Interim report from the Board of Directors

All figures relate to the Group. Figures in brackets refer to the corresponding period last year. The financial statements have been prepared in accordance with IFRS and the interim report has been prepared in conformity with IAS 34 Interim Financial Reporting.

RESULTS FOR Q1 2025
Profit before losses amounted to NOK 315 million for the first quarter of 2025, or 1.21 per cent of average assets, compared with NOK 350 million, or 1.42 per cent, for the corresponding quarter last year.

The profit after tax for the first quarter of 2025 amounted to NOK 232 million, or 0.89 per cent of average assets, compared with NOK 254 million, or 1.03 per cent, for the corresponding quarter last year.

Return on equity was 11.2 per cent in the first quarter of 2025, compared with 13.1 per cent in the first quarter of 2024, and the cost income ratio amounted to 44.5 compared with 39.5 in the first quarter of 2024. 

Earnings per equity certificate were NOK 2.13 (NOK 2.41) for the Group and NOK 3.38 (NOK 3.32) for the parent bank. 

Net interest income 
Net interest income was NOK 485 million for the quarter, which is NOK 23 million, or 4.5 per cent, lower than in the corresponding quarter of last year. This represents 1.87 per cent of total assets, which is 0.2 percentage points lower than for the corresponding quarter last year.

Interest rate margins contracted in both the retail and corporate markets compared with the first quarter of 2024. The lending margin in the retail market was stable compared with the same period in 2024, while it decreased in the corporate market.

Other income
Other income was NOK 82 million in the quarter, which is NOK 12 million higher than in the first quarter of last year. The net result from financial instruments of NOK 15 million for the quarter was NOK 1 million less than in the first quarter of 2024.  Capital gains from bond holdings amounted to NOK 5 million in the quarter, the same as in the first quarter of 2024. Capital gains from equities amounted to NOK 1 million, compared with capital losses of NOK 4 million in the first quarter of 2024. The negative change in value for fixed-rate lending amounted to NOK 2 million, compared with a change in value of NOK 0 million in the same quarter last year. Income from foreign exchange and interest rate business for customers amounted to NOK 6 million in the quarter, NOK 6 million less than in the same quarter last year.

Other income excluding financial instruments increased by NOK 13 million compared with the first quarter of 2024. The increase was mainly attributable to income from Discretionary Portfolio Management and fund sales/securities.

Expenses
Operating expenses amounted to NOK 252 million for the quarter, which is NOK 24 million higher than for the same quarter last year. Personnel expenses accounted for NOK 13 million of the rise in relation to the same period last year and totalled NOK 137 million. Other operating expenses increased by NOK 11 million from the same period last year. 

Provisions for expected credit losses and credit-impaired commitments 
Losses on loans and guarantees amounted to NOK 13 million in the quarter (NOK 17 million), corresponding to 0.05 per cent of average assets (0.07 per cent of average assets). The corporate segment saw an increase of NOK 11 million in losses in the quarter, while losses in the retail segment increased by NOK 2 million.

At the end of the first quarter of 2025, provisions for expected credit losses totalled NOK 272 million, equivalent to 0.30 per cent of gross loans and guarantee commitments (NOK 284 million and 0.33 per cent).  Of the total provision for expected credit losses, NOK 33 million relates to credit-impaired commitments more than 90 days past due (NOK 26 million), which represents 0.04 per cent of gross loans and guarantee commitments (0.03 per cent), while NOK 75 million relates to other credit-impaired commitments (NOK 92 million), corresponding to 0.08 per cent of gross loans and guarantee commitments (0.11 per cent). 

Net credit-impaired commitments (commitments more than 90 days past due and other credit-impaired commitments) have decreased by NOK 87 million in the past12 months. At end of the first quarter of 2025, the corporate market accounted for NOK 121 million of net credit-impaired commitments and the retail market NOK 168 million. In total, this represents 0.32 per cent of gross loans and guarantee commitments (0.44 per cent). 

