience in audit
and accounting matters, particularly in relation to membership of the audit committee, and insight into financial,
legal and economic matters. Moreover, a number of more
bank-specific skills have been identified in connection
with the Board of Directors’ self-evaluation in accordance
with the Danish FSA’s guidelines for financial businesses.
The Board of Directors assesses its overall qualifications
and work procedures once a year. The Chairman of the
Board of Directors is responsible for the review. The results of the review will form part of the work of the Board
of Directors going forward.
The Board of Directors held 15 meetings in 2013.
Audit committee
The Board of Directors of Alm. Brand Bank has set up an
audit committee, which also performs this task for the
subsidiary Alm. Brand Formue.
The audit committee consists of three board members:
•
•
•
Arne Nielsen (chairman)
Jørgen H. Mikkelsen
Boris N. Kjeldsen
The Board of Directors deems that Arne Nielsen meets
the requirements for independence and qualifications
within accounting and auditing as defined in section 31
of the Danish Auditors’ Act. Arne Nielsen has many years
of experience as a state-authorised public accountant of
financial and other businesses.
•
•
•
The financial reporting process, including checking
the accuracy of financial information disclosed in annual reports and interim reports, and ensuring that
accounting policies are relevant and have been consistently applied
Internal control and risk management, including
reviewing and assessing management’s guidelines
at least once a year with a view to identifying, monitoring and managing the most important risks. The
committees also assess and review internal control
and risk management systems; and
Internal and external audit, including reviewing and
discussing the results of the work of the internal and
external auditors and the auditors’ observations and
conclusions and verifying the independence of the
external auditors, including in particular the provision of additional services. The committees supervise
management’s follow-up on the recommendations
to management reported by the internal and external auditors.
The audit committees’ work involves historical data and
generally does not comprise forward-looking events such
as outlook and budgets.
The audit committee held four meetings in 2013. The
audit committee reports to the Board of Directors on a
current basis. Audit committee meetings are attended by
the audit committee members as well as by Chief Executive Officer of Alm. Brand Søren Boe Mortensen, the
Group CFO and the Group Chief Auditor. In addition, the
meetings are attended by the appointed auditors, who
can also meet with the audit committee and the Group
Chief Auditor without the day-to-day management being
present.
Social responsibility
Alm. Brand Bank forms part of the Alm. Brand Group
and the corporate social responsibility approach is shared with the parent company Alm. Brand A/S. For further
information on corporate social responsibility, see Alm.
Brand A/S’ Annual Report 2013.
The audit committees support the boards of directors in
their work with and supervision of:
29
Capitalisation
Having adequate and satisfactory capital resources is a
fundamental prerequisite for Alm. Brand Bank’s ability
to assume risks on behalf of its customers. Various types
of calculated risk are taken in support of the bank’s longterm business objectives. The bank’s risks are described in
detail in notes 46 and 47.
The Board of Directors of Alm. Brand Bank is responsible
for identifying and quantifying the principal risks which
the bank currently faces or may face in future. In terms
of solvency, the statutory requirement prescribes that the
bank must be sufficiently capitalised to absorb adverse
events over the next 12 months without compromising
outstanding customer accounts. It is the Board of Directors that approves the method of calculation applied in
the calculation of the capital requirement.
Moreover, a capital target is determined to provide an
additional buffer relative to the solvency capital requirement.
The Management Board is responsible for ensuring that
instructions from the Board of Directors are actually implemented and for ensuring that the Board of Directors
is informed about significant changes in the assumptions
underlying the capital requirement or the amount thereof.
The capital and risk management is described in detail in
the group’s Risk and Capital Management Report for 2013
available at www.almbrand.dk/risk.
Capital base
The bank’s capital base is comprised primarily of shareholders’ equity plus supplementary capital. The supplementary capital consists of both hybrid capital and subordinated loan capital.
30
The capital base has been supplemented by hybrid and
subordinated capital in recent years. In 2010, the bank
exercised the option of obtaining state-funded hybrid
core capital, borrowing a total of DKK 856 million. In
2013, the bank repaid DKK 630 million of this amount.
The use of supplementary capital in the bank’s capital
base will be further reduced in 2014 as a result of new capital adequacy rules applicable from 1 January 2014 and
the bank’s decision to repay the remaining DKK 226 million of state-funded hybrid core capital. Repayment will
take place when approval has been granted by the Danish
FSA.
The bank’s supplementary capital will be reduced by a
total amount of approximately DKK 425 million in 2014.
million into Alm. Brand Bank A/S as equity. The capital
injection will be used to repay the state-funded hybrid
core capital as well as to offset the effect of the new capital
adequacy rules in 2014.
Individual solvency need
On 1 January 2013, Alm. Brand Bank transitioned to using
the Danish FSA’s 8+ method for calculating the adequate
capital base. The calculation according to the 8+ method
is based on 8% of the risk-weighted items plus a Pillar 2
margin for risks not assessed to be covered by the Pillar 1
requirement.
In the credit area, the guidelines specify methods for calculating Pillar 2 margins for exposures representing more
than 2% of the capital base and for credit risk concentration on industries and individual exposures, respectively.
Moreover, there is a requirement that a Pillar 2 margin is
calculated according to a non-specified method on weak
exposures representing less than 2% of the capital base.
capitalisation
In addition to the specified margins in the credit area, the
bank reserves a Pillar 2 margin on agricultural and corporate exposures, on mortgage deeds as well as on the private customer portfolio.
The calculation of adequate capital base in the market risk
area adheres to the Danish FSA’s 8+ method as described
in the guidelines. Risks related to properties are calculated in the bank under the credit risk area.
Under additional risks, the bank reserves capital for operational risks and earnings risks. The calculation of operational risk is based on the basic indicator method, which
calculates the operational risk as 15% of the average net
interest income and non-interest-related net income for
the past three years. The earnings risk is calculated according to the 8+ method, which requires that capital is reserved if core earnings divided by lending is less than 1%.
At 31 December 2013, the bank’s capital base amounted
to DKK 1.8 billion, of which shareholders’ equity represented DKK 1.5 billion. The risk-weighted items amounted
to DKK 8.7 billion, and accordingly the solvency ratio was
DKK 20.3, and the core capital ratio was 19.2. The bank’s
individual solvency need was calculated at 14.2%, which
means that the solvency ratio exceeded the individual
solvency need by 6.1 percentage points.
Capital target
The capital target of Alm. Brand Bank is calculated on the
basis of management’s wish to consistently maintain excess capital adequacy relative to the individual solvency
need or relative to the statutory minimum requirement
of 8% of risk-weighted assets if the statutory minimum
requirement proves higher than the individual solvency
need defined. In addition, the capital target has been determined so as to take the Basel III rules into account. The
capital target can be met through a combination of several
capital components such as shareholders’ equity, hybrid
core capital and subordinated capital.
The implementation of the Basel III rules in CRD IV / CRR
entail a requirement for an equity ratio of 9.5 of riskweighted assets. The equity ratio includes a capital conservation buffer of 2.5% and a counter-cyclical buffer of
2.5% to protect against future cyclical downturns. CRD IV
/ CRR will be implemented gradually in the period until
2019 when the rules must be fully implemented.
The capital target of Alm. Brand Bank has been fixed at an
excess capital adequacy corresponding to a solvency ratio
of at least 13%, always provided that the target must be at
least 3 percentage points higher than the individual solvency need.
At 31 December 2013, the banking group’s capital base
amounted to DKK 1.8 billion, of which shareholders’
equity represented DKK 1.7 billion. The risk-weighted
items amounted to DKK 9.6 billion, and accordingly the
solvency ratio was DKK 18.4, and the core capital ratio
was 17.7. The banking group’s individual solvency need
was calculated at 14.3%, which means that the solvency
ratio exceeded the individual solvency need by 4.1 percentage points.
31
32
investor information
Investor information
Activities
Listed bonds
Alm. Brand Bank A/S is wholly owned by the listed
company Alm. Brand A/S. The nominal value of the
company’s share capital is DKK 1,021 million. As a result,
the primary investor activities take place within the framework of Alm. Brand. For further information, see the
2013 Annual Report of Alm. Brand and www.almbrand.dk.
Alm. Brand Bank has issued the following listed bonds:
•
Hybrid core capital with a nominal value of DKK 175
million, NASDAQ OMX Copenhagen A/S
Annual general meeting
The annual general meeting will be held on 23 April 2014
at 9.00 a.m. at Alm. Brand Huset, Midtermolen 7, 2100
Copenhagen Ø, Denmark.
Shareholdings of the board of directors and management board in alm. brand a/s
In 2013, the Board of Directors’ and the Management Board’s shareholdings in Alm. Brand totalled:
No. of shares held 1 Jan 2013
No. of shares held 31 Dec 2013
RelatedRelated
Personally partiesPersonally parties
Board of Directors:
115,369
106,439
125,369
Boris N. Kjeldsen
5,480
0
5,480
0
Arne Nielsen
2,500
11,600
5,900
14,400
12,000
75,000
12,000
75,000
0
0
1,000
0
34,697
1,173
34,697
1,173
Christian Bundgaard
6,767
20
6,767
20
Torben Jensen
4,658
196
4,797
196
Pia Støjfer
1,916
96
1,916
96
Jan Skytte Pedersen
Ebbe Castella
116,439
Management Board:
Kim Bai Wadstrøm
0
0
0
0
The members of the Board of Directors and the Management Board hold no shares in other companies of the Alm. Brand Group.
Alm.
Brand
Bank
annual
report 2013
Alm.
Brand
Bank
årsrapport
33
Company announcements in 2013
26.02.13 Annual Report 2012
19.03.13 Partial repayment of state-funded hybrid core capital
21.03.13 Election of employee representatives
22.03.13 Prepayment of government-guaranteed bonds in Alm. Brand Bank
25.03.13 Notice of annual general meeting
17.04.13 Result of annual general meeting 2013
22.05.13 Interim report Q1 2013
22.08.13 Interim report H1 2013
11.09.13 Partial repayment of state-funded hybrid core capital
01.10.13 Financial calendar 2014
21.11.13 Interim report Q3 2013
Financial calendar 2014
27.02.14 Release of Annual Report 2013
23.04.14 Annual general meeting
21.05.14 Release of Q1 2014 interim report
21.08.14 Release of H1 2014 interim report
20.11.14 Release of Q3 2014 interim report
34
investor information / statement by the management board and the board of directors
Statement by the Management Board
and the Board of Directors
The Board of Directors and the Management Board have
today considered and approved the annual report of Alm.
Brand Bank A/S for the financial year 1 January to 31 December 2013.
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial companies. The
parent bank financial statements have been prepared in
accordance with the Danish Financial Business Act. The
management commentary has been prepared in accordance with the Danish Financial Business Act.
In our opinion, the consolidated financial statements and
the parent bank financial statements give a true and fair
view of the Group’s and the Parent Bank’s financial position at 31 December 2013 as well as of the results of their
operations and the Group’s cash flows for the financial
year 1 January to 31 December 2013.
In our opinion, the management commentary contains a
fair review of the development in the Group’s and the Parent Bank’s activities and financial position together with
a description of the principal risks and uncertainties that
may affect the Group and the Parent Bank.
We recommend the annual report for adoption at the Annual General Meeting.
Management Board
Copenhagen, 27 February 2014
Kim Bai Wadstrøm
Chief Executive
Board of Directors
Boris N. Kjeldsen
Arne Nielsen
ChairmanDeputy Chairman
Jan Skytte Pedersen
Ebbe Castella
Christian BundgaardTorben JensenPia Støjfer
35
Auditors´ report
Internal auditors’ report
Report on the financial statements
We have audited the consolidated financial statements
and the parent company financial statements of Alm.
Brand Bank A/S for the financial year ended 31 December 2013, comprising an income statement, statement
of comprehensive income, balance sheet, statement of
changes in equity, segment information and notes to the
financial statements, including accounting policies, for
the group as well as for the parent company, and a consolidated cash flow statement. The consolidated financial
statements have been prepared in accordance with the
International Financial Reporting Standards as adopted
by the EU and Danish disclosure requirements for listed
financial enterprises. The parent company financial statements have been prepared in accordance with the Danish
Financial Business Act.
Management is responsible for the consolidated financial
statements and the parent company financial statements.
Our responsibility is to express an opinion on the consolidated financial statements and the parent company financial statements.
Basis of opinion
We conducted our audit on the basis of the Executive
Order of the Danish Financial Supervisory Authority on
auditing financial enterprises and financial groups and
in accordance with international auditing standards.
This requires that we plan and perform our audit to obtain reasonable assurance as to whether the consolidated
financial statements and the parent company financial
statements are free from material misstatement.
We participated in auditing the critical audit areas.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial statements and the parent company
financial statements. The procedures selected depend
on the auditor’s judgement, including the assessment of
the risks of material misstatement of the consolidated
statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal
control relevant to the preparation of consolidated financial statements and parent company financial statements
that give a true and fair view. The purpose of this is to design procedures that are appropriate in the circumstances
36
but not to express an opinion on the effectiveness of the
company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements and the parent
company financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Our audit did not result in any qualification.
Opinion
In our opinion, the consolidated financial statements give
a true and fair view of the group’s assets, liabilities and
financial position at 31 December 2013 and of the results
of the group’s operations and cash flows for the financial
year 1 January to 31 December 2013 in accordance with the
International Financial Reporting Standards as adopted
by the EU and Danish disclosure requirements for listed
financial enterprises.
Furthermore, in our opinion the parent company financial statements give a true and fair view of the parent
company’s assets, liabilities and financial position at 31
December 2013 and of the results of the parent company’s
operations for the financial year 1 January to 31 December
2013 in accordance with the Danish Financial Business
Act.
Statement on the management’s review
We have read the management’s review as required by
the Danish Financial Business Act. We performed no
other work in addition to the conducted audit of the consolidated financial statements and the parent company
financial statements.
On this basis, we believe that the information in the management’s review is in accordance with the consolidated
statements.
Poul-Erik Winther
Group Chief Auditor
auditors´ report
Independent auditors’ report
To the shareholders of Alm. Brand Bank A/S
Report on the consolidated financial statements and
parent bank financial statements
We have audited the consolidated financial statements
and parent bank financial statements of Alm. Brand Bank
A/S for the financial year 1 January to 31 December 2013,
which comprise the income statement, statement of comprehensive income, balance sheet, statement of changes
in equity, segment information and notes, including the
accounting policies, for the Group and the Parent Bank
and the cash flow statement of the Group. The consolidated financial statements are prepared in accordance
with International Financial Reporting Standards as
adopted by the EU and Danish disclosure requirements
for listed financial companies. The parent bank financial
statements are prepared in accordance with the Danish
Financial Business Act.
Management’s responsibility for the consolidated financial statements and parent bank financial statements
Management is responsible for the preparation of consolidated financial statements that give a true and fair view
in accordance with International Financial Reporting
Standards as adopted by the EU and Danish disclosure
requirements for listed financial companies, and for the
preparation of parent bank financial statements that give
a true and fair view in accordance with the Danish Financial Business Act, and for such internal control as Management determines is necessary to enable the preparation
of consolidated financial statements and parent bank financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on the consolidated financial statements and parent bank financial
statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing and
additional requirements under Danish audit regulation.
This requires that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and parent bank financial statements are free from
material misstatement.
An audit involves performing audit procedures to obtain
audit evidence about the amounts and disclosures in the
consolidated financial statements and parent bank financial statements. The audit procedures selected depend on
the auditor’s judgment, including the assessment of the
risks of material misstatements of the consolidated financial statements and parent bank financial statements,
whether due to fraud or error. In making such risk assessment, the auditor considers internal control relevant to
the entity’s preparation of consolidated financial statements and parent bank financial statements that give
a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of
the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by
Management, as well as the overall presentation of the
consolidated financial statements and parent bank financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Our audit has not resulted in any qualification.
Opinion
In our opinion, the consolidated financial statements give
a true and fair view of the Group’s financial position at 31
December 2013 and of the results of its operations and
cash flows for the financial year 1 January to 31 December
2013 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed financial companies.
In our opinion, the parent bank financial statements give
a true and fair view of the Parent Bank’s financial position
at 31 December 2013 and of the results of its operations for
the financial year 1 January to 31 December 2013 in accordance with the Danish Financial Business Act.
Statement on the management commentary
Pursuant to the Danish Financial Statements Act, we have
read the management’s review. We have not performed
any further procedures in addition to the audit of the consolidated financial statements and parent bank financial
statements.
On this basis, it is our opinion that the information provided in the management’s review is consistent with the
consolidated financial statements and parent bank financial statements.
Deloitte
Statsautoriseret Revisionspartnerselskab
Henrik Wellejus
Jens Ringbæk
State-Authorised Public Accountant State-Authorised
Public Accountant
37
Financial
Statements
38
financial statements / income statement and comprehensive income
Income statement and comprehensive income
INCOME STATEMENT AND COMPREHENSIVE INCOME
Parent company
DKK '000
Note
Group
2013
2012
2013
2012
Interest receivable
1
547,758
702,373
571,526
727,497
Interest payable
2
312,994
447,448
320,653
456,620
234,764
254,925
250,873
270,877
886
694
6,876
6,168
193,814
149,815
195,337
149,533
Net interest income
Dividend on shares, etc.
Fees and commissions receivable
3
Fees and commissions payable
Net interest and fee income
Value adjustments
4
Other operating income
Profit before expenses
Staff costs and administrative expenses
5
Depreciation, amortisation and impairment of property, plant and
equipment
Other operating expenses
Impairment of loans, advances and receivables, etc.
