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. 

Fourth quarter results 
The financial statements of Møre Boligkreditt AS show a pre-tax profit of NOK 62 million in fourth quarter 2021, compared to NOK 84 million in fourth quarter 2020. Net interest income amounted to NOK 86 million, compared to NOK 95 million in the same quarter last year. Costs amounted to NOK 12 million in fourth quarter 2021, compared to NOK 12 million in the corresponding quarter 2020.

The calculation of expected credit loss (ECL) for Møre Boligkreditt AS resulted in no change in ECL in the fourth quarter 2021 compared to a decrease of NOK 1 million in the corresponding quarter in 2020.

Profit after tax amounted to NOK 49 million in fourth quarter 2021, compared to NOK 66 million in the corresponding quarter 2020.  Basis swap spreads are added to OCI with NOK 6 million after tax in fourth quarter 2021, compared to NOK 8 million added in fourth quarter 2020.

Møre Boligkreditt AS acquired mortgages from Sparebanken Møre in fourth quarter of 2021, however, due to mortgage payments, net mortgage volume decreased by NOK 560 million in the quarter. One bond loan of NOK 3,000 million matured, and no new covered bond volume was issued in fourth quarter 2021. 

Fourth quarter end results
By fourth quarter end 2021 the financial statements show a profit before tax of NOK 306 million, compared to NOK 294 million by fourth quarter end 2020. Net interest income amounted to NOK 360 million by fourth quarter end 2021, compared to NOK 345 million by end of same period last year. Costs in the period ending 31 December 2021 amounted to NOK 51 million, compared to NOK 49 million for the corresponding period 2020. 

Net losses from financial instruments in 2021 was NOK 3 million, compared to net loss of NOK 1 million in 2020. Basis swap spreads are added to OCI with NOK 2 million after tax as at 31 December 2021, compared to NOK 2 million added by fourth quarter end 2020.

Profit after tax amounted to NOK 239 million by fourth quarter end 2021 compared to NOK 230 million by fourth quarter end 2020. Tax amounted to NOK 67 million in 2021 compared to NOK 64 million in 2020.

Møre Boligkreditt AS had thirteen bond loans outstanding of 31 December 2021 with a total bond loan debt of NOK 25,603 million, compared to twelve bond loans with NOK 23,991 million outstanding of 31 December 2020.  Total assets at fourth quarter end 2021 amounted to NOK 31,223 million compared to NOK 31,783 million at fourth quarter end 2020. Møre Boligkreditt AS reported Net Stable Funding Ratio (NSFR) of 92 per cent as at 31 December 2021.

Net mortgage lending to customers decreased by NOK 70 million in 2021 and amounted to NOK 28,971 million at fourth quarter end 2021, compared to NOK 29,041 million at fourth quarter end 2020. The ECL calculation as at 31 December 2021 shows expected credit loss of NOK 4 million for Møre Boligkreditt AS, compared to NOK 4 million in ECL as at 31 December 2020.

At fourth quarter end 2021, the mortgages in the cover pool had an average loan-to-value ratio of 54.0 per cent, calculated as mortgage amount relative to the value of the property used as collateral, compared to 56.6 per cent loan-to-value ratio by fourth quarter end 2020. At fourth quarter end 2021, the company's substitute assets included in the cover pool amounted to NOK 1,455 million, compared to NOK 903 million at fourth quarter end 2020. Net value of financial derivatives included in the cover pool amounted to NOK 461 million at fourth quarter end 2021, compared to NOK 1,100 million at end of fourth quarter 2020. Over-collateralisation, calculated as the value of the cover pool relative to the value of outstanding covered bond loan debt was 19.9 per cent as at 31 December 2021, compared to 27.9 per cent as at 31 December 2020.  In addition to liquid assets included in the cover pool, Møre Boligkreditt AS’ Liquidity Coverage Ratio (LCR) eligible assets amounted to NOK 104 million of 31 December 2021, reporting total LCR of 525 per cent by fourth quarter end 2021.

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 amounted to NOK 1,791 million by end of fourth quarter 2021, compared to NOK 2,282 million by end of fourth quarter 2020. Risk weighted assets amounted to NOK 7,686 million by end of fourth quarter 2021. Net equity and subordinated loan capital amounted to NOK 1,489 million by end of fourth quarter 2021. This corresponds to a Common Equity Tier 1 capital ratio of 19.4 per cent. Møre Boligkreditt AS uses internal rating based (IRB) models to calculate capital requirements for credit risk.

Outlook 
Mainland Norway GDP rose 0.7 per cent month-over-month in November. CPI rose 5.3 per cent from December 2020 to December 2021 according to Statistic Norway. CPI growth adjusted for tax changes and excluding energy products was 1.8 per cent in the same period, and above Norges Bank expectations of 1.3 per cent. In December, the national level of unemployment was reported at 2.2 per cent, compared with 2.0 per cent in the county of Møre og Romsdal.

Despite the uncertainty in response to the Omicron variant of the Covid-virus, Norges Bank delivered the second rate-hike in 2021 at its December-meeting. The published policy rate path indicates three hikes of 0.25 percentage points in 2022, the first hike in 2022 is expected in March.

Twelve-month growth in household loan debt was 5.1 per cent by November 2021, and housing prices increased by 5.2 per cent as a national average in 2021. Housing prices are expected to stay at present levels or increase at a slower pace in 2022, and growth in household debt is expected to dampen going forward due to the increase in mortgage interest rates.

We expect unemployment levels, both on national level and in the county of Møre og Romsdal, to further decline, and we expect to see lower unemployment levels than before Covid-19.

The Board believes that the low level of unemployment, still low interest rate level on mortgages and high disposable household income will contribute to further mortgage loan growth in Sparebanken Møre. This mortgage growth will position Møre Boligkreditt AS to acquire mortgage loan portfolios from Sparebanken Møre and increase the volume of outstanding bond loans from Møre Boligkreditt AS.

Ålesund, 31 December 2021
26 January 2022    

THE BOARD OF DIRECTORS OF MØRE BOLIGKREDITT AS  

KJETIL HAUGE, Chair of the Board
ELISABETH BLOMVIK 
GEIR TORE HJELLE
SANDRA MYHRE HELSETH

OLE ANDRE KJERSTAD, Managing Director