Sparebanken Møre Group
Presentation 1st quarter 2022
Runar Sandanger Senior Economist (SVP) Finance 28. April 2022
Contents
- Introduction and highlights
- Outlook and Main Targets
- Results
- Deposits and Loans
- Liquidity and Capital
Q1 2022 - highlights
Balance growth
Lending growth was 3.9 per cent over the last 12 months. Growth in deposits was 7.9 per cent
Net Interest Income
In NOK: 334 million In per cent: 1.62
Efficiency
Cost/Income ratio at 46 per cent in the quarter
Losses
NOK 0 million (0.00 per cent) in losses on loans and guarantees
Strong liquidity and solidity
Deposit-to-loan ratio at 61.5 per cent, LCR at 143 and CET1 at 17.2 per cent. Leverage Ratio at 7.7 per cent
Return on Equity ended at 9.3 per cent for the first quarter of 2022
Results in Q1
Profit per Equity Certificate in the first quarter of 2022 is NOK 7.85 (the Group) against NOK 8.26 (the Group) in the first quarter of 2021.
Profit after tax - NOK million
Results compared
Results in Q1 2022 vs. Q1 2021
The bank's net interest income is 9. 9 per cent higher than last year.
Other income reflects inter alia lower markto-market valuation of the bank`s LCR portfolio. Customer related other income shows a positive development compared to Q1 2021.
The costs are somewhat higher compared with the same period in 2021.
NOK 0 million in losses in Q1 is NOK 14 million lower compared to last year.
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Key figures by quarter end
Return on Equity Cost/Income
11,6
10,6
0,07
In per cent of Average Assets
0,14
Losses on Loans and Guarantees Common Equity Tier 1 Capital (CET1)
8,6
2018 2019 2020 2021 Q1 22
9,5 9,3
Q1 21 Q2 21 Q3 21 Q4 21 Q1 22
0,01
0,03
0,00
Balance sheet and key figures
|
31.03.22 |
31.03.21 |
Changes |
|
| Balance in NOK million |
|
|
NOK |
% |
| Total Assets |
83 805 |
81 072 |
2 733 |
3.4 |
| Loans to customers |
70 380 |
67 711 |
2 669 |
3.9 |
| Deposits from customers |
43 501 |
40 301 |
3 200 |
7.9 |
| Net Equity and Subordinated Loans |
7 392 |
7 078 |
314 |
4.4 |
| Key Figures |
31.03.22 |
31.03.21 |
Changes p.p. |
| Return on Equity |
9.3 |
10.2 |
-0.9 |
Cost/Income
ratio |
46.0 |
39.9 |
6.1 |
| Total Capital |
20.8 |
20.6 |
0.2 |
| Tier 1 Capital |
18.8 |
18.6 |
0.2 |
| CET1 |
17.2 |
16.9 |
0.3 |
| Leverage Ratio |
7.7 |
7.7 |
0.0 |
Profit per EC (NOK, the
Group) |
7.85 |
8.26 |
-0.41 |
| Profit per EC (NOK, the Bank) |
17.34 |
17.20 |
0.14 |
MORG – very strong Total Return LYTD
- MORG increased by 55.3 per cent during 2021, more than the average growth (51.5 per cent) in the EC-market in the same period (Total Return for the EC-index (OSEEX)) consisting of the larger savings banks)
- The positive price development has continued into 2022, Total Return on MORG was 2.93 per cent in Q1 compared to 3.30 per cent for OSEEX
- The CET1-ratio ended at 17.2 per cent by quarter end
Development at Oslo Stock Exchange YTD (MORG vs. EC-index)
Outlook for the region and the bank
- The outlook for global economic growth has weakened as a result of the war between Russia and Ukraine. The adopted sanctions will lead to reduced international trade. High inflation also has a dampening effect on growth. This is because high inflation reduces households' purchasing power and increases companies' costs
- To alleviate inflationary pressures, several central banks have begun to raise key interest rates
- Norges Bank raised the key interest rate by 0.25 p.p. to 0.75 per cent in connection with the interest rate decision on 24 March. Furthermore, the interest rate path indicates another three interest rate increases this year and four interest rate hikes in 2023
- The level of activity both in Norway and in Møre og Romsdal is high. As a result, unemployment has fallen almost continuously since the first reopening of society in the spring of 2020. At the end of March, the number of completely unemployed in the county was 1.8 per cent of the labor force. The corresponding unemployment rate for the country as a whole was 2.0 per cent. Following the abolition of the infection control rules in February, production has picked up well in service industries such as transport, hotels and restaurants and tourism
- The bank has a solid capital base and strong liquidity and will continue to be a strong and committed supporter for our customers. The focus is always on having good operations and profitability
Financial targets remain unchanged
Sparebanken Møre's strategic financial performance target is a return on equity exceeding 11 per cent and a cost income ratio below 40 per cent.
