SpareBank 1 Sørøst-Norge

Earnings Release • Aug 8, 2024

The growth is back in a challenging market

The growth is back in a challenging market

SpareBank 1 Sørøst-Norge’s profit in second quarter of 2024 was NOK 350 million. SpareBank 1 Sørøst-Norge maintains focus on “business as usual” and delivers on targets as communicated to the market.

The result for the quarter is driven by increased net interest income and other incomes. The reduction in profit is mainly due to the dividend received in the first quarter, as well as a write-down of the equity stake in Kredinor and a negative value change on fixed-rate derivatives.

Systematic efforts are paying off, and we can once again report growth in a challenging market. High quality in the portfolio has resulted in revenue recognition of NOK 5 million for the quarter.

Taking into account one-time cost of NOK 4.6 million this quarter and NOK 2.7 million in the previous quarter, the return on equity was 10,8 percent in the quarter compared to 11,9 percent in the previous quarter. Revenues before finance have improved with NOK 53 million compared to the previous quarter, while total operating expenses have increased NOK 14 million compared to the previous quarter. The increase in operating expenses is due to costs related to the employee equity certificate savings program, merger costs, and costs associated with increased activity at estate agency business.

Net interest income, including commission income from credit institutions, has increased by 2,2 percent during the quarter (NOK 12 million). The net interest margin is positively affected by the interest rate change from December 2023, which took effect for personal customers from March 10, 2024, and thus had a full effect from the second quarter. Additionally, the net interest margin is affected by increased growth.

Other commission income has increased by NOK 7 million during the quarter, mainly due to an increase in payment processing and securities trading/management. Other income is up NOK 34 million, due to increased revenues from estate agency business.

Net financial result is NOK 25 million, which is a decrease of NOK 91 million from the previous quarter. Dividends from SpareBank 1 Boligkreditt and SpareBank 1 Næringskreditt were recognized in the previous quarter at NOK 57 million, while dividends from SpareBank 1 Forvaltning and SpareBank 1 Markets, as well as Eksportfinans income, were recognized in the second quarter at NOK 14 million.

In the second quarter, Kredinor became a subsidiary of SpareBank 1 Gruppen because of the convention of subordinated loans to equity. The acquisition analysis conducted in connection with the consolidation of Kredinor as a subsidiary (68.64 percent) resulted in a further NOK 234 million write-down of the stake. Of this, SpareBank 1 Sørøst-Norge’s share amounted to NOK 14 million. SpareBank 1 Sørøst-Norge’s share amount of SpareBank 1 Gruppen's net profit after tax for the second quarter was NOK 0.1 million, and BN Bank ASA was NOK 16 million. Other financial investments have a negative result of NOK -4 million.

Operating expenses is NOK 349 million in the quarter, which has increased by NOK 14 million from the previous quarter. The group has a financial goal for the cost-to-income ratio to be below 40 percent. The cost-to-income ratio excluding one-time costs for the second quarter is 43.0 percent for the group and 38.6 percent for the parent bank.

The loan growth increased this quarter and ended at 1.1 percent for the quarter, which, when annualized, will result in an annual growth of 4.3 percent. Over the last 12 months, loan growth has been 1.9 percent. The loan portfolio is considered to have good quality, reflected in low loan losses. 99 percent of the loan portfolio is classified in stages 1 and 2. Loss provisions for the quarter amount to income of NOK 5 million, of which net realized losses amount to NOK 0 million in the quarter.

The common equity Tier 1 capital ratio for the group is calculated to be 19.2 percent (this calculation includes the share of the year-to-date profit in 2024 of 31 percent). 19.4 percent if incl. 50 percent of year-to date profit which is the same level as the end of the year. The decrease is primarily explained by the repurchase of mortgage loans from SpareBank 1 Boligkreditt, where the risk weight differs from that of the parent bank.

On October 26, 2023, the Board of Directors announced a plan to merger with SpareBank 1 SR-Bank ASA and SpareBank 1 Sørøst-Norge. On December 5. 2023, the merger plan was unanimously approved by the Supervisory Board of SpareBank 1 Sørøst-Norge. On April 17, the Norwegian Competition Authority announced that they had no comments to the merger plan and that they concluded their review of the application. On June 20, the Financial Supervisory Authority of Norway granted the approvals necessary to implement the merger, with certain conditions as stated in the stock exchange announcement on June 21, 2024. The Ministry of Finance's decision on tax exemption for the merger was received on June 25. Preparations for the merger between the banks are being carried out by a dedicated project organization and are on schedule as of the end of the second quarter. The planned completion date for the merger remains October 1, 2024.

Highlights from the second quarter of 2024 (figures in brackets concern the second quarter of 2023)

• Ordinary profit after tax of NOK 350 million (NOK 387 million)

• EPS group NOK 1.48 (1.65)

• Return on equity 10.7% (12.4%) adjusted for one-time effects the return on equity was 10.8% (12.5%)

• Net interest income, inclusive of mortgage credit institutions, of NOK 571 million (NOK 530 million)

• Net other commission and other income NOK 204 million (NOK 201 million)

• Net income from financial assets NOK 25 million (NOK 52 million)

• Results from SpareBank 1 Gruppen/SamSpar and BN Bank ASA of NOK -0,1 million (NOK -1 million) and NOK 16 million (NOK 12 million), respectively

• Losses on loans income NOK 5 million (income NOK 34 million)

• Lending and deposit growth in the past quarter was 1.1% (0.2%) and 4.6% (3.5%), respectively.

• Common Equity Tier 1 capital ratio 19.2% (19.4%)

Highlights from the first half of 2024 (figures in brackets concern the first half of 2023)

• Ordinary profit after tax of NOK 738 million (NOK 707 million)

• EPS group NOK 3.12 (3.01)

• Return on equity 11.5% (11.3%) adjusted for one-time effects the return on equity was 11.6% (11.3%)

• Net interest income, inclusive of mortgage credit institutions, of NOK 1.129 million (NOK 1.053 million)

• Net other commission and other income NOK 368 million (NOK 372 million)

• Net income from financial assets NOK 141 million (NOK 85 million)

• Results from SpareBank 1 Gruppen/SamSpar and BN Bank ASA of NOK 13 million (NOK 12 million) and NOK 33 million (NOK 25 million), respectively

• Losses on loans NOK 19 million (income NOK 34 million)

• Lending and deposit growth last year was 1.9% (-0.6%) and 0.9% (0.0%), respectively.

The full quarterly report can be downloaded from the Bank’s website sparebank1sorost.no

Sandefjord, 08.08.2024

For further information:

Per Halvorsen, CEO, Tel. +47 934 07 441

Roar Snippen, CFO/IR, Tel. +47 976 10 360

This information must be disclosed pursuant to section 5-12 of the Securities Trading Act.