Note 22 Alternative performance measures Alternative performance measures (APMs) are often used by investors, financial analysts and others for decision-making purposes by providing a deeper insight into the Bank’s operational and financial aspects. APMs can provide reinforcing information about Bank’s historical and present situation, and the company’s future prospects. The following APMs are used by the Bank: RETURN ON EQUITY (ROE) Return on equity (ROE) is defined as the annual profit/average quarterly equity (reduced by interest on additional tier 1 capital) expressed as a percentage. This is one of the Bank’s most important target figures and provides information on the Bank’s ability to generate a surplus from the shareholders’ investments. Amounts in NOK million 2021 2020 Profit/(loss) after tax -208.7 262.8 Interest after tax on additional Tier 1 capital -13.4 -9.3 Average equity 1.954 1.932 ROE 2021: (-208.7-13.4)/1,950 = -11.4% ROE 2020: (262.8-9.3)/1,932 = 13.1% COST PERCENTAGE The cost percentage is defined as total operating expenses excluding losses on loans and marketing expenses/net interest income and net commissions and fees. The target figure is presented to give investors, financial analysts and others an insight into how the costs correlate to revenues, and to give users of the financial reporting information regarding the development of the Bank’s operational efficiency or regarding the development of operational efficiency in the Bank. Amounts in NOK million 2021 2020 Total operating expenses excluding losses on loans and marketing expenses 415.0 388.0 Total income 876.0 1,100.0 Cost percentage 2021: 415 / 876 = 47.4 % Cost percantage 2020: 388 / 1,100.8 = 35.2 % LOSS PERCENTAGE/LOSS RATIO Adjusted loss percentage/ loss ratio is defined as the adjusted losses on loans divided by the average adjusted yearly loans to customers. The number is represented in percentage. Losses on loans is among the most significant elements in the income statement, and the development in loan loss ratio is an important key measure amongst investors, financial analytics and other to assess the be able to assess the underlying credit risk in the Bank’s loans to customers. Amounts in NOK million 2021 2020 Losses on loans 739.1 364.3 Average loans to customer 7,879.5 8,428.5 Loss percentage 2021: 739.1 / 7,879.5 = 9.4 % Loss percentage 2020: 364.3 / 8,428.5 = 4.3 % 86 Notes to the financial statements
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