Lending to customers
At the end of the first quarter of 2025, net lending to customers amounted to NOK 88,770 million (NOK 83,260 million). In the past 12 months, gross customer lending has increased by a total of NOK 5,485 million, equivalent to 6.6 per cent. Retail lending has increased by 7.2 per cent, while corporate lending has increased by 5.4 per cent in the past 12 months. Retail lending accounted for 65.6 per cent of total lending at the end of the first quarter of 2025 (65.3 per cent).

Customer deposits 
Customer deposits have increased NOK 3,071 million, or 6.4 per cent, in the past 12 months. At the end of the first quarter of 2025, deposits amounted to NOK 51,262 million (NOK 48,191 million). Retail deposits have increased by 3.6 per cent in the past 12 months, while corporate deposits and public sector deposits have increased by 10.9 per cent. The retail market’s relative share of deposits amounted to 60.1 per cent (61.7 per cent), while deposits from the corporate market accounted for 39.9 per cent (38.3 per cent).

LIQUIDITY AND FUNDING
Sparebanken Møre’s liquidity and funding are managed based on frameworks for its liquidity coverage ratio (LCR), net stable funding ratio (NSFR), deposit-to-loan ratio and others. The regulatory minimum LCR and NSFR requirements are both 100 per cent. The Group has established minimum internal targets that exceed the regulatory requirements for LCR and NSFR as well as an internal target corridor for its deposit-to-loan ratio.

Sparebanken Møre’s liquidity coverage ratio (LCR) was 141 (173) for the Group and 133 (160) for the parent bank at the end of the year.

The NSFR ended at 119 (124) at the end of the first quarter of 2025 (consolidated figure), while the bank’s and Møre Boligkreditt AS’s NSFR ended at 121 (125) and 108 (112), respectively.

Both LCR and NSFR meet both external and internal requirements by good margin.

Deposits from customers represent the bank’s main source of funding. The deposit-to-loan ratio was 57.6 per cent (57.7 per cent) at the end of the first quarter of 2025, and this is within the established target corridor.

Total net market funding amounted to NOK 39,927 million at the end of the quarter. Senior bonds with a remaining term to maturity of more than 1 year have a weighted remaining term to maturity of 2.72 years, while covered bond funding through Møre Boligkreditt AS correspondingly has a weighted remaining term to maturity of 2.87 years – overall for market funding in the Group (inclusive of T2 and T3) the remaining term to maturity is 2.89 years.

Møre Boligkreditt AS issues bonds based on the transfer of loans from the parent bank. Gross retail lending transferred to Møre Boligkreditt AS amounted to NOK 35,098 million at the end of the quarter, which corresponds to 39.5 per cent of the bank’s total lending.

RATING
In a Credit Opinion published on 17 January 2025, the rating agency Moody's confirmed Sparebanken Møre’s counterparty, deposit and issuer ratings as A1 with a stable outlook.

Møre Boligkreditt has the same issuer rating as the parent bank, while the mortgage credit company’s issuances are rated Aaa.

CAPITAL ADEQUACY 
Capital adequacy is calculated and reported in line with the EU capital requirements for banks and investment firms – CRD /CRR. Sparebanken Møre has authorisation from the Financial Supervisory Authority of Norway to use internal measurement methods, the Foundation IRB method, for credit risk. Market risk calculations are based on the standard method and operational risk calculations on the basic method. The use of IRB involves comprehensive requirements for the bank’s organisation, expertise, risk models and risk management systems.

CRR3 will enter into force in Norway on 1 April 2025. The bank is thus reporting in line with CRR2 for the first quarter of 2025, and will report in line with CRR3 from the second quarter of 2025 onwards.

The Ministry of Finance has decided to increase the risk-weighted floor for mortgages from 20 to 25 per cent with effect from 1 July 2025. Overall, the changes in capital requirements will have a positive effect of around 1.5 percentage points on CET1 capital for Sparebanken Møre.

In January 2025, a new application was submitted for the acquisition of equity certificates. Sparebanken Møre received a response to this application on 25 February 2025. New permission to acquire equity certificates has been granted for a total amount of up to NOK 42 million. Authorisation was granted on the condition that the buybacks do not reduce CET1 capital by more than NOK 42 million. Sparebanken Møre has deducted NOK 42 million from CET1 capital since the date authorisation was granted and will do so until the authorisation expires on 30 June 2025.

