Our 'BBB+' issuer and issue ratings for Sparbanken Västra Mälardalen's (SBVM) are unchanged following the publication of its first quarter 2019 results. The quarter saw an improvement in core earnings, a rebound in financial valuations, Swedbank's annual dividend, lower costs (Q-on-Q) and net credit loss recoveries, resulting in the bank's highest recorded quarterly profit.
Capital unaffected by Swedbank share price fall
SBVM reported profits of SEK 59m for the first quarter, an all-time high for the bank. The most significant contributions came from higher net interest income margin and loan volumes, a SEK 28m dividend payment from Swedbank and the material improvement in financial instrument valuations described below. SBVM maintained its CET 1 ratio at 22.3%. This despite a material loss of value in Swedbank shares and reduction on equity approaching SEK 130m which was similarly offset in the calculation of CET1 (see "Swedbank's controversy spills over to Swedish savings banks", 29 Mar. 2019 for how Swedbank's share price affects associated savings banks).
Stable growth
SBVM reported increased business and lending volumes during the quarter, growing 2.5% and 2.4%, respectively, and 5.8% and 7.4% compared to first quarter 2018. Including loans transferred to Swedbank Hypotek loan volumes increased 1.2% during the quarter and 6.1% over the last four quarters.
Valuation of financial assets
The market volatility during December 2018 was replaced by tightened credit spreads in the first quarter of 2019. As a result, SBVM reported a higher valuation of its fixed income portfolios and reported SEK 12.6m in net result of financial transactions, compared to a SEK 23.9m loss in the fourth quarter of 2018.
This commentary does not reflect a rating action.
For more information, please contact:
Sean Cotten, Lead Analyst, +46 703 232 43 78, sean.cotten@nordiccreditrating.com
Geir Kristiansen, Credit Rating Analyst, +47 907 845 93, geir.kristiansen@nordiccreditrating.com