The Board of Directors expects the financial target figures to be achieved in 2022.
Results
Total Income
Total income - NOK million
Total income
Net Interest Income Other Income
Net Interest Income rebounds
Net Interest Income - NOK million
Net Interest Income
Q1-21 Q2-21 Q3-21 Q4-21 Q1-22
Q1-21 Q2-21 Q3-21 Q4-21 Q1-22
Quarterly development in Other Income
- The development in the quarter is affected by negative value adjustments on the financial instruments
- Other income, excluding financial instruments, shows a good development and has increased by NOK 6 million (12.2 per cent) compared with the same period last year
- Skilled customer advisers and more investment in areas such as asset management and real estate brokerage are contributing to increased income. In addition, the prospects of a high level of activity in these areas are good also going forward
Other Income - NOK million
Other Income
Other Income Financial Instruments
Q1 21 Q2 21 Q3 21 Q4 21 Q1 22
Costs control
- Costs in the first quarter of 2022 were NOK 23 million higher than in Q1 2021
- The costs in the quarter were affected by both non-recurring costs and costs as a result of a strengthened focus on further growth
- Non-recurring costs in the quarter amount to approximately NOK 12 million
- We expect lower costs in the quarters ahead
- The target of a cost/income ratio below 40 per cent remains unchanged
Operating Costs - NOK million
Operating Costs
Cost/Income ratio Total Assets and Man Years
- Total Assets in NOK billion
Losses and portfolio quality
- The quarterly accounts are not charged with losses
- Positive development in creditimpaired commitments
- Close customer follow-up is a key part of our business model and clearly one of the reasons for the bank's low losses over time
- Proximity and specialist expertise are a reassurance for both customers and the bank
Losses on loans and guarantees - NOK million
Q1-21 Q2-21 Q3-21 Q4-21 Q1-22
Credit impaired committments (net)
-per cent of loans/guarantees
Losses on loans and guarantees
Q1-21 Q2-21 Q3-21 Q4-21 Q1-22
Impairments
Individual impairments on other credit-impaired commitments
17
ECL-impairments on loans and guarantees
Losses by sector
Losses on loans and guarantees
Credit-impaired loans
Total impairments in % of Credit-impaired Loans and Guarantees
Credit-impaired Loans are loans and guarantees more than 90 days overdue and loans with individually assessed impairments.
