Our 'A' issuer rating on SpareBank 1 Østfold Akershus is unchanged following the publication of its results for the first quarter of 2022.
Reversal of loan losses
The bank's net interest margin continued to increase in the first quarter, to 1.84% from 1.81% in the previous quarter and from 1.71% for the full-year 2021. The main driver is improved deposit margins, due to higher NIBOR. The net interest margin is, however, slightly down quarter on quarter when loans transferred to covered-bond companies are included. Total lending increased by 6.7% in the last 12 months and by 1.2% quarter on quarter, including transferred loans. Both private and corporate lending showed modest growth in the quarter.
Net commission and fee income increased by 7.4% compared with the first quarter of 2021, largely driven by a rise in commission income from payments and real-estate brokerage. The contribution from the SpareBank 1 Group's insurance operations fell by NOK 8m from the first quarter of 2021, due to a combination of larger insurance claims and weaker financial results. Operating costs were up by 5% year on year, while costs to income increased to 42.9% from 42.5%.
The bank reported a net reversal of loan losses of NOK 2m for the quarter, which was the third consecutive quarter with net reversals. The bank has undertaken an individual review of all major exposures related to housing and real-estate development. The review has not identified the need for increased loss provisions.
Return on equity and capital ratios above target
Return on equity was 10.5% in the quarter, above the bank's long-term target of 10%. The common equity Tier 1 (CET1) ratio was 17.8%, slightly down from 18.0% for 2021. This is above the updated target CET1 ratio of 16.5%.
Figure 1 SpareBank 1 Østfold Akershus key credit metrics, 2018–Q1/2022
(%) |
2018 |
2019 |
2020 |
2021 |
2022 Q1 YTD |
Net interest margin |
1.76 |
1.85 |
1.78 |
1.71 |
1.84 |
Loan losses/net loans |
0.04 |
-0.02 |
0.10 |
-0.03 |
-0.04 |
Pre-provision income/REA |
3.4 |
3.8 |
3.0 |
2.8 |
2.6 |
Return on ordinary equity |
11.7 |
12.3 |
10.6 |
11.8 |
10.5 |
Loan growth |
11.3 |
1.3 |
5.4 |
2.5 |
3.0* |
CET1 ratio |
16.4 |
16.8 |
18.5 |
18.0 |
17.8 |
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Based on company data. REA–risk exposure amount. *Last 12 months. All metrics adjusted in line with NCR methodology.
This commentary does not constitute a rating action.
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com