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 Q4 2023
The financial statements of Møre Boligkreditt AS show a pre-tax profit of NOK 28 million in the fourth quarter of 2023 (NOK 20 million). Net interest income amounted to NOK 57 million (NOK 56 million) and costs ended at NOK 15 million (NOK 13 million).

The quarterly accounts were charged with NOK 0 million in model-based losses on loans (ECL) (NOK 1 million). In the fourth quarter, losses from financial instruments are charged with NOK 14 million (NOK 22 million).

Profit after tax in the fourth quarter amounts to NOK 22 million (NOK 16 million).

Net loans to and receivables from customers decreased by NOK 1,360 million in the fourth quarter of 2023.

No new bond loan volume was issued, and no bond loan volume matured in the fourth quarter of 2023, but Møre Boligkreditt AS made an early redemption of NOK 653 million in a bond loan maturing in March 2024.

Fourth quarter end results
By fourth quarter end 2023, the financial statements show a pre-tax profit of NOK 164 million (NOK 177 million). Net interest income amounts to NOK 237 million (NOK 263 million). Costs by year-end 2023, amounted to NOK 58 million (NOK 51 million). Net losses from financial instruments ended at NOK 14 million (NOK 29 million).

As at 31 December 2023, taxes amount to NOK 36 million (NOK 39 million), and profit after tax amounts to NOK 128 million (NOK 138 million).

Changes in value of basis swap spreads are subtracted from other comprehensive income (OCI) with NOK 29 million after tax as at 31.12.2023, compared to added with NOK 24 million as at 31.12.2022.

Financial position
Møre Boligkreditt AS has twelve bond loans outstanding at 31 December 2023 with total debt securities issued of NOK 28,311 million (NOK 26,807 million). Møre Boligkreditt AS reported Net Stable Funding Ratio (NSFR) of 109 per cent as at 31 December 2023.

Total assets at year-end 2023 amounted to NOK 34,600 million (NOK 32,714 million). The ECL calculation 31 December 2023 shows expected credit losses of NOK 11 million for Møre Boligkreditt AS (NOK 10 million).

At year-end 2023, the average loan-to-value ratio is 55.1 per cent, calculated as mortgage amount relative to the value of the property used as collateral (53.2 per cent). The company's substitute assets included in the cover pool amount to NOK 854 million at the end of 2023 (NOK 1,503 million). Over-collateralisation, calculated as the nominal value of the cover pool relative to the nominal value of outstanding covered bond loan debt is 19.8 per cent as at 31 December 2023 (20.1 per cent).

Møre Boligkreditt AS’ Liquidity Coverage Ratio (LCR) eligible assets amount to NOK 153 million as of 31 December 2023, reporting total LCR of 493 per cent by fourth quarter end 2023.

Rating
The rating agency Moody's has assigned Aaa-rating to all covered bond loans issued by Møre Boligkreditt AS.

Moody’s has furthermore assigned long-term and short-term issuer ratings of A1/Prime-1, and long-term and short-term Counterparty Risk Ratings of A1/Prime-1 to Møre Boligkreditt AS, aligned with ratings of the parent bank, Sparebanken Møre.  

Capital strength
Paid in equity and retained earnings amount to NOK 1,665 million by fourth quarter end 2023 (NOK 1,712 million). Risk weighted assets amount to NOK 7,640 million (NOK 7,845 million). Net equity and subordinated loan capital amount to NOK 1,489 million (NOK 1,515). This corresponds to a Common Equity Tier 1 capital ratio of 19.5 per cent as at 31 December 2023 (19.3 per cent). Møre Boligkreditt AS uses internal rating based (IRB) models to calculate capital requirements for credit risk.

Outlook
From December 2022 to December 2023 the Consumer Price Index (CPI) increased by 4.8 per cent, while the CPI adjusted for tax changes and excluding energy products (CPI-ATE) rose by 5.5 per cent. These levels are slightly below Norges Bank’s projections, but still significantly higher than the long-term inflation target of 2 per cent. The depreciation of the Norwegian krone adds to pressure on inflation levels through imported goods and services.

Unemployment levels in Norway remain low. In December 2023, the national level of registered unemployment was 1.9 per cent, compared to 1.7 per cent in the county of Møre og Romsdal.

In December, Norges Bank delivered a rate-hike of 0.25 percentage points to a policy rate of 4.5 per cent. The policy rate path indicates that the policy rate will stay at 4.5 per cent for the larger part of 2024.

National twelve-months growth in household loan debt is declining and reported at 3.3 per cent in November 2023. This is the lowest growth level since the mid 1990’s. National housing prices increased by 0.2 per cent in December 2023, seasonally adjusted, and are up by 0.5 per cent the 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 and a general increase in household costs. Unemployment levels, both on a 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 housing prices in the first quarters of 2024.

Ålesund, 31 December 2023
24 January 2024

 THE BOARD OF DIRECTORS OF MØRE BOLIGKREDITT AS

KJETIL HAUGE, Chair
ELISABETH BLOMVIK
KRISTIAN TAFJORD
SANDRA MYHRE HELSETH

  OLE ANDRE KJERSTAD, Managing Director