SpareBank 1 Østlandet (SPOL): A quarterly result characterised by solid underlying banking operations, but increased provisions for credit losses

27 Oct 2023 07:00 CEST

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.

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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602353_SPOL_2023Q3_ENG_quartely report.pdf
602353_SPOL_20233Q_ENG_Quarterly presentation.pdf