Results in details
|
Q1 2022 |
|
Q1 2021 |
|
Changes |
|
| Results (NOK million and %) |
NOK |
% |
NOK |
% |
NOK |
p.p. |
| Net Interest Income |
334 |
1.62 |
304 |
1.53 |
30 |
0.09 |
| Net Income Financial Investments |
-31 |
-0.15 |
8 |
0.04 |
-39 |
-0.19 |
Gains/losses
liquidity portfolio |
11 |
0.05 |
10 |
0.05 |
1 |
0.00 |
| Gains/losses on shares |
18 |
0.09 |
16 |
0.09 |
2 |
0.00 |
| Other Income |
55 |
0.27 |
49 |
0.24 |
6 |
0.03 |
| Total Other Income |
53 |
0.26 |
83 |
0.42 |
-30 |
-0.16 |
| Total Income |
387 |
1.88 |
387 |
1.95 |
0 |
-0.07 |
| Salaries and wages |
105 |
0.51 |
86 |
0.43 |
19 |
0.08 |
| Other costs |
73 |
0.35 |
69 |
0.35 |
4 |
0.00 |
| Total operating costs |
178 |
0.86 |
155 |
0.78 |
23 |
0.08 |
| Profit before losses |
209 |
1.02 |
232 |
1.17 |
-23 |
-0.15 |
Losses on loans, guarantees
etc |
0 |
0.00 |
14 |
0.07 |
-14 |
-0.07 |
| Pre-tax profit |
209 |
1.02 |
218 |
1.10 |
-9 |
-0.08 |
| Taxes |
46 |
0.22 |
48 |
0.24 |
-2 |
-0.02 |
| Profit after tax |
163 |
0.80 |
170 |
0.86 |
-7 |
-0.06 |
Balance sheet
High activity and good growth
- Over the last 12 months, there has been an increase in lending to customers of a total of NOK 2,669 million, corresponding to 3.9 per cent
- In the corporate portfolio, we periodically have larger withdrawals on construction loans, upon conversion to final financing, this will lead to volatility in the lending volume
- The high level of deposit growth has continued this year
- We see a clear potential for growth in our market area and have strengthened the offices to ensure good activity and high availability
Loans Deposits
- NOK billion and per cent (y/y) - NOK billion and per cent (y/y)
Customer lending has increased by 3.9 % over the last 12 months.
Deposit growth of 7.9 % over the last 12 months.
High deposit-to-loan ratio of 61.5 %
Lending
Retail market Corporate market
Retail lending has increased by 4.1 % over the last 12 months
Loans to the retail market amount to 67.7 % of total loans
Corporate lending has increased by 3.8 % over the last 12 months
Loans to the corporate market amount to 32.3 % of total loans
Diversified loan book
Loans by sector
- The bank has a stable share of commitments towards the corporate sector
- There is good industry risk diversification and a persistently low level of risk in the portfolio
- We see limited effect of the Ukraine situation
Other;
Financial services
1.1 %
Other
Industry
2.3 %
Building
and Construction
1.4 %
Fishing Industry
1.2 %
Retail/wholesale
trade
1.6 %
Ship
Yards
0.4 %
Agriculture
0.9 %
Other
0.8 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Important area for seafood exports
- Our county, Møre og Romsdal, accounts for almost 30 per cent of the total seafood exports from Norway
- Despite the tense global trade situation, the export value of Norwegian seafood has never been higher in a first quarter than in 2022. In the first three months of the year, Norway exported seafood to a value of NOK 34 billion. This is a growth in value of 22 per cent, or NOK 6.2 billion, measured against the first quarter last year
- 15 per cent of the bank`s lending volume to corporate customers is related to fisheries
- The bank has its own industry group for Marin, staffed by authorized financial advisers with industry specialization in fisheries, the fishing industry and aquaculture
Low exposure towards Oil Services
1,8 %
Expected Credit Losses
| (EAD in NOK million) |
Loa
ns |
Guarantees |
Total
EAD* |
Individually
assessed
impairments |
ECL-IFRS 9 |
Total |
Per cent
of
EAD |
Low
Risk (Risk Class A-C) |
257 |
57 |
314 |
0 |
2.5 |
2.5 |
0.8 % |
| Medium Risk (Risk Class D-G) |
12 |
95 |
107 |
0 |
0.2 |
0.2 |
0.2 % |
| High Risk (Risk Class H-M) |
227 |
169 |
396 |
0 |
11.2 |
11.2 |
2.8 % |
Loans and guarantees
with
individually
assessed
impairments |
