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 Q4 2024
Profit before losses amounted to NOK 354 million for the fourth quarter of 2024, or 1.38 per cent of average assets, compared with NOK 335 million, or 1.39 per cent, for the corresponding quarter last year.

The profit after tax for the fourth quarter of 2024 amounted to NOK 251 million, or 0.98 per cent of average assets, compared with NOK 340 million, or 1.42 per cent, for the corresponding quarter last year.

Return on equity was 12.2 per cent for the fourth quarter of 2024, compared with 17.8 per cent for the fourth quarter of 2023, and the cost income ratio amounted to 40.0 per cent compared with 42.0 per cent for the fourth quarter of 2023. 

Earnings per equity certificate were NOK 2.03 (NOK 3.28) for the Group and NOK 1.65 (NOK 3.07) for the parent bank. 

Net interest income 
Net interest income was NOK 522 million for the quarter, which is NOK 16 million, or 3.2 per cent, higher than in the corresponding quarter of last year. This represents 2.04 per cent of total assets, which is 0.07 percentage points lower than for the corresponding quarter last year.

The interest rate margin for deposits in both the retail market and corporate market contracted compared with the fourth quarter of 2023, while the lending margin was stable compared with the same period in 2023.

Other income
Other income was NOK 67 million for the quarter, which is NOK 4 million less than in the fourth quarter of last year. The net result from financial instruments of NOK -16 million for the quarter was NOK 17 million less than in the fourth quarter of 2023. Capital losses from bond holdings were NOK 24 million in the quarter, compared with NOK 0 million in the corresponding quarter last year. Capital losses from equities amounted to NOK 4 million, compared with capital gains of NOK 4 million in the fourth quarter of 2023. The negative change in value for fixed-rate lending amounted to NOK 8 million, compared with a negative change in value of NOK 14 million in the same quarter last year. Income from foreign exchange and interest rate business for customers amounted to NOK 10 million in the quarter, NOK 5 million less than in the same quarter last year.

Other income excluding financial instruments increased by NOK 14 million compared with the fourth quarter of 2023. The increase was mainly attributable to income from Discretionary Portfolio Management, real estate agency activities and sundry other income.

Expenses
Operating expenses amounted to NOK 235 million for the quarter, which is NOK 7 lower than for the same quarter last year. Personnel epxenses were NOK 4 million lower than in the corresponding period last year and totalled NOK 131 million. Other operating expenses were NOK 3 million lower than in the same period last year. 

Provisions for expected credit losses and credit-impaired commitments 
Losses on loans and guarantees amounted to NOK 21 million in the quarter (receipts of NOK 117 million), corresponding to 0.08 per cent of average assets (-0.49 per cent of average assets). The corporate segment saw an increase of NOK 27 million in losses in the quarter, while receipts on losses in the retail segment amounted to NOK 6 million.

PRELIMINARY FINANCIAL STATEMENTS FOR 2024
Profit before losses amounted to NOK 1,446 million, or 1.45 per cent of average assets, compared with NOK 1,336 million, or 1.42 per cent, for 2023.

Profit after tax was NOK 1,086 million, or 1.09 per cent of average assets, compared with NOK 1,055 million, or 1.13 per cent, for 2023.

Return on equity was 13.7 per cent for 2024, compared with 14.0 per cent for 2023, and the cost income ratio amounted to 39.8 per cent, compared with 39.2 per cent for 2023.

Earnings per equity certificate in 2024 were NOK 9.95 (NOK 10.12) for the Group, and NOK 9.55 (NOK 10.34) for the parent bank. 

Net interest income
Net interest income totalled NOK 2,071 million (NOK 1,900 million) or 2.08 per cent (2.02 per cent) of average assets.

The interest rate margin for deposits in both the retail market and corporate market contracted compared with 2023, while the lending margin was stable compared with 2023.

Other income 
Other income amounted to NOK 330 million in 2024 (0.33 per cent of average assets). This is an increase of NOK 35 million compared with 2023.

Dividends amounted to NOK 14 million, compared with NOK 1 million in 2023. Capital losses from bond holdings were NOK 8 million, compared with losses of NOK 2 million in 2023. Capital losses from equities amounted to NOK 9 million, compared with capital gains of NOK 10 million in 2023. Income from other financial instruments increased by NOK 10 million compared with 2023.

Other income, excluding financial instruments, increased by NOK 37 million compared with 2023.