At the end of the first quarter of 2025, the CET1 capital ratio was 17.0 per cent (18.5 per cent), including 50 per cent of the result for the year to date. This is 0.85 percentage points higher than the total minimum requirement and the Financial Supervisory Authority of Norway’s expected capital adequacy margin (P2G) totalling 16.15 per cent. The primary capital ratio, including 50 per cent of the result for the year to date, was 20.7 per cent (23.1 per cent) and the Tier 1 capital ratio was 18.7 per cent (20.8 per cent).

Sparebanken Møre’s total internal minimum CET1 capital ratio requirement is 16.15 per cent. The requirement consists of a minimum requirement of 4.5 per cent, a capital conservation buffer of 2.5 per cent, a systemic risk buffer of 4.5 per cent and a countercyclical buffer of 2.5 per cent. The Financial Supervisory Authority conducted a SREP in 2023. The individual Pillar 2 requirement for Sparebanken Møre has been set at 1.6 per cent, and the expected capital adequacy margin has been set at 1.25 per cent. At least 56.25 per cent of the Pillar 2 requirement (P2R) that resulted from the aforementioned SREP must be met with CET1 capital (0.9 per cent), while a minimum of 75 per cent must be met with Tier 1 capital. The P2G margin must be met with CET1 capital.

The leverage ratio (LR) at the end of the first quarter of 2025 was 7.3 per cent (7.7 per cent). The regulatory minimum requirement (3 per cent) was met by a good margin. 

MREL
On 1 January 2025, the Financial Supervisory Authority of Norway set Sparebanken Møre’s effective MREL requirement at 35.7 per cent of the risk-weighted assets at any given time. The minimum subordination requirement was set at 28.7 per cent. At the end of the quarter, Sparebanken Møre’s actual MREL level was 36.6 per cent, while the level of subordination was 29.7 per cent of the risk-weighted assets.

Sparebanken Møre had issued NOK 3,750 million in subordinated bond debt at the end of first quarter of 2025.

SUBSIDIARIES 
The aggregate profit of the bank’s subsidiaries amounted to NOK 43 million after tax in 2024 (NOK 41 million).  

Møre Boligkreditt AS was established as part of the Group’s long-term funding strategy. The main purpose of the covered bond company is to issue covered bonds for sale to Norwegian and international investors. At the end of the first quarter of 2025, the company had nominal outstanding covered bonds of NOK 28.6 billion in the market. Around 40 per cent was issued in a currency other than NOK. At the end of the quarter, the parent bank held NOK 0 million in bonds issued by the company. Møre Boligkreditt AS contributed NOK 43 million to the Group’s result in the first quarter of 2025 (NOK 41 million).

Møre Eiendomsmegling AS provides real estate brokerage services to both retail and corporate customers. The company made a NOK -1 million contribution to the result in the first quarter of 2025 (NOK -1 million). At the end of the quarter, the company employed 24 FTEs. 

The purpose of Sparebankeiendom AS and Storgata 41-45 Molde AS is to own and manage the bank’s own commercial properties. The company contributed NOK 0 million to the result in the first quarter of 2025 (NOK 1 million). The companies have no staff. 

EQUITY CERTIFICATES
At the end of the first quarter of 2025, there were 7,639 holders of Sparebanken Møre's equity certificates. The proportion of equity certificates owned by foreign nationals and entities amounted to 3.7 per cent at the end of the year.

Note 14 includes a list of the 20 largest holders of the bank’s equity certificates. As at 31 March 2025, the bank owned 171,741 of its own equity certificates. These were purchased on the Oslo Stock Exchange at market price.

At the end of the first quarter of 2025, equity certificate capital accounted for 49.1 per cent of the bank’s total equity.

FUTURE PROSPECTS 
The first quarter was marked by political initiatives from the new US government headed by President Donald Trump. The initiatives particularly centred around security policy, trade policy and domestic policy. Initiatives were launched, postponed, changed and later revoked. Doubts about whether what is on the table at any given time is a negotiating tactic or an actual initiative that will be implemented have created great uncertainty in the financial markets.

