The bank is well capitalised and has a solid equity situation. At the end of the quarter, the Group’s leverage ratio totalled 9.2 percent, while its common equity tier 1 (CET1) capital ratio was 15.8 percent, which is well above the regulatory authorities’requirements.
The Group made a profit before tax of NOK 345 million in the first quarter 2021. This is NOK 123 million more than in the corresponding period last year, which was affected by the market turbulence caused by the Covid-19 pandemic. The Group achieved a return on equity of 8.4 percent in the first quarter 2021.
Reduced net interest income
Net interest income totalled NOK 451 million in the first quarter 2021. This is NOK 74 million less than in the corresponding period last year. The low interest rate has significantly affected the bank’s interest margin over the past year.
Increase in financial income
Net income from financial instruments totalled NOK 8 million in the first quarter 2021, up from NOK -69 million in the corresponding period last year. The financial markets have remained relatively stable through the first quarter 2021.
Positive development from subsidiaries and associates
The associates Frende and Brage made positive contributions in the first quarter 2021. Associates contributed a total of NOK 29 million in the quarter, up from NOK -12 million in the same period last year.
The bank’s subsidiary Sørmegleren has also seen a strong increase in profits, and contributed NOK 4.5 million in the first quarter 2021.
Cost-income ratio among the best thanks to good cost control
In the first quarter 2021, operating expenses totalled NOK 242 million, compared with NOK 232 million in the first quarter 2020. The NOK 10 million increase is attributable primarily to Sørmegleren’s higher levels of activity, while costs in the banking operations are on a par with 2020.
With an cost-income ratio of 38.4 percent in its banking operations, Sparebanken Sør retains its position as one of the most cost-effective banks in the business.
Net entry on losses on loans and low level of non-performing loans
Net entry on losses on loans totalled NOK 11 million in the first quarter 2021. The corresponding figure in 2020 was a loss expenses NOK 61 million. There has been an improvement in the macro-picture, which has resulted in lower model-based losses on loans.
Non-performing loans totalled NOK 946 million at the close of the first quarter 2021, down from NOK 1 186 million at the corresponding period last year.
The level of losses and non-performing loans is considered low given the challenging period the Norwegian economy has been through, and demonstrates the high quality and low risk profile of the bank’s lending portfolio.
Strong lending and deposit growth
In the past 12 months, gross lending increased by 4.8 percent, while deposits grew by 5.5 percent.
The bank has experienced a notable increase in current account deposits from private customers and commercial enterprises. It has therefore been decided to reduce the level of deposits in capital markets. Adjusted for the reduction in capital market deposits, deposits have grown by 13.4 percent in the past 12 months. Net lending at the close of the period stood at NOK 112.8 billion, while deposits totalled NOK 60.8 billion. The loan-to-deposit ratio was 53.9 percent.
Total bank assets and equity
The Group had total bank assets of NOK 139.0 billion at the end of the quarter, down from NOK 142.0 billion last year. The Group’s equity totalled NOK 14.0 billion, up from NOK 13.2 billion last year.
“Sparebanken Sør has confirmed its position as one of the region’s foremost banks. The bank has a strong market position, a high level of customer satisfaction, and effective, forward-looking digital solution. This puts the bank in a good position for further growth and development in line with our business strategy,” says CEO Geir Bergskaug.