See Note 7 for a specification of other income.

Expenses
Total expenses were NOK 955 million, which is NOK 96 million higher than in 2023. Personnel expenses increased by NOK 43 million compared with 2023 and were NOK 525 million. Staffing has increased by 2 FTEs in the past 12 months to 402 FTEs. Other operating expenses were NOK 53 million higher than in 2023. See Note 8 for a specification of expenses.

The cost income ratio for 2024 was 39.8 per cent, which represents an increase of 0.6 percentage points compared with 2023.

Provisions for expected credit losses and credit-impaired commitments 
The accounts were charged NOK 20 million in losses on loans and guarantees in 2024, while the accounts for 2023 were credited with net receipts of NOK 53 million.

At the end of 2024, provisions for expected credit losses totalled NOK 263 million, equivalent to 0.30 per cent of gross loans and guarantee commitments (NOK 266 million or 0.32 per cent). Of the total provision for expected credit losses, NOK 40 million relates to credit-impaired commitments more than 90 days past due (NOK 26 million), which represents 0.05 per cent of gross loans and guarantee commitments (0.03 per cent), while NOK 76 million relates to other credit-impaired commitments (NOK 72 million), corresponding to 0.09 per cent of gross loans and guarantee commitments (0.09 per cent).

Net credit-impaired commitments (commitments more than 90 days past due and other credit-impaired commitments) have increased by NOK 68 million in the past 12 months. At year end 2024, the corporate market accounted for NOK 236 million of net credit-impaired commitments and the retail market NOK 159 million. In total, this represents 0.45 per cent of gross loans and guarantee commitments (0.39 per cent). 

Lending to customers
At the end of 2024, net lending to customers amounted to NOK 86,875 million (NOK 81,572 million). In the past 12 months, gross customer lending has increased by a total of NOK 5,294 million, equivalent to 6.5 per cent. Retail lending has increased by 7.6 per cent and corporate lending has increased by 4.3 per cent in the past 12 months. Retail lending accounted for 66.4 per cent of lending at year end 2024 (65.7 per cent).

Customer deposits 
Customer deposits have increased NOK 2,140 million, or 4.5 per cent, in the past 12 months. At year end 2024, deposits amounted to NOK 49,550 million (NOK 47,410 million). Retail deposits have increased by 3.2 per cent in the past 12 months, while corporate deposits and public sector deposits have increased by 6.7 per cent. The retail market’s relative share of deposits amounted to 60.8 per cent (61.7 per cent), while deposits from the corporate market accounted for 39.2 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 167 (174) for the Group and 150 (155) for the parent bank at the end of the year.

The NSFR ended at 122(124) at the end of 2024 (consolidated figure), while the bank’s and Møre Boligkreditt AS’s NSFR ended at 122 (128) and 110 (109), 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 56.9 per cent (57.9 per cent) at the end of 2024, and this is within the established target corridor.

Total net market financing amounted to NOK 39.6 billion at the end of the year. Senior bonds with a remaining term to maturity of more than 1 year have a weighted remaining term to maturity of 2.17 years, while covered bond funding through Møre Boligkreditt AS correspondingly has a weighted remaining term to maturity of 3.12 years – overall for market funding in the Group (inclusive of T2 and T3) the remaining term to maturity is 3.02 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 35,751 million at year end, which corresponds to 41.0 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.

Bank Package IV came into effect in the EU on 1 January 2025 with the implementation of the Capital Requirements Regulation (CRR III) and the Capital Requirements Directive (CRD VI). However, CRR III cannot enter into force in Norway until CRR III has been incorporated into, and is in effect in, the EEA Agreement. CRR III will enter into force in the EEA Agreement after any constitutional reservations in Liechtenstein and Iceland have been resolved.

The ministry has decided to increase the risk-weighted floor for mortgages from 20 to 25 per cent with effect from 1 July 2025. It is estimated that this will result in a reduction in Common Equity Tier 1 capital of around 1.1 percentage points for Sparebanken Møre, based on figures from the third quarter of 2024. At the same time, other changes in CRR III will have positive capital effects for the bank. Overall, the changes in capital requirements will have a positive effect of around 1.2 percentage points on Common Equity Tier 1 capital for Sparebanken Møre.

On 16 August 2024, the Financial Supervisory Authority approved Sparebanken Møre’s application to acquire equity certificates. Authorisation was granted on the condition that the buybacks do not reduce Common Equity Tier 1 capital by more than NOK 78.4 million. Sparebanken Møre deducted NOK 78.4 million from Common Equity Tier 1 capital between the date authorisation was granted until the authorisation expired on 31 December 2024. In January 2025, a new application was submitted for the acquisition of equity certificates.

At the end of 2024, the Common Equity Tier 1 capital ratio was 17.2 per cent (18.2 per cent). This is 1 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. Primary capital amounted to 21.1 per cent (22.2 per cent), and Tier 1 capital was 19.0 per cent (20.0 per cent).

Sparebanken Møre’s total Common Equity Tier 1 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 Common Equity Tier 1 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 Common Equity Tier 1 capital.

The leverage ratio (LR) at year end 2024 was 7.4 per cent (7.5 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 year, Sparebanken Møre’s actual MREL level was 39.6 per cent, while the level of subordination was 32.4 per cent of the risk-weighted assets.

Sparebanken Møre has issued NOK 3,750 million in subordinated bond debt at the end of 2024.

SUBSIDIARIES 
The aggregate profit of the bank’s subsidiaries amounted to NOK 172 million after tax in 2024 (NOK 130 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 2024, the company had nominal outstanding covered bonds of NOK 30.6 billion in the market. Around 40 per cent was issued in a currency other than NOK. At the end of the year, the parent bank held NOK 279 million in bonds issued by the company. Møre Boligkreditt AS contributed NOK 169 million to the Group’s result in 2024 (NOK 128 million).

Møre Eiendomsmegling AS provides real estate brokerage services to both retail and corporate customers. The company contributed NOK 0 million to the result in 2024 (NOK 0 million). At year end, the company employed 22 full-time equivalents. 

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 3 million to the result in 2024 (NOK 2 million). The companies have no staff. 

EQUITY CERTIFICATES
At year end 2024, there were 7,424 holders of Sparebanken Møre's equity certificates (EC). The proportion of ECs owned by foreign nationals and entities amounted to 5.7 per cent at the end of the year.

Note 14 includes a list of the 20 largest holders of the bank’s ECs. As at 31 December 2024, the bank owned 259,658 ECs. These were purchased on the Oslo Stock Exchange at market price.

In connection with the establishment of the foundation Sparebankstiftelsen Sparebanken Møre, the equity certificate capital was increased by a nominal value of NOK 7,215,000 on 4 December 2024 by converting primary capital to equity certificate capital.  The equity certificates issued at the time of conversion were transferred to the foundation. The number of issued equity certificates after the conversion is 49,795,520. It is estimated that the conversion, in isolation, will increase the ownership fraction by 0.35 percentage points.

Based on Sparebanken Møre’s practice related to the distribution ofdividend funds for the local community, the Financial Supervisory Authority of Norway has instructed the bank to make a correction in connection with the annual report and financial statements for 2024. The effect of the instruction entails a transfer from profit for the year to primary capital of NOK 132.4 million. This results in an increase in Common Equity Tier 1 capital of about 0.32 percentage points and a reduction in the ownership fraction of almost 0.9 percentage points.

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

DIVIDEND POLICY
The aim of Sparebanken Møre is to achieve financial results which provide a good and stable return on the bank’s equity capital. The results should ensure that the owners of the equity receive a competitive long-term return in the form of cash dividends and capital appreciation on their equity.

Dividends consist of cash dividends for equity certificate holders and dividend funds for local communities. The proportion of profits allocated to dividends is in line with the bank’s capital strength. Unless the bank’s capital strength dictates otherwise, it is expected that about 50 per cent of this year’s surplus can be distributed as dividends.

Sparebanken Møre’s allocation of earnings should ensure that all EC holders are guaranteed equal treatment.

PROPOSED ALLOCATION OF PROFIT FOR THE YEAR
Reference is made to provisions on the distribution of profits according to the Financial Institutions Act, among other to §10-17, and to Sparebanken Møre’s dividend policy. It is intended to propose that 72.2 per cent of the profit in the Group after correction (75.6 per cent of the profit in the Parent bank) is distributed as cash dividends to EC owners and dividend funds for local communities.

Based on the accounting breakdown of equity in the parent bank between equity certificate capital and the primary capital fund, 48.41 per cent of the profit will be allocated to equity certificate holders and 51.59 per cent to the primary capital fund. The Group posted earnings per equity certificate of NOK 9.95 in 2024 (NOK 9.55 in the parent bank). The Board of Directors is also planning to propose to the Annual General Meeting is that the cash dividend per equity certificate for the 2024 financial year be set at NOK 6.25, which will come to NOK 311.2 million in total. The corresponding provision for dividend funds for local communities will amount to NOK 331.7 million.

Proposed allocation of profit in the parent bank (figures in NOK millions):

Profit for the year                                                                      1,045

Share allocated to hybrid Tier 1 instrument holders                       63

Instruction to correct primary capital fund                                   132

Dividend funds (75.6 per cent):

To cash dividends                                                                        311

To dividend funds for local communities                           332      643

Strengthening of equity (24.4 per cent):

To the dividend equalisation fund                                                100

To the primary capital fund                                           107          207

Total allocated                                                                         1,045

FUTURE PROSPECTS 
In early autumn, the financial markets were worried that there would be a marked slowdown in the US economy. At the time, the market assumed that the US Federal Bank would reduce interest rates relatively quickly. The decrease in expectations concerning US interest rates also spread to European interest rates.

In the past few months, a more robust picture of the US economy has emerged. This has reduced fears of a marked slowdown and caused interest rate expectations to rise again. Expectations that the policies of the Trump administration will be inflationary are also causing expectations concerning interest rates to rise. A lot of uncertainty remains about the specific policy measures that will be implemented, although they are expected to include higher import duties and lower corporate taxes.

While interest rate expectations among our trading partners have risen, a number of central banks have continued to reduce their policy rates. This is because international inflationary pressures continue to decrease. Both the US and European central banks have reduced their key rates by one percentage point from their peak; the Swedish Riksbanken has lowered its by even more.

The uncertainty surrounding the future performance of the global economy remains relatively high. The fluctuations in interest rate expectations are, therefore, also significant. US policy news may lead to fluctuations in the international financial markets in the coming months.

The Norwegian economy has yet to exhibit any particular signs of weakness in the overall picture. Growth has slightly exceeded Norges Bank’s estimates in recent quarters. At the same time, the fiscal policy for 2025 appears to be somewhat more expansive than expected, which is helping to boost the prospects of growth for 2025. A gradual lowering of interest rates and expectations of increased household purchasing power pull in the same direction. Norges Bank estimates that the Norwegian mainland economy will grow by 1.4 per cent in 2025, up from 0.9 per cent in 2024.

The unemployment rate remains low and is not expected to rise much. Nordvestlandet is also seeing higher levels of activity than a number of other areas of the country. This is in part due to the weak Norwegian krone exchange rate, which has boosted activity in export industries.

With a Norwegian economy that is holding up well, it appears that the decrease in interest rates will be gradual. Overall, Norges Bank is expecting three interest rate cuts in 2025, with the first in March.

The rate of growth in lending to households for Norway as a whole continued to edge upwards throughout the fourth quarter of the year as well. The trend of declining growth in household debt over the past 2 years ended in March; the 12-month growth rate has increased each month since April and was 3.9 per cent at the end of November. The growth in lending to non-financial companies fell during 2024 and was 1.9 per cent at the end of November. At the same time, the 12-month growth in total lending was 3.6 per cent.

Sparebanken Møre’s overall lending growth remains satisfactorily high and is still markedly above market growth. At the end of 2024, the 12-month growth rate was 6.5 per cent, slightly below the growth rate at the end of 2023 of 7.2 per cent. Year-on-year growth in lending to the retail market amounted to 7.6 per cent at the end of the year, while lending growth in the corporate market amounted to 4.3 per cent. Deposits have increased by 4.5 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 for 2024 ended at 13.7 per cent and its cost income ratio at 39.8. Sparebanken Møre’s long-term strategic financial performance targets have been a return on equity of above 12 per cent and a cost income ratio of below 40. Going forward, the long-term performance targets are a return on equity above 13 per cent, while the cost income ratio below 40 remain unchanged.

Ålesund, 31 December 2024
29 January 2025

THE BOARD OF DIRECTORS OF SPAREBANKEN MØRE 

ROY REITE, Chair of the Board
KÅRE ØYVIND VASSDAL, Deputy Chair
JILL AASEN
THERESE MONSÅS LANGSET
TERJE BØE
BIRGIT MIDTBUST
MARIE REKDAL HIDE
BJØRN FØLSTAD

TROND LARS NYDAL, CEO