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 Q3 2023
The financial statements of Møre Boligkreditt AS show a pre-tax profit of NOK 20 million in the third quarter of 2023 (NOK 50 million). Net interest income amounted to NOK 53 million (NOK 66 million), net losses of NOK 17 million (NOK 5 million) from financial instruments in third quarter, and costs ended at NOK 13 million (NOK 11 million).

The quarterly accounts were charged NOK 3 million in losses on loans (NOK 0 million) in the third quarter 2023. Profit after tax amounted to NOK 16 million (NOK 39 million).

Basis swap spreads are subtracted from OCI with NOK 12 million after tax, compared to added to OCI with NOK 21 million in third quarter of 2022.

Møre Boligkreditt AS has acquired mortgages from Sparebanken Møre and net mortgage volume increased by NOK 62 million in the quarter. Net mortgage lending to customers amounted to NOK 33,717 million at third quarter end 2023 (NOK 28,200 million).

No new bond loan volume was issued, and no bond loan volume matured in the third quarter of 2023. 

Third quarter end results
By third quarter end 2023, the financial statements show a pre-tax profit of NOK 136 million (NOK 157 million). Net interest income amounts to NOK 180 million by third quarter end 2023 (NOK 207 million). Costs in the period ending 30 September 2023 amounts to NOK 43 million (NOK 38 million). No gain/losses from financial instruments by third quarter end 2023, compared with net losses of NOK 7 million by third quarter end 2022.

As at 30 September 2023, taxes amount to NOK 30 million (NOK 35 million), and profit after tax amounts to NOK 106 million (NOK 122 million).

Changes in value of basis swap spreads are charged to other comprehensive income (OCI) with NOK 18 million after tax by third quarter end 2023, compared with NOK 46 million being added at third quarter end 2022.

Financial position
Møre Boligkreditt AS had 12 bond loans outstanding at 30 September 2023 with a total bond debt market value of NOK 28,832 million (NOK 24,184 million). Møre Boligkreditt AS reported Net Stable Funding Ratio (NSFR) of 112 per cent as at 30 September 2023.

Total assets at third quarter end 2023 amounted to NOK 35,857 million (NOK 29,967 million). The ECL calculation as at 30 September 2023 shows expected credit losses of NOK 11 million for Møre Boligkreditt AS (NOK 10 million).

At third 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 (51.5 per cent).

The company's substitute assets included in the cover pool amounted to NOK 757 million at end-September 2023 (NOK 990 million). Over-collateralisation, calculated as the nominal value of the cover pool relative to the nominal value of outstanding covered bond loan debt was 21.8 per cent as at 30 September 2023 (21.7 per cent).

Møre Boligkreditt AS’ Liquidity Coverage Ratio (LCR) eligible assets amount to NOK 154 million as of 30 September 2023, reporting total LCR of 456 per cent by third 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 third quarter, paid in equity and retained earnings amounted to NOK 1,654 million (NOK 1,718 million). Risk weighted assets amounted to NOK 8,624 million (NOK 7,224 million). Net equity and subordinated loan capital amounted to NOK 1,515 million at end of September 2023 (NOK 1,495 million). This corresponds to a Common Equity Tier 1 capital ratio of 17,6 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 September 2023 at 3.3 per cent. Adjusted for tax changes and excluding energy products, the CPI was 5.7 per cent in September. CPI levels in September are below Norges Bank expectations, but above the long-term inflation target of 2 per cent. The weak Norwegian krone adds to pressure on inflation levels on imported goods.

In September 2023, the national level of unemployment was reported at 1.8 per cent, compared with 1.5 per cent in the county of Møre og Romsdal.

Norges Bank delivered in their September meeting a rate-hike of 0.25 percentage points to a policy rate of 4.25 per cent. The published policy rate path from Norges Bank indicates one further hike in 2023 and a policy rate of 4.5 per cent by the end of 2023.

National twelve-months growth in household loan debt is declining and reported at 3.7 per cent in August 2023. National housing prices fell by 0.2 per cent in September 2023, seasonally adjusted, and down by 1.3 per cent last twelve months.

The Board expects to see a further dampened growth in household debt going forward, due to both the increase in mortgage interest rate levels but also the general increase in household costs. Unemployment levels, both on national level and in the county of Møre og Romsdal, are expected to increase somewhat in the coming quarters, but still stay at low levels. The Board also expects to see a moderate decline in house prices for the full year 2023.

Ålesund, 30 September 2023

25 October 2023
THE BOARD OF DIRECTORS OF MØRE BOLIGKREDITT AS

KJETIL HAUGE, Chair
ELISABETH BLOMVIK
KRISTIAN TAFJORD
SANDRA MYHRE HELSETH

 
OLE ANDRE KJERSTAD, Managing Director