Sparebanken Øst (Hold, TP: NOK50.00) - Sustained margin pressure
SPOG reported a strong Q2 ROE of 13.5% and PTP 46% above consensus. However, the increased profitability mainly reflected a high contribution from Frende and we still find the underlying profitability challenging. Despite a sustained elevated volume inflow (5.2% QOQ), NII came in below our estimate on continued margin pressure. We have reduced our 2022–2023e EPS by 1–3%, mainly due to lower NII. We find the current valuation fair, at a 2021e P/B of ~0.9x and with prospects of underlying ROEs of ~7%, and reiterate our HOLD and NOK50 target price.Sparebanken Ost (the Bank) is a Norway-based regional bank. The Bank is engaged in the provision of both banking and financial products and services to individuals and businesses. The Bank's primary market area is the lower part of Buskerud county and the Drammen region. Its product and service offering includes loans, cards, payment services, savings accounts, pension funds, life and non-life insurance, investment services and foreign exchange. As of December 31, 2011, the Bank had such subsidiaries, as Sparebanken Ost Boligkredit AS, a mortgage company; AS Financiering, a car financing company; Sparebanken Ost Eiendom AS, which was engaged in real estate development and operations, and Ost Prosjekt AS, a subsidiary supporting the Bank's activities. As of December 31, 2011, the Bank's largest shareholder was MP Pensjon (9.89%).
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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