Report for the third quarter 2021

Report for the third quarter 2021

Bank Norwegian Group

Q3

Table of contents
Letter from the CEO ................................................................................................	3
Report for the third quarter 2021 ...........................................................................	4
Profit and loss account ...........................................................................................	7
Balance sheet ..........................................................................................................	9
Cash flow statement .............................................................................................	11
Changes in equity..................................................................................................	13
Notes
Note 1	General accounting principles ........................................................	14
Note 2	Segments ............................................................................................	14
Note 3	Capital adequacy and Liquidity Coverage Ratio ............................	15
Note 4	Expected credit loss ..........................................................................	16
Note 5	Loans to customers by product groups .........................................	19
Note 6	Provision for loan losses ..................................................................	21
Note 7	Risk classes........................................................................................	21
Note 8	Net interest income............................................................................	21
Note 9	Net commission and bank services income ...................................	22
Note 10	Net change in value on securities and currency ............................	22
Note 11	General administrative expenses.....................................................	22
Note 12	Debt securities issued and subordinated loan ...............................	22
Note 13	Financial instruments .......................................................................	23
Note 14	Related parties and other investments............................................	24
Note 15	Subsequent events ............................................................................	24
Quarterly figures....................................................................................................	25

Report for the third quarter 2021 Bank Norwegian Group 1

Financial highlights

Profit and loss account

		Bank Norw egian Group
Amounts in NOK 1000	Q3 2021	Q3 2020	2020
Interest income	1 245 264	1 498 588	6 115 326
Interest expenses	94 306	177 518	702 272
Net interest income	1 150 959	1 321 070	5 413 054
Net other operating income	-15 981	45 751	229 644
Total income	1 134 978	1 366 822	5 642 698
Total operating expenses	408 361	335 031	1 313 162
Provision for loan losses	359 715	365 623	1 830 948
Profit before tax	366 902	666 168	2 498 588
Profit after tax	276 095	500 622	1 886 975

Balance sheet

		Bank Norw egian Group
Amounts in NOK 1000	30.9.21	30.9.20	31.12.20
Total assets	57 607 307	64 363 956	63 192 011
Loans to customers	34 216 695	39 962 311	37 943 688
Liquid assets	22 825 758	23 586 465	24 364 666
Deposits from customers	38 224 252	43 880 046	42 677 703
Debt securities issued	6 018 621	6 649 351	6 034 387
Subordinated loans	753 807	876 049	877 820
Tier 1 capital	425 000	635 000	635 000
Total equity	11 202 754	10 899 035	11 328 161

Key figures and alternative performance measures

		Bank Norw egian Group
	Q3 2021	Q3 2020	2020
Return on equity (ROE) 1	10.1 %	19.6 %	18.9 %
Return on assets (ROA)1	1.9 %	3.2 %	3.1 %
Earnings per share (EPS)	1.43	2.63	9.90
Dividend per share (DPS) 2	-	-	6.00
Common equity tier 1 (CET 1) 2	25.7 %	21.4 %	22.0 %
Leverage ratio	16.5 %	13.9 %	14.5 %
Liquidity coverage ratio (LCR)	400 %	494 %	569 %
Net interest margin (NIM)1	7.9 %	8.3 %	8.8 %
Cost/income ratio1	0.36	0.25	0.23
Loan loss provisions to average loans 1	3.6 %	3.3 %	4.1 %
Stage 3 loans to loans 1	21.0 %	22.3 %	23.7 %
Stage 3 loan loss allowance to Stage 3 loans 1	37.4 %	40.4 %	40.9 %
Loan loss allowance to loans 1	9.3 %	10.9 %	11.5 %

1. Defined as alternative performance measure (APM ). APM s are described on banknorwegian.no/OmOss/InvestorRelations.
2. The Board of Directors was authorized by the AGM in April 2021 to resolve a distribution to the shareholders of up to NOK 1 per share after October 1, 2021, in addition to the dividend of NOK 5 approved and paid out in M ay 2021. As one of the conditions for the completion of the offer from Nordax for the purchase of all the shares in Bank Norwegian is that Bank Norwegian shall not make or resolve to make any distributions to its shareholders, the Board of Directors has resolved that no further distributions will be made. The dividend is thus no longer provided for in the capital ratios in the third quarter 2021.