6
Profit/loss from investments in associates and group enterprises
7
Tax
Profit/loss for the year
8
27,317
31,338
27,418
31,435
402,147
374,096
425,668
395,143
-272,682
-165,476
-232,074
-96,125
5,097
5,952
78,070
50,485
134,562
214,572
271,664
349,503
387,904
409,912
423,201
442,560
32,638
132
354
52,356
43,281
42,557
43,815
42,773
196,419
309,657
196,316
309,120
4,673
28,776
315
-2,345
-488,501
-519,132
-443,709
-479,933
-96,794
-127,939
-77,643
-127,410
-391,707
-391,193
-366,066
-352,523
Other comprehensive income
-
-
-
-
Total comprehensive income
-
-
-
-
-391,707
-391,193
-366,066
-352,523
Share attributable to Alm. Brand Bank
-391,707
-391,193
-391,707
-391,193
Share attributable to minority interests
-
-
25,641
38,670
-391,707
-391,193
-366,066
-352,523
Total comprehensive income for the year
PROFIT/LOSS ALLOCATION AND COMPREHENSIVE INCOME
Transferred to Total shareholders' equity
39
Balance sheet
BALANCE SHEET
Parent company
DKK '000
Note
Group
2013
2012
2013
2012
ASSETS
Cash in hand and balances at call with central banks
40
323,267
304,623
323,267
304,623
Balances due from credit institutions and central banks
9
610,854
554,086
610,854
554,086
Loans, advances and other receivables at fair value
10
2,497,207
2,930,050
2,497,207
2,930,050
Loans, advances and other receivables at amortised cost
11
5,603,333
6,213,956
4,842,335
5,465,944
Bonds at fair value
12
5,232,616
5,785,654
5,955,401
6,643,258
Shares, etc.
13
273,064
247,873
606,167
539,356
Investments in associates
14
42,467
43,748
42,467
43,748
Investments in group enterprises
15
214,573
223,090
-
-
Investment properties
16
36,960
-
36,960
-
Other property, plant and equipment
17
442
1,322
301,088
158,000
Current tax assets
18
183,768
299,314
166,114
286,009
Deferred tax assets
19
202,884
286,736
335,765
420,250
Assets held temporarily
20
52,366
117,461
204,971
136,455
Other assets
21
414,480
334,730
392,411
367,043
Prepayments
6,335
6,370
6,346
6,381
Total assets
15,614,866
17,406,694
16,295,985
17,902,640
balance sheet
BALANCE SHEET
Parent company
DKK '000
Note
2013
2012
Group
2013
2012
LIABILITIES AND EQUITY
Payables
Payables to credit institutions and central banks
22
1,880,440
1,105,289
2,197,066
1,396,914
Deposits and other payables
23
10,937,376
11,324,932
10,936,444
11,324,932
Issued bonds at amortised cost
24
Liabilities temporarily acquired
Other liabilities
25
Prepayments
Total payables
-
2,000,000
-
2,000,000
16,116
19,214
165,878
36,899
566,901
522,040
589,530
535,480
610
1,216
610
1,216
13,401,443
14,972,691
13,889,528
15,295,441
Provisions
Provisions for pensions and similar liabilities
26
1,412
1,361
1,412
1,361
Provisions for losses on guarantees
27
8,150
7,094
8,150
7,094
9,562
8,455
9,562
8,455
Total provisions
Subordinated debt
Supplementary capital
28
300,000
400,000
300,000
400,000
Hybrid Tier 1 capital
28
400,949
1,030,108
400,949
1,030,108
700,949
1,430,108
700,949
1,430,108
1,021,000
1,021,000
1,021,000
1,021,000
61,641
78,734
-
-
420,271
-104,294
481,912
-25,560
-
-
193,034
173,196
Total shareholders' equity
1,502,912
995,440
1,695,946
1,168,636
Total liabilities and equity
15,614,866
17,406,694
16,295,985
17,902,640
Total subordinated debt
Shareholders' equity
Share capital
Other reserves
Retained earnings
Minority interests
29
See note 31 for a specification of off-balance sheet items.
41
Statement of changes in equity
STATEMENT OF CHANGES IN EQUITY
Parent company
DKK '000
Shareholders' equity at 1 January 2012
Share
capital
Other
reserves
Retained
earnings
Total
Group
Minority
interests
Total
1,021,000
1,456
70,405
1,092,861
140,839
1,233,700
-882
-390,311
-391,193
38,670
-352,523
-
-882
-390,311
-391,193
38,670
-352,523
300,000
300,000
228,160
-234,388
-6,228
-6,313
-12,541
-
-
-
-
-
-150,000
150,000
-
-
-
-
77,278
-174,699
-97,421
32,357
-65,064
Shareholders' equity at 31 December 2012
1,021,000
78,734
-104,294
995,440
173,196
1,168,636
Shareholders' equity at 1 January 2013
1,021,000
78,734
-104,294
995,440
173,196
1,168,636
-17,093
-374,614
-391,707
25,641
-366,066
-17,093
-374,614
-391,707
25,641
-366,066
900,000
900,000
Changes in equity in 2012
Comprehensive income in 2012
Capital contribution
Other capital movements
Tax on equity entries
Dividend paid
Total changes in equity in 2012
300,000
Changes in equity in 2013
Comprehensive income in 2013
-
Capital contribution
-
-821
-821
-5,803
-6,624
Dividend paid
-
-
-
-
-
-
-17,093
524,565
507,472
19,838
527,310
1,021,000
61,641
420,271
1,502,912
193,034
1,695,946
Total changes in equity in 2013
Shareholders' equity at 31 December 2013
42
900,000
statement of changes in equity / cash flow statement
Cash flow statement
CASH FLOW STATEMENT
Group
DKK '000
2013
2012
-443,709
-479,933
282,023
156,039
Operating activities
Profit/loss for the year before tax
Tax paid for the year
Adjustment for amounts with no cash flow impact:
Depreciation, amortisation and impairment of property, plant and
equipment
Other adjustments to cash flows from operating activities
Total, operating activities
52,356
32,638
181,053
271,244
53,116
-75,847
124,839
-95,859
Working capital
Loans and advances
Deposits
Bonds
Shares
Total, working capital
766,216
1,568,625
-388,488
3,330,235
798,206
1,512,227
-1,795
59,426
1,174,139
6,470,513
-
9,200
Investing activities
9
1,486
Property, plant and equipment
-194,729
-81,086
Total, investing activities
-194,720
-70,400
900,000
300,000
-729,159
-
Financing activities
Net proceeds from capital increase
Repayment of hybrid core capital, Bank Package II
Payables to credit institutions
800,313
-2,762,262
Bonds issued
-2,000,000
-4,000,000
Total, financing activities
-1,028,846
-6,462,262
75,412
-158,008
858,709
1,016,717
75,412
-158,008
934,121
858,709
323,267
304,623
Balances due from credit institutions less than 3 months
610,854
554,086
Cash and cash equivalents, year-end
934,121
858,709
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Change in cash and cash equivalents
43
Segment information
Segment
overview
Group
DKK '000
Private
179,334
Trading income (excl. value
adjustments
Leasing
Financial
Markets
Formue
Other
Total
continuing Winding-up
activities
activities
-
-
-
-
179,334
Total
-17,463
161,871
250,933
-
-
203,434
10,656
36,843
250,933
-
Other income
715
85,840
982
-
776
88,313
2,624
90,937
Total income
180,049
85,840
204,416
10,656
37,619
518,580
-14,839
503,741
Expenses
214,932
32,524
104,817
3,306
15,505
371,084
95,932
467,016
119
52,224
-
-
13
52,356
-
52,356
-35,002
1,092
99,599
7,350
22,101
95,140
-110,771
-15,631
486
-
-15,473
-7,053
-17,859
-39,899
-14,362
-54,261
-
-
596
-
-2,497
-1,901
2,216
315
-34,516
1,092
84,722
297
1,745
53,340
-122,917
-69,577
Depreciation
Core earnings
Value adjustments
Writedowns and credit-related
value adjustments
119,804
-103
-1,898
-
-
117,803
256,329
374,132
-154,320
1,195
86,620
297
1,745
-64,463
-379,246
-443,709
-77,643
Tax
Of which share attributable to
minority interests
Loans and advances
2,293,023
-379,246
-366,066
-
25,641
-
138,329
-
136,845
2,568,197
4,771,345
7,339,542
5,955,401
Bonds
-
-
2,406,822
722,785
2,825,794
5,955,401
-
Lease assets
-
300,646
-
-
-
300,646
-
300,646
Other assets
4,625
162,260
56,230
340,594
1,738,660
2,302,369
398,027
2,700,396
Total assets
2,297,648
462,906
2,601,381
1,063,379
4,701,299
11,126,613
5,169,372
16,295,985
General
Business areas
In order to provide a more accurate presentation of the bank’s
underlying activities, the segment financial statements have
been changed relative to the Annual Report 2012. The comparative figures for 2012 have been restated to reflect this change.
The segment financial statements are in accordance with the
bank’s internal reporting.
The segment financial statements are segmented according to
the group’s business areas and have generally been divided into
Continuing activities and Winding-up activities. Continuing
activities form part of the bank’s future strategy and represent
areas in which the bank wants to expand its business volume.
Winding-up activities primarily comprise exposures which do
not form part of the future strategy and represent an area in
which the bank, in a responsible and financially appropriate
manner, aims to reduce its exposure. The individual business
areas are described below.
The segment financial statements are segmented according to
the group’s primary business areas. All activities are located in
Denmark. Assets are placed in the business areas to which they
are related in terms of operations. All funding is channelled to
the bank’s treasury function, which is included in the segment
other, and which is responsible for the bank’s funding and liquidity. Transactions between the segments are settled on
market terms.
The criteria for recognition and measurement are in accordance with the group’s accounting policies. The line items used are
consistent with the financial highlights on page 8 and as described in Accounting policies.
44
2013
Private: Provides advisory services and sells financial products
to the bank’s private customers, both through branch offices in
11 major Danish towns and cities and online. Drawing on the
full range of the group’s capabilities, Private offers optimum
solutions, including in connection with wealth management
and investment.
segment information
Group
DKK '000
Private
Trading income (excl. value
adjustments
177,220
Leasing
Financial
Markets
Formue
Other
Total
continuing Winding-up
activities
activities
-
-
-
-
177,220
2012
Total
24,752
201,972
-
-
157,003
5,174
15,120
177,297
-
177,297
Other income
10
60,410
1,082
-
1,107
62,609
3,753
66,362
Total income
177,230
60,410
158,085
5,174
16,227
417,126
28,505
445,631
Expenses
222,015
29,809
105,151
3,057
7,340
367,372
117,961
485,333
217
32,285
41
-
52
32,595
43
32,638
-45,002
-1,684
52,893
2,117
8,835
17,159
-89,499
-72,340
Depreciation
Core earnings
364
-
3,887
34,190
-921
37,520
37,050
74,570
-
-
1,429
-
-7,705
-6,276
3,931
-2,345
-44,638
-1,684
58,209
36,307
209
48,403
-48,518
-115
Value adjustments
Writedowns and credit-related
value adjustments
56,807
-538
-402
-
130
55,997
423,821
479,818
-101,445
-1,146
58,611
36,307
79
-7,594
-472,339
-479,933
Tax
-127,410
-352,523
Of which share attributable to
minority interests
38,670
2,441,934
-
204,995
-
107,243
2,754,172
5,641,822
8,395,994
-
-
1,978,353
857,604
3,807,301
6,643,258
-
6,643,258
Lease assets
-
156,678
-
-
-
156,678
-
156,678
Other assets
5,001
153,477
40,445
299,940
1,729,253
2,228,116
478,594
2,706,710
Total assets
2,446,935
310,155
2,223,793
1,157,544
5,643,797
11,782,224
6,120,416
17,902,640
Loans and advances
Bonds
Leasing: Offers operating leases of passenger and commercial
vehicles with related car fleet management for businesses. The
segment also offers operating leases of passenger cars to private
individuals. The business area is anchored in Alm. Brand Leasing A/S, which is a subsidiary of the bank.
Financial Markets: Comprises Markets and Asset Management. Markets handles all of the bank’s financial market activities, providing advisory services on and performs securities
and currency transactions. In addition, Markets prepares research reports on developments in fixed income, equity and
foreign exchange markets. Asset Management has assets under
management for both institutional and private investors.
Alm. Brand Formue: Comprises the bank’s ownership interest
in the listed company Alm. Brand Formue A/S, which invests in
equities and bonds. The company was listed on the Copenhagen Stock Exchange in September 2003. This business area also
comprises the bank’s hedging of the indirect equity risk arising
as a result of holding an ownership interest in a company
which invests in equities. Alm. Brand Formue A/S is a consolidated company of the Alm. Brand Bank Group, which holds a
100% ownership interest.
Other: Comprises the bank’s treasury function, which is responsible for the bank’s composition of funding and liquidity
management, including the bank’s own portfolio. All funding
procured by the bank’s other business areas is channelled to
Treasury, which is responsible for allocation and settlement to
the individual business areas. Funding is allocated at a price
equivalent to the actual cost of procuring the funding plus a
spread to cover administrative expenses and any risks.
Winding-up: Is the only business area under Winding-up Activities and comprises exposures to small and medium-sized
commercial customers, agricultural customers, property development projects, mortgage deeds and a portfolio of car finance contracts. Efforts are made to gradually reduce these exposures, a process which is expected to extend over a number
of years.
45
Overview of notes
OVERVIEW OF NOTES
NOTES WITH REFERENCE
NOTE 1
Interest receivable
NOTE 2
Interest payable
NOTE 4
Value adjustments
NOTE 3
NOTE 5
NOTE 6
NOTE 7
NOTE 8
Tax
NOTE 10
NOTE 9
NOTE 11
NOTE 12
NOTE 13
NOTE 14
NOTE 15
NOTE 16
NOTE 17
NOTE 18
NOTE 19
NOTE 20
NOTE 21
NOTE 22
NOTE 23
NOTE 24
NOTE 25
NOTE 26
NOTE 27
NOTE 28
NOTE 29
Bonds at fair value
Shares, etc.
Current tax assets
Deferred tax assets
Other assets
Other liabilities
Subordinated debt
Share capital
NOTES WITHOUT REFERENCE
NOTE 30 Capital base
NOTE 31
Off-balance sheet items
NOTE 33
Credit risk
NOTE 32
NOTE 34
NOTE 35
NOTE 36
NOTE 37
NOTE 38
NOTE 39
NOTE 40
NOTE 41
NOTE 42
Market risk
Genuine purchase and resale transactions
Genuine sale and repurchase transactions
Related parties
Derivatives
Fair value measurement of financial instruments
Classification of financial instruments
Offsetting
NOTE 43
Return on financial assets and liabilities
NOTE 45
Group overview
NOTE 44
NOTE 46
NOTE 47
NOTE 48
46
By term to maturity
Fair value of financial instruments
Risk management
Significant accounting estimates, assumptions and uncertainties
Accounting policies
overview of notes / notes to the financial statements
Notes to the financial statements
NOTES TO THE FINANCIAL STATEMENTS
Parent company
DKK '000
NOTE 1
2013
2012
Group
2013
2012
Interest receivable
719
3,916
719
3,916
Loans, advances and other receivables
449,270
544,002
440,844
543,922
Bonds
135,488
185,732
167,394
210,788
Total derivatives
-37,727
-31,354
-37,439
-31,212
Of which:
Foreign exchange contracts
Interest rate contracts
Other interest income
Total interest receivable
-1,603
-3,130
-1,315
-2,988
-36,124
-28,224
-36,124
-28,224
8
77
8
83
547,758
702,373
571,526
727,497
-117
35
-117
35
-20
138
-20
138
3,228
26,998
10,882
36,164
228,053
Interest receivable from genuine purchase and resale transactions:
Loans, advances and other receivables
NOTE 2
Interest payable
Credit institutions and central banks
227,484
228,053
227,480
Bonds issued
10,662
75,550
10,662
75,550
70,897
115,549
70,897
115,549
Other interest expenses
723
1,298
732
1,304
312,994
447,448
320,653
456,620
226
1,095
226
1,095
5
18
5
18
151,890
110,200
145,391
104,601
3,962
4,734
3,962
4,734
313
592
313
592
5,575
5,786
5,575
5,786
Total interest payable
Interest payable on genuine sale and repurchase transactions:
NOTE 3
Securities trading and deposits
Payment transfers
Loan fees
Commission fees
Other fees and commissions
Total fees and commissions receivable
32,074
28,503
40,096
33,820
193,814
149,815
195,337
149,533
47
Parent company
DKK '000
NOTE 4
Group
2013
2012
2013
2012
-245,828
-76,975
-245,828
-76,975
Value adjustments
Bonds
-45,388
-26,902
-62,789
-16,096
Shares, etc.
20,043
4,200
82,068
65,392
-3,958
-
-3,957
-
Foreign currency
-7,590
-9,942
-11,932
-8,791
Total derivatives
10,090
-56,568
10,415
-60,366
-
8,211
-
8,211
64,343
-51,905
65,384
-53,615
-54,253
-12,876
-54,969
-14,964
Of which:
Share contracts
Commodity contracts
Other liabilities
Total value adjustments
NOTE 5
-
2
-
2
-51
711
-51
711
-272,682
-165,476
-232,074
-96,125
2,799
2,730
2,799
2,730
333
332
333
332
3,132
3,062
3,132
3,062
Remuneration to the Management Board and Board of Directors:
Remuneration to the Management Board:
Salaries and wages
Pensions
Total remuneration to the Management Board
Remuneration to the Board of Directors:
Fees
1,112
1,050
1,112
1,050
Total remuneration to the Management Board and Board of Directors
4,244
4,112
4,244
4,112
Staff costs:
Salaries and wages
161,610
170,794
162,051
171,270
Pensions
17,508
18,582
17,539
18,612
Social security costs
17,107
18,250
17,144
18,285
Total staff costs
196,225
207,626
196,734
208,167
Other administrative expenses
187,435
198,174
222,223
230,281
Total staff costs and administrative expenses
387,904
409,912
423,201
442,560
The tax calculation for 2013 contains a tax deduction of DKK 1.6 million relating to remuneration to the Management Board (2012: DKK 1.5
million).
Number of employees
Average number of employees during the financial year, full-time equivalents
48
263
275
263
275
notes to the financial statements
Parent company
DKK '000
NOTE 5
2013
Group
2012
2013
2012
Staff costs and administrative expenses - continued
Management Board
The Management Board of the bank consists of Chief Executive Kim Bai Wadstrøm.
In Alm. Brand Bank A/S, all employees, including the Management Board member, are entitled to a defined contribution pension plan. The
bank's costs for the Management Board member's pension plan appear from the note above.
The Management Board member and the bank are subject to a mutual notice of termination of 6-12 months. In the event of termination by the
bank, the Management Board member is entitled to severance pay equal to six months' salary.
