SpareBank 1 SMN (SRMGF) Q3 2025 Earnings Call Prepared Remarks Transcript

2025-10-29 11:01:33 ET

SpareBank 1 SMN (SRMGF) Q3 2025 Earnings Call October 29, 2025 3:30 AM EDT

Company Participants

Trond Soraas - Executive Director of Group Finance & Governance

Presentation

Trond Soraas
Executive Director of Group Finance & Governance ...

Good afternoon. My name is Trond Soraas. I'm the CFO at SpareBank 1 SMN, and I'm here to present the results of the third quarter of 2025 that we released earlier today. We have put behind us a strong quarter or should I say yet another very strong quarter financially. Underlying the third quarter of 2025 was characterized by a strong net interest income, lower costs, continued low loan losses and again, good contributions from associated companies. In addition, we booked a gain of NOK 42 million realized related to the transaction in SB1 Markets. All in all, this led to a profit of NOK 1.171 billion and return on equity for the quarter alone of 15.9%. The group remains very solid even after the implementation of the new floor for mortgage loans with a CET1 ratio of 17.8% at the end of the quarter. Loan growth ended at 0.8% for the quarter as a whole, driven by good growth in the retail market, but offset by sideways growth in corporate market again this quarter.

Our subsidiaries deliver results that are better than or in line with the same quarter last year, especially our real estate broker delivers a strong seasonal quarter with more units sold and a higher price per assignment. If we add this quarter to the 2 previous ones, the result so far this year is NOK 3.305 billion and a return on equity of 15.3%, which is down NOK 235 million from the same period last year, but that period included a significant one-off gain related to the transaction between Fremtind and Eika Insurance of NOK 450 million. Again, good clearance to financial main targets, where we are particularly well ahead of the most important one with a return on equity of more than 13%. A bit more about growth and margin development. The retail market had loan growth in the third quarter, roughly in line with the same quarter last year at 1.3%. 12-month growth in the retail market is now at 4.9%. And with that, we continue to gain market share.

Deposits somewhat down this quarter, but strong when it comes to the 12-month growth of 9.3%. With average NIBOR down around 30 basis points in the quarter and interest rate change that took place towards the end of August, we see, as expected, an improvement in lending margins and corresponding reduction in deposit margin this quarter. For the corporate market, it is yet another quarter with sideways volume development on the lending side, which means that the 12-month growth is also sideways now. A good deposit quarter for the corporate market. And also here, the 12-month deposit growth is high, specifically at 9.1%. Looking more closely at the main lines in the accounts, we see that the net interest income is almost in line with the previous quarter. The change in our net interest income is largely affected by high fee income and the net interest income in the previous quarter.

Looking at real net interest income, where we take into account commissions from covered bond companies and adjust for number of days in the quarter and the extra high fees over the net interest income in the previous quarter, real net interest income is also sideways. And we are satisfied with that in a market with increasing margin pressure. Commissions income is down from the second quarter, but seasonally strong. I will return to that. And costs are significantly down, mainly due to the one-off effect towards the Tietoevry effect that we had in the previous quarter. Loan losses remain low at NOK 27 million this quarter. And as mentioned at the start, yet another quarter with good contributions from associated companies, especially SpareBank 1 Gruppen delivers well, mainly due to strong figures from Fremtind. The finance line is positively affected by the aforementioned gain in SB1 Markets. This gives a profit of close to NOK 1.2 billion and a return on equity, as said, at 15.9%.

Commissions income naturally down from a very strong second quarter, but seasonally strong compared to the same quarter last year, especially income from payments and real estate brokerage has a good development. When it comes to costs, as mentioned, much lower than the previous quarter, as stated, mainly due to the provision for the Tietoevry lawsuit that we saw in the previous quarter. But measured against the same quarter last year, costs are up 2.9% in the group and only 1% in the bank. And we expect that cost growth in 2025, as earlier stated, when we adjust for the provisions from the Tietoevry case will be moderate. Again, a very good quarter when it comes to contributions from associated companies. Driven primarily by a good result in SpareBank 1 Gruppen, where, of course, a strong insurance result in Fremtind contributes, but where we also see better figures from SpareBank 1 Forsikring, life insurance company and Kredinor debt collection.

The group's losses for the quarter is NOK 27 million, corresponding to 4 basis points. That is NOK 5 million lower than the previous quarter. Lower losses within the corporate market in the parent bank are the main reason for the decline. The losses are distributed with NOK 47 million in individual losses and NOK 20 million in reduced model provisions. As mentioned at the start, the group is very well capitalized also at the end of this quarter with a core -- with a CET1 ratio of 17.8% and an unweighted core capital ratio of 7.1%. Note that we only include 38% of the results so far this year when calculating these figures. So the CET1 ratio is down from 18.8% last quarter, mainly due to the new floor on mortgage risk weights. Specifically, the effect was around 1.4 percentage points for us compared to the previously reported one at 1.3%. Despite this, we are well ahead of our own targets and regulatory requirements and expect to be in a very good position when the Board is to decide on the dividend for 2025 at year-end.

So with our usual slide on why an investment in SpareBank 1 SMN and our equity certificate MING is a good investment in the background, I can just summarize that the third quarter of 2025 was yet a very strong quarter financially with a profit of nearly NOK 1.2 billion, a return on equity of 15.9%, and we have a very strong capital situation as we exit the quarter, placing us well both when it comes to growth and dividends to our owners. Thank you.

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