790 |
105 |
894 |
215 |
- |
215.0 |
24.0 % |
| Total |
1,285 |
426 |
1,712 |
215 |
13.9 |
228.9 |
13.4 % |
Good quality in our retail portfolio
- Low risk in the portfolio with a large proportion of loans below 85 per cent loan-to-value ratio
- The proportion of customers with payment problems is low and there are few customers who request an installment exemption
- Many customers have made extraordinary repayments of their loans through the pandemic and many have also built good liquidity buffers
Deviation from Boliglånsforskriften reported in the first quarter of 2022 were 7.8 % ( max. 10 %) outside Oslo, and 7.9 % (8 %) in Oslo
61,0 % 20,0 % 10,0 % 6,0 % 2,0 % 1,0 %
97 % of mortgages are within 85 % of LTV
House prices Price per square meter
- Based on pre-owned dwellings sold in March 2022, Norwegian seasonal adjusted house prices increased by 1 per cent last month
- Last twelve months Norwegian house prices have increased in average by 6.2 per cent
- The City of Ålesund and the Mid-Norway region has over time experienced moderate growth in house prices compared to the national average, both indexed development and in price per square meter
Indexed development - January 2015 = 100
- January 2015 – March 2022
Key information
on
pre-owned
dwellings
sold in March
2022 |
Norway |
Mid-Norway |
Greater
Ålesund |
City of
Oslo |
| Seasonal adj. development month |
+1.0 % |
+0.8 % |
+0.8 % |
+0.8 % |
Development
12 months |
+6.2 % |
+7.6 % |
+5.3 % |
+4.1 % |
Per square
meter (NOK) |
49,858 |
39,080 |
32,691 |
86,639 |
Average
number
of
days
on
market |
30 days |
38 days |
57 days |
16 days |
Price median dwelling
(NOK) |
3,643,674 |
3,050,000 |
2,900,000 |
4,933,500 |
Deposits
Retail market Corporate and public - NOK billion and per cent y/y - NOK billion and per cent y/y
- Good deposit growth in the quarter and deposits increased by 7.9 per cent y/y (MNOK 3,200)
- Strong deposit development in the corporate market with a growth of 9.1 per cent
- Growth in the retail market also strengthened during the first quarter and ended at 7.1 per cent y/y
2018
2019
2020
2021
Q1 2022 |
| ----------------------------------------- |
Retail deposits have increased by 7.1 % over the last 12 months Deposits from the retail market amount to 58.3 % of total deposits
2018 2019 2020 2021 Q1 2022
Deposits from corporate and public customers have increased by 9.1 % the last 12 months
Liquidity and Capital
Deposits from customers and market funding – strong rating
Deposits are the Group`s most important source of funding
Sparebanken Møre`s strong capital provides competitive financing
- Our deposit-to-loan ratio stood at 61.5 per cent by quarter end
- Total net market funding ended at NOK 30.4 billion by end of Q1 2022 more than 90 per cent with remaining maturity of more than one year
- Senior Bonds: Weighted average maturity of 2.40 years (FSA defined key figures)
- Covered Bonds issued through Møre Boligkreditt AS have a weighted average maturity of 3.29 years (FSA defined key figures)
- January 2021, Moody`s upgraded the banks rating from A2- stable to A1 with stable outlook. Issuances from Møre Boligkreditt AS are rated Aaa
- The Group's first green market financing was established when Møre Boligkreditt AS entered the euro market on 21 September 2021 with a 5 year semi-benchmark (EUR 250 million inaugural green covered bond). The issue was very well received
- In January this year, Sparebanken Møre further issued its first green senior non preferred bond (SNP) with a first tranche of NOK 1.0 billion of a limit of NOK 1.5 billion. The loan has a maturity of 6 years. Through this issue and with a total of NOK 2.0 billion issued, the bank is well on track with the linear phasing in of the new capital class
Strong Capital
CET1 capital in Sparebanken Møre
- % of risk weighted assets
.