Remuneration of the Board of Directors
Members of the Board of Directors receive a fixed annual remuneration of DKK 150 thousand.
Performance-based remuneration
The Management Board member and the senior executives of Alm. Brand Bank only receive fixed remuneration. They are not comprised by the
bonus scheme of the Alm. Brand Group.
The bank's bonus scheme for a number of other employee groups is mentioned in detail in “Human resources”.
The bonus scheme will have no material effect on the banking group's cost level and does not comprise share-based payment.
Key employees
In addition to the Management Board and members of the Board of Directors, key management employees comprise 9 other senior employees
who have a material impact on the groupʼs risk profile.
Remuneration to other senior employees:
Fixed salary
Variable salary
8,318
11,434
8,318
11,434
-
-
-
-
Pensions
1,094
1,024
1,094
1,024
Total remuneration to other senior employees
9,412
12,458
9,412
12,458
Statutory audit
952
1,199
1,197
1,457
Assurance engagements other than audits
570
426
575
445
9
44
9
44
274
585
344
585
1,805
2,254
2,125
2,531
Fees to auditors appointed by the shareholders in general meeting
Tax and VAT advice
Other services
Total fees to auditors appointed by the shareholders in general meeting
49
Parent company
DKK '000
Group
2013
2012
2013
2012
Impairment and value adjustments, respectively, during the year
331,977
434,356
333,074
436,165
Reversal of impairment in previous years
120,265
236,532
121,293
239,909
Total individual assessment
211,712
197,824
211,781
196,256
Impairment and value adjustments, respectively, during the year
50,824
104,526
50,986
104,877
Reversal of impairment in previous years
61,406
22,660
62,896
25,278
-10,582
81,866
-11,910
79,599
Losses not previously provided for
34,952
48,001
37,239
52,575
Bad debts recovered
39,663
18,034
40,794
19,310
196,419
309,657
196,316
309,120
Profit from investments in associates
2,216
2,478
2,216
2,478
Loss from investments in group enterprises
2,457
26,298
-1,901
-4,823
Total profit/loss from investments in associates and group enterprises
4,673
28,776
315
-2,345
-180,550
-298,908
-162,896
-285,602
83,079
171,333
83,712
157,763
NOTE 6
Individual assessment:
Group assessment:
Total group assessment
Total impairment of loans, advances and receivables, etc.
NOTE 7
For additional information, see the overview of group companies in note 45.
NOTE 8
Tax
Current tax on income for the year
Changes in deferred tax
Withholding tax paid
Adjustment of previous years' current tax
Total tax
-
-
864
794
677
-364
677
-365
-96,794
-127,939
-77,643
-127,410
Of the change in deferred tax, DKK 19 million was attributable to the gradual reduction of the tax rate from 25% in 2013 to 22% in 2016.
Effective tax rate:
Current tax rate
25.0%
25.0%
25.0%
Adjustment for non-tax items and joint taxation
-5.1%
-0.5%
-7.1%
1.6%
0.0%
0.0%
-0.2%
-0.2%
-0.1%
0.1%
-0.2%
0.1%
20%
24.6%
17.5%
26.5%
Withholding tax on foreign shares
Total effective tax rate
NOTE 9
50
25.0%
Balances due from credit institutions
610,854
554,086
610,854
554,086
Total balances due from credit institutions and central banks
610,854
554,086
610,854
554,086
Parent company
DKK '000
Group
2013
2012
2013
2012
Mortgage deeds
2,497,207
2,930,050
2,497,207
2,930,050
Total loans, advances and other receivables at fair value
2,497,207
2,930,050
2,497,207
2,930,050
NOTE 10
Of the total fair value adjustment of mortgage deeds for the year of DKK -245.8 million (2012: DKK -77 million), DKK -177 million was
attributable to credit losses (2012: DKK -155 million).
NOTE 11
Loans and advances
Leases
7,046,173
7,758,431
6,235,881
6,941,835
-
-
52,185
73,696
Total before impairment, etc.
7,046,173
7,758,431
6,288,066
7,015,531
Impairment, etc.
1,442,840
1,544,475
1,445,731
1,549,587
Total loans, advances and other receivables at amortised cost, year-end
5,603,333
6,213,956
4,842,335
5,465,944
1 January
-
-
69,777
113,116
Additions during the year
-
-
42,551
17,341
Disposals during the year
-
-
69,245
60,680
Net investment in finance leases before other balances
-
-
43,083
69,777
Other balances regarding finance leases
-
-
9,103
3,919
Net investment in finance leases
-
-
52,186
73,696
Term of less than 1 year
-
-
30,449
39,384
Term of between 1 and 5 years
-
-
23,990
37,961
Term of more than 5 years
-
-
391
713
Total
-
-
54,830
78,058
Assets held under finance leases
Gross investment in finance leases
Of which unearned financial income
-
-
2,644
4,362
-
-
52,186
73,696
51
Parent company
DKK '000
Group
2013
2012
2013
2012
Term of less than 1 year
-
-
29,991
38,469
Term of between 1 and 5 years
-
-
21,883
34,643
Term of more than 5 years
-
-
312
584
Total
-
-
52,186
73,696
Of which any unguaranteed residual value
-
-
-
-
Impairment of finance leases
-
-
471
1,398
NOTE 11
Loans, advances and other receivables at amortised cost - continued
Finance leases comprise car leases in the subsidiary Alm. Brand Leasing A/S.
Specification of loans, advances and other receivables for which there
is an objective indication of impairment
Loans, advances and other receivables before impairment
2,090,572
2,234,117
2,092,791
2,240,132
Impairment, etc.
1,326,162
1,417,214
1,327,989
1,419,934
764,410
816,903
764,802
820,198
3,627,587
3,855,077
3,727,410
4,069,252
116,678
127,261
117,742
129,653
Loans, advances and other receivables after impairment
3,510,909
3,727,816
3,609,668
3,939,599
Total loans, advances and other receivables after impairment
4,275,319
4,544,719
4,374,470
4,759,797
Loans, advances and other receivables after impairment
Group assessment:
Loans, advances and other receivables before impairment
Impairment, etc.
NOTE 12
Bonds at fair value
Government bonds
Mortgage credit bonds
Corporate bonds
Total bonds at fair value, year-end
148,631
829
148,631
829
4,997,873
5,758,552
5,656,636
6,612,253
86,112
26,273
150,134
30,176
5,232,616
5,785,654
5,955,401
6,643,258
4,622,506
5,540,449
5,273,774
6,087,043
320,012
Rating of bonds:
Rated AAA
Rated AA- til AA+
Rated A- til A+
Others
Bonds at fair value, year-end
52
8,779
22,385
17,217
72,014
19,186
108,291
26,926
529,317
203,634
556,119
209,277
5,232,617
5,785,654
5,955,401
6,643,258
Parent company
DKK '000
NOTE 13
Group
2013
2012
2013
2012
14,168
12,388
248,026
219,357
Shares, etc.
Listed on NASDAQ OMX Copenhagen A/S
Listed on other stock exchanges
55,878
46,453
155,123
130,233
Other shares
203,018
189,032
203,018
189,766
Total other shares, etc., year-end
273,064
247,873
606,167
539,356
38,509
47,033
38,509
47,033
-
-8,524
-
-8,524
38,509
NOTE 14
Cost, beginning of year
Cost, year-end
38,509
38,509
38,509
Adjustments, beginning of year
5,239
4,436
5,239
4,436
Share of profit for the year
2,216
2,478
2,216
2,478
-3,497
-999
-3,497
-999
-
-676
-
-676
Dividends
Reversal of adjustments
Adjustments, year-end
Carrying amount, year-end
NOTE 15
3,958
5,239
3,958
5,239
42,467
43,748
42,467
43,748
-
332,416
328,828
-
19,635
22,726
-
-
-23,207
-19,138
-
-
328,844
332,416
-
-
Adjustments, beginning of year
Cost, year end
-109,326
20,816
-
-
Share of profit/loss for the year
2,444
26,086
-
-
-6,569
-150,000
-
-
Dividends
-820
-6,228
-
-
Adjustments, end of year
-114,271
-109,326
-
-
-
-
-
-
214,573
223,090
-
-
Investments in parent company
Alm. Brand Bank A/S' trading portfolio comprises investments in the bank's parent company, Alm. Brand A/S.
NOTE 16
Fair value, beginning of period
-
-
-
-
48,301
-
48,301
-
7,384
-
7,384
-
Fair value adjustment
-3,957
-
-3,957
-
36,960
-
36,960
-
Rental income from investment properties amounted to DKK 0.7 million (2012: DKK 0.0 million). Direct costs relating to rental income
generating investment property were DKK 0.7 million (2012: DKK 0.0 million) and DKK 2.3 million (2012: DKK 0.0 million) relating to non-rental
income generating investment property.
53
Parent company
DKK '000
NOTE 17
Group
2013
2012
2013
2012
2,571
3,997
207,090
126,144
106,363
Operating equipment:
Additions during the year, including improvements
-
-
212,186
1,480
1,426
29,439
25,417
Cost, year-end
1,091
2,571
389,837
207,090
Depreciation and impairment losses, beginning of year
1,249
1,531
48,598
27,914
132
354
51,829
32,638
-
-
526
-
Reversed depreciation and impairment losses
732
636
15,046
11,954
Depreciation and impairment losses, year-end
649
1,249
85,907
48,598
-
-
-2,842
-492
442
1,322
301,088
158,000
Term of 1 year or less
-
-
23,564
12,718
Term of 1-5 years
-
-
274,851
143,334
Term of 5 years or more
-
-
5,394
1,117
Total
-
-
303,809
157,169
Tax receivable, beginning of year
299,314
169,095
286,009
155,685
Tax received in respect of prior years
299,410
170,649
286,105
157,240
96
1,554
96
1,555
180,550
298,907
162,896
285,602
3,218
407
3,218
407
183,768
299,314
166,114
286,009
286,736
459,259
420,250
579,203
-773
-1,190
-773
-1,190
-
-
-
-
Change in deferred tax recognised in the income statement
-83,079
-171,333
-83,712
-157,763
Deferred tax at year-end, net
202,884
286,736
335,765
420,250
Depreciation for the year
Impairment writedowns for the year
Other balances regarding operating leases
Operating leases comprise car leases in the subsidiary Alm. Brand Leasing A/S.
Future minimum lease payments for assets held under operating leases:
NOTE 18
Current tax assets
Current tax for the year
Tax paid for the year
Tax receivable, year-end
NOTE 19
Deferred tax assets
Deferred tax at beginning of year, net
Change in deferred tax taken to equity
Change in deferred tax recognised in equity
Deferred tax was capitalised with due consideration for future earnings and possibilities for utilisation. The banking group's total tax asset
amounted to DKK 380 million at 31 December 2013, of which DKK 336 million has been capitalised.
54
Parent company
DKK '000
NOTE 19
2013
2012
Group
2013
2012
Deferred tax assets - contiued
Deferred tax relates to the following items:
Operating equipment
2,301
2,449
2,381
2,540
8,163
6,217
8,163
6,217
-
-
132,789
132,974
Lease assets
Net fees included in effective interest rate
Investment companies
Provisions for jubilees, severance payment, etc.
Provisions for bad debts, etc.
638
603
546
614
-6,721
-9,142
-6,721
-9,142
6,087
4,653
6,087
4,653
-
-
104
438
Loss to be carried forward
192,416
281,956
192,416
281,956
Deferred tax at year-end, net
202,884
286,736
335,765
420,250
NOTE 20
Cars taken over
-
-
2,842
1,309
Properties etc. taken over
52,366
117,461
202,129
135,146
Assets held temporarily, year-end
52,366
117,461
204,971
136,455
Interest and commissions receivable
107,514
111,533
114,484
120,059
Positive market value of derivatives
180,035
233,866
180,053
233,866
47,181
47,012
72,506
60,555
334,730
392,411
367,043
414,480
1,002,804
1,000,506
1,002,804
1,000,506
877,636
104,783
1,194,262
396,408
1,880,440
1,105,289
2,197,066
1,396,914
NOTE 21
Other assets
Other assets
Other assets, year-end
NOTE 22
Central banks
Credit institutions
Payables to credit institutions and central banks, year-end
NOTE 23
Deposits at call
4,031,236
3,376,890
4,030,303
3,376,890
At notice
5,643,030
6,548,906
5,643,030
6,548,906
-
4,126
-
4,126
Time deposits
Special categories of deposits
Deposits and other payables, year-end
1,263,110
1,395,010
1,263,111
1,395,010
10,937,376
11,324,932
10,936,444
11,324,932
55
Parent company
DKK '000
NOTE 24
2013
2012
Group
2013
2012
Floating-rate loan in DKK with expiry on 30 June 2013
-
2,000,000
-
2,000,000
Issued bonds at amortised cost, year-end
-
2,000,000
-
2,000,000
On 22 March 2013, the bank prepaid DKK 1 billion of the bond issued on 30 June 2010 with an original principal of DKK 4 billion. The issue was
made under the individual government guarantee and was finally repaid on 1 July 2013. The bond issue carried a floating rate of interest at 6M
CIBOR plus 0.06 of a percentage point.
NOTE 25
Other liabilities
Interest and commissions payable
Miscellaneous creditors
Other liabilities
38,912
44,601
39,151
44,769
116,350
123,850
138,644
137,132
3,335
1,376
3,368
1,377
Repo/reverse transactions, negative values
176,672
-
176,672
-
Negative market value of derivatives
233,591
350,221
233,686
350,244
Other liabilities, year-end
566,901
522,040
589,530
535,480
Provisions, beginning of year
1,361
2,072
1,361
2,072
New and adjusted provisions
306
-613
306
-613
Reversed provisions for the year
94
487
94
487
Provisions used during the year
44
117
44
117
-117
506
-117
506
1,412
1,361
1,412
1,361
NOTE 26
Discounting effect
Provisions, year-end
The provision covers provisions for anniversaries, severance of service, etc. and has been calculated using an estimated likelihood of
disbursement.
NOTE 27
Provisions, beginning of year
7,094
7,009
7,094
7,009
Provisions for the year
4,193
4,912
4,193
4,912
Reversed provisions for the year
3,137
4,827
3,137
4,827
Provisions used during the year
-
-
-
-
8,150
7,094
8,150
7,094
Floating rate bullet loans in DKK maturing 9 May 2013
-
100,000
-
100,000
Floating rate bullet loans in DKK maturing 9 May 2014
100,000
100,000
100,000
100,000
Floating rate bullet loans in DKK maturing 3 December 2015
200,000
200,000
200,000
200,000
Supplementary capital, year-end
300,000
400,000
300,000
400,000
Provisions, year-end
NOTE 28
Subordinated debt
Supplementary capital:
56
Parent company
DKK '000
Group
2013
2012
2013
2012
Fixed rate bullet loans in DKK with indefinite terms
175,000
175,000
175,000
175,000
State-funded capital injection, bullet loan in DKK with an indefinite term
225,949
855,108
225,949
855,108
Hybrid Tier 1 capital, year-end
400,949
1,030,108
400,949
1,030,108
Subordinated debt, year-end
700,949
1,430,108
700,949
1,430,108
Interest on subordinated debt
70,897
115,549
70,897
115,549
841
517
841
517
630,000
-
630,000
-
NOTE 28
Subordinated debt - continued
Hybrid Tier 1 capital:
Of this, amortisation of costs incurred on raising the debt
Extraordinary instalments
The supplementary capital carries a floating rate of interest at 3M CIBOR plus a supplement of 2.10-2.20 percentage points and 6M CIBOR plus
2.50 percentage points, respectively.
The hybrid core capital was issued on 12 October 2006 and carries a rate of interest for the first ten-year term of 5.855%. Subsequently, the
capital certificates carry interest at 3M CIBOR plus 2.70 percentage points.
The state-funded capital injection in the form of hybrid core capital was issued on 24 September 2009 at an interest rate of 11.01%. The capital
injection may be repaid at par in the period 25 September 2012 to 24 September 2014, at a price of 105% in the period 25 September 2014 to
24 September 2015 and at a price of 110% from 25 September 2015. Repayment may be effected earlier but in all circumstances requires
approval from the Danish FSA.
The agreement on state-funded capital injection was originally composed of hybrid core capital of DKK 561 million without conversion and hybrid
core capital of DKK 295 million with the possibility of conversion into share capital. In 2013, the bank repaid DKK 135 million on 19 March and
DKK 200 million on 11 September of the original DKK 561 million of non-convertible hybrid core capital. Accordingly, the bank remains to repay
DKK 226 million of non-convertible hybrid core capital. On 19 March 2013, the bank repaid the full amount of DKK 295 million of the hybrid core
capital convertible into share capital.
The risk report “Risk and Capital Management 2013” contains a description of the bank's liquidity management and funding situation. The risk
report is available from the groupʼs website, www.almbrand.dk/risk.
Except for DKK 175 million of the supplementary capital which can no longer be included according to section 28 due to maturity reduction, the
full amount of the subordinated capital may be included in the capital base pursuant to the Executive Order on Calculation of Capital Base.
NOTE 29
Share capital
Unlisted share capital:
Nominal value at 1 January 2008
351,000
351,000
351,000
351,000
Capital increase April 2009
300,000
300,000
300,000
300,000
Capital increase September 2009
90,000
90,000
90,000
90,000
Capital increase November 2009
280,000
280,000
280,000
280,000
1,021,000
1,021,000
1,021,000
1,021,000
Nominal value, year-end
The share capital consists of 1,021,000 shares of DKK 1,000 nominal value and is paid up in full.