Report for the third quarter 2021 Bank Norwegian Group 2

Letter from the CEO

The positive shift we experienced starting in the second quarter continued through the third quarter; consumption increased, airline traffic is on its way up and unemployment continued to normalize. The effects of more than 1.5 year with reduced activity level and lower lending balances are still visible in our income statement through lower interest income and, paired with a strong NOK, also affecting our net income from other countries negatively in the third quarter. The margin pressure is expected to continue in a highly competitive market, and the topline growth depends on resuming lending volumes.

I am glad to see that instalment loan sales in all four countries have increased to the highest level in the last six quarters. Credit card usage is increasing both in domestic consumption and increased usage abroad. The third quarter represents the first quarter since the pandemic started where we have growth in lending balances, adjusted for currency and the portfolio sales. In the quarter the Bank sold two portfolios, in July the non-performing instalment loans portfolio in Denmark and in September an instalment and credit card loans portfolio in Norway, reducing the stage 3 volume ratios. The net result from the portfolio sales was positive and gives additional comfort to our loan loss provisioning model.

It is pleasing to see our increased efforts related to ESG work gives results; in the recently published 100 largest companies on the Oslo Stock Exchange report on ESG, Bank Norwegian was lifted to a C-grade this year.

During the third quarter, preparation for our European expansion has commenced according to plan and we went live in Spain now in October and soon in Germany. We have ramped up the organization with local competence and are ready for launching our products in these markets. I want to extend my sincere gratitude to all our employees and vendors in making this happen.

At the end of the quarter, the last piece of the puzzle of regulatory approval was obtained for Nordax Bank AB (publ) (Nordax) to continue the process of buying Bank Norwegian. Together with Nordax, Bank Norwegian will be the largest Nordic specialist bank with a combined total lending of approximately NOK 70 billion. We look forward to joining forces to form and develop the most professional specialist bank in the Nordic region and Europe.

Bank Norwegian has a solid and liquid balance sheet and have a record strong capital position. Even though we see effects from the pandemic on our income level, we still deliver a solid result in the quarter. We are confident that the launch of our European expansion and the increased activity level in the Nordics will provide long-term profitable growth and high earnings going forward.

We have a strong focus on supporting our customers in all parts of our business and look forward to welcoming customers from six countries instead of four. Delivering sustainable products and services, easy to use, transparent and digital, is key for us, and that will not change as part of a larger Nordax-Bank Norwegian group in the future. We will continue to prove our relevance to existing and potential customers and focus our development activities with the clear ambition to continue delivering high customer value.

Bærum, October 26, 2021

Klara-Lise Aasen

Interim CEO

Report for the third quarter 2021 Bank Norwegian Group 3

Report for the third quarter 2021

The positive development observed in the later part of the second quarter from opening of societies and increased economic activity has continued throughout the third quarter with higher credit card purchase volumes and increased instalment loan sales. In the quarter, Bank Norwegian Group (BN Group) has sold two non- performing loan portfolios with positive earnings impact. As seen in the second quarter, the third quarter also experienced a more stable exchange rate development with minor effects on this quarter's results.

At the end of the third quarter 2021 the BN Group had a customer base of 1 671 800 customers, which can be broken down into 1 195 900 credit card customers, 188 900 instalment loan customers and 287 000 deposit customers. During the third quarter the BN Group sold a large part of the surveillance instalment and credit card loans portfolios in Norway and non-performing instalment loan portfolio in Denmark which is the main reason for the 34 900 reduction in the customer base from the second quarter.

