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.

Third quarter results
The financial statements of Møre Boligkreditt AS show a pre-tax profit of NOK 50 million in the third quarter of 2022 (NOK 89 million). Net interest income amounts to NOK 66 million (NOK 96 million) and costs ended at NOK 11 million (NOK 12 million).

The quarterly accounts were charged NOK 0 million in losses on loans (NOK 0 million). In the third quarter, losses from financial instruments are charged with NOK 5 million, compared to NOK 5 million gained in the corresponding quarter of 2021.

Profit after tax in the third quarter amounts to NOK 39 million (NOK 69 million).

Net loans to and receivables from customers increased by NOK 724 million in the third quarter of 2022. 

Third quarter end results
By third quarter end 2022, the financial statements show a pre-tax profit of NOK 157 million (NOK 244 million). Net interest income amounts to NOK 207 million by third quarter end 2022 (NOK 274 million). Costs in the period ending 30 September 2022 amounts to NOK 38 million (NOK 39 million). Net loss from financial instruments is NOK 7 million, compared to net gain of NOK 9 million in the corresponding period in 2021.

As at 30 September 2022, taxes amount to NOK 35 million (NOK 54 million), and profit after tax amounts to NOK 122 million(NOK 190 million).

Changes in value of basis swap spreads are added to other comprehensive income (OCI) with NOK 46 million after tax, compared to being charged with NOK 4 million by third quarter end 2021.

Financial position
Møre Boligkreditt AS has eleven bond loans outstanding at 30 September 2022 with total debt securities issued of NOK 24,184 million (NOK 28,926 million). Møre Boligkreditt AS reported Net Stable Funding Ratio (NSFR) of 115 per cent as at 30 September 2022.

Total assets at third quarter end 2022 amounted to NOK 29,967 million (NOK 32,757 million). The ECL calculation per 30 September 2022 shows expected credit losses of NOK 10 million for Møre Boligkreditt AS (NOK 4 million).

At third quarter end 2022, the average loan-to-value ratio is 51.5 per cent, calculated as mortgage amount relative to the value of the property used as collateral (53 per cent).

The company's substitute assets included in the cover pool amount to NOK 990 million at end-September 2022 (NOK 2,138 million). Net value of financial derivatives included in the cover pool amounts to NOK 221 million (NOK 768 million). Over-collateralisation, calculated as the market value of the cover pool relative to the market value of outstanding covered bond loan debt is 21.2 per cent as at 30 September 2022 (11.6 per cent).

Møre Boligkreditt AS’ Liquidity Coverage Ratio (LCR) eligible assets amount to NOK 115 million as of 30 September 2022, reporting total LCR of 482 per cent by third 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
Paid in equity and retained earnings amount to NOK 1,718 million by third quarter end 2022 (NOK 1,736 million). Risk weighted assets amount to NOK 7,224 million (NOK 7,927 million). Net equity and subordinated loan capital amount to NOK 1,495 million (NOK 1,483). This corresponds to a Common Equity Tier 1 capital ratio of 20.7 per cent as at 30 Septebmer 2022. Møre Boligkreditt AS uses internal rating based (IRB) models to calculate capital requirements for credit risk.

Regulatory changes
The EU directive 2019/2162 (The Covered Bonds Directive) came into force 8 July 2022. Only premium European covered bonds that satisfy the guidelines and meet the requirements of Article 129 of the CRR will benefit from preferential regulatory treatment.

The Norwegian Financial Supervisory Authority has approved Møre Boligkreditt AS’ European Covered Bond Premium Program.

Covered bonds issued by Møre Boligkreditt AS that complied under existing legislations before 8 July 2022 will be grandfathered and eligible for preferential treatment to maturity.

Outlook
The war in Ukraine contributes to increased uncertainty and upward pressure on energy and commodity prices. The inflation level is elevated, and the annual CPI rate in Norway in September 2022 was 6.9 per cent. Adjusted for tax changes and excluding energy products, the CPI was 5.3 per cent in September, well above Norges Bank’s aim to stabilize inflation around 2 per cent.

In September 2022, the national level of unemployment was reported at 1.6 per cent, compared with 1.4 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 rate-hikes in both their August- and September meetings, both of 0.5 percentage points to a policy rate of 2.25 per cent. The published policy rate path from Norges Bank indicates a further string of hikes, and a policy rate above 3 per cent by the end of 2023.

Twelve-months national growth in household loan debt is declining and reported at 4.3 per cent by August 2022. National housing prices are down 0.6 per cent in September 2022, seasonally adjusted, and up 4.3 per cent last 12 months. Housing prices will probably continue to decline going forward. Growth in household debt is also 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 the coming quarters, but still stay at low levels. The Board believes that despite the increase in interest rates on mortgages and increasing 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 September 2022
26 October 2022

THE BOARD OF DIRECTORS OF MØRE BOLIGKREDITT AS
KJETIL HAUGE, Chair
ELISABETH BLOMVIK
KRISTIAN TAFJORD
SANDRA MYHRE HELSETH

OLE ANDRE KJERSTAD, Managing Director