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.
Fourth quarter results
The financial statements of Møre Boligkreditt AS show a pre-tax profit of NOK 20 million in the fourth quarter of 2022 (NOK 62 million). Net interest income amounted to NOK 56 million (NOK 86 million) and costs ended at NOK 13 million (NOK 12 million).
The quarterly accounts were charged with NOK 1 million in model-based losses on loans (ECL) (NOK 0 million). In the fourth quarter, losses from financial instruments are charged with NOK 22 million (NOK 12 million).
Profit after tax in the fourth quarter amounts to NOK 16 million (NOK 49 million).
Net loans to and receivables from customers increased by NOK 2,300 million in the fourth quarter of 2022.
Fourth quarter end results
By fourth quarter end 2022, the financial statements show a pre-tax profit of NOK 177 million (NOK 306 million). Net interest income amounts to NOK 263 million by fourth quarter end 2022 (NOK 360 million). Costs by year-end 2022, amounted to NOK 51 million (NOK 51 million). Net loss from financial instruments ended at NOK 29 million (NOK 3 million).
As at 31 December 2022, taxes amount to NOK 39 million (NOK 67 million), and profit after tax amounts to NOK 138 million (NOK 239 million).
Changes in value of basis swap spreads are added to other comprehensive income (OCI) with NOK 24 million after tax (NOK 2 million).
Financial position
Møre Boligkreditt AS issued a EUR 250 million green covered bond premium in the fourth quarter of 2022. No bond loan matured in the fourth quarter. Møre Boligkreditt AS has twelve bond loans outstanding at 31 December 2022 with total debt securities issued of NOK 26,807 million (NOK 25,603 million). Møre Boligkreditt AS reported Net Stable Funding Ratio (NSFR) of 110 per cent as at 31 December 2022.
Total assets at year-end 2022 amounted to NOK 32,714 million (NOK 31,223 million). The ECL calculation 31 December 2022 shows expected credit losses of NOK 10 million for Møre Boligkreditt AS (NOK 4 million).
At year-end 2022, the average loan-to-value ratio is 53.2 per cent, calculated as mortgage amount relative to the value of the property used as collateral (54 per cent).
The company's substitute assets included in the cover pool amount to NOK 1,503 million at the end of 2022 (NOK 1,455 million). Over-collateralisation, calculated as the nominal value of the cover pool relative to the nominal value of outstanding covered bond loan debt is 20.1 per cent as at 31 December 2022 (20.7 per cent).
Møre Boligkreditt AS’ Liquidity Coverage Ratio (LCR) eligible assets amount to NOK 113 million as of 31 December 2022, reporting total LCR of 436 per cent by fourth 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 1,712 million by fourth quarter end 2022 (NOK 1,791 million). Risk weighted assets amount to NOK 7,845 million (NOK 7,686 million). Net equity and subordinated loan capital amount to NOK 1,515 million (NOK 1,489). This corresponds to a Common Equity Tier 1 capital ratio of 19.3 per cent as at 31 December 2022 (19.4 per cent). 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 December 2022 was 5.9 per cent. Adjusted for tax changes and excluding energy products, the CPI was 5.8 per cent in December, both well above Norges Bank’s aim to stabilize inflation around 2 per cent.
In December 2022, the national level of unemployment was reported at 1.6 per cent, compared with 1.5 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 November- and December meetings, both of 0.25 percentage points to a policy rate of 2.75 per cent at year-end. The published policy rate path from Norges Bank indicates one more hike, probably in their March 2023 meeting, and a policy rate of 3 per cent by the end of 2023.
Twelve-months national growth in household loan debt is declining and growth is reported at 4.1 per cent by November 2022. National housing prices have increased by 0.2 per cent in December 2022, seasonally adjusted, and are up 1.5 per cent in 2022. 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 December 2022
25 January 2023
THE BOARD OF DIRECTORS OF MØRE BOLIGKREDITT AS
KJETIL HAUGE, Chair
ELISABETH BLOMVIK
KRISTIAN TAFJORD
SANDRA MYHRE HELSETH
OLE ANDRE KJERSTAD, Managing Director