Interim 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 2023
The financial statements of Møre Boligkreditt AS show a pre-tax profit of NOK 48 million in the first quarter of 2023 (NOK 65 million). Net interest income amounted to NOK 67 million (NOK 76 million), and costs ended at NOK 14 million (NOK 13 million).

No losses on loans were charged to the quarterly accounts (NOK 1 million).

Profit after tax amounted to NOK 38 million (NOK 51 million).

Basis swap spreads are subtracted from OCI with NOK 1 million after tax, compared to added with NOK 23 million in the first quarter of 2022.

Møre Boligkreditt AS has acquired mortgages from Sparebanken Møre and net mortgage volume increased by NOK 1,776 million in the quarter. Net mortgage lending to customers amounted to NOK 32,240 million at first quarter end 2023 (NOK 29,756 million).

Møre Boligkreditt AS had 12 bond loans outstanding at 31 March 2023 with a total bond debt of NOK 27,772 million (NOK 24,030 million). Møre Boligkreditt AS reported Net Stable Funding Ratio (NSFR) of 108 per cent as at 31 March 2023.

Total assets at first quarter end 2023 amounted to NOK 35,365 million (NOK 31,296 million). The ECL calculation as at 31 March 2023 shows expected credit losses of NOK 10 million for Møre Boligkreditt AS (NOK 5 million).

At first quarter end 2023, the mortgages in the cover pool had an average loan-to-value ratio of 53.6 per cent, calculated as mortgage amount relative to the value of the property used as collateral (52.2 per cent).

The company's substitute assets included in the cover pool amounted to NOK 891 million at end-March 2023 (NOK 976 million). Over-collateralisation, calculated as the nominal value of the cover pool relative to the nominal value of outstanding covered bond loan debt was 23.7 per cent as at 31 March 2023 (27.2 per cent).

Møre Boligkreditt AS’ Liquidity Coverage Ratio (LCR) eligible assets amount to NOK 117 million as of 31 March 2023, reporting total LCR of 442 per cent by first quarter end 2023.

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 1,603 million (NOK 1,624 million). Risk weighted assets amounted to NOK 8,129 million (NOK 7,733 million). Net equity and subordinated loan capital amounted to NOK 1,516 million at end-March 2023 (NOK 1,489 million). This corresponds to a Common Equity Tier 1 capital ratio of 18.6 per cent (19.3 per cent). Møre Boligkreditt AS uses internal rating based (IRB) models to calculate capital requirements for credit risk.

Outlook 
Bankrun on deposits in three American Banks, and the UBS takeover of Credit Suisse led to wider spreads and increased volatility in the end of first quarter. The war in Ukraine contributes to increased uncertainty and upward pressure on energy and commodity prices. Inflation levels are elevated, with the annual CPI rate in Norway in March 2023 at 6.5 per cent. Adjusted for tax changes and excluding energy products, the CPI was 6.2 per cent in March, both well above Norges Bank’s aim to stabilize inflation around 2 per cent. The weak Norwegian krone adds to pressure on inflation levels on imported goods.

In March 2023, the national level of unemployment was reported at 1.8 per cent, compared with 1.7 per cent in Sparebanken Møre´s main market of operation, the county of Møre og Romsdal. The low unemployment level and tight labour market put further upward pressure on wages and prices.

Norges Bank delivered in their March meeting a rate-hike of 0.25 percentage points to a policy rate of 3.0 per cent. The published policy rate path from Norges Bank indicates further hikes in 2023 and a policy rate of 3.5 per cent by the end of 2023.

Twelve-months national growth in household loan debt is declining and growth is reported at 4.0 per cent by February 2023. National housing prices increased by 0.5 per cent in March 2022, seasonally adjusted, and are down 0.2 per cent last twelve months. We expect to see a moderate decline in house prices in 2023. Growth in household debt is expected to further dampen due to the increase in mortgage interest rate levels and increase in household costs.

We expect unemployment levels, both on national level and in the county of Møre og Romsdal, to increase somewhat in the coming quarters, but still stay at low levels.

The Board believes that despite the increase in interest rates on mortgages and an increase in household costs, the low level of unemployment and still 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 2023
26 April 2023
THE BOARD OF DIRECTORS OF MØRE BOLIGKREDITT AS

KJETIL HAUGE, Chair
ELISABETH BLOMVIK
KRISTIAN TAFJORD
SANDRA MYHRE HELSETH

OLE ANDRE KJERSTAD, Managing Director