57
Parent company
DKK '000
NOTE 30
Group
2013
2012
2013
2012
1,502,912
995,440
1,695,946
1,168,636
-420,250
Capital base
Deferred tax assets
Tier 1 capital after deductions
Hybrid Tier 1 capital
Transferred to Supplementary capital
Deduction of ownership interest in financial institution
Tier 1 capital including hybrid Tier 1 capital after deduction
Supplementary capital
Transferred from Hybrid Tier 1 capital
-202,884
-286,736
-335,765
1,300,028
708,704
1,360,181
748,386
400,949
1,030,108
400,949
1,030,108
-281,722
-
-321,404
-
-26,840
-15,740
-64,492
-15,740
1,674,137
1,401,668
1,696,638
1,481,032
300,000
400,000
300,000
400,000
281,722
-
321,404
-
-26,840
-15,740
-64,492
-15,740
-175,000
-175,000
-175,000
-175,000
1,772,297
1,932,332
1,757,146
1,972,014
Weighted items involving credit risk
7,104,338
8,313,354
6,959,494
8,102,528
Weighted items involving market risk
1,352,504
1,205,991
2,153,735
2,023,763
283,088
424,893
451,291
520,436
8,739,930
9,944,238
9,564,520
10,646,727
699,194
795,539
765,162
851,738
Deduction of ownership interest in financial institution
25% reduction
Capital base
Risk-weighted items:
Weighted items involving operational risk
Risk-weighted items, year-end
The solvency requirement represents 8% of the risk-weighted items
Core capital including hybrid Tier 1 capital and capital base is calculated in accordance with the Executive Order on Calculation of Capital Base.
The report "Risk and Capital Management 2013" contains a calculation and description of the individual solvency need. The report is available
from the groupʼs website, www.almbrand.dk/risk.
NOTE 31
Off-balance sheet items
Contingent liabilities:
Financial guarantees
143,863
360,838
143,863
360,838
Loss guarantees for mortgage loans
181,258
370,841
181,258
370,841
11,685
17,575
11,685
17,575
Other contingent liabilities
316,590
220,661
316,590
220,661
Contingent liabilities, year-end
653,396
969,915
653,396
969,915
-
-
-
-
653,396
969,915
653,396
969,915
Registration and conversion guarantees
Other commitments:
Commitments, year-end
Off-balance sheet items, year-end
58
Parent company
DKK '000
NOTE 31
2013
2012
Group
2013
2012
Off-balance sheet items - continued
Other contingent liabilities
For Danish tax purposes, the company is taxed jointly with Alm. Brand A/S as administration company. As a result, the company is liable
according to the rules of the Danish Corporation Tax Act with effect from the 2013 financial year for income taxes etc. for the jointly taxed
companies and with effect from 1 July 2012 also for any obligation to withhold tax on interest, royalties and dividends on behalf of the jointly
taxed companies.
Alm. Brand Bank A/S has entered into operating leases with Alm. Brand Leasing A/S. The residual value of future lease payments under these
operating leases totalled DKK 6 million at 31 December 2013 (2012: DKK 7 million).
Alm. Brand Bank A/S is a member of Bankdata, which operates the bank's key banking systems. Termination of this membership would cause
the bank to incur a significant liability which would have to be calculated in accordance with Bankdata's by-laws.
Being an active financial services group, the group is a party to a number of lawsuits. The cases are reviewed on an ongoing basis, and the
necessary provisions are made. Management believes that these cases will not inflict further losses on the group.
Collateral security
Monetary counterparties in Danmarks Nationalbank can only obtain credit by providing collateral security in the form of pledging of approved
securities.
As part of its current operations, at 31 December 2013 the bank provided security in the form of bonds representing a nominal value of DKK
1,281 million (2012: DKK 1,704 million) and loans representing a loan value of DKK 478 million (2012: DKK 530 million).
As collateral for positive and negative fair values of derivative financial instruments, respectively, cash in the amount of DKK 1 million was
received and cash in the amount of DKK 340 million was paid at 31 December 2013 (2012: DKK 0 million and DKK 432 million).
NOTE 32
By term to maturity
Balances at call
323,267
304,623
323,267
304,623
Cash in hand and balances at call with central banks, year-end
323,267
304,623
323,267
304,623
Balances at call
432,539
554,086
432,539
554,086
Up to and including 3 months
178,315
-
178,315
-
Balances due from credit institutions and central banks, year-end
610,854
554,086
610,854
554,086
Deposits at call
930,480
1,108,802
930,839
1,110,874
543,299
472,363
245,174
361,464
Over 3 months and up to and including 1 year
1,361,991
1,870,238
1,001,409
1,116,911
Over 1 year and up to and including 5 years
1,063,670
1,289,913
960,116
1,402,359
Loans and advances
Over 5 years
4,201,100
4,402,690
4,202,004
4,404,386
Deposits at call, year-end
8,100,540
9,144,006
7,339,542
8,395,994
Bonds at fair value
Up to and including 1 year
2,552,445
1,220,682
2,588,469
1,220,683
1,189,609
2,352,326
1,256,214
2,352,326
Over 5 years
1,490,562
2,212,646
2,110,718
3,070,249
Bonds at fair value
5,232,616
5,785,654
5,955,401
6,643,258
59
Parent company
DKK '000
Group
2013
2012
2013
2012
Payables at call
103,494
104,783
103,495
104,783
772,164
-
772,164
-
-
-
316,625
291,625
1,002,804
1,000,506
1,002,804
1,000,506
Payables to credit institutions and central banks, year-end
1,880,440
1,105,289
2,197,066
1,396,914
Deposits at call
4,031,236
3,376,890
4,030,303
3,376,890
5,782,327
6,688,395
5,782,327
6,688,395
23,154
20,891
23,154
20,891
192,444
225,689
192,444
225,689
Over 5 years
908,215
1,013,067
908,216
1,013,067
10,937,376
11,324,932
10,936,444
11,324,932
-
2,000,000
-
2,000,000
NOTE 32
By term to maturity - continued
Deposits and other payables, year-end
Bonds issued
-
-
-
-
Bonds issued, year-end
-
2,000,000
-
2,000,000
103,888
95,553
103,888
95,553
6,862
12,121
6,862
12,121
Over 5 years
542,646
862,241
542,646
862,241
Guarantees, year-end
653,396
969,915
653,396
969,915
-
-
-
62,174
Guarantees
Up to and including 1 year
Financial liabilities
44,891
61,983
45,225
165,172
10,109
165,172
10,109
38,071
280,670
38,071
280,670
Over 5 years
24,369
42,060
24,369
42,060
272,503
394,822
272,837
395,013
Financial liabilities, year-end
60
Parent company
DKK '000
NOTE 33
Group
2013
2012
2013
2012
0.0%
0.0%
0.0%
0.0%
Credit risk
Loans and advances and guarantee debtors by sector and industry
Public authorities
Business sectors:
Agriculture, hunting, forestry and fishery
9.3%
9.2%
10.4%
10.2%
Manufacturing and raw materials extraction
0.1%
0.1%
0.1%
0.1%
Utilities
0.2%
0.2%
0.3%
0.2%
Construction
0.1%
0.2%
0.2%
0.3%
Trade
0.2%
0.3%
0.3%
0.4%
Transport, hotels and restaurants
0.1%
0.1%
0.1%
0.1%
Information and communication
0.0%
0.0%
0.0%
0.0%
Financing and insurance
15.6%
14.3%
6.1%
5.0%
Real property
14.9%
17.3%
16.3%
18.8%
Other business
7.9%
7.3%
8.9%
8.3%
Total business sector
48.4%
49.0%
42.7%
43.4%
Private customers
51.6%
51.0%
57.3%
56.6%
100.0%
100.0%
100.0%
100.0%
Total
Impairment
Impairment, beginning of year
1,424,308
1,563,393
1,427,378
1,569,656
Impairment during the year
331,978
434,356
333,074
436,165
Reversal of impairment
120,265
236,532
121,293
239,909
Loss (written off)
Impairment, year-end
301,708
336,909
303,020
338,534
1,334,312
1,424,308
1,336,139
1,427,378
Group assessment:
Impairment, beginning of year
127,261
45,394
129,653
50,054
Impairment during the year
50,824
104,527
50,986
104,877
Reversal of impairment
61,407
22,660
62,897
25,278
116,678
127,261
117,742
129,653
1,450,990
1,551,569
1,453,881
1,557,031
31,812
12,160
31,812
12,160
Impairment, year-end
Total impairment, year-end
Interest income relating to loans, advances and receivables, etc. written down
61
Parent company
DKK '000
Group
2013
2012
2013
2012
234,394
144,472
234,394
144,472
82,258
95,360
84,476
101,374
Uncollectible claims
1,787,066
2,006,032
1,787,066
2,006,032
Loans, advances and other receivables before impairment and provisions,
year-end
2,103,718
2,245,864
2,105,936
2,251,878
228,704
141,238
228,704
141,238
70,882
78,779
72,709
81,849
Uncollectible claims
1,034,726
1,204,291
1,034,726
1,204,291
Impairment and provisions, year-end
1,334,312
1,424,308
1,336,139
1,427,378
769,406
821,556
769,797
824,500
NOTE 33
Credit risk - continued
Reasons for individual impairment writedowns and provisions
Loans, advances and other receivables before impairment and provisions:
Estate administration
Debt collection
Impairment and provisions:
Estate administration
Debt collection
Loans, advances and other receivables after impairment and provisions,
year-end
Description of value of collateral for loans impaired after individual
assessment
Value of security:
Real property, private
Real property, commercial
Cash, deposits and highly marketable securities
Cars
Other security
Total value of collateral for loans impaired after individual assessment,
year-end
58,734
44,616
58,734
44,616
734,381
895,343
734,381
895,343
6,266
13,089
6,266
13,089
787
2,606
2,054
5,447
42,092
33,401
42,092
33,401
842,260
989,055
843,527
991,896
The collateral security is marked to market on the basis of the following:
Real property: Estate agent valuation, reasoned internal assessment or public assessment considering type of property, location, condition and
estimated marketability.
Cash and cash equivalents: Official price where available and otherwise the transaction price obtainable in a transaction between independent
parties.
Goods, cars: Assessment from BilpriserPro considering type, model and age.
Goods, other security: Based on an individual assessment.
The collateral security stated is unstressed. In the calculation of impairment writedowns on agricultural and property exposures in financial
difficulty, the value of collateral security is calculated on the basis of realisable value upon a sale within six months.
62
Parent company
DKK '000
NOTE 33
2013
2012
Group
2013
2012
41,957
Realised security, including conditions
Value of realised security:
Securities
Cars
Total value of realised collateral
11,240
41,957
11,240
131,500
-
131,500
-
35,146
141,923
35,146
141,923
-
-
4,550
8,257
177,886
183,880
182,436
192,137
Forced realisation of collateral becomes necessary if the bank cannot induce the creditor or the provider of collateral security to enter into a
voluntary agreement on realisation. The bank always seeks to maximise the value of collateral by way of forced realisation.
Before forced realisation of collateral is initiated, the debtor and/or the provider of collateral will receive typically eight daysʼ notice, however,
shorter notice may be given in the case of an obvious risk of imminent impairment of the value of the collateral.
Loans, advances and other receivables, etc. in arrears
Age distribution of assets due but not impaired at the balance sheet date:
Up to 3 months
8,814
29,170
8,939
29,431
3 to 6 months
350
447
351
447
6 to 12 months
538
1,216
538
1,217
More than 12 months
451
4,987
781
5,317
10,153
35,820
10,609
36,412
Arrears, year-end
Value of security for loans in arrears
Value of security:
Cash and marketable securities
Cars
Other securities
Total value of collateral for loans in arrears, year-end
68,960
129,630
68,960
129,630
409,265
583,850
409,265
583,850
18,502
34,603
18,502
34,603
2,364
5,486
4,691
10,734
59,149
33,304
59,149
33,304
558,240
786,873
560,567
792,121
63
Parent company
DKK '000
Group
2013
2012
2013
2012
323,267
304,623
323,267
304,623
610,854
554,086
610,854
554,086
2,497,207
2,930,050
2,497,207
2,930,050
5,603,333
6,213,956
4,842,336
5,465,944
Bonds at fair value
NOTE 33
Maximum exposure to credit risk
Maximum credit risk at the balance sheet date without taking into account
security.
On-balance sheet exposures:
5,232,616
5,785,654
5,955,401
6,643,258
Shares, etc.
273,064
247,873
606,167
539,356
Other assets
334,730
392,411
367,044
414,480
14,875,071
16,428,653
15,202,276
16,851,797
653,396
969,915
653,396
969,915
Maximum exposure to credit risk, year-end
Off-balance sheet items:
Contingent liabilities
Total value of security at the balance sheet date
Value of securitiy:
2,553,699
2,778,141
2,553,699
2,778,141
2,773,501
3,289,808
2,773,501
3,289,808
759,093
981,932
187,060
293,417
204,321
Cash and marketable securities
Cars
Other security
Total value of collateral, year-end
The collateral security is marked to market as described above.
64
31,334
62,528
107,661
170,351
104,911
170,351
104,911
6,287,978
7,217,320
5,792,272
6,670,598
Parent company
DKK '000
NOTE 33
2013
2012
Group
2013
2012
Credit quality
The credit quality is quantified on the basis of the credit quality categories of the Danish FSA, according to which loans and advances with
normal credit quality are categorised in 2a and 3, loans and advances with certain indications of weakness are categorised in 2b, loans and
advances with substantial weaknesses are categorised in 2c and loans and advances with an objective evidence of impairment are categorised
in category 1.
Loans, advances and other receivables at fair value - by credit quality
category:
Loans and advances with normal credit quality
1,470,759
1,627,955
1,470,759
1,627,955
Loans and advances with certain indications of weakness
168,603
202,949
168,603
202,949
Loans and advances with substantial weaknesses
281,420
343,438
281,420
343,438
Loans that are neither due nor impaired
1,920,782
2,174,342
1,920,782
2,174,342
Loans and advances with an objective indication of impairment
1,323,140
1,471,093
1,323,140
1,471,093
Total residual debt before value adjustments etc.
3,243,922
3,645,435
3,243,922
3,645,435
-746,715
-715,385
-746,715
-715,385
2,497,207
2,930,050
2,497,207
2,930,050
Value adjustments etc.
Loans, advances and other receivables at fair value, year-end
Of value adjustments etc. of DKK 747 million, DKK 926 million was attributable to credit-related value adjustments at 31 December 2013.
Loans, advances and other receivables at amortised cost - by credit quality
category:
Loans and advances with normal credit quality
2,661,373
2,874,332
1,896,892
2,117,212
Loans and advances with certain indications of weakness
1,292,463
1,512,319
1,296,220
1,521,362
Loans and advances with substantial weaknesses
Loans that are neither due nor impaired
708,804
797,536
708,873
797,536
4,662,640
5,184,187
3,901,985
4,436,110
Loans and advances with an objective indication of impairment
2,383,533
2,574,244
2,386,081
2,579,421
Total gross loans and advances before value adjustments etc.
7,046,173
7,758,431
6,288,066
7,015,531
-1,442,840
-1,544,475
-1,445,731
-1,549,587
5,603,333
6,213,956
4,842,335
5,465,944
Guarantee debtors with normal credit quality
365,219
299,281
365,219
299,281
Guarantee debtors with certain indications of weakness
138,208
511,765
138,208
511,765
28,526
29,429
28,526
29,429
Guarantee debtors that are neither due nor impaired
531,953
840,475
531,953
840,475
Guarantee debtors with an objective indication of impairment
129,593
136,534
129,593
136,534
Total guarantee debtors before provisions etc.
661,546
977,009
661,546
977,009
-8,150
-7,094
-8,150
-7,094
653,396
969,915
653,396
969,915
Impairment writedowns etc.
Loans, advances and other receivables at amortised cost, year-end
Guarantee debtors - by credit quality category:
Guarantee debtors with substantial weaknesses
Provisions etc.
Total guarantee debtors, year-end
An overview of lending developments pursuant to the Danish Act on State-Funded Capital Injections is available from the groupʼs website,
www.almbrand.dk//bankpakkeII.
65
Parent company
DKK '000
NOTE 34
2013
2012
Group
2013
2012
Market risk
Foreign exchange risk
Foreign currency positions:
Long positions
3,746,086
3,892,508
3,917,737
3,990,576
Short positions
3,638,393
3,886,388
3,638,393
3,886,388
-107,693
-6,120
-279,344
-104,188
-23,416
Net positions
Foreign currency positions distributed on the five largest net positions:
Positioner i fremmed valuta opdelt på de fem største nettopositioner:
-179,938
-5,280
-273,115
EUR
79,767
4,594
61,008
-6,983
CHF
-9,482
11,861
-46,548
-23,811
SEK
-17,235
-2,149
-29,977
-14,352
USD
-1,099
-84
-10,056
-8,677
Other
20,294
-15,062
19,344
-26,949
-107,693
-6,120
-279,344
-104,188
208,993
23,057
360,935
104,669
Total foreign currency positions
Exchange rate indicator 1
Exchange rate indicator 1 as a percentage of Tier 1 capital after deductions
12.5%
1.6%
21.3%
3,241
350
2,966
Exchange rate indicator 2 as a percentage of Tier 1 capital after deductions
0.2%
0.0%
0.2%
7.1%
1,836
0.1%
Interest rate risk
The Danish Financial Supervisory Authority's method:
Total interest rate exposure on debt instruments, etc.
41,587
-25,841
58,307
22,697
DKK
32,083
-38,698
44,776
5,853
EUR
5,019
7,826
9,046
11,147
SEK
4,830
4,980
4,830
4,980
CHF
-253
10
-253
10
CZK
-63
-
-63
-
NOK
-40
-
-40
-
Interest rate exposure by currency subject to the greatest risk:
Other
Total interest rate risk
The banking group's own method
11
41
11
707
41,587
-25,841
58,307
22,697
11,692
-44,735
The internal calculation approach is used for the management of day-to-day risk. The calculation approach applies modified option-adjusted
durations for the calculation of interest rate risk in the event of a 1 percentage point increase in interest rates.
66
Parent company
DKK '000
Group
2013
2012
2013
2012
178,315
-
178,315
-
Genuine purchase and resale transactions, year-end
178,315
-
178,315
-
772,164
-
772,164
-
Genuine sale and repurchase transactions, year-end
772,164
-
772,164
-
NOTE 35
Genuine purchase and resale transactions
Of the assets below, genuine purchase and resale transactions amount to:
NOTE 36
Genuine sale and repurchase transactions
Of the liabilities below, genuine sale and repurchase transactions amount to:
NOTE 37
Related parties
Related parties comprise:
(a) members of the company's Management Board, Board of Directors and Key Employees and their related family members
(b) companies controlled by members of the Management Board or Board of Directors
(c) the parent company's Management Board or Board of Directors, and
(d) the Alm. Brand Group, Midtermolen 7, DK-2100 Copenhagen Ø, which exercises a controlling influence on the company.
Amount of loans granted, mortgages received from and guarantees with related security issued by the Alm. Brand Bank Group for the belowmentioned officers, their related family members and any companies controlled by them:
Loans, etc.
Management Board, Alm. Brand Bank A/S
Board of Directors, Alm. Brand Bank A/S
Key Employees, Alm. Brand Bank A/S
Management Board, Alm. Brand A/S
Board of Directors, Alm. Brand A/S
-
100
-
100
4,328
28,714
5,849
29,354
422
1,016
422
1,016
1,991
2,000
1,991
2,000
670
25,920
2,192
26,560
-
-
-
-
1,812
17,096
3,134
17,736
-
-
-
-
450
600
450
600
-
15,603
1,322
16,243
Guarantees
Management Board, Alm. Brand Bank A/S
Board of Directors, Alm. Brand Bank A/S
Key Employees, Alm. Brand Bank A/S
Management Board, Alm. Brand A/S
Board of Directors, Alm. Brand A/S
Loans in DKK to the Management Board, the Board of Directors and Key Employees carry interest in the interval of 1.70%-8.5% p.a.
67
Parent company
DKK '000
NOTE 37
2013
2012
Group
2013
2012
Related parties - continued
Salaries and remuneration to members of the bank's Management Board, Board of Directors and Key Employees are disclosed in the note
relating to staff costs and administrative expenses. No other financial relations have been identified to members of the Management Board,
Board of Directors, etc.
The Alm. Brand Group maintains cross-cutting functions that solve joint administrative tasks for the group's companies. The consideration paid
for this administrative function is fixed on an arm's length basis or, where there is no specific market, on a cost-recovery basis. The bank
reinvoices part of the administration fee to its subsidiaries.
Alm. Brand Bank is the Alm. Brand Group's primary banker. This involves the conclusion of a number of agreements between the company and
the group's other enterprises, and a number of transactions are regularly made between the company and the rest of the group. All agreements
and transactions between the company and the bank are made on an arm's length or cost-recovery basis in accordance with applicable
legislation for intra-group transactions.
An agreement has been made on interest accruing on accounts between the bank and the other group companies on an arm's length basis.
The company has also signed an agreement with Alm. Brand Formue concerning the management of Alm. Brand Formue's portfolio. All specific
investment decisions are made by Alm. Brand Bank pursuant to this asset management agreement. Accordingly, Alm. Brand Formue buys and
sells securities through the bank.
In addition, the bank has made an asset management agreement with the other companies of the Alm. Brand Group, according to which a
substantial proportion of the group's assets are under management with the bank.
Other than the above, no material intra-group transactions have taken place.
Financial relations, Alm. Brand af 1792 fmba
Receivables
Payables
Guarantees
Interest and fee income
Interest and fee expenses
Administration fee
-
-
-
-
79,030
78,775
79,030
78,775
-
-
-
-
-
-
-
-
4,391
4,397
4,391
4,397
-
-
-
-
Purchase of securities, etc.
65,892
5,061
65,892
5,061
Sale of securities, etc.
65,802
47,011
65,802
47,011
403,052
550,164
-
-
933
33
-
-
-
-
-
-
19,770
16,235
-
-
NOTE 37
Related parties - continued
Financial relations, Alm. Brand Formue
Receivables
Payables
Guarantees
Interest and fee income
Interest and fee expenses
Administration fee
68
-
-
-
-
1,779
1,577
-
-
Purchase of securities, etc.
1,398,784
1,019,562
-
-
Sale of securities, etc.
1,269,615
1,208,743
-
-
Group
Market value 2013
DKK '000
NOTE 38
Positive
Average
market value 2013
Market value 2012
Negative
Positive
Negative
Positive
Average
market value 2012
Negative
Positive
Negative
Derivatives
Forward transactions/futures,
bought
sold
Swaps
4,046
1,499
8,046
1,190
4,393
2,386
5,735
1,445
2,887
2,886
1,363
7,905
3,439
4,618
2,481
5,262
-
-
-
-
-
-
132
2,306
Options, bought
3,639
41
-
-
46,187
140
-
-
Options, written
259
4,186
-
-
175
48,570
-
-
-
94
-
-
140
3,992
3,992
15,752
-
-
-
28
4,068
197
13,349
1,546
296,032
bought
sold
Swaps
163,992
221,818
218,945
332,798
170,818
250,163
202,873
Options, bought
528
119
-
-
404
13
2,752
-
Options, written
119
60
-
9
19
464
-
3,678
Share contracts
bought
sold
628
-
629
501
691
18,390
271
7,203
2,614
20,489
4,007
3,863
8,016
-
628
1,323
Options, bought
1,345
-
34
-
3,005
-
1,785
-
Options, written
-
-
-
34
-
3,193
-
1,658
Commodity contracts
bought
sold
-
-
-
-
-
-
122
3
-
-
-
-
-
-
-
-
177,443
231,331
230,340
345,079
253,828
336,133
237,355
342,901
Unsettled spot transactions
Foreign exchange contracts,
bought
Foreign exchange contracts,
sold
316
106
933
324
94
81
32
2,672
Interest rate contracts, bought
812
1,350
1,933
320
Interest rate contracts, sold
888
353
357
1,592
Share contracts, bought
383
101
40
231
Share contracts, sold
117
364
231
26
2,610
2,355
3,526
5,165
180,053
233,686
233,866
350,244
Derivatives, year-end
Unsettled spot transactions,
year-end
Total
69
Group
DKK '000
NOTE 39
2013
2012
2011
2010
2009
Value adjustments
425,668
395,143
495,298
710,577
610,870
-232,074
-96,125
-430,684
-351,099
-256,954
423,201
442,560
459,569
513,028
557,826
196,316
309,120
768,450
659,772
1,451,210
Profit/loss from investments in associates
group enterprises
Profit for the year
Loans and advances
Total assets
Solvency ratio
Tier 1 ratio
315
-2,345
385
11,145
1,153
-366,066
-352,523
-950,204
-642,898
-1,396,276
7,339,542
8,395,994
10,217,017
12,484,676
14,822,922
1,695,946
1,168,636
1,233,700
1,759,284
1,589,527
16,295,985
17,902,640
21,392,869
25,596,792
26,539,295
18.4
18.5
16.8
18.8
16.0
17.7
13.9
11.0
16.2
12.9
-33.8
-41.6
-94.5
-67.2
-321.7
-27.9
-30.6
-75.8
-50.0
-243.7
0.4
0.4
0.1
0.3
0.2
Income/cost ratio
Interest rate risk (%)
3.4
1.5
-0.9
1.1
8.4
21.3
7.1
5.3
4.6
3.0
0.2
0.1
0.2
0.1
0.1
80.3
87.8
148.0
160.2
149.8
4.3
7.2
8.3
7.1
9.3
Annual growth in lending (%)
-12.6
-17.8
-18.2
-15.8
-14.3
Excess cover relative to statutory liquidity requirement (%)
201.6
248.7
319.6
256.8
104.1
63.0
60.9
68.0
69.1
73.9
2.1
2.8
6.0
4.3
7.9
Foreign exchange position (%)
Foreign exchange risk (%)
Loans and advances as a percentage of deposits (%)
Gearing of loans and advances
Total amount of large exposures (%)
Impairment ratio for the year
Financial highlights and key ratios have been prepared in accordance with IFRS and "Recommendations & Financial Ratios 2010" issued by the Danish Society of
Financial Analysts.
70
Parent company
DKK '000
NOTE 39
2013
2012
2011
2010
2009
Financial highlights and key ratios - continued
Value adjustments
402,147
374,096
469,197
649,742
540,043
-176,103
-272,682
-165,476
-374,181
-298,302
387,904
409,912
426,952
471,089
498,838
196,419
309,657
766,625
678,803
1,409,980
Profit/loss from investments in associates
group enterprises
Profit for the year
Loans and advances
4,673
28,776
-24,548
-13,628
-27,719
-391,707
-391,193
-918,219
-646,974
-1,324,523
8,100,540
9,144,006
10,521,202
12,847,819
15,069,289
1,502,912
995,440
1,092,861
1,563,910
1,362,203
15,614,866
17,406,694
20,895,193
24,586,939
26,038,202
Solvency ratio
20.3
19.4
16.8
17.9
14.7
Tier 1 ratio
19.2
14.1
10.7
15.3
11.3
-43.2
-52.1
-106.3
-80.7
-321.7
-34.7
-39.3
-84.6
-60.1
-243.7
0.22
0.32
0.06
0.29
0.16
2.5
-1.8
-2.4
-0.9
5.0
12.5
1.6
10.6
1.5
1.1
0.2
0.0
0.1
0.0
0.0
87.3
94.4
151.6
164.3
151.5
5.4
9.2
9.6
8.2
11.1
Annual growth in lending (%)
-11.4
-13.1
-18.1
-14.7
-11.3
Excess cover relative to statutory liquidity requirement (%)
202.0
255.6
327.3
265.9
106.4
52.6
62.1
68.7
67.6
96.9
1.9
2.7
5.8
4.4
7.6
Total assets
Income/cost ratio
Interest rate risk (%)
Foreign exchange position (%)
Foreign exchange risk (%)
Loans and advances as a percentage of deposits (%)
Total amount of large exposures (%)
Financial highlights and key ratios have been prepared in accordance with the Danish Financial Business Act.
71
Group
DKK '000
NOTE 40
2013
2012
Fair value measurement of financial instruments
Level 1
Level 2
Level 3
Total
2,497,207
2,497,207
Level 1
Level 2
Level 3
Total
2,930,050
2,930,050
Financial assets:
Loans, advances and other
receivables at fair value
Bonds at fair value
Shares, etc.
5,955,401
403,149
Other assets
Total financial assets
5,955,401
6,643,258
203,018
606,167
349,590
36,960
36,960
294,537
6,358,550
294,537
294,537
2,737,185
9,390,272
6,643,258
189,766
539,356
-
-
353,925
6,992,848
353,925
353,925
3,119,816
10,466,589
Financial liabilities:
Other liabilities
Total financial liabilities
272,837
-
272,837
272,837
-
272,837
395,013
-
395,013
395,013
-
395,013
There are three levels of fair value measurement:
- Level 1 is based on official (unadjusted) prices in active markets.
- Level 2 comprises financial instruments whose valuation is based on directly or indirectly observable input for the instrument.
- Level 3 comprises financial instruments for which the input is not based on directly observable market data.
There were no transfers between categories in the fair value hierarchy in 2012 or 2013.
Loans, advances and other receivables at fair value comprises mortgage deeds measured using a valuation model which estimates the present
value of expected future cash flows. The valuation is based in part on observable market data (interest rates) and in part on expected future
redemption and loss rates. Measurement at fair value is based on a swap yield curve plus 50 basis points and expected repayment of around
0.5%-17.5% depending on the remaining term to maturity and expected loss rates at the level of 0.75%-4.25% depending on property type and
loan-to-value ratio. See note 47.
Bonds at fair value comprises corporate bonds valued at quoted prices or based on observable data.
Shares, etc. comprises listed shares valued at quoted prices and unlisted shares for which the input is not based on directly observable market
data. Unlisted equities primarily comprise sector equities which are priced on the basis of information from the Association of Local Banks in
Denmark and equities received for credit-defence purposes in which case the valuation is typically based on interim balance sheets.
Investment property comprises single-family houses and rental property which are not expected to be sold within 12 months. Single-family
houses are measured on the basis of valuations received from external appraisers. Rental property is measured on the basis of a cash flow
model that takes into account a return requirement which is dependent on location, financial strength of tenants, lease terms and use etc. Rental
property is supplemented by valuations received from external appraisers if the property is deemed to be difficult to sell.
Other assets comprises interest receivable at DKK 114 million and positive values of derivative financial instruments at DKK 180 million, of which
DKK 170 million was wound up at the beginning of 2014. Interest rates are measured on the basis of normal principles of accrual. Derivative
financial instruments are measured on the basis of observable data in the form of yield curves, volatilities or share indices.
Other liabilities comprises interest payable at DKK 39 million and negative values of derivative financial instruments at DKK 234 million, of which
DKK 160 million was wound up at the beginning of 2014. Interest rates are measured on the basis of normal principles of accrual. Derivative
financial instruments are measured on the basis of observable data in the form of yield curves, volatilities or share indices.
72
Group
DKK '000
NOTE 40
2013
2012
Fair value measurement of financial instruments - continued
Level 3:
Carrying amount, beginning of
period
Value adjustment through
profit or loss
Shares
Mortgage
deeds
189,766
2,930,050
-138
-222,161
-
13,390
35,146
-245,828
Investment
properties
Total
Shares
Mortgage
deeds
Investment
properties
Total
-
3,119,816
184,456
3,154,339
-
3,338,795
-7,384
-229,683
-8,990
-289,237
-
-298,227
48,301
-3,957
203,018
2,497,207
-596
-177,055
-68,773
-3,957
13,390
-245,828
83,447
-236,395
1,450
12,850
141,923
-
143,373
189,766
2,930,050
-76,975
-
1,140
-153,163
-
-152,023
12,850
-76,975
-
-64,125
36,960
2,737,185
-
-177,651
-58,744
11,710
-3,957
-236,395
-64,125
3,119,816
Value adjustments for the year
are composed as follows:
Realised value adjustments
Unrealised value adjustments
Total value adjustment through
profit or loss
13,986
76,188
-
87,898
73
Group
DKK '000
NOTE 41
2013
2012
Classification of financial instruments
Loans at
amortised cost
Trading
portfolio
Total
Loans at
amortised cost
Trading
portfolio
Total
Financial assets:
Cash in hand and balances at call with
central banks
323,267
323,267
304,623
304,623
Balances due from credit institutions
and central banks
610,854
610,854
554,086
554,086
receivables at fair value
receivables at amortised cost
2,497,207
5,955,401
606,167
4,842,335
Bonds at fair value
Shares, etc.
Other assets
Financial assets, year-end
2,497,207
5,776,456
Liabilities at
amortised cost
2,930,050
2,930,050
5,955,401
6,643,258
6,643,258
606,167
539,356
539,356
4,842,335
294,537
294,537
9,353,312
15,129,768
Trading
portfolio
Total
5,465,944
6,324,653
Liabilities at
amortised cost
5,465,944
353,925
353,925
10,466,589
16,791,242
Trading
portfolio
Total
Payables to credit institutions and
central banks
2,197,066
2,197,066
1,396,914
1,396,914
10,936,444
10,936,444
11,324,932
11,324,932
-
-
2,000,000
Other liabilities
74
272,837
700,949
13,834,459
272,837
272,837
2,000,000
395,013
700,949
1,430,108
14,107,296
16,151,954
395,013
1,430,108
395,013
16,546,967
Group
DKK '000
NOTE 42
2013
Offsetting
Financial assets
Derivatives
Financial
assets stated
Gross Liabilities offset at net amounts
recognised in the balance in the balance
assets
sheet
sheet
180,035
-
Repo agreements
178,315
-
Total
358,350
-
Financial liabilities
Gross
recognised
liabilities
180,035
Related amounts which
have not been offset in
the balance sheet
Financial
instruments
Financial
collateral
Net amounts
3,161
181,794
-
178,315
-
175,671
2,644
358,350
3,161
357,465
2,644
Financial
liabilities are
Assets offset stated at net
in the balance amounts in the
sheet balance sheet
Related amounts which
have not been offset in
the balance sheet
Financial
instruments
Financial
collateral
Net amounts
Derivatives
233,591
-
233,591
3,161
232,538
-
Repo agreements
772,164
-
772,164
-
759,396
12,768
1,005,755
-
1,005,755
3,161
991,934
12,768
Total
75
Group
DKK '000
NOTE 43
2013
Return on financial assets and liabilities
Assets at
Liabilities at
amortised cost amortised cost
Interest receivable
Trading
portfolio
Management
activities
Total
301,175
-
270,351
-
571,526
-
320,653
-
-
320,653
301,175
-320,653
270,351
-
250,873
-
-
6,876
-
6,876
Fees and commissions received
49,946
-
37,284
108,107
195,337
Other fees and commissions paid
13,043
-
9,075
5,300
27,418
305,436
102,807
425,668
Interest payable
Net interest income
338,078
-320,653
Value adjustments excluding credit losses
on mortgage deeds
-
-51
-54,820
-
-54,871
Credit losses on mortgage deeds
-
-
-177,203
-
-177,203
78,070
-
-
-
78,070
Impairment of loans, advances and
receivables, etc.
196,316
-
-
-
196,316
Total
219,832
-320,704
73,413
102,807
75,348
Group
DKK '000
2012
Assets at
Liabilities at
amortised cost amortised cost
Interest receivable
Interest payable
Net interest income
Fees and commissions received
Other fees and commissions paid
Value adjustments excluding credit losses
on mortgage deeds
Credit losses on mortgage deeds
Impairment of loans, advances and
receivables, etc.
Total
76
466,376
Trading
portfolio
Management
activities
-
261,121
466,376
-456,620
261,121
44,932
-
23,487
81,114
149,533
495,246
-456,620
280,072
76,445
395,143
472
711
50,485
-
-
-
16,062
-
309,120
237,083
456,620
-
-
-
-455,909
-
6,168
10,704
57,946
-155,254
-
-
182,764
-
Total
-
-
-
4,669
-
727,497
456,620
270,877
6,168
31,435
59,129
-
-155,254
-
309,120
-
76,445
50,485
40,383
Group
DKK '000
NOTE 44
2013
2012
Fair value of financial instruments
Fair value
Recognised
value
Fair value
Recognised
value
Financial assets:
323,267
323,267
304,623
304,623
610,854
610,854
554,086
554,086
2,497,207
2,497,207
2,930,050
2,930,050
4,848,810
4,842,335
5,464,894
5,465,944
Bonds at fair value
5,955,401
5,955,401
6,643,258
6,643,258
Shares, etc.
606,167
606,167
539,356
539,356
Other assets
294,537
294,537
353,925
353,925
15,136,243
15,129,768
16,790,192
16,791,242
Financial assets, year-end
Other liabilities
2,197,066
2,197,066
1,396,914
1,396,914
11,118,913
10,936,444
11,637,919
11,324,932
-
-
1,999,938
2,000,000
272,837
272,837
395,013
395,013
742,515
700,949
1,619,174
1,430,108
14,331,331
14,107,296
17,048,958
16,546,967
Cash in hand and demand deposits with central banks has a relatively short duration, and recognised values at amortised cost are assumed to
equal fair values.
