Heder Bank to offer mortgages at 4.99%

Outlook for continued high rates

Although we continue to expect some margin headwind, the outlook for postponed rate cuts – leaving interest rates at continued high levels – should bode well for sector earnings, further supported by a strong profitability focus and modest loan losses. With the sector trading at an average 2026e P/E of c11.0x, and solid dividend potential, we find the valuation undemanding. We reiterate our positive sector view but highlight a larger share of HOLD recommendations than 12 months ago.

Norwegian banks: Q4'24 outcome vs. expectations

ROE >14% in 2027 seems unlikely

SpareBank 1 Sør-Norge (Buy, TP: NOK167.00) - Raised ROE and synergy am...

Helped by strong fees and moderate loan losses, the Q4 ROE was 10.9% in the first post-merger quarter, despite soft trading income and NOK89m of merger-related costs. With the report, the bank raised its ROE target to >14% (>13%). We have increased our 2026e EPS by ~2% and our target price to NOK167 (160). Trading at a 2026e P/E of ~9.8x adjusted for the proposed 2024 DPS (NOK8.5, implying a 5.4% yield), we continue to find the valuation undemanding and reiterate our BUY.

Weaker Q4 numbers, but solid ROE guiding

Adj. PTP in-line with ABGSCe, but -1% vs. cons; Stronger lending growth, but weak deposit growth; Cons. EPS 0-2% down, but depending on long term ROE details

Norw. banks Q4e: Lower yields from RW floor

Likely to give more details on cost synergies

On course for ample distributions

While we forecast some margin moderation from current highs, we believe still-high interest rates, robust asset quality and a firm profitability focus bode well for continued strong earnings. With the sector trading at an average dividend-adjusted 2025e P/E of ~9.3x and several banks having additional excess capital, we still find the valuation undemanding. Noting some HOLD recommendations, we keep our positive sector view.

Norwegian banks: Increased RW floors for IRB banks

N-MoF increase RW to 25% for mortgages, keep CRE at 35%; Implementation 30 June 2025, banks time to adopt; Stocks likely down 1-3%. SVEG, MING more than DNB, NONG.

Norwegian savings banks: 4 proposals in a white paper

The ECC capital loss absorbing rank must be solved. Four independent suggestions, interconnect we think. SB1NO could be a relative winner, but still early days.

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 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...

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%

Proforma normalised ROE >13%

Still-encouraging profitability outlook

Despite expecting some margin headwinds, we believe still-high interest rates, robust asset quality and a firm profitability focus bode well for sector earnings remaining strong. Adding generous dividend prospects, we continue to find the valuation undemanding, with a coverage average 2025e P/E of ~9.1x. While noting a slightly more nuanced perspective with some HOLD recommendations, we maintain our positive sector view.

2024 Norwegian bank survey - Sector trends remain promising

While the respondents unsurprisingly forecast margins to decline from current highs, our 11th annual survey of the 50 largest banks in Norway presents an upbeat outlook, in our view. In addition to robust asset quality, the banks expect a slight uptick in lending growth. Supported by a market-disciplining profitability focus and solid dividend potential, we still find the sector valuation undemanding at an average 2025e P/E of ~9.3x. Noting a slightly more nuanced perspective with some HOLD reco...

SpareBank1 SR-Bank (Buy, TP: NOK160.00) - Solid growth but slight marg...

Supported by still-high NII and solid fee income, SRBNK reported a strong Q2 ROE of 14.6%, despite somewhat soft trading income. With margin pressure mitigated by high activity (2.3% QOQ lending growth), NII was fairly flat QOQ, while fee income rose 4.4% YOY, even with the recent transfer of its capital markets operations to SpareBank 1 Markets. With the stock trading at a 2025e P/E of ~8.8x, we continue to find the valuation attractive. We reiterate our BUY and NOK160 target price.

More than enough capital post merger

Adj. PTP -1% vs. ABGSCe, but -5% vