"The first quarter net profit of 42 million compares well with the 4 million loss reported over the first quarter of 2009 and also represents an improvement on recent quarters. Solvency ratios remained strong. The improvement of net profit was due wholly to the rebound of earnings at the Insurance activities. SNS Retail Bank reported an almost flat net result, with an improvement in the quality of earnings as the impact of lower incidental gains was offset by sharply higher net interest income.
Impairments on international loans pushed results into the red at SNS Property Finance but were lower than in recent quarters. Furthermore, in the first quarter we continued to make good progress in actively managing down our international loan portfolio. For SNS REAAL as a whole, results were supported by a decline in operating costs" said Ronald Latenstein, Chairman of the Executive Board.
SNS Retail Bank
Total interest income at SNS Retail Bank was up sharply. Net interest margins on mortgages continued to improve on a slightly higher mortgage portfolio, in a still contracting market. Over the first quarter, SNS REAAL's market share in new mortgages was 7.7%, below the level for 2009 as a whole (9.1%) but above the market share in the first quarter of 2009 (6.5%). Net interest income from savings deposits was sharply higher, mainly due to the combination of high retention rates and lower interest rates offered on term and sight deposits. Savings balances grew by 1 billion compared to the end of 2009 and the share of the total Dutch savings market improved to 8.9% (year end 2009: 8.7%). Included in savings balances are the so-called bank savings, nowadays used as a fiscally attractive alternative for individual unit-linked insurance. At the end of the first quarter, bank savings balances amounted to 322 million, up 68 million compared to year end 2009. Other interest income was still negatively impacted by short term interest rate movements.
Commission income was in line with previous quarters. Other income segments were sharply lower compared to last year when the buy-back of own funding paper led to an exceptionally high level of gains. The higher interest income was not sufficient to offset the sharply lower other income segments and total income declined somewhat.
Operating costs were markedly lower due to the combination of the benefits of restructuring programmes flowing through and the absence of restructuring charges. Impairments on loans were almost stable compared to the first half of 2009, at 0.17% annualised of gross outstanding loans. Net profit of SNS Retail Bank was almost flat.
SNS Property Finance
Interest income at SNS Property Finance came in lower in the first quarter, pressured by higher funding costs and a declining loan portfolio. Total commitments (gross loans including undrawn commitments) declined from 14.6 billion at year-end 2009 to 13.9 billion. Total outstanding loans, net of provisions, declined from 13.2 billion at year-end 2009 to 12.8 billion. Property projects, real estate projects where SNS Property Finance has taken control, remained stable at 0.6 billion.
The decline in loans outstanding was mostly due to the reduction of the international loan portfolio, which fell by 0.3 billion to 3.3 billion. Next to repayment of loans, the international exposure was reduced through the sale of a number of loans, most notably in the USA. Due to the shrinking non-performing loan portfolio at SNS Property Finance, non-performing loans as a percentage of gross loans outstanding declined from 11.9% at year end 2009 to 11.1%.
Operating expenses were higher than in the first half of 2009 and flat compared to the second half, due to higher advisory and restructuring costs. Impairments of 101 million in the first quarter of 2010 were higher than in the first half of 2009 but lower compared to the third (126 million) and fourth quarter ( 139 million). As in previous periods, impairments were mainly taken for the international loan portfolio, including those rel