SpareBank 1 Sørøst-Norge (Buy, TP: NOK61.00) - Addressing capital efficiency
Helped by solid core revenues and trading income tailwinds, the Q4 ROE was 10.9%. While the board proposed a generous 2022 ordinary DPS of NOK2.6 (58% payout ratio) and a potential extraordinary DPS of NOK1.5, management highlighted the importance of capital efficiency to reach its >11% ROE ambition. The bank lowered its CET1 ratio target to >17.0% and raised its dividend policy to >50%. We have increased our 2023–2024e EPS by ~2–3% driven by higher NII, and in turn raised our target price to NOK61 (60). Given our ~10% 2023–2024e ROEs, we still find the valuation attractive at a 2023e P/B of ~0.9x and reiterate our BUY.Sparebank 1 BV, formerly Sparebank1 Buskerud-Vestfold (the Bank), is a Norway-based regional bank. It is primarily active in Buskerud, Kongsberg, Drammen and Vestfold in Norway. It is engaged in the provision of a range of banking and related products and services to both private clients and small and middle-sized enterprises. Its products and services include financing, payment processing, savings accounts, insurance and real estate services. The Bank is active through branches in Drammen, Kongsberg, Hvittingfoss, Horten, Tonsberg, Sandefjord, Larvik and Stavern. As of December 31, 2011, the Bank had three direct wholly owned subsidiaries, namely EiendomsMegler 1 Buskerud Vestfold AS, Georg Solberg AS and Imingen Holding AS. Additionally, it had one indirect subsidiary, Parkeringsplassen AS, and three associated companies. Sparebank1 BV is a member of the SpareBank1 bank alliance, which comprises 15 independent Norwegian banks.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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