Balances with credit institutions are measured at amortised cost. The difference relative to fair values is assumed to be the interest rate levelindependent value adjustment calculated by comparing current market rates with the market rates prevailing when the outstanding balances
were established.
Loans, advances and other receivables at fair value, Bonds at fair value, Shares etc. and Derivative financial instruments are measured at fair
value in the financial statements in order that recognised values equal fair values.
The difference between fair values and recognised values of Loans, advances and other receivables at amortised cost is assumed to equal the
interest rate level-independent value adjustment calculated by comparing current market rates with the market rates prevailing when the loans
were raised. Changes in the credit quality are not taken into account as such changes are assumed to be included in impairment writedowns for
both recognised values and fair values.
The fair value of Deposits and other payables is assumed to equal the interest rate level-independent value adjustment calculated by comparing
current market rates with the market rates prevailing when the deposits were established.
Issued bonds and Subordinated debt are measured at amortised cost. The difference relative to fair values is assumed to be the interest rate
level-independent value adjustment calculated by comparing current market rates with the market rates prevailing when the issues were made.
Changes in fair values due to changes in the bank's own credit-worthiness are not taken into account.
Fair value adjustment of financial assets and liabilities indicates a total unrecognised, unrealised loss of DKK 218 million at 31 December 2013,
which can be attributed to higher interest rates on the underlying assets and liabilities relative to the level of interest rates at year-end. The
adjustment can be attributed to loans and advances, deposits and other payables and subordinated debt.
The calculation of fair values is described in detail in note 48, Accounting policies, for items measured at fair value.
77
DKK '000
NOTE 45
Group overview
Net
income
Total
assets
Total
liabilities
Net
income
Total
assets
Total
liabilities
2013
2013
2013
2012
2012
2012
13,673
155,125
25,857
20,857
197,980
63,214
1,066
162,732
110,049
-11
174,112
121,941
-55
287
617
-
315
590
Share
capital
Shareholders'
equity
Profit for
the year
2013
2013
2013
2013
2012
2013
2012
Associates (not consolidated):
Nordic Corporate Investments A/S
Cibor Invest A/S
Hirlap Finans ApS
Ownership interest
in %
Voting share
in %
Consolidated subsidiaries:
Alm. Brand Leasing A/S (Copenhagen)
3,000
64,641
-17,093
100.0
100.0
100.0
100.0
Alm. Brand Formue A/S (Copenhagen)
31,000
342,966
47,092
42.9
44.9
69.2
70.3
Nordic Corporate Investment A/S
(Copenhagen)
96,969
129,739
8,164
25.0
25.0
25.0
25.0
Cibor Invest A/S (Århus)
45,000
52,683
454
33.1
33.1
33.1
33.1
125
-330
-55
25.0
25.0
25.0
25.0
Associates (not consolidated):
Hirlap Finans ApS (Gentofte)
Directorships
Name and municipality of registered office of group enterprises in which employees of the bank hold offices:
Company (registered office)
Employees of Alm. Brand Bank, who are board members
Alm. Brand Leasing A/S (Copenhagen)
Chief Executive Kim Bai Wadstrøm
Director Bo Overvad
Director Michael Iversen
Director Søren Olling
Moreover, the group comprises the following companies:
Ejendomsselskabet af 16. marts 2010 ApS,
Ejendomsselskabet af 5. august 2010 ApS,
Ejendomsselskabet af 14. september 2011 ApS,
K/S Juventusvej and
Juventusvej Komplementar ApS.
All companies are wholly-owned subsidiaries, which have been established or acquired in connection with properties taken over temporarily.
The bank has issued a letter of comfort and guarantees the continued operations of the companies.
78
Note 46 Risk management
Managing the group’s risk exposure is a key management
priority because uncontrolled developments in different risks may have a substantial impact on financial performance and solvency and, by extension, on the future
business potential.
The purpose of the risk management function of Alm.
Brand Bank and the Alm. Brand Group in general is to ensure ongoing, proactive risk management in day-to-day
activities based on common sense. This imposes a duty
on the risk management function to ensure that the necessary reporting is available in order for the business to
make sound and informed decisions. The reporting and
sparring process is aligned to the specific business areas
in order to make risk management relevant for the business and, hence, for the customers. The decentralised entities in Alm. Brand’s risk management system include
the credit secretariat dealing with the bank’s credit risks,
a special committee dealing with IT-related risks and a
group risk management function dealing with market
risks and capital management. In other words, the structure of risk management is decentralised with respect to
the key business risks, while the overall risk management
is of course followed up at group level.
The board of directors of each individual group company
defines and approves the overall policy for the company’s
acceptance of risks, and the board of directors determines
the overall limits for such risks and the required reporting.
On this basis, the management boards of the individual
companies determine the operational risk management.
The statutory audit committee of Alm. Brand Bank provides risk and capital management support to the board
of directors and other bodies. The audit committee comprises three members of the board of directors.
The group’s central risk forum is the group risk committee, the objective of which is to ensure coordination and
uniformity in the group companies with respect to accepting, calculating and reporting risk. In addition, a
group investment committee ensures that the group’s investments and market risks are within the limits defined
by the board of directors and the policies of the individual
companies.
The internal audit department oversees the administrative and financial reporting procedures, control procedures and compliance with management’s policies and
guidelines. The group compliance function assists management in ensuring that the companies’ methods and
procedures are adequate to ensure compliance with the
legislation and rules in force from time to time as well as
ethical standards.
In addition, a forum for operational risk collates information about operational events in Alm. Brand Bank. Participating in this forum are Risk Management, Compliance
and Internal Audit. Moreover, the group has set up an approval committee for financial products. This committee
is responsible for ensuring that business procedures, processing routines, etc. are in place before new products or
activities are implemented, thereby helping to mitigate
operational risk.
Credit risk
Credit risk is the risk of incurring a financial loss due to
default on counterparties’ payment obligations. Credit
risk includes losses/impairment writedowns on loans,
guarantees, derivatives, etc., concentration risk on customer types, exposure types, collateral types, etc., a general change in credit quality due to changes in legislation,
economic conditions, market practices and conditions,
etc.
The bank’s future lending strategy is directed at private
customers. As a result, Alm. Brand Bank mainly grants
loans to private customers, investment credit facilities
and leasing in the subsidiary Alm. Brand Leasing. The
bank still holds mortgage deeds and credit exposures
with commercial and agricultural customers as counterparties, but this part of the business will be phased out in
the years ahead.
Once a year, the bank’s board of directors reviews and
approves the credit policy and the associated guidelines
describing the rules governing the bank’s loan granting,
provision of guarantees and other credit risks. The guidelines contain specific limits for the individual products offered by the bank and the customer segments buying the
bank’s credit products.
79
Note 46 Risk management - continued
The bank’s lending to private customers is based on the
application of credit scoring models and budget and disposable income calculations. The credit scoring models
have been developed over a number of years. The models are still being developed and improved on the basis
of recent experience and changes in market conditions.
Credit scoring models are applied to secured as well as
unsecured loans.
The board of directors of Alm. Brand Bank has defined
limits for interest rate risk within and outside the trading portfolio. The bank’s interest rate risk in the trading
portfolio is derived from the portfolio of bonds and other
financial instruments and from trading on behalf of customers. Most of the bank’s interest rate exposure is to
DKK. Alm. Brand Bank seeks to minimise interest rate risk
in currencies other than DKK and EUR.
Alm. Brand Bank uses an authorisation control system for
private customers. In combination with the bank’s credit
application and approval system, this system ensures that
the approvals made by individual managers and employees are consistent with their lines. The system also supports collection of information on individual customers.
This information is included in the overall decision-making basis for credit segmentation of the customer and
determination of the maximum exposures and risks, including already established facilities.
The bank’s interest rate risk outside the trading portfolio is derived exclusively from the portfolio of mortgage
deeds. Most of the mortgage deeds are Danish, but the
portfolio also comprises a limited number of Swedish
mortgage deeds. For the purpose of calculating and managing interest rate risk related to the mortgage deed portfolio, the bank uses an internal mark-to-model mortgage
deed model, which takes into account expected prepayments and credit losses on mortgage deeds. As part of the
bank’s strategy, interest rate risk derived from mortgage
deeds is hedged with a view to minimising the interest
rate risk on the mortgage deed portfolio after hedging.
In the winding-up portfolio, loans are granted only for
credit-defence purposes when this is deemed to minimise
the bank’s risk of loss.
As part of the control environment, an independent credit control function has been established, which has been
charged with the task of making spot checks to identify
any potential process shortcomings.
Interest rate risk on a one percentage point increase in
Interest rates
DKKm
Mortgage deeds (incl. hedging)
Bonds
20122013
–8 –4
–72
Other balance sheet items involving interest rate risk 125 Total interest rate risk
45
–70
62
–12
Market risk
The bank regularly takes positions in the financial markets for the account of customers as well as for its own account. The financial positions may involve different types
of market risk. Active risk management is applied across
the bank in order to balance out financial risks on assets
and liabilities with the aim of achieving a satisfactory
return that matches the bank’s risks and applied capital.
The bank’s risk management uses derivative financial instruments to adjust the market risk.
The asset allocation of Alm. Brand Bank did not change
significantly in 2013, and mortgage bonds still represent
the majority of the investment assets. Spread risk is mitigated by means of rating-defined limits for investments
in bonds.
80
In the event of a 1 percentage point increase in interest
rates on the total interest-bearing portfolio, the banking
group’s equity and results will be adversely affected by
DKK 12 million (2012: income of DKK 45 million).
The banking group’s daily currency risk is calculated
and managed on the basis of the sum of receivables and
payables denominated in foreign currency translated
into Danish kroner. This corresponds to the unweighted
and weighted exchange rate indicator 1. At 31 December
2013, the bank’s currency risk calculated according the
unweighted exchange indicator 1 was DKK 361 million,
against DKK 105 million at 31 December 2012. The bank’s
currency risk calculated according to the weighted exchange rate indicator 1 was DKK 7.1 million at 31 December 2013, against DKK 5.5 million at 31 December 2012.
The calculated currency risk may fluctuate as a result of
day-to-day operations.
The risk weights used in the calculation of the weighted
exchange rate indicator 1 are intended to ensure that, in
the foreign exchange area, the bank uses the risk weights
that best reflect the underlying market risk. The risk
weights are determined every six months on the basis of
the standard deviation of the last 500 days’ return history.
For each currency pair, the risk weights are based on internal assessments. The use of internal assessments may
be due to the bank expecting a trend to continue or to the
bank assessing that the calculated risk weight is too low to
reflect the actual risks in the market.
Equities in the trading portfolio (excluding Alm. Brand
Formue), amounting to DKK 10 million, are held with a
view to trading on behalf of customers or as part of the
bank’s investment portfolio. The bank’s trading portfolio consists of positions in listed Nordic equities and
unit trust certificates held with a view to supporting the
bank’s markets and asset management functions.
The bank’s portfolio of equities outside the trading portfolio comprises equities held through Alm. Brand Formue
and equities taken over for credit-defence purposes. The
portfolio also comprises sector equities intended to support the bank’s operations. Participation in sector companies is deemed necessary, and the bank does not expect
to sell these equities, which are therefore recognised outside the trading portfolio. Most of the sector equities are
unlisted. The group hedges exposure to equities through
the ownership of Alm. Brand Formue.
In the event of a 10% decline on the total portfolio of equities within and outside the trading portfolio, the banking
group’s equity and results will be adversely affected by
DKK 45 million (2012: DKK 43 million).
Equity risk assuming a 10% price decline
DKKm
Shares listed on
NASDAQ OMX Copenhagen A/S
Shares listed on foreign exchanges
Portfolio 10 % Stress
248
–25
99
–10
Total listed shares
347 –35
Unlisted shares
259
–26
Hedging of shares in Alm. Brand Formue
Total shares
–161
16
445
–45
Counterparty risk
The bank’s financial counterparty risks arise mainly
through placement of cash funds with other banks and
bilateral derivative agreements. Based on an individual
assessment, exposure limits are defined for each counterparty.
The bank reduces its exposure by means of margin agreements and netting with the relevant counterparties. Margin agreements ensure that a counterparty provides collateral when the exposure exceeds a certain level. The way
in which this collateral is managed is described in detail in
a framework agreement or in the form of an ISDA Credit
Support Annex to an ISDA Master Agreement. Netting
is also described in the framework agreements or in the
ISDA Master Agreements and means that gains and losses
on derivative financial instruments may be offset if the
counterparty breaches its obligations.
Liquidity
The banking group aims to ensure that liquidity is at
all times sufficient to support its future operations and
comply with the statutory requirements, including the
guideposts of the Danish FSA’s Supervisory Diamond.
Compliance with the bank’s liquidity target is ensured
through the internally defined limits for the composition
of funding, including funding sources and their repayment structure as well as requirements for the size of the
bank’s liquidity reserve. The bank determines its liquidity management on the basis of a conservative risk profile.
The bank manages and monitors its liquidity on a day-today basis based on short-term and long-term liquidity requirements.
The short-term liquidity management is intended to ensure that Alm. Brand Bank complies with the statutory
requirements at all times. This is achieved partly by neutralising imminent liquidity effects, thereby maintaining
liquidity within the limits defined by the board of directors, and partly by securing financial resources in the
form of certificates of deposit and undrawn money market lines with major market players. The bank has also established a set-up for repo transactions and the possibility
of selling the cash portfolio.
81
The long-term liquidity management is intended to ensure that Alm. Brand Bank does not find itself in a situation where the cost of funding the bank’s operations
becomes disproportionately high. A significant part of the
bank’s current funding will expire at the turn of the year
2014/2015 with the expiry of a substantial share of the
fixed-rate agreements. However, the excess liquidity coverage is expected to be adequate afterwards as well, as the
bank has a successful track record and extensive experience in attracting fixed-interest deposits. The refinancing
requirement will depend on developments in deposits
and lending in 2014, and the bank is working continuously to reduce the its assets related to activities being
wound up.
Other risks
The Alm. Brand Group’s operational risks, i.e. costs associated with operational errors, are assessed on an ongoing basis. The group has a number of control procedures
in the form of work routines, business procedures and
reconciliation processes, performed locally and centrally
throughout the organisation. The extent of control measures is balanced against the expenses they involve. Security measures are assessed relative to potential threats
and their assessed probability of occurrence as well as the
potential business consequences, should such threats materialise.
82
Reputational risks are costs associated with having a poor
public reputation. This affects the group’s ability to maintain and develop its business volume. A reputation arises
through media coverage of the group or incidents in relation to the group, for instance in news media and/or on
social media. The group has drawn up media contingency
plans to handle any incidents that could lead to unfavourable media coverage.
Strategic risks have an adverse effect on earnings or capital requirements. They arise due to inexpedient business
decisions, insufficient implementation of business initiatives or slow response to the challenges facing the group.
Strategic risks cannot be avoided but they can be limited by maintaining high professional standards, openness and willingness to change in the organisation. Alm.
Brand’s strategy has been prepared by the group management on the basis of a structured process and in cooperation with each group subsidiary’s board of directors,
management board and managerial groups.
The group’s risk profile and risk management are described in detail at almbrand.dk/risk.
NOTE 47 Significant accounting estimates, assumptions and uncertainties
The consolidated and parent company financial statements have been prepared on the basis of certain special
assumptions involving the use of accounting estimates.
Such estimates are made by the company’s management
in accordance with the accounting policies and on the basis of historical experience and assumptions, which management considers prudent and realistic but which are
inherently uncertain and unpredictable.
The most significant estimates concern recognition and
measurement and relate to impairment writedowns
on loans, provisions for losses on guarantees, fair value
measurement of loans and advances, measurement of
financial instruments which are not traded in an active
market, and deferred tax assets.
Unlisted financial instruments for which there is no active
market are measured using recognised valuation methods
or measured at cost less any impairment. Deferred tax is
recognised to the extent management deems that the asset can be utilised over the next few years, which includes
an estimate of the group’s expected future earnings.
Impairment writedowns on loans and advances and provision for losses on guarantees
In respect of impairment of loans and advances and provisions for losses on guarantees, significant estimates have
been applied in quantifying the risk that not all future
payments may be received, including estimates related
to determining whether a customer should be marked
for objective evidence of impairment. If it can be determined that not all future payments will be received, the
determination of the amount of the expected payments,
including realisation values of any collateral and expected
dividend payments from estates, involves significant estimates.
Continuing adverse and unforeseen macro-economic developments may affect the payment ability of individual
customers. For example, the values of the collateral forming the basis of the calculation of the bank’s collateral may
give rise to additional impairment writedowns especially
on loans for activities concerning the funding of real
property and agriculture.
In addition, changes are regularly made to the rules that
form the basis of the bank’s calculation of the impairment
writedown and provisioning requirement. Changes that
are subsequently introduced may trigger higher impairment writedowns and provisions, regardless of the fact
that no events would seem to have occurred in relation to
the customers’ ability to pay or collateral that would warrant such higher impairment writedowns.
Valuation of loans and advances at fair value
The bank’s mortgage deed portfolio is included in loans
and advances at fair value, and the valuation is partly
based on non-observable input and therefore to some extent subject to estimates. The calculation of the fair value
of mortgage deeds is based on a credit model and a market
value model which include parameters such as expected
prepayments, loss rates and interest rate level.
Mortgage deeds in arrears are measured on the basis of
the credit model and any unsecured part is written down
if relevant. The level of credit adjustments and loss rates
in the model are on an ongoing basis held up against the
realised credit writedowns with respect to mortgage
deeds in arrears. It is assumed that the mortgage deeds
can be sold in a compulsory sale at the calculated collateral value.
The market value model used for the valuation of mortgage deeds not in arrears comprises a number of assumptions relating to return requirement, expected credit losses and repayments – assumptions basically concerning
what a mortgage deed could trade for between two independent parties. The model revalues the mortgage deed
at a value above the nominal amount of the residual debt
if the mortgage deed coupon is higher than the discount
rate less expected credit losses. This market value supplement is sensitive to the model assumptions.
