Says CEO Geir Bergskaug, who Friday presented the results for Q2 2022. A financial result pre-tax of NOK 351 mill., a small decrease compared to the same quarter in 2021.
Strong revenue growth
The annualized lending growth in Q2 was a strong 11.5 per cent, which results in a 12-month lending growth of 5.4 per cent and a deposit-to-loan ratio of 55.4 per cent. The increase in net interest income continues and amounted to NOK 555 mill. in Q2 2022, compared to NOK 488 mill. in the same quarter of 2021.
– The increased level of interest rates results in, as expected, a stronger net interest income, and the notified interest rate changes from Norges Bank will contribute even more to this in the time ahead. Both the lending growth and the net interest income bring solid revenue to the bank. At the same time, negative return on net financial and one-off expenses of NOK 15 mill. in the quarter for important strategic development projects cause a somewhat weaker financial result.
High activity and important endeavours
– As the leading bank in the region, our ambitions are high. We are continuously working to provide even better solutions to our customers. This means important strategic endeavours, which are visible in the Q2 accounts. The increased operating expenses are largely due to one-off expenses on important IT investments, including a new data platform which in time will result in more cost-effective operations, and the implementation of strategic projects where external expertise was needed.
The increase in operating expenses is also caused by the fact that Sparebanken Sør has strengthened important areas like risk management and compliance, as well as insurance.
– And like the rest of the corporate market, we also notice the increased energy prices, adds Bergskaug.
40 percent of capital listed on the stock exchange
In Q2, a larger share of our capital was listed on the stock exchange. About 3 billion of our primary capital was converted into equity certificates and transferred to Sparebankstiftelsen Sparebanken Sør, which will release a substantial part of them in the market.
– With a larger share of our capital listed, being an owner in Sparebanken Sør will be more attractive. Both for small and larger investors in and outside of our region, says Bergskaug, who says that the equity certificates will be put on the market when the trade outlook is good.
Customer dividends will be introduced from the financial year of 2022.
Low losses on loans and non-performing loans
The bank experienced a net loss on loans of 11 mill. NOK, compared to a net entry on losses of 11. Mill. NOK in the same quarter of 2021. Impairment losses were calculated to NOK 391 mill. in Q2, which is a decrease from NOK 430 mill. in Q2 2021.
– We have low default in loans and have no larger declared losses in the quarter. This is positive in the light of today’s national and international economy, but is also a consequence of a low risk profile in our loan portfolio, explains Bergskaug.
Solid capital situation
Sparebanken Sør ended Q2 2022 at a common equity tier 1 (CET1) capital ratio of 17.4 percent, compared to 16.0 percent in Q2 2021. This is well above current capital requirements of 13.2 percent, and an increase from 16.7 percent in Q1 2022.
– Among other things, we can see a positive effect from the bank package of 1.0 per cent, and a substantial lending growth which resulted in a decreased capital adequacy. We are well positioned for the increased capital requirements which will come by the turn of the year.
Principal figures from Q2 2022 (Q2 2021 in parenthesis):
- Profit before tax: NOK 351 mill. (NOK 386 mill.)
- Return on equity: 7.2 percent (9.0 percent)
- Net interest income: NOK 555 mill. (NOK 488 mill.)
- Net profits financial instruments: NOK -33 mill. (NOK -11 mill.)
- Income from associated companies and subsidiaries: NOK 24 mill. (NOK 45 mill.)
- Operating expenses: NOK 293 mill. (NOK 260 mill.)
- Net loss on loans: NOK 11 mill. (NOK -11 mill.)