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 Q2 2023
The financial statements of Møre Boligkreditt AS show a pre-tax profit of NOK 68 million in the second quarter of 2023 (NOK 42 million). Net interest income amounted to NOK 60 million (NOK 65 million), and costs ended at NOK 16 million (NOK 14 million).
NOK 2 million in losses on loans were reversed in second quarter 2023, compared to NOK 4 million charged to the quarterly accounts in the same quarter of 2022.
Profit after tax amounted to NOK 52 million (NOK 32 million).
Basis swap spreads are subtracted from OCI with NOK 5 million after tax, compared to added to OCI with NOK 2 million in second quarter of 2022.
Møre Boligkreditt AS has acquired mortgages from Sparebanken Møre and net mortgage volume increased by NOK 1,416 million in the quarter. Net mortgage lending to customers amounted to NOK 33,656 million at second quarter end 2023 (NOK 27,476 million).
One new NOK 4,000 million bond loan was issued, and one bond loan of EUR 250 million matured in the second quarter of 2023.
Half year end results
By half year end 2023, the financial statements show a pre-tax profit of NOK 116 million (NOK 107 million). Net interest income amounts to NOK 127 million by half year end 2023 (NOK 141 million). Costs in the period ending 30 June 2023 amounts to NOK 30 million (NOK 27 million). Net gain from financial instruments amount to NOK 17 million at half year end 2023, compared with net losses of NOK 2 million at half year end 2022.
Taxes amount to NOK 26 million in the first six months of 2023 (NOK 24 million), and profit after tax amounts to NOK 90 million in the first six months of 2023 (NOK 83 million).
Changes in value of basis swap spreads are charged to other comprehensive income (OCI) with NOK 6 million after tax by half year end 2023, compared with NOK 25 million being added at half year end 2022.
Financial position
Møre Boligkreditt AS had 12 bond loans outstanding at 30 June 2023 with a total bond debt of NOK 29,157 million (NOK 24,262 million). Møre Boligkreditt AS reported Net Stable Funding Ratio (NSFR) of 118 per cent as at 30 June 2023.
Total assets at second quarter end 2023 amounted to NOK 36,355 million (NOK 29,824 million). The ECL calculation as at 30 June 2023 shows expected credit losses of NOK 8 million for Møre Boligkreditt AS (NOK 9 million).
At second quarter end 2023, the mortgages in the cover pool had an average loan-to-value ratio of 51.9 per cent, calculated as mortgage amount relative to the value of the property used as collateral (50.0 per cent).
The company's substitute assets included in the cover pool amounted to NOK 762 million at end-June 2023 (NOK 1,484 million). Over-collateralisation, calculated as the nominal value of the cover pool relative to the nominal value of outstanding covered bond loan debt was 21.5 per cent as at 30 June 2023 (20.5 per cent).
Møre Boligkreditt AS’ Liquidity Coverage Ratio (LCR) eligible assets amount to NOK 122 million as of 30 June 2023, reporting total LCR of 388 per cent by second 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 second quarter, paid in equity and retained earnings amounted to NOK 1,650 million (NOK 1,658 million). Risk weighted assets amounted to NOK 8,827 million (NOK 7,212 million). Net equity and subordinated loan capital amounted to NOK 1,513 million at end-June 2023 (NOK 1,495 million). This corresponds to a Common Equity Tier 1 capital ratio of 17.1 per cent (20.7 per cent). Møre Boligkreditt AS uses internal rating based (IRB) models to calculate capital requirements for credit risk.
Outlook
Inflation levels are elevated, with the annual CPI rate in Norway in June 2023 at 6.4 per cent. Adjusted for tax changes and excluding energy products, the CPI was 7.0 per cent in June, 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 June 2023, the national level of unemployment was reported at 1.8 per cent, compared with 1.7 per cent in the county of Møre og Romsdal. The low unemployment level and tight labour market put upward pressure on wages and prices.
Norges Bank delivered in their June meeting a rate-hike of 0.5 percentage points to a policy rate of 3.75 per cent. The published policy rate path from Norges Bank indicates further hikes in 2023 and a policy rate of 4.25 per cent by the end of 2023.
National growth in household loan debt is declining and reported down from 4.1 per cent twelve-months growth in April to 3.9 per cent by May 2023. National housing prices fell by 0.5 per cent in June 2023, seasonally adjusted, and are down by 0.7 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 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 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, 30 June 2023
9 August 2023
THE BOARD OF DIRECTORS OF MØRE BOLIGKREDITT AS
KJETIL HAUGE, Chair
ELISABETH BLOMVIK
KRISTIAN TAFJORD
SANDRA MYHRE HELSETH
OLE ANDRE KJERSTAD, Managing Director