BackInterim report from the Board of Directors
About the Company
Møre Boligkreditt AS is a wholly owned subsidiary of Sparebanken Møre. The company is licensed to operate as a mortgage company, issuing covered bonds. Møre Boligkreditt AS is Sparebanken Møre's most important source of market funding and an important part of the parent bank's long term funding strategy. The accounts have been prepared in accordance with IFRS. Figures in brackets refer to the corresponding period last year.
Results for Q1 2022
The financial statements of Møre Boligkreditt AS show a pre-tax profit of NOK 65 million in the first quarter of 2022 (NOK 76 million). Net interest income amounted to NOK 76 million (NOK 88 million), and costs ended at NOK 13 million (NOK 13 million).
The quarterly accounts were charged NOK 1 million in losses on loans (NOK 0 million).
Profit after tax amounted to NOK 51 million (NOK 59 million).
Basis swap spreads are added to OCI with NOK 23 million after tax, compared with subtracted by NOK 7 million in the first quarter of 2021.
Møre Boligkreditt AS has acquired mortgages from Sparebanken Møre and net mortgage volume increased by NOK 785 million in the quarter. Net mortgage lending to customers amounted to NOK 29,756 million at first quarter end 2022 (NOK 29,198 million).
Møre Boligkreditt AS had 12 bond loans outstanding at 31 March 2022 with a total bond debt of NOK 24,030 million (NOK 26,278 million) One bond loan of NOK 1,000 million matured in the first quarter of 2022, no new bond loan volume was issued. Møre Boligkreditt AS reported Net Stable Funding Ratio (NSFR) of 97 per cent as at 31 March 2022.
Total assets at first quarter end 2022 amounted to NOK 31,296 million (NOK 32,179 million). The ECL calculation as at 31 March 2022 shows expected credit losses of NOK 5 million for Møre Boligkreditt AS (NOK 4 million).
At first quarter end 2022, the mortgages in the cover pool had an average loan-to-value ratio of 52.2 per cent, calculated as mortgage amount relative to the value of the property used as collateral (53.9 per cent).
The company's substitute assets included in the cover pool amounted to NOK 976 million at end-March 2022 (NOK 1,960 million). Net value of financial derivatives included in the cover pool amounted to NOK -33 million (NOK 633 million). Over-collateralisation, calculated as the value of the cover pool relative to the value of outstanding covered bond loan debt was 27.2 per cent as at 31 March 2022 (20.0 per cent).
In addition to liquid assets included in the cover pool, Møre Boligkreditt AS’ Liquidity Coverage Ratio (LCR) eligible assets amounted to NOK 131 million as of 31 March 2022, reporting total LCR of 562 per cent by first quarter end 2022.
Rating
The rating agency Moody's has assigned Aaa-rating to all covered bond loans issued by Møre Boligkreditt AS.
Capital strength
At the end of the first quarter, paid in equity and retained earnings amounted to NOK 1,624 million (NOK 2,102 million). Risk weighted assets amounted to NOK 7,733 million (NOK 7,867 million). Net equity and subordinated loan capital amounted to NOK 1,489 million at end-March 2022 (NOK 1,988 million). This corresponds to a Common Equity Tier 1 capital ratio of 19.3 per cent (25.3 per cent). Møre Boligkreditt AS uses internal rating based (IRB) models to calculate capital requirements for credit risk.
Outlook
Covid-19 restrictions have been lifted, and Norway is heading out of the pandemic showing strong economic growth. The war in Ukraine has contributed to more uncertainty, but also higher commodity prices, including oil and gas and thus generating additional income to the Norwegian economy. Unemployment is low, and the tight labour market puts upward pressure on wages and prices.
Norges Bank delivered its first 2022 rate-hike of 0.25 percentage points to a policy rate of 0.75 per cent in March. The published policy rate path indicates a further string of hikes, and a policy rate of 2.5 per cent by the end of 2023. In March 2022, the national level of unemployment was reported at 2.0 per cent, compared with 1.8 per cent in the county of Møre og Romsdal.
Twelve-months growth in household loan debt was 5.0 per cent by February 2022. National housing prices rose 1 per cent in March, seasonally adjusted, and 6.2 per cent last 12 months. Housing prices are expected to stay at present levels or increase at a slower pace in 2022. Growth in household debt is also expected to dampen going forward due to the increase in mortgage interest rate levels.
Assuming the global economy avoids long-term negative effects from the war in Ukraine, we expect unemployment levels, both on national level and in the county of Møre og Romsdal, to further decline, and stay at levels below those seen before Covid-19.
The Board believes that the low level of unemployment, still low interest rate level on mortgages together with high disposable household income, will contribute to further mortgage loan growth in Sparebanken Møre. This mortgage growth will position Møre Boligkreditt AS to further acquire mortgage loan portfolios from Sparebanken Møre and increase the volume of outstanding bond loans from Møre Boligkreditt AS.
Ålesund, 31 March 2022
27 April 2022
THE BOARD OF DIRECTORS OF MØRE BOLIGKREDITT AS
KJETIL HAUGE, Chair
ELISABETH BLOMVIK
KRISTIAN TAFJORD
SANDRA MYHRE HELSETH
OLE ANDRE KJERSTAD, Managing Director