SpareBank 1 Sørøst-Norge

Earnings Release • May 10, 2023

A good start to an turbulent year

A good start to an turbulent year

SpareBank 1 Sørøst-Norge delivered a good result with low losses. At the same time, loan growth is low, and it may seem that people and businesses have lower expectations for the development of their own economy according to the bank's own expectation survey.

SpareBank 1 Sørøst-Norge achieved a profit after tax of NOK 320 million in the first quarter compared to NOK 195 million in the first quarter of 2022 (pro forma SpareBank 1 Sørøst-Norge including SpareBank 1 Modum). Return on equity for the first quarter is 10.4 (6.9) percent.

The improvement in results from the same period last year is mainly due to increased net interest income. Net interest income, including commission income from credit institutions (pro forma), increased by just over 4 percent in the first quarter and 27 percent over the last 12 months. The Norwegian central bank’s policy rate has been raised 7 times in 2022 and 2023, from 0.5 percentage points at the beginning of 2022 to 3.0 percent at the end of the first quarter of 2023. The bank has adjusted customer interest rates based on changes in the policy rate by the Norwegian central bank. The latest interest rate change in March 2023 will first take effect for retail customers in mid-May 2023 and for corporate customers in mid-April 2023.

Loan growth has been low in the quarter and over the past year. In the first quarter, loan growth was negative 0.7 percent compared to 1.0 percent for the same period last year, and negative 0.8 percent for the past 12 months compared to 5.6 percent for the same period last year. The group's growth ambitions remain unchanged. The group aims to grow slightly more than the market growth in the region, but will focus on profitable growth in light of the group's financial goals.

Commission income and other income (pro forma) increased by 6.1 percent from the same period last year, mainly due to increased income from accounting services following the acquisition of Grenland Gruppen AS. Income from Grenland Gruppen AS has full effect from the first quarter.

The group's operating expenses increased by of 8.7 percent compared to the same period last year. The operating expenses in the parent bank increased by 5.9 percent. The increase in the parent bank is due to increased operating expenses from the SB1 Alliance as well as underlying wage price growth. The increase in operating expenses in subsidiaries is due to the acquisition of Grenland Gruppen AS with full effect from the first quarter of 2023.

The parent bank and the group focus on cost control. The group has a financial goal for the cost ratio to be below 40 percent. The cost ratio for the first quarter of this year is 43.3 (60.8) percent for the group, and 38.7 (57.8) percent for the parent bank.

The loan portfolio is of good quality, as evidenced by low losses on loans and guarantees. At the end of the quarter, the cost of losses is positive with a revenue recognition of NOK 1 million. We do not see a significant increase in defaults for the first quarter.

The bank changed lending and deposit rates following the Norwegian central bank's interest rate decision in March. A general increase in market rates is expected to improve the group's net interest margin and earnings.

Increased interest rates and increased competition, especially in the mortgage loan segment, may have contributed to for the low loan growth in the fourth quarter of 2022 and the first quarter of this year.

At the end of the quarter, the bank's common equity Tier 1 ratio was 19.1 (18.5 pro forma) percent and the leverage ratio was 8.3 (8.3 pro forma) percent on a consolidated basis.

At the end of April, it was announced that Sparebanken Sogn og Fjordane is buying into SamSpar and SpareBank 1, which means that the bank is reducing its ownership stake. There are still some details to be worked out in the settlement calculations for the transaction, but a preliminary estimate of the gain for SpareBank 1 Sørøst-Norge is expected to be in the range of 50 to 55 million Norwegian kroner for the parent bank.

Key highlights for the first quarter of 2023 (figures in brackets are pro forma for the first quarter of 2022):

• Net profit of 320 (195) million kroner

• Return on equity of 10.4 (6.9) percent - adjusted for one-off costs in 2022, 9.6 percent

• Increased net interest income including credit institutions of 523 (410) million kroner

• Improved financial results of 33 (27) million kroner

• Increased operating expenses excluding merger one-off costs of 314 (289) million kroner;

merger one-off costs of 0 (75) million kroner

• Loan loss provision excluding merger effects of -1 (-11) million kroner

• Loan and deposit growth for the last quarter of -0.7 (1.0) percent and 0.1 (1.9) percent respectively, and for the last 12 months of 0.8 (5.6) percent and -0.6 (8.5) percent respectively

• Very strong solvency with a common equity Tier 1 ratio of 19.1 (18.5) percent for the bank

The quarterly report can be downloaded in its entirety from the bank's website, sparebank1sorost.no.

*) Figures in brackets indicate the amount for the corresponding period in 2022 pro forma for SpareBank 1 Sørøst-Norge.

Sandefjord, May 10, 2023

Contact people:

Per Halvorsen, CEO, phone +47 934 07 441

Roar Snippen, CFO/IR, phone +47 976 10 360

This information is disclosed in compliance with section 5-1 of the Securities Trading Act.