Our 'A' issuer and issue ratings for SpareBank 1 Østfold Akershus are unchanged following the publication of its Q1/19 results. The bank reported lower volumes and net interest margins than expected while total revenues were boosted by one-off gains from associated companies. The bank booked net reversals of loan losses in the quarter.
Lower core income
Net interest income was negatively affected by lower volumes; gross lending was down 2% QoQ (down 0.7% included transferred loans) due to increased competition and seasonal effects. YoY growth in lending was 5.4% inclusive and 7.4% exclusive transferred loans. Higher funding costs, mainly due to higher NIBOR, lead to lower net interest margin (NIM) at 1.63% vs 1.74% in Q4/18. These factors also affected net fees from Boligkreditt negatively. Operating costs came in about as expected; cost/ncome was 56.7% excl. net financials.
Reversal of loan losses continues
The bank reported net reversal of loan losses (NOK 3.5m) for the second quarter in row. Non-performing loans and other problem loans are 0.30% of lending vs 0.33% per Q4/18 and 0.29% per 1Q/18.
One-off gains will boost CET1 ratio in Q2/19
Reported CET1 ratio was 15.8%, including 50% of profit YTD, vs 16.1% per year-end 2018. In Q2/18, the mother bank will report NOK 52m as dividend from the SpareBank 1 Group related to the merger between SpareBank 1 and DNB's P&C insurance businesses, which is already reflected in the consolidated accounts. This will affect the CET 1 ratio positively by 0.3%-points.
This commentary does not reflect a rating action.
For more information, please contact:
Geir Kristiansen, Credit Rating Analyst, +47 907 845 93, geir.kristiansen@nordiccreditrating.com
Sean Cotten, Lead Analyst, +46 703 232 43 78, sean.cotten@nordiccreditrating.com