83
NOTE 47 Significant accounting estimates, assumptions and uncertainties - continued
The repayment rates included in the market value model
are updated on an ongoing basis to reflect the development in realised repayments. An increase in repayment
rates would currently have an adverse effect on the market value supplement. An increase in expected future
credit losses would reduce the value as would also a higher return requirement and/or interest rate level.
Capitalisation
At 31 December 2013, Alm. Brand Bank A/S had a solvency
ratio of 20.3.
On 26 February 2013 and 22 August 2013, Alm. Brand A/S
contributed DKK 700 million and DKK 200 million, respectively, in equity to Alm. Brand Bank. The capital injections were used partly to repay DKK 630 million of the
state-funded hybrid core capital and partly to strengthen
the bank’s capital base.
On 27 February 2014, the parent company Alm. Brand
A/S injected DKK 400 million into Alm. Brand Bank A/S
as equity. This capital injection will be used, among other
things, to repay the remaining part of the hybrid core capital. In addition, due to the new capital adequacy rules,
the subordinated loans in Alm. Brand Bank A/S cannot be
recognised as part of the capital base effective 1 January
2014. The value of the bank’s supplementary capital will
decline by a total of approximately DKK 200 million in
2014, and the capital injection is therefore also made in
part to cover this decline.
84
Repayment of the remaining part of the hybrid core capital will take place when permission is in place and will
entail a substantial reduction of the bank’s future funding
costs and hence have a favourable impact on the bank’s
earnings and interest margin.
Management believes that the bank has adequate capitalisation to withstand the business risks inherent in the
bank’s operations, including potential additional future
impairment writedowns.
Cash resources
To secure adequate cash resources throughout 2013 and
onwards, the bank has worked according to a detailed plan
encompassing reduction of loans, attracting new deposits
and, on a certain scale, raising of loans with Danmarks
Nationalbank by pledging credit claims as collateral in accordance with the rules thereon. The implementation of
these activities is progressing according to plan.
On 22 March 2013, the bank repaid just over DKK 1 billion
of government guaranteed bonds, and on 1 July 2013 the
remaining DKK 950 million of the bond issue was repaid.
At 31 December 2013, the bank’s excess liquidity coverage
202%, or DKK 3.0 billion, relative to the statutory minimum requirement.
Management continues to monitor the bank’s liquidity
closely, and it is expected that the excess liquidity coverage will be reduced further in 2014.
NOTE 48 Accounting policies
General
The consolidated financial statements have been prepared
in accordance with the International Financial Reporting
Standards as adopted by the EU. The parent company financial statements have been prepared in accordance
with the provisions of the Danish Financial Business Act,
including the Executive Order on financial reports presented by credit institutions and investment companies.
In addition, the financial statements are presented in accordance with additional Danish disclosure requirements
for the annual reports of listed financial enterprises.
Additional Danish disclosure requirements for annual
reports are for the group set out in the Danish Statutory
Order on Adoption of IFRS for financial enterprises issued
pursuant to the Danish Financial Business Act and by
NASDAQ OMX Copenhagen A/S. For the parent company,
the disclosure requirements are defined in the Danish Financial Business Act and by NASDAQ OMX Copenhagen
A/S.
The annual financial statements are presented in Danish
kroner (DKK), which is considered the primary currency
of the group’s activities and the functional currency of the
parent company.
The requirement concerning a sale within 12 months according to IFRS 5 is not met for the business area Winding-up. Consequently, a division on continuing and winding-up activities in the income statement and the balance
sheet and related notes has not been used.
The accounting policies applied in the consolidated financial statements are described below and are unchanged
from 2012.
The accounting policies of the parent company on recognition and measurement are in accordance with the
accounting policies of the group. See also the separate
section below on the accounting policies of the parent
company.
Implementation of new and amended standards
and interpretations
The Annual Report 2013 is presented in accordance with
the new and amended standards (IFRS/IAS) and interpretations (IFRIC) which apply for financial years starting on
or after 1 January 2013. The following new or amended
standards and interpretations, which apply to financial
years starting on 1 January 2013, have been implemented
in the consolidated financial statements for 2013:
•
•
•
•
IAS 1, Presentation of financial statements: The
amendment requires that items presented in other
comprehensive income must be broken down on
items which are subsequently recycled to profit and
loss and items which are not recycled.
IFRS 13, Fair value measurement: The new standard
has resulted in additional disclosures in connection
with fair value measurement, particularly fair values
on level 3 of the fair value hierarchy.
IFRS 7, Financial Instruments: Disclosures. The
amendment has resulted in a requirement for additional disclosure of information about offsetting
financial assets and financial liabilities.
Annual improvements to IFRS 2009-2011. The
amendments of various standards resulting from
IASB’s annual improvements are minor.
The implementation of the above did not have any effect
on the profit for the year, other comprehensive income,
total assets or shareholders’ equity.
Standards and interpretations not yet in
force
At the date of publication of these annual financial statements, the following new or amended standards and interpretations have not yet entered into force and/or been
adopted for use in the EU and are therefore not included
in these annual financial statements:
•
IFRS 9, Financial instruments: Classification and
measurement (Financial assets) (November 2009).
IFRS 9 concerns the accounting treatment of financial assets in relation to classification and measurement. Pursuant to IFRS 9, the “held-to-maturity”
and “available-for-sale” categories are eliminated. A
85
NOTE 48 Accounting policies - continued
•
new optional category is defined for equity instruments which are not held for sale and which at initial
recognition are classified in the category “fair value
through other comprehensive income”. In future, financial assets will thus be classified either as “measured at amortised cost” or “measured at fair value
through profit or loss” or – in the case of qualifying equity instruments – as “measured at fair value
through other comprehensive income”. The standard is not expected to come into force until at the
earliest for financial years starting on or after 1 January 2017. The standard has not yet been adopted for
use in the EU.
IFRS 9, Financial instruments: Classification and
measurement (Financial liabilities) (October 2010).
The amendment to IFRS 9 adds provisions on the
classification and measurement of financial liabilities
and derecognition. The majority of the provisions of
IAS 39 on recognition and measurement of financial
liabilities are unchanged in IFRS 9. However, IFRS
does introduce the following amendments:
•
The exemption in IAS 39 providing that derivative financial instruments related to unquoted
assets may in some cases be measured at cost is
eliminated. According to IFRS 9, all derivative
financial instruments must be measured at fair
value.
•
Under IFRS 9, when a company elects to measure financial liabilities at fair value (fair value
option) the portion of the fair value adjustment
for the period attributable to changes in the
company’s own credit rating should be presented in other comprehensive income.
The derecognition provisions of IAS 39 are unchanged in
IFRS 9. The standard is not expected to come into force
until at the earliest for financial years starting on or after
1 January 2017. The standard has not yet been adopted for
use in the EU.
•
86
IFRS 10, Consolidated Financial Statements (May
2011): IFRS 10 specifies the principles for consolidation of an entity. The standard supersedes the sections on consolidation in IAS 27, Consolidated and
Separate Financial Statements. In certain areas, this
standard provides significantly more guidance with
a view to establishing whether an investor controls
an investee. IFRS 10 determines that an investor controls an investee if and only if the investor has all of
the following elements:
•
power over the investee
•
exposure, or rights, to variable returns from its
involvement with the investee
•
the ability to use its power over the investee to
affect the amount of the investor’s return.
The standard comes into force for financial years starting
on or after 1 January 2014. The standard has been adopted
for use in the EU.
•
•
•
•
IFRS 11, Joint Arrangements (May 2011): IFRS 11 concerns the accounting treatment of joint ventures.
Proportional consolidation in the consolidated financial statements is no longer allowed, as joint ventures are to be recognised using the equity method
in future. The standard comes into force for financial
years starting on or after 1 January 2014. The standard
has been adopted for use in the EU.
IFRS 12, Disclosure of Interests in Other Entities (May
2011): IFRS 12 specifies disclosure requirements for
consolidated and unconsolidated entities, joint ventures and associates. The objective of IFRS 12 is to
require the disclosure of information that enables
users of financial statements to evaluate the basis of
control, any restrictions concerning consolidated assets and liabilities, risks associated with interests in
unconsolidated entities and the involvement of noncontrolling interests in the activities of consolidated
entities. The standard comes into force for financial
years starting on or after 1 January 2014. The standard
has been adopted for use in the EU.
IAS 27, Consolidated and separate financial statements (May 2011): This amendment is a consequence
of the adoption of IFRS 10. The amendment comes
into force for financial years starting on or after 1 January 2014. The standard has been adopted for use in
the EU.
IAS 28, Investments in associates and joint ventures
(May 2011): This amendment is a consequence of the
adoption of IFRS 10-12. The amendment comes into
force for financial years starting on or after 1 January
2014. The standard has been adopted for use in the
EU.
•
•
•
•
•
•
IAS 32, Financial Instruments: Presentation (December 2011). The amendment clarifies the criteria for
offsetting of financial assets and financial liabilities.
The amendment comes into force for financial years
starting on or after 1 January 2014. The standard has
been adopted for use in the EU.
IAS 36, Impairment of assets (May 2013). The amendment clarifies the disclosure requirements with respect to impairment of assets etc. and narrows the
disclosure requirement with respect to the recoverable amount. The amendment comes into force for financial years starting on or after 1 January 2014. The
standard has been adopted for use in the EU.
IAS 39, Financial instruments: Recognition and
measurement (June 2013). The amendment means
that a replacement of a counterparty with respect
to a hedging instrument should not be considered
expiration or termination of the hedging instrument, which would also result in the discontinuance of hedge accounting if certain criteria are met.
starting on or after 1 January 2014. The standard has
IAS 19, Employee benefits (November 2013). The
amendment simplifies the treatment of contributions from employees or a third party which are not
dependent on the length of service. The amendment
comes into force for financial years starting on or after 1 July 2014. The standard has not been adopted for
use in the EU.
Annual improvements to IFRS 2010-12 (December
2013). The amendments of various standards resulting from IASB’s annual improvements are minor.
starting on or after 1 July 2014. The standard has not
Annual improvements to IFRS 2011-13 (December
2013). The amendments of various standards resulting from IASB’s annual improvements are minor.
starting on or after 1 July 2014. The standard has not
•
IFRIC 21, Levies (May 2013). This interpretation provides guidance on when and how to recognise a liability for a levy imposed by a government arising
from participation on a specific market. The amendment comes into force for financial years starting on
or after 1 January 2014. The standard has not been
adopted for use in the EU.
Management believes that the implementation of the
above standards, amended standards and interpretations, except for the implementation of IFRS 9, the effect
of which has not been investigated in connection with the
preparation of the annual report, will only have a minor
impact on the annual report.
Consolidation
The Alm. Brand Bank Group has decided to prepare and
publish consolidated financial statements, notwithstanding that the banking group is included in the consolidated
financial statements of a higher-ranking parent company.
The consolidated financial statements comprise the parent company, Alm. Brand Bank A/S, and group enterprises
in which the parent company directly or indirectly exercises a controlling influence. Companies in which the
group holds between 20% and 50% of the voting rights or
otherwise exercises a significant but not a controlling influence are considered associates.
The consolidated financial statements have been prepared
on the basis of the financial statements of Alm. Brand Bank
and its subsidiaries by consolidating items of a similar nature and eliminating intra-group income and expenses,
intra-group accounts and gains and losses on transactions
between the consolidated companies. The financial statements used for consolidation have been prepared or restated in accordance with the group’s accounting policies.
Parent company investments in consolidated subsidiaries
are offset by the parent company’s proportionate share of
the equity value of the subsidiaries.
The proportionate shares of the results and equity of subsidiaries attributable to minority interests are measured
and recognised as an integral part of the income state-
87
ment and the balance sheet. The share of the results attributable to minority interests is shown as the group’s
profit allocation.
The consolidated financial statements of Alm. Brand Bank
are a component of the consolidated financial statements
of Alm. Brand A/S and Alm. Brand af 1792 fmba.
Certain financial assets and liabilities are measured at
amortised cost, implying the recognition of a constant effective rate of interest to maturity. Amortised cost is stated as original cost less any principal payments and plus
or minus the accumulated amortisation of any difference
between cost and the nominal amount. This method allocates capital gains and losses over the term to maturity.
Intra-group transactions
At initial recognition, financial assets are divided into the
following categories:
Intra-group services are settled on market terms or on a
cost recovery basis. Intra-group financial statements carry interest on market terms. Intra-group transactions in
securities and other assets are settled at market prices.
General recognition and measurement
policies
Income is recognised in the income statement as earned.
This includes the recognition of value adjustments of financial assets and liabilities. Costs incurred to generate
the year’s income are recognised in the income statement.
Assets are recognised in the balance sheet when, due to a
previous event, it is probable that future economic benefits will flow to the group and the value of the asset can
be reliably measured. Liabilities are recognised in the balance sheet when, due to a previous event, it is probable
that future economic benefits will flow from the group
and the value of the liability can be reliably measured.
Recognition and measurement take into account predictable losses and risks occurring before the presentation of
the financial statements which confirm or invalidate affairs and conditions existing at the balance sheet date.
Otherwise, assets and liabilities are recognised and measured as described for each individual item below.
In connection with the acquisition or sale of financial assets and liabilities, the settlement date is used as the recognition date. Changes to the value of the asset acquired
or sold during the period from the transaction date to the
settlement date are recognised as a financial asset or a financial liability. If the acquired item is measured at cost or
amortised cost after initial recognition, any value changes
during the period from the transaction date to the settlement date are not recognised.
88
•
•
Trading portfolio measured at fair value
Loans measured at amortised cost
At initial recognition, financial liabilities are divided into
the following categories:
•
•
Trading portfolio measured at fair value
Other financial liabilities measured at amortised cost
Below is a description of the accounting policies applied
to financial assets and liabilities as well as other items.
Foreign currency
Transactions in foreign currency are translated into the
functional currency at the exchange rate prevailing at
the transaction date. Gains and losses on exchange differences arising between the transaction date and the settlement date are recognised in the income statement.
Monetary assets and liabilities in foreign currency are
translated at the exchange rates at the balance sheet date.
Exchange rate adjustments of monetary assets and liabilities arising as a result of differences in the exchange rates
applying at the transaction date and at the balance sheet
date are recognised in the income statement.
Non-monetary assets and liabilities in foreign currency
that are subsequently revalued at fair value are translated
at the exchange rates applying at the date of revaluation.
Exchange rate adjustments are included in the fair value
adjustment of the asset or liability. Other non-monetary
items in foreign currency are translated at the exchange
rates at the date of transaction.
Repo/reverse transactions
Securities sold under agreements to repurchase at a later
date (repo transactions) are recognised in the balance
sheet. Amounts received are recognised as amounts owed
to the counterparty and carry interest at the agreed rate.
The securities are measured as if they were still recognised in the balance sheet, and market value adjustments
and interest etc. are recognised in the income statement.
Securities purchased under agreements to resell at a later
date (reverse transactions) are not recognised in the balance sheet. Amounts paid are recognised as a receivable
and carry interest at the agreed rate. There may be negative portfolios which are recognised in other liabilities if
the securities are resold.
Deferred tax assets, including the tax base of tax losses
carried forward, are measured at the amount at which
they are expected to be realised, either as a set-off against
tax on future income or as a set-off against deferred tax
liabilities.
Deferred tax assets and liabilities are offset within the
same legal tax unit.
Income statement
Interest receivable comprises interest and interest-like
income, while Interest payable comprises interest and
interest-like expenses. Interest-like income and expenses
comprise fees and commissions that are an integral part of
the effective rate of interest. Interest income and expenses
also include interest on financial instruments at fair value.
Derivative financial instruments
Forward transactions, futures, swaps, options and unsettled spot transactions are measured at fair value on initial
and subsequent recognition. Positive and negative fair
values of derivatives are recognised as Other assets and
Other liabilities, respectively. Changes in the fair value of
derivatives are recognised in the income statement.
Interest income and expenses in respect of interest-bearing financial instruments measured at amortised cost
are recognised in the income statement applying the effective interest method based on the cost of the financial
instrument. Interest includes amortisation of fees which
are part of the effective yield of the financial instrument,
including origination fees, and amortisation of any additional difference between cost and redemption price.
Tax
Calculated current and deferred tax on the profit for the
year and adjustments of tax charges for previous years are
recognised in the income statement. Income tax for the
year is recognised in the income statement on the basis of
the tax regulations applying to the individual companies.
Current tax assets and liabilities are recognised in the balance sheet at the amount that can be calculated on the
basis of the expected taxable income for the year. Current
tax assets and liabilities are shown as net amounts to the
extent that the amounts can legally be offset against each
other and the items are expected to be settled net or simultaneously.
Deferred tax is recognised using the balance sheet liability method on all temporary differences between the carrying amount and the tax value of assets and liabilities.
Deferred tax is measured on the basis of the tax regulations and rates that, according to the rules in force at the
balance sheet date, will apply at the time the deferred tax
is expected to crystallise as current tax.
Recognition of interest on loans and advances with impairment is made on the basis of the value after impairment.
Dividend on shares, etc. comprises dividends and similar
income from equity investments and is recognised when
the shareholders have approved the dividend distribution. For associates, however, dividend received is offset
against the value adjustment made at equity value.
Fees and commission income comprises income relating
to services at the expense of the customers, while Fees
and commissions payable include expenses concerning
management fees, etc.
Value adjustments comprises value adjustments of assets
and liabilities measured at fair value. The item also includes exchange rate adjustments.
89
Other operating income includes leasing income from
operating leases, proceeds from the sale of lease assets,
income relating to assets held temporarily, proceeds from
the sale of tangible assets, as well as income from the sale
of information services.
Staff costs and administrative expenses comprises remuneration for the Management Board and the Board of Directors and staff costs and other administrative expenses.
The group offers defined contribution plans with the majority of its employees, under which the group pays fixed
contributions into the employees’ pension plans with
their pension companies. Expenses for pension contributions are recognised in the income statement in the period in which the contributions are earned. The group has
no obligations to pay additional contributions. There are
no defined benefit plans in the group.
Other operating expenses comprises guarantee commission to Finansiel Stabilitet A/S and costs relating to assets
held temporarily. This item also includes value adjustment of acquired assets held temporarily.
Impairment of loans, advances and receivables, etc. comprises impairment of items that involve a credit risk and
provisions for guarantees. See also under accounting policies for balance sheet items.
Profit/loss from investments in associates comprises the
share of the net profit or loss of associates.