Recently, there has been a lot about trade policy. Trump was clear throughout his campaign that he wanted to increase import duties (tariffs) to remedy what he believes has been the unfair treatment of the US for decades. What was announced on 2 April, referred to as “Liberation Day,” was far more extensive than the financial markets had anticipated. High tariffs targeting 175 countries sent stock markets into a period of sharp decline.

In such situations, investors have normally sought out safe havens, with US government bonds being the ultimate safe haven. A weaker USD and sharp rises in interest rates for US debt can be read as indications that investors have lost confidence in the US based on what is currently happening. It also appears that this is what triggered a 90-day pause for the tariffs, except for China, during which only a “base rate” of 10 per cent tariffs remains. The news was welcomed by the markets, although the uncertainty about what comes next between the US and China superpowers rests like a clammy hand on the shoulder of the financial markets. At the same time, many countries are entering into negotiations with the US government.

The uncertainty surrounding the future performance of the global economy remains high. The central banks in Western countries have pointed out that a more protectionist direction could mean both higher inflation and lower growth potential going forward. The big fear is that the result will be so-called “stagflation”, where inflation increases while economic activity levels drop. This could put central banks in a difficult position where price stability considerations pull in the direction of higher interest rates while an economic slowdown pulls in the opposite direction. So far, the markets appear to believe that economic activity considerations are the priority, which has lowered expectations concerning interest rates cuts in both the US and Europe.

As a small, open economy, Norway will obviously be impacted by the direction this takes. A weaker performing global economy will also slow down demand for Norwegian goods. At the same time, it is unclear what the actual tariffs on Norwegian goods will be, as well as where we will end up in relation to our trading partners.

Meanwhile, the Norwegian economy has a relatively good starting point.  Unemployment remains low and in the first quarter there were signs of activity levels recovering in most industries. High wage growth combined with lower inflation also appear to ensure households will see some increase in purchasing power this year. At the same time, the uncertainty has also grown for us. Møre og Romsdal is the most export-intensive county with regards to export income per employed person, excluding oil and gas. A slowdown in world trade could obviously hit a number of companies and industries in our part of the country as well.

When Norges Bank presented its last monetary policy report on 27 March it expected a total of three interest rate cuts in 2025. The interest rate market is currently assuming the same. However, significant movements with respect to interest rates, equities and exchange rates must be expected going forward as well.

Figures from Statistics Norway show that the rate of growth in lending to Norwegian households continues to edge upwards. In February, the 12-month growth rate was 4.0 per cent, up from 3.2 per cent in the same period last year. The growth in lending to non-financial enterprises has for its part continued to fall to 1.5 per cent, while the growth in lending to municipalities has risen slightly. Overall lending growth in the retail market remains relatively stable at around 3.5 per cent.

Sparebanken Møre’s overall lending growth remains satisfactorily high and is still markedly above market growth. At the end of the first quarter of 2025, the 12-month growth rate was 6.6 per cent, slightly above the growth rate at the end of 2024 of 6.5 per cent. The year-on-year growth in lending to the retail market ended at 7.2 per cent at the end of first quarter, while lending growth in the corporate market amounted to 5.4 per cent. Deposits have increased by 6.4 per cent in the past 12 months and the deposit-to-loan ratio remains high.

The bank has a solid capital base and good liquidity and will remain a strong and committed supporter of our customers also going forward. The focus will always be on good operations and profitability.

The bank’s return on equity at the end of the first quarter of 2025 amounted to 11.2 per cent and the cost income ratio was 44.5. Sparebanken Møre’s long-term strategic financial performance targets are a return on equity of above 13.0 per cent and a cost income ratio below 40.0. 

Ålesund, 31 March 2025
29 April 2025

THE BOARD OF DIRECTORS OF SPAREBANKEN MØRE 

ROY REITE, Chair of the Board
KÅRE ØYVIND VASSDAL, Deputy Chair
JILL AASEN
  TERJE BØE
BIRGIT MIDTBUST
ANNE JORUNN VATNE 
MARIE REKDAL HIDE
BJØRN FØLSTAD

TROND LARS NYDAL, CEO