SpareBank 1 Østlandet’s consolidated profit after tax for the third quarter was NOK 417 (441) million and the return on equity was 8.3 (9.4) per cent.
The results for the quarter were characterised by solid growth in interest income, while loan loss provisions for a selected few individual corporate exposures were increased. Financial items made a negative contribution, mainly due to the weak results of SpareBank 1 Gruppen. Commission income was slightly lower than in the same quarter last year, particularly due to last year’s demerger in SpareBank 1 ForretningsPartner Østlandet AS.
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Banking operations doing well
“We are very satisfied with underlying banking operations this quarter. We have seen solid growth in lending with a 12-month growth rate of 5.4 per cent and 1.4 per cent for the quarter in isolation. Improved deposit margins contributed to continued higher interest margins, while lending margins were weaker due to increased funding costs,” says CEO Richard Heiberg.
Lower expectations and increased provisions for credit losses
The Bank’s survey of expectations and the report from Norges Bank’s regional network show that businesses in the market area are relatively pessimistic about the economy going forward. Business investment is the main driver behind the Bank’s lending to the business sector. It is reasonable to assume that poorer prospects will mean somewhat lower growth in business investments and demand for credit going forward. A few corporate customers experienced increasing challenges during the third quarter and the Bank has, therefore, increased its individual provision for credit losses. Model-based provisions for credit losses were increased moderately due to higher interest rate expectations, but net write-offs remain low.
Customers adapt
Although some sectors have been hit harder by higher interest rates and reduced activity, it looks like the regional economy has remained solid for people and businesses in general. Our customers appear to adapt their financial situation well to new economic conditions. The share of retail customers with interest-only mortgages is low and stable, and defaults remain very low. We have seen no increase in mortgages going to debt collection. There is a growing need for financial advice, and our advisors are ready to help customers experiencing problems. Together with our customers, we find good solutions.
Intensifying sustainability efforts to achieve the Bank’s ambitions for net zero
In collaboration with EiendomsMegler 1 Innlandet (real estate agent) and Takstgruppen AS (home appraiser), SpareBank 1 Østlandet has launched a pilot project called “Plan for energy efficiency” (or the “Green page”) to work together on providing advice on green loans and energy efficiency measures for homes. The aim is to help customers upgrade their homes to reduce energy consumption, make forward-looking decisions with respect to their homes, and to save costs. This also helps customers meet the requirements for lower interest green loans and support from the government entity ENOVA. This in turn helps reduce CO2 emissions in the Bank’s lending portfolio.
Outlook
Despite weaker business expectations, the Bank’s longer term growth opportunities are considered strong. SpareBank 1 Østlandet enjoys a solid market position with high customer satisfaction, sound financial strength and a competent organisation that is present where the customer wants to meet us. The Bank’s lending practices are conservative. Nevertheless, it is likely that more customers will experience financial challenges in the coming period.
“In such a situation, a bank with in-depth local knowledge offering good professional advice is especially valuable for customers. The Bank will continue to help with good solutions for its customers, including those experiencing tougher times,” says Richard Heiberg.
Third quarter of 2023 (Consolidated figures. Figures in brackets concern the corresponding period in 2022)
• Profit after tax: NOK 417 (441) million
• Return on equity: 8.3 (9.4) per cent
• Earnings per equity capital certificate: NOK 2.41 (2.58)
• Net interest income: NOK 941 (694) million
• Net commissions and other operating income: NOK 358 (385) million
• Net income from financial assets and liabilities: NOK -63 (10) million
• Total operating expenses: NOK 533 (496) million
• Net loan loss provisions were NOK 134 (19) million.
• Lending growth in the last quarter, including mortgages transferred to the covered bond companies: 1.4 (1.8) per cent
• Growth in deposits in the last quarter: -1.9 (-1.1) per cent
• Lending growth in the past 12 months, including mortgages transferred to the covered bond companies: 5.4 (9.6) per cent
• Deposit growth in the past 12 months: 5.0 (8.4) per cent
• Common Equity Tier 1 capital ratio: 17.7 (18.2) per cent
• The Bank’s green loans (incl. loans transferred to the covered bond companies) amounted to NOK 39 (31) billion at the end of the third quarter
Contact information:
Richard Heiberg, Group CEO, Tel.: +47 902 06 018
Geir-Egil Bolstad, CFO, Tel.: +47 918 82 071
Bjørn-Erik Orskaug, Head of Investor Relations, Tel.: +47 922 39 185
Siv Stenseth, EVP Communication and Social Affairs, Tel.: +47 958 46 991
This information must be disclosed pursuant to section 5-12 of the Securities Trading Act.
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