Balance sheet items
Cash in hand and balances at call with central banks and
are measured at fair value on initial recognition and subsequently at amortised cost. Balances due from credit
institutions and central banks includes all receivables
from credit institutions and central banks, including receivables in connection with genuine purchase and resale
transactions.
Loans, advances and other receivables at fair value comprises mortgage deeds measured at fair value on initial
and subsequent recognition. The fair value is measured
90
using a valuation model which estimates the present value of expected future cash flows. The valuation is based in
part on observable market data (interest rates) and in part
on expected future redemption and loss rates.
Measurement at fair value is based on a swap yield curve
plus 50 basis points and expected repayment of around
0.5%-17.5% depending on the remaining term to maturity and expected loss rates at the level of 0.75%-4.25%
depending on property type and loan-to-value ratio. The
valuation technique is in accordance with generally recognised methods of pricing financial instruments.
comprises all types of loans and advances, including receivables from finance leases, measured at amortised
cost. Loans, advances and other receivables at amortised
cost are measured on initial recognition at fair value plus
transaction costs less fees and commissions received that
are directly related to the acquisition or issue of the financial instrument. Subsequently, loans, advances and
receivables are measured at amortised cost using the effective interest method.
An ongoing evaluation takes place to detect any objective evidence of impairment of loans, advances and other
receivables determined at amortised cost. If there is any
objective evidence of impairment, an individual impairment writedown will be made on the loan or receivable
corresponding to the difference between the carrying
amount before the impairment and the present value
of expected future payments from the loan, advance or
receivable if it is deemed that the debtor is able to make
payments in addition to cash flows from the assets provided as collateral for the loan. A realisation principle is
used if the debtor is not deemed to be able to make payments in addition to cash flows from the assets provided
as collateral for the loan.
Loans, advances and receivables that are not written
down individually are subject to a collective assessment
of whether there is any evidence of impairment for the
group as a whole. A collective assessment involves groups
of loans, advances and receivables with uniform credit
risk characteristics.
The collective assessment is based on a segmentation
model developed by the Association of Local Banks in
Denmark, which is responsible for the ongoing maintenance and development of the model. The segmentation model determines the correlation in the individual
groups between actual losses and a number of significant
explanatory macroeconomic variables by way of a linear
regression analysis. The explanatory macroeconomic
variables include unemployment, house prices, interest
rates, number of bankruptcies/forced sales, etc.
The macroeconomic segmentation model is generally
calculated on the basis of loss data for the entire banking sector. The bank has therefore assessed whether the
model estimates reflect the bank’s portfolio of loans and
advances.
This assessment has entailed an adjustment of the model
estimates to the bank’s own circumstances, and these
adjusted estimates form the basis of the calculation of
collective impairment charges. An estimate has been calculated for each individual group of loans, advances and
receivables, which expresses the percentage impairment
of the specific group of loans, advances and receivables at
the balance sheet date. The individual loans and advances’
impact on collective impairment charges is calculated by
comparing the actual risk of loss of the individual loans
and advances with the original risk of loss of such loans
and advances and the risk of loss of the loans and advances at the beginning of the current reporting period. The
impairment is calculated as the difference between the
carrying amount and the discounted value of the expected future payments.
The model-based calculation of collective impairment
charges is supplemented by a management estimate
where management finds that there are factors which the
model does not sufficiently take into account. The management estimate hence reflects the effect of expectations
for the development in credit risk in selected segments.
Bonds at fair value comprises listed bonds for which the
price is fixed in active markets. Bonds at fair value are
measured at fair value on initial and subsequent recognition. The fair value of listed bonds is determined based on
the closing price at the balance sheet date, or in the absence of a closing price, another public price deemed to
be most similar thereto. However, the fair value of drawn
listed bonds is calculated as the present value of the bonds.
Shares, etc. comprises listed equity investments and other
unlisted equity investments. Shares, etc. are measured at
fair value at initial and subsequent recognition. The fair
value of listed equity investments is determined based on
the closing price at the balance sheet date, or in the absence of a closing price, another public price deemed to
be most similar thereto. The fair value of unlisted equity
investments is determined as the transaction price that
would result from a transaction between independent
parties. If the fair value cannot be reliably measured, unlisted equity investments will be measured at cost less any
impairment.
Investments in associates are measured according to the
equity method, implying that the investments are measured at the proportionate ownership interest of the equity value of the associates at the balance sheet date.
Other property, plant and equipment comprises operating equipment, furniture and fittings and operating leases,
which are measured at the lower of cost less accumulated
depreciation and impairment charges and the recoverable amount. Depreciation is carried out on a straightline basis with due consideration of the expected residual
value over the expected useful life of the assets, which is
expected to be up to five years.
Assets held temporarily comprises properties and cars
only temporarily in the company’s possession and awaiting sale within 12 months and where a sale is very probable. The item is measured at the lower of the carrying
amount and the fair value less expected costs to sell.
Investment property comprises single-family houses and
rental property originally classified as assets held temporarily, but which are no longer expected to be sold within
12 months. Properties are recognised at fair value through
profit or loss in value adjustments. Single-family houses
are measured on the basis of valuations received from
external appraisers. Rental property is measured on the
basis of a cash flow model that takes into account a return
requirement which is dependent on location, financial
strength of tenants, lease terms and use etc. Rental property is supplemented by valuations received from external appraisers if the property is deemed to be difficult to
sell.
91
Other assets comprises the positive fair value of spot
transactions and derivatives and income that does not fall
due for payment until after the end of the financial year,
including interest receivable and dividend receivable.
Prepayments comprises expenses incurred prior to the
balance sheet date but which relate to a subsequent accounting period, including prepaid salaries, commission
and interest.
Payables to credit institutions and central banks comprises obligations in connection with genuine sale and repurchase transactions and receivable margins in connection
with futures and option transactions. Payables to credit
institutions and central banks are measured at fair value
on initial recognition and subsequently at amortised cost.
Deposits and other payables comprise all deposits, including obligations in connection with genuine sale and
repurchase transactions with counterparties which are
not credit institutions or central banks and customers’ receivable margins in connection with futures and option
transactions if the customer is not a credit institution.
Deposits and other payables are measured at fair value on
initial recognition and subsequently at amortised cost.
Issued bonds at amortised cost are measured at fair value
on initial recognition, equalling the payment received
less directly attributable costs incurred. Subsequently, issued bonds are measured at amortised cost using the effective interest method.
Liabilities temporarily acquired comprises liabilities acquired in connection with assets held temporarily and
measured at amortised cost.
Other liabilities comprises the negative fair value of spot
transactions and derivatives and expenses that do not fall
due for payment until after the end of the financial year,
including interest payable.
Deferred income comprises income received prior to the
balance sheet date but which relates to a subsequent accounting period, including interest and commission received in advance.
92
Provisions includes liabilities which are uncertain with
respect to size or time of settlement when it is likely that
the obligation will require an outflow of the company’s
financial resources, and the obligation can be measured
reliably.
Provisions for pensions and similar obligations comprise
jubilee benefits, etc. to employees, notwithstanding that
the future benefit is subject to the individual being employed by the company at the time of the benefit. The
value of the future benefits is measured as the present
value of the benefits expected to be paid based on a best
estimate.
Provisions for losses on guarantees are measured at the
best estimate of the costs necessary to meet the relevant
obligation at the balance sheet date.
Subordinated debt comprises liabilities which, in the
case of liquidation or bankruptcy and pursuant to the
loan conditions, cannot be settled until any other creditor
claims have been honoured.
Subordinated debt is initially measured at fair value,
equalling the payment received less directly attributable costs incurred. Subsequently, subordinated debt is
measured at amortised cost using the effective interest
method.
Dividends are recognised as a liability in the financial
statements at the time of adoption by the shareholders
at the annual general meeting. Proposed dividends in respect of the financial year are stated as a separate line item
in the statement of changes in equity.
Purchases and sales of treasury shares are recognised as a
change in shareholders’ equity under other reserves.
Cash flow statement
The cash flow statement shows the group’s cash flows for
the year divided into cash flows from operating activities,
working capital, investing activities and financing activities. The cash flow statement is presented using the indirect method and based on the profit for the year before
tax.
Cash flows from operating activities include the items of
the income statement adjusted for operating items of a
non-cash nature. Realised gains and losses on the sale of
tangible assets are included in cash flows from investing
activities.
Trading income (excl. value adjustments): This item
comprises the bank’s earnings from market activities and
the bank’s own portfolio placed in the treasury department. The item also comprises allocation of funding costs
to the bank’s business areas, including winding-up activities.
Cash flows from working capital include assets and liabilities related to operating activities, including loans, deposits etc.
Other income: This item primarily comprises earnings
from the subsidiary Alm. Brand Leasing A/S.
Cash flows from investing activities includes acquisitions
and divestments of subsidiaries as well as net investments
in assets not related to operating activities, including realised gains and losses on the sale of such assets.
Costs: This item comprises staff costs and administrative expenses and other operating expenses in the business areas Financial Markets, Private, Leasing and Other,
equivalent to the continuing activities.
Cash flows from financing activities includes financing
from shareholders as well as financing sourced through
short-term and long-term loans, including issued bonds.
Depreciation and amortisation: This item comprises depreciation and amortisation of non-current assets and assets held under leases.
Cash and cash equivalents comprises cash at bank and in
hand and balances due from credit institutions and central banks with a remaining term of up to three months.
Value adjustments: This item comprises value adjustments from primary and derivative financial instruments
which are placed in the bank’s market function and the
treasury department.
Parent company
Profit/loss from investments: This item comprises investments in associates and group enterprises which are
not subsidiaries.
The accounting policies of the parent company on recognition and measurement are in accordance with the accounting policies of the group. In addition, investments in
subsidiaries are recognised according to the equity method. This implies that the investments are measured at the
proportionate share of the subsidiaries’ net asset value at
the balance sheet date.
Financial highlights
The individual lines in the overview of financial highlights on page 8 are described below. The business areas
are described on page 44. Criteria for recognition and
measurement are in accordance with the group’s accounting policies.
Impairment writedowns: This item comprises impairment writedowns related to the loans and advances provided to bank’s private customers which form part of the
bank’s future strategy.
Winding-up activities: This item shows the results from
winding-up activities. The profit/loss before writedowns,
which comprises interest, fees, staff costs and administrative expenses and value adjustments. Writedowns are
related to exposures to small and medium-sized commercial customers, agricultural customers, property development projects and credit-related value adjustments
of mortgage deeds.
Net interest and fee income, Private: This item comprises interest and fees related to the bank’s private customers which form part of the bank’s continuing activities.
93
Definitions of ratios
DEFINITIONS OF RATIOS
94
Interest margin
=
Solvency ratio
=
Tier 1 ratio
=
Equity ratio
=
Average shareholders' equity
=
Return on equity before tax
=
Return on equity after tax
=
Income/cost ratio
=
Interest rate risk (percent)
=
Foreign exchange position
=
Foreign exchange risk
=
Loans and advances
=
Loans and advances as a percentage of deposits
=
=
Interest receivable
Interest payable
Average interest-bearing assets
Average interest-bearing liabilities
Capital base
Risk-weighted assets
Tier 1 capital including hybrid Tier 1 capital less deduction
Tier 1 capital after deductions
Shareholders' equity at beginning of year + shareholders' equity at year-end
2
(Profit after tax - minority interests before tax) x 100
(Profit after tax - minority interests after tax) x 100
Income
Costs
Interest rate risk
Loans, advances and other receivables at fair value +
Loans and advances + Impairment losses
Loans and advances
definitions of ratios
DEFINITIONS OF RATIOS
Annual growth in lending
=
Excess cover relative to statutory liquidity requirement
=
(Loans, etc. at year-end - Loans, etc. at beginning of year) x 100
Loans and advances at beginning of year
Excess liquidity after compliance with s. 152(2)
of the Danish Financial Business Act
At least 10% or 15% – the statutory requirement
Total amount of large exposures (percent)
=
Share of receivables at reduced interest rate
=
=
Funding-ratio
=
Total amount of large exposures
Capital base
Receivables at reduced interest rate
Loans and advances, etc. + Guarantees + Impairment losses
Impairment losses for the year
Loans and advances, etc. + Guarantees + Impairment losses
Loans and advances
Working capital less bonds with a remaining maturity of less than 1 year
The calculation of average equity takes into account capital increases where capital increases are included at a proportionate share relative to the date of the change.
Shares held by minority interests are not included in the calculation of average equity.
95
Directorships and
special qualifications
Board of Directors
Directorship
Directorship
Farm owner
Managing Director
Jørgen Hesselbjerg Mikkelsen
Boris Nørgaard Kjeldsen
Chairman of the Board of Directors of:
Alm. Brand A/S
Alm. Brand Bank A/S
Alm. Brand Fond
Alm. Brand af 1792 fmba
Deputy chairman of the Boards of Directors of:
Alm. Brand A/S
Alm. Brand Bank A/S
Alm. Brand Fond
Member of the Boards of Directors of:
Forsikringsselskabet Alm. Brand Liv og Pension A/S
Alm. Brand Forsikring A/S
Directorships outside the Alm. Brand Group
Chairman of the Boards of Directors of:
Danish Agro A.m.b.a
Danish Agro Byggecenter A/S
Danish Agro Shoppen A/S
Danish Agro Finance A/S
Tømrermester Søren Gliese-Mikkelsen A/S
Breinholt Consulting A/S
Breinholt Invest A/S
DATEA A/S
Kemp & Lauritzen A/S
Sigvald Madsen Holding A/S
DPL Invest A/S (Investeringsselskabet for
Dansk Primær Landbrug)
Hesselbjerg Agro A/S
Vilomix International Holding A/S
DLA International Holding A/S
Dan Agro Holding A/S
DLA Foods Holding A/S
Benny Johansen & Sønner A/S
DAVISTA Komplementarselskab A/S
DAVISTA K/S
Ejendomsforeningen Danmark (Deputy chairman)
Chairman
Born 1954
Member of the Board of Directors since 2004
Managing Director of:
J.H.M. Holding 2010 ApS
Member of the Chairmanship, Landbrug & Fødevarer
Special qualifications
General management experience
Experience from the Alm. Brand Group’s customer segments
Experience in audit and accounting matters
(particularly in relation to membership of the audit
commitee)
Insight into financial matters
Insight into economic matters
96
Deputy chairman
Born 1959
DADES A/S (adm.dir.)
DAVISTA Komplementarselskab A/S
DAVISTA K/S
commitee)
Insight into legal matters
directorships and special qualifications
Directorship
Directorship
Chief Executive Officer
Manager
Jan Skytte Pedersen
Chief Executive Officer of:
Alm. Brand A/S
Alm. Brand A/S
Alm. Brand Fond
Alm. Brand Bank A/S
Born 1955
Member of the Management Board since 1998
Asgaard Finans A/S
Alm. Brand Præmieservice A/S
Alm. Brand Ejendomsinvest A/S
Alm. Brand Formue A/S
Alm. Brand Bank A/S
Chairman appointed by the Management Board of:
Pensionskassen under Alm. Brand A/S
Forsikringsakademiet A/S
Forsikring & Pension (Deputy Chairman)
commitee)
Born 1956
Energimidt Holding A.M.B.A.
Energimidt Renewables A/S
Herm. Rasmussen A/S Holding
Herm. Rasmussen A/S
Herm. Rasmussen A/S Malerforretning
Herm. Rasmussen A/S Erhvervsejendomme
K/S Papirfabrikken
Malerfirmaet Fr. Nielsen og Søn, Skanderborg, Aktieselskab
Ringvejens Autolakereri A/S
Silkeborg IF Invest A/S
Gustav Hansen Holding A/S
Gustav Hansen Murer og Entreprenører A/S
Fast Entreprise A/S
Den Selvejende Institution Silkeborg Fodbold College
EnergiMidt Handel A/S
Michael Sørensens Stiftelse
Herm. Rasmussen A/S Holding
Herm. Rasmussen A/S
Herm. Rasmussen A/S Malerforretning
Herm. Rasmussen A/S Erhvervsejendomme
Ringvejens Autolakereri A/S
Malerfirmaet Fr. Nielsen og Søn, Skanderborg, Aktieselskab
97
Directorship
Directorship
State-authorised public accountant
Head of department
Arne Nielsen
Born 1944
Alm. Brand A/S
Alm. Brand Bank A/S
Alm. Brand Forsikring A/S Directorships outside the Alm. Brand Group
Managing Director:
Cartofico Lejlighed 4 P/S
commitee)
Directorship
Christian Bundgaard
Born 1976
Alm. Brand Bank A/S
Directorship
General manager
Torben Jensen
Born 1966
Alm. Brand Bank A/S
Ebbe Castella
Alm. Brand A/S
Alm. Brand Bank A/S
Directorship
Cand.polit.
Born 1950
Experience from the Alm. Brand Group’s customer
segments
Financial adviser
Pia Støjfer
Born 1961
Alm. Brand Bank A/S
98
Management
Board
Kim Bai Wadstrøm,
Chief Executive of Alm. Brand Bank
Directorship
Chief Executive
Kim Bai Wadstrøm
Born 1964
Joined Alm. Brand in 2011
Chief Executive of Alm. Brand Bank A/S since 2011
Chief Executive:
Alm. Brand Bank A/S
Chairman of the boards of directors of:
Alm. Brand Leasing A/S
Member of the board of directors of:
Alm. Brand Formue A/S (Deputy Chairman)
99
Disclaimer
The forecast is based on the interest rate and price levels
that prevailed at mid-February 2014. All other forwardlooking statements are based exclusively on the information available when this interim report was released.
The actual performance may be affected by major changes in a number of factors. Such impacts include changes
in conditions in the financial market, legislative changes,
changes in the competitive environment, loans and advances, etc. and guarantees, etc.
The above-mentioned risk factors are not exhaustive.
Investors and others who base their decisions on the information containedin this report should independently
consider any uncertainties of significance to their decision. A more detailed review of the bank’s risks is provided
in Note 46, Risk management.
This annual report has been translated from Danish into
English. In the event of any discrepancy between the Danish text and the English-language translation, the Danish text shall prevail.
100
anvendt regnskabspraksis
101
Since 1792

ABB 01-2014 - Annual Report 2013

Transcription

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