Profit and loss as of September 30, 2021

The BN Group's profit after tax for the first nine months amounted to NOK 1 041 million, compared with NOK 1 451 million for the same period in 2020. The decrease is mainly caused by reduced interest income through lower loan volumes, lower net gain on currency and reduced net commission income, partly offset by lower interest expense from reduced deposit rates. In addition, provisions for loan losses were affected by net gains from sales of non-performing loan portfolios during the second and third quarter this year.

Net interest income totaled NOK 3 574 million, net other operating income amounted to NOK 16.4 million, while total operating expenses were NOK 1 085 million. Provisions for loan losses were NOK 1 120 million.

Profit and loss for the third quarter 2021

The BN Group's profit after tax in the quarter amounted to NOK 276.1 million compared with NOK 367.8 million in the second quarter and down from NOK 500.6 million in the same quarter last year. The decrease from the previous quarter is mainly caused by higher administrative expenses from provision for legal and financial advisors' fees related to the offer from Nordax Bank AB (publ) (Nordax) of approximately NOK 47 million, negative change in value of shares and lower interest income due to two non-performing loan portfolio sales in the quarter, partly offset by gains of approximately NOK 71.6 million from non-performing loan portfolio sales lowering provisions for loan losses in the quarter. Compared to the same quarter last year, the main reason for the decrease in net profit is reduced interest income from lower instalment loan and credit cards loan volumes, particularly in Norway, following the non-performing loan portfolio sales this year and lower demand due to high customer liquidity during the pandemic. In addition, the BN Group observes net loss on securities, shares and currency and

higher administrative expenses from provision for advisors' fee related to the offer from Nordax, partly offset by reduced interest expenses from deposit rate reductions and lower provisions for loan losses from the non- performing loan portfolio sales.

Return on equity was 10.1%, compared with 13.3% in the second quarter and the return on assets was 1.9%, compared with 2.5% in the second quarter.

Net interest income amounted to NOK 1 151 million, a decrease of NOK 32.2 million from the second quarter. The reduction is mainly explained by lower interest income due to the two non-performing loan portfolio sales in Norway and Denmark in the quarter and lower income from certificates and bonds mainly in Norway. This was partly offset by currency fluctuation between the quarters and lower interest expenses from full quarter effect of reduced deposit rates and reduced deposit volumes in Norway. The net interest margin was 7.9%, compared with 8.1% in the second quarter.

Net other operating income amounted to NOK -16.0 million compared with NOK 19.1 million in the second quarter. Net commission income increased NOK 13.3 million to NOK 44.7 million mainly due to higher commission income from increased credit card activity. Net loss on securities and currency amounted to NOK 60.7 million, compared with a net loss of NOK 12.4 million in the second quarter. The decrease is mainly due to negative change in fair value of shares of NOK 33.3 million. In addition, a net loss on currency of NOK 4.9 million in the quarter compared with a net gain of NOK 9.7 million in the previous quarter and insurance incentives of NOK 13.1 million received in the second quarter.

Total operating expenses amounted to NOK 408.4 million, an increase of NOK 67.5 million compared to the second quarter. Personnel expenses increased NOK 11.2 million in the quarter mainly due to an employee bonus provision. Administrative expenses increased NOK 59.8 million mainly due to provision for advisors' fee in connection with the Nordax offer and increased sales expenses. Depreciation decreased by NOK 1.6 million. Other operating expenses decreased NOK 1.8 million.

Provision for loan losses were NOK 359.7 million, a decrease of NOK 10.9 million in the third quarter compared to the previous quarter. The BN Group have sold non-performing loan portfolios in both the third and second quarter resulting in combined net gains of approximately NOK 71.6 million in the third quarter and NOK 29.5 million in the second quarter reducing the loan loss provisions in the quarters. Provisions equalled 3.6% of average gross loans, compared with 3.7% in the second quarter, and adjusted for net gains from portfolio sales the provision equalled 4.2% and 3.9% of average gross loans, respectively.

Report for the third quarter 2021 Bank Norwegian Group 4