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Note 3
Losses and impairments on loans and guarantees
Sparebanken Møre applies a three-stage approach when assessing ECL on loans to customers and guarantees in accordance with IFRS 9.
- Stage 1: At initial recognition and if there’s no significant increase in credit risk, the commitment is classified in stage 1 with 12-months ECL
- Stage 2: If a significant increase in credit risk since initial recognition is identified, but without objective evidence of loss, the commitment is transferred to stage 2 with lifetime ECL measurement
- Stage 3: If the credit risk increases further and there’s objective evidence of loss or if individual impairments have been made, the commitment is transferred to stage 3.
ECL on loans and guarantees are presented in the balance sheet as a reduction to «Loans to and receivables from credit institutions» and ECL on guarantees are recognised under «Other provisions for incurred liabilities and costs».
The methodology for measuring expected credit losses (ECL) in accordance with IFRS 9 is explained in the interim report for the 1st quarter. Tables showing the transition effects of the implementation of IFRS 9 are presented in Note 2.6 in the Annual Report 2017.
| Specification of credit loss expense | |||||
|---|---|---|---|---|---|
| GROUP | Q2 2018 | Q2 2017 | 30.06.2018 | 30.06.2017 | 31.12.2017 |
| Changes in collective impairment during the period (IAS 39) | - | -40 | - | -40 | -45 |
| Changes in ECL during the period - Stage 1 | -1 | - | 1 | - | - |
| Changes in ECL during the period - Stage 2 | 20 | - | 17 | - | - |
| Changes in ECL during the period - Stage 3 | -17 | - | -23 | - | - |
| Increase in existing individual impairments | 0 | 3 | 0 | 4 | 5 |
| New individual impairments | 2 | 52 | 14 | 53 | 65 |
| Confirmed losses, previously impaired | 0 | 3 | 5 | 24 | 25 |
| Reversal of previous individual impairments | -9 | -12 | -16 | -39 | -49 |
| Confirmed losses, not previously impaired | 0 | 1 | 2 | 9 | 18 |
| Recoveries | 0 | -1 | -3 | -3 | -6 |
| Total impairment on loans and guarantees, etc | -5 | 6 | -3 | 8 | 13 |
| Commitments (exposure) divided into risk groups based on probability of default | ||||
|---|---|---|---|---|
| GROUP | Stage 1 | Stage 2 | Stage 3 | Total 30.06.2018 |
| Low risk (0 % - < 0.5 %) | 46 576 | 1 747 | 0 | 48 322 |
| Medium risk (0.5 % - < 3 %) | 5 577 | 2 078 | 1 258 | 8 913 |
| High risk (3 % - <100 %) | 663 | 490 | 107 | 1 260 |
| Problem loans | 0 | 0 | 345 | 345 |
| Total commitments before ECL | 52 816 | 4 314 | 1 710 | 58 841 |
| - ECL | -25 | -64 | -247 | -335 |
| Net commitments *) | 52 791 | 4 250 | 1 464 | 58 505 |
| *) The table above is based on exposure at the reporting date, not including fixed rate loans assessed at fair value. The figures are thus not reconcilable against balances in the statement of financial position. | ||||
| Changes in ECL in the period | ||||
|---|---|---|---|---|
| GROUP | Stage 1 | Stage 2 | Stage 3 | Total |
| Total impairments at 31.12.2017 according to IAS 39 | 336 | |||
| Effect of transition to IFRS 9 | 7 | |||
| ECL 01.01.2018 according to IFRS 9 | 24 | 47 | 272 | 343 |
| New commitments | 9 | 4 | 2 | 15 |
| Disposal of commitments | -4 | -6 | -10 | -20 |
| Changes in ECL in the period for commitments which have not migrated | -5 | -5 | 9 | 0 |
| Migration to stage 1 | 3 | -14 | -7 | -18 |
| Migration to stage 2 | -2 | 40 | -25 | 13 |
| Migration to stage 3 | 0 | -2 | 6 | 4 |
| Changes in individual impairments | - | - | -2 | -2 |
| ECL 30.06.2018 | 25 | 64 | 247 | 335 |
| - of which expected losses on loans | 236 | |||
| - of which expected losses on guarantees | 99 |