SpareBank reports a net profit of NOK526.5 million from ordinary operations
OSLO: The SpareBank 1 BV Group has reported a net profit from ordinary operations before losses of NOK 526.5 million. Earnings after tax were NOK 426.2 million, which represents 1.50% of average total assets. The Group’s annualised return on equity was 12.1%.
The Group’s annualised return on equity as at 30.09.2019 was heavily affected by gains from the insurance merger (Fremtind) of NOK 71.9 million, while the corresponding period last year was affected by the sale of own commercial buildings for NOK 90.7 million and a one-time effect from winding up defined-benefit pension schemes of NOK 92.2 million. Without these items, the Group’s annualised return on equity was 10.0%.
Net interest income amounted to NOK 469.2 million. Net interest income as a percentage of average total assets was 1.65%.
At the end of the quarter, the Bank had transferred mortgages worth NOK 12,009 million to SpareBank 1 Boligkreditt AS, and NOK 549 million to SpareBank 1 Næringskreditt AS. Earnings from these loan portfolios are shown under net commission income and amounted to NOK 74.3 million.
Lending rates increased by up to 0.25 percentage points in the third quarter. The interest rate change took full effect from September. Compared to the second quarter of 2019, net interest income (excluding mortgage companies) increased by NOK 20.4 million.
Based on the continued increase in money market rates, and the rise in the key interest rate from Norges Bank on 19 September, the bank has decided to increase deposit and lending rates by up to 0.25 percentage points from 14 November.
The Group’s total assets amounted to NOK 38.724 billion. This represents an increase of NOK 2.24 billion over the last 12 months.
The Board is satisfied with the profits recorded for the core business during Q3 of 2019. The changes in rates of interest adopted in August will take full effect during Q4. In addition, the adopted change in interest rates that will take effect from mid-November will have a positive effect on interest margins in the fourth quarter of 2019.
The Group is financially strong and has very good liquidity.
The proposal for amended capital requirements from the Ministry of Finance entails equal treatment of IRB and standard banks in terms of the increase in the systemic risk buffer by 1.5 percentage points. The Board believes that tighter capital requirements for standard banks in parallel with the removal of the Basel 1 floor for IRBA banks will cause some distortion of competition for the lending business in favour of Norwegian and Nordic banks with IRB approval.
The Financial Supervisory Authority of Norway has proposed substantial changes to the Mortgage Regulation from 2020. The Board is of the view that the current Mortgage Regulation has worked as intended and that current developments do not necessitate any significant changes.
There remains good growth in the Norwegian economy and continued positive development is expected in 2019. Exports are currently benefitting exponentially from the very weak NOK at present. The labour market has improved and the registered unemployment rate has fallen. The growth in house prices has been moderate so far this year. The growth in household debt is stable, but still above wage growth. Continued sluggish development of the NOK may result in increases to the Norges Bank key interest rate, but is is likely that the peak has been reached for interest rates in the medium-term.
It is assumed that higher interest rates, ongoing international unrest and relatively weak GDP growth in many of Norway’s trading partners over a slightly longer time horizon could combine to slow the growth in the Norwegian economy.
There are good prospects in the Group's market areas with low unemployment, a stable housing market and good conditions for local business. Lending growth in the retail market is expected to remain in line with market growth nationally, while moderate growth in the corporate market is expected.