Our 'A-' issuer rating on Sparbanken Rekarne AB (publ) is unchanged following publication of the bank's results for the third quarter of 2021.
Capital ratios improve further
Sparbanken Rekarne reported improved capital ratios for the third time this year. As of 30 Sep. 2021, the bank's NCR-adjusted CET1 ratio was 21.4% and the total capital ratio 23.4%, outperforming our previous expectations. At end-2020 the corresponding values were 16.6% and 18.5%, respectively. Improvements in the third quarter were due to stable core earnings, and a major property divestment. In addition to revenues, the realisation of profit on the property sale reduced deductions for unrealised gains in the bank's common equity Tier 1 (CET1) and decreased the risk exposure amount (REA), improving capital further.
Earnings inflated by one-off income, otherwise in line with expectations
Earnings were strong in the third quarter, driven by a quarter-on-quarter 13.7% increase in net fee and commission income and proceeds from the property sale. These factors boosted pre-provision profit to REA to 3.7%. Core pre-provision income to NCR-adjusted REA rose to 2.1% in the first nine months in line with our earlier expectations.
Figure 1. Sparbanken Rekarne key credit metrics, 2017-30 Sep. 2021
(%) |
2017 |
2018 |
2019 |
2020 |
Q3 2021 |
Net interest margin |
1.4 |
1.4 |
1.5 |
1.4 |
1.3 |
Loan losses/net loans |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Pre-provision income/REA |
3.2 |
3.0 |
2.0 |
2.4 |
3.7 |
Return on ordinary equity |
11.7 |
13.4 |
11.6 |
10.3 |
7.8 |
Loan growth |
6.0 |
18.5 |
14.2 |
-4.7 |
0.6* |
CET1 ratio |
18.6 |
16.3 |
15.6 |
18.1 |
23.2 |
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Based on company data. *12 months to June 2021. All metrics adjusted in line with NCR methodology. Annualised where appropriate.
This commentary does not constitute a rating action.
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com