This was stated by CEO Geir Bergskaug, who presented the results for Q3 2023 this week. A pre-tax result of NOK 605 million is a substantial improvement from the same period in 2022.
Strong return and a low cost-income ratio
– To become a more efficient bank, we are working on keeping our costs low. We have increased staffing and invested heavily in technology. Now we see that things are moving in the right direction, and we are delivering a cost-income ratio of 31.9 percent in Q3 2023, Bergskaug explains.
The corresponding figure for Q3 2022 was 41.6 percent. He also reports strong return on equity for the quarter.
– The bank’s return on equity has been strong over the past year. In Q3 2023 we delivered 11.5 percent which gives a year-to-date return of 11.6 percent.
Lower lending growth
Bergskaug reports lower lending growth for Sparebanken Sør.
– Lending growth is somewhat lower than before. We have observed a decline, which can be attributed to uncertain times affecting credit growth in the population. For banks, the margins on mortgage loans are historically low.
Net interest income has continued to increase, reaching NOK 783 million in Q3 2023, a rise influenced by interest rate changes from Norges Bank. Notably, this increase is primarily driven by improved margins on deposits, which is an expected outcome when interest rates rise.
Increased provisions for losses and positive financial income
The bank had a net loan loss of NOK 32 million in Q3 2023.
– While defaults have slightly increased, they remain at low levels. Bankruptcies and losses are also minimal. Sparebanken Sør maintains a low-risk profile with solid collateral backing the loan portfolio, says Bergskaug.
The quarterly results reveal a net financial income of NOK 20 million.
– This is an improvement compared to the negative net financial income of NOK 69 million in the same quarter of 2022.
Strong capital situation
Sparebanken Sør ended Q3 2023 with a common equity tier 1 (CET1) capital ratio of 17.2 percent. This is well above the current capital requirement of 14.2 percent.
– As we approach the new year, we are well-prepared for the expected increase in capital requirements, confidently solidifying our position, Bergskaug emphasizes.
Highlights from Q3 2023 (Q3 2022 in parentheses)
- Profit before tax: NOK 605 million (NOK 344 million)
- Return on equity: 11.5 percent (7.1 percent)
- Net interest income: NOK 783 million (NOK 603 million)
- Net profits financial instruments: NOK 20 million (NOK -69 million)
- Income from associated companies and subsidiaries: NOK 6 million (NOK 28 million)
- Operating expenses: NOK 298 million (NOK 282 million)
- Net loss on loans: NOK 32 million (NOK 51 million)