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Alternative performance measures
Alternative performance measures
Alternative performance measure or APM is defined by ESMA (European Securities and Markets Authority) as «a financial measure of historical or future financial performance, financial position, or cash flows, other than financial measure defined or specified in the applicable financial reporting framework».
Alternative performance measures are either adjusted key figures or key figures not defined under IFRS. APMs are not intended to substitute accounting figures prepared in accordance with IFRS and are not to be assigned greater importance than these accounting figures, however, they have been included in the financial reporting in order to provide a more complete description of the Group’s performance. Furthermore, APMs constitute important targets as to how the management governs the Group.
The APMs of Sparebanken Møre are used in the overview of key figures, in the report of the Board of Directors, as well as in presentations of the financial statements. All APMs are specified with corresponding comparative figures for previous periods.
Sparebanken Møre has the following APMs, which are not reflected in the financial statements with disclosures:
Total assets
Definition: The sum of all assets.
Justification: Total assets is an industry-specific designation for the sum of all assets.
Average assets
Definition: The average sum of total assets for the year, calculated as a daily average.
Justification: This key figure is used in the calculation of percentage ratios for the performance items.
Return on equity
Definition: Profit/loss for the financial year as a percentage of the average equity for the year. Additional Tier 1 capital classified as equity is excluded from this calculation, both in profit/loss and in equity.
Justification: Return on equity is one of Sparebanken Møre’s most important financial performance figures. It provides relevant information about the profitability of the Group by measuring the profitability of the operation in relation to the invested capital. The profit/loss is adjusted for interest on Additional Tier 1 capital, which pursuant to IFRS, is classified as equity, but in this context more naturally is classified as liability since the Additional Tier 1 capital bears interest and does not entitle to dividends.
Cost income ratio
Definition: Total operating costs in percentage of total income.
Justification: This key figure provides information about the relation between income and costs, and is a useful performance indicator for evaluating the cost-efficiency of the Group.
Losses as a percentage of loans
Definition: «Impairment on loans, guarantees etc.» in percentage of «Net loans to and receivables from customers» at the beginning of the accounting period.
Justification: This key figure specifies recognised impairments in relation to net lending and gives relevant information about the bank’s losses compared to lending volume. This key figure is considered to be more suitable as a comparison figure to other banks than the impairments itself since this figure is viewed in context of lending volume.
Gross problem loans as a percentage of loans
Definition: Problem loans, measured as the total of non-performing commitments exceeding 3 months, which have individual impairments, as well as other doubtful commitments subject to individual impairments without being in default, in percentage of gross lending and guarantees (before impairments).
Justification: This key figure provides relevant information about the Group’s credit risk and is considered to be useful supplementary information in addition to the loss disclosures.
Net problem loans as a percentage of loans
Definition: Problem loans, measured as the total of non-performing commitments exceeding 3 months, which have individual impairments, as well as other doubtful commitments subject to individual impairments without being in default, in percentage of net lending and guarantees (after impairments).
Justification: This key figure provides relevant information about the Group’s credit risk and is considered to be useful supplementary information in addition to what follows from the loss disclosures.
Deposit-to-loan ratio
Definition: «Deposit from customers» as a percentage of «Net loans to and receivables from customers».
Justification: The deposit-to-loan ratio provides important information about how the Group finances its operations. Receivables from customers represent an important share of the financing of the Group’s lending, and this key figure provides important information about the Group’s dependence on market funding.
Lending growth as a percentage
Definition: The period’s change in «Lending to and receivables from customers» as a percentage of «Lending to and receivables from customers» at the beginning of the period.
Justification: This key figure provides information about the activity and growth in the bank’s lending.
Deposit growth as a percentage
Definition: The period’s change in «Receivables from customers» as a percentage of «Receivables from customers» at the beginning of the period.
Justification: This key figure provides information about the activity and growth in deposits, which is an important part of the financing of the Group’s lending.
Price/book value (P/B)
Definition: Market price on the bank’s equity certificates (MORG) divided by the book value per equity certificate for the Group.
Justification: This key figure provides information about the book value per equity certificate compared to the market price at a certain time. This gives the reader the opportunity to assess whether the market price of the equity certificate is reasonable.
Book value per equity certificate
Definition: The total equity that belongs to the owners of the bank’s equity certificates (equity certificate capital, share premium, dividend equalisation fund and equity certificate holders’ share of other equity, including proposed dividends) divided by the number of issued equity certificates.
Justification: This key figure provides information about the value of the book equity per equity certificate. This gives the reader the opportunity to assess whether the market price of the equity certificate is reasonable. The key figure is calculated as equity certificate holders’ share of the equity at the end of the period, divided by the number of equity certificates.
Asset ratio/LTV (Loan to value)
Definition: Average loan amount of loans to customers divided by average market value of collateral.
Justification: This key figure provides information about the asset ratio in the lending portfolio and is relevant for evaluating the risk of loss.