DNB (No_rec, TP: NOK) - ROE and fee income targets raised

At its 2024 CMD, DNB raised its ROE target from >13% to >14% for 2025–2027. Targeting a CET1 ratio of >16.7% (supervisory expectation), the bank kept its dividend policy of nominally increasing cash dividends, a >50% payout ratio and share buybacks to optimise its capital position. While it continues to target 3–4% annual lending growth and a 9% (previously 4–5%).

CMD: ROE target upped to >14%

Heads-up for CMD 19 November

Sparebanken Vest (Buy, TP: NOK158.00) - Long-term synergy potential

In this note, we have included the merger with Sparebanken Sør in our estimates (scheduled for 1 May 2025 pending regulatory approval). The banks have guided for annual operating synergies of NOK350m–400m from 2027–2028, as well as combined capital benefits of NOK4.1bn (NOK2.1bn from the new standard method and NOK2bn from SVEG’s IRB models). While we have cut our 2025–2026e EPS by ~5% due to the synergy time lag, we expect the merger to be accretive longer-term. Also seeing generous dividend pr...

Norwegian banks: Q3'24 outcome vs. expectations

DNB (No_rec, TP: NOK) - Focus on key 2027 financial targets

With 2022–2024 YTD ROEs of ~15–17%, DNB has continuously hit its >13% target set in 2022, with ample headroom. While expecting some margin pressure, we believe still-high interest rates, capital-light revenue momentum and robust asset quality bode well for continued strong earnings generation. At the CMD scheduled for 19 November, we expect the main focus to be on the new financial targets towards 2027, and see scope for its ROE target to be raised to >14%.

Negative cost revisions saved by associates

NII in line but higher cost and losses; Positive associate revisions, muted by personnel cost; Valuation in line with fundamentals

Q3: Positive proforma revisions

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

Nordic banks – statistical update – Swedish bankruptcies October 2024

SpareBank 1 Sør-Norge (Buy, TP: NOK160.00) - Strong final pre-merger q...

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 lo...

Sparebank 1 SMN (Buy, TP: NOK175.00) - NII momentum

Solid NII from strong loan growth helped offset higher opex and loan losses in Q3, while the NOK452m gain from the merger of Fremtind and Eika Forsikring on 1 July helped drive Q3 ROE above 21%. Asset quality remains strong, and we expect moderate loan losses going forward. We have raised our 2025–2026e EPS by ~2% on continued NII momentum and increased our target price to NOK175 (172). We reiterate our BUY.

Nordic banks – Statistical update - Norwegian lending September 2024

Quarter impacted by higher cost and losses

Adj. PTP -7% vs. ABGSCe, -1% vs cons amid cost & LLP; Stronger lending growth, but weak deposit growth; Cons. EPS chg. likely down 1-3%, stock down 1-4%

Weaker cost and lending to impact revisons

Adj. PTP -6% vs. ABGSCe, -5% vs. consenus. Higher cost lower lending to impact revisions. Cons. '24e-26e EPS chg. down 0-1%, stock down 0-2% today.

Sparebanken Vest (Buy, TP: NOK158.00) - Strong revenues and firm cost ...

Fuelled by continued core revenue expansion, good cost efficiency and low loan losses, SVEG reported a strong Q3 ROE of 21.4%. While NII rose 2.5% QOQ and fee income 10.3% YOY, the bank saw marginal YOY cost reductions. We have raised our 2025–2026e EPS by ~3%, and our target price to NOK158 (148). With the stock trading at a 2025e P/E of ~9.1x, we continue to find the valuation attractive and reiterate our BUY.

SpareBank1 Nord-Norge (Hold, TP: NOK123.00) - Strong Q3, but reduced D...

NONG reported a Q3 ROE of 32.1%, boosted by sustained core revenue tailwinds, moderate loan losses and a NOK452m gain from the Fremtind/Eika merger (still-strong 21.2% adjusted for the latter). Meanwhile, the CET1 ratio fell by ~70bp QOQ, lowering the requirement buffer to ~80bp. Thus, while we have raised our 2025–2026e EPS by ~1%, we have cut our 2024–2026e DPS by ~5–6%. Following the recent share price uptick, we find the valuation fair (2025e P/E of ~9.7x) and have downgraded to HOLD (BUY). ...

Impressive fundamentals priced in

Q3: Adj. PTP +8% and +7% vs. ABGSCe and cons; Adj. EPS up 6.3%, 3.5% and 3.4% for '24e-'26e; At 1.57x P/NAV in '24e the valuation is fair: HOLD

Estimates up, but distributions down

Strong cost combined with higher lending

Adj. PTP +7% vs.cons and +8% vs ABG from income & costs; Merger synergies of ~25-30% of the smallest unit looks low; Cons. est. rev. likely up 1-2% (costs ); Stock up 1-2%

Improve the cost guidance for towards 2027

Adj. PTP +3% vs. ABGSCe, 0% vs. cons, driven by better costs; Guide future costs growth 1-2% lower from replacing fewer FTEs; Cons. '25e-'26e EPS rev. likely up 0-2%; stock could just hold up