CET1 requirement for Sparebanken Møre
-
% of risk weighted assets
-
In a letter from Finanstilsynet (FSA) dated 27.04.2022, the Pillar 2 requirement for Sparebanken Møre is finally set at 1.7 per cent, while FSA expects a P2G margin of minimum 1.25 per cent. The requirements must be met with CET1 capital
- Sparebanken Møre's future capital planning will be based on a CET1 ratio target that – as a minimum – will amount to the sum of Pillar 1 and Pillar 2 requirements plus the Pillar 2 Guidance
CRD V/CRR 2 is expected to have a positive effect of 1.3 p.p from 1.6.2022
Development in CET1
Changes in CET1 from year end 2021
Dividend policy
MORG – price and Price/Book (P/B) value
- Sparebanken Møre aims to achieve financial results providing a good and stable return on the bank's equity capital
- Sparebanken Møre's results should ensure that the owners of the equity receive a competitive long-term return in the form of cash dividends and capital appreciation on their equity
- Unless the capital strength dictates otherwise, about 50 per cent of the profit for the year will be distributed as dividends
Equity per MORG is calculated on Group figures
Equity Capital in Sparebanken Møre
- The PCCs/ECs of Sparebanken Møre (MORG) have been listed at Oslo Stock Exchange since 1989. Sparebanken Møre was the first Norwegian savings bank to be listed at OSE
- Total EC capital was NOK 989 million by March 2022
- Good Total Return over many years the figure below shows Total Return on MORG vs the broad Oslo Børs index OSEBX since the beginning of 2000
- Paid dividend is NOK 16 per EC for the financial year 2021
| Annual dividend per EC (NOK) |
|
|
|
|
|
|
| 1990 |
10 |
2006 |
20 |
|
|
|
| 1991 |
0 |
2007 |
23 |
|
|
|
| 1992 |
0 |
2008 |
20 |
|
|
|
| 1993 |
13 |
2009 |
12 |
|
|
|
| 1994 |
12 |
2010 |
12 |
|
|
|
| 1995 |
13 |
2011 |
8 |
|
|
|
| 1996 |
13 |
2012 |
12 |
|
|
|
| 1997 |
13 |
2013 |
8 |
|
|
|
|
|
|
|
|
|
|
| 1998 |
15 |
2014 |
13.50 |
| 1999 |
16 |
2015 |
11.50 |
| 2000 |
17 |
2016 |
14.00 |
| 2001 |
17 |
2017 |
14.00 |
| 2002 |
15 |
2018 |
15.50 |
| 2003 |
16 |
2019 |
14.00 |
| 2004 |
18 |
2020 |
3.50+9.00 |
2005
Dividend and EC-price |
20 |
2021 |
16.00 |
|
|
|
|
Equity Capital in Sparebanken Møre
About equity certificates (EC)
- Equity certificates are a special kind of equity instrument first introduced by savings banks in 1988. A total of 32 banks have now issued such certificates, and 19 of them are listed on the stock exchange
- Equity certificates are an important part of savings banks' capital base and confer ownership of between 14 % and 97 % of the individual bank
- A savings bank that has issued equity certificates has two types of equity. One is its primary capital, or "ownerless" equity, consisting of retained earnings built up by the bank over the years. The other is the certificate-holders' equity, consisting of equity certificate capital and related reserves (equalization reserve and premium account)
- Equity certificates have clear similarities to shares. The main difference is the owners' rights to the bank's assets and influence over the bank's governing bodies. The key principle is that profits are distributed proportionally on the basis of ownership share and the bank's other capital
- In a limited company, losses hit shareholders' equity directly. In a savings bank, losses are first absorbed by the primary capital and the equalization reserve before hitting the equity certificate capital
Source: The Norwegian Savings Bank Association https://www.sparebankforeningen.no/en/egenkapitalbevis/about-equity-certificates/
Contact
sbm.no facebook.com/sbm.no @sbmno engasjert.sbm.no
CEO Trond Lars Nydal
+47 951 79 977 [email protected]
Senior Economist (SVP) Finance Runar Sandanger
+47 950 43 660 [email protected]
Disclaimer
This presentation has been prepared solely for promotion purposes of Sparebanken Møre. The presentation is intended as general information and should not be construed as an offer to sell or issue financial instruments.
The presentation shall not be reproduced, redistributed, in whole or in part, without the consent and Sparebanken Møre. Sparebanken Møre assumes no liability for any direct or indirect losses or expenses arising from an understanding of and/or use of the presentation. of Sparebanken Møre.