Our 'A-' issuer and issue ratings on Varbergs Sparbank AB (publ) (Varbergs Sparbank) are unchanged following the publication of its first-quarter results.
Swedbank dividends boost first-quarter figures
Varbergs Sparbank reported profit before loan losses of SEK 107.5m in the first quarter of 2021 against SEK 52.6m in the previous quarter. The increase was driven by dividends of SEK 59.1m from Swedbank AB. Commission payments from payment company Swedbank Pay will be lower from 2021 onwards (Varbergs Sparebank received SEK 7.4m in compensation from Swedbank in the fourth quarter of 2021) but this has been offset by fees from savings products and loan commissions. First-quarter profit was also boosted by net financials of SEK 9m compared with SEK 4.7m in the fourth quarter of 2020.
While net lending was down 2% and deposits were up 6% year on year, both have been relatively flat since mid-2020. Net interest income was, however, down by 1.5% quarter on quarter and 6% year on year. The decrease was mainly due to contracting margins on mortgages and corporate lending due to increased competition and lower market rates. Operating costs were up by 12% year on year due to due to increased staff and IT development costs.
Net reversal of loan losses continues
Varbergs Sparbank booked SEK 28.5m in loan losses in the first quarter of 2020, which have been continually reversed in subsequent quarters. In the first quarter of 2021, the bank recorded reversals of SEK 3.0. Net stage 3 non-performing loans to net loans fell somewhat to 0.60% from 0.67% quarter-on quarter.
Capital remains strong
Varbergs Sparbank's capitalisation continues to strengthen; the bank's common equity Tier 1 ratio stood at 25.1% at the end of the first quarter compared with 24.6% at the end of the fourth quarter of 2020. The ratio takes into account a board proposal to make a SEK 78m dividend payout to the foundation which owns the bank in respect of 2019 and 2020. This dividend will be paid today.
This commentary does not constitute a rating action.
If you have any questions, please contact:
Geir Kristiansen, credit rating analyst, +4790784593, firstname.lastname@example.org
Sean Cotten, chief rating officer, +46735600337, email@example.com