Norwegian banks: Q3'24 outcome vs. expectations

Q3: Positive proforma revisions

Adj. proforma PTP in line with ABGSCe; Positive revisions muted by commision income and cost; Valuation is fair (HOLD)

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 ...

Edda Wind (Buy, TP: NOK30.00) - Well positioned

While EBITDA was broadly in line with expectations, the Q3 report gave early signs of improved operational reliability, which we believe will be key to narrowing the discount to underlying values (the stock is trading at 0.6x P/NAV). Recent contract awards (including a new 12+12-month contract announced with the results) have made the fleet fully booked until the 2025 summer season, and three of the four 2025 newbuild deliveries are now booked directly following yard delivery. We reiterate our BUY and NOK30 target price.

Valuation and market update

In this note, we show updated valuation and market statistics for the Offshore Drilling sector.

Petrobras FPSO delays may hit service volumes but lengthen cycle

Being the largest global consumer of deepwater oil services, Petrobras’ strategic plans tend to get investor attention. On the positive side, its latest 5-year plan sees 5% higher E&P spending than the previous one, and has a more stable phasing between the years, which is supportive for the cycle duration. However, several FPSOs are facing significant delays, which is on the downside for oil services, leading to delays for deepwater oilfield services (primarily drilling and subsea), likely resulting in lower ‘peak volumes’ and demand being spread over a longer period. The rig count is said to...