SpareBank 1 Sør-Norge (Buy, TP: NOK160.00) - Strong final pre-merger quarter
With a NOK452m gain from the merger of Fremtind and Eika Forsikring, but a NOK105m writedown in Folkeinvest and NOK64m of merger-related costs, the bank reported a strong Q3 ROE of 17.5% (13.6% adjusted). While loan losses were a somewhat elevated ~22bp, NII increased 2.4% QOQ. From an 18.3% end-Q3 pro forma CET1 ratio, it guided for a ~10bp benefit in Q4 (sale of SamSpar shares), ~40bp in Q1 (Basel IV) and another ~70bp in 2025 (IRB models). With the stock trading at a 2025e P/E of ~9.8x and longer-term synergy potential, we continue to find the valuation attractive. We reiterate our BUY and NOK160 target price.Sparebank 1 SR Bank is a savings bank. Co.'s core activities are sales and brokering of financial products and services, as well as leasing and real estate brokering. Co. is organized in three divisions: The Retail Market Division; The Corporate Market Division; and The Capital Market Division Co. provides products and services in the fields of financing, investments, money transfers, pensions and life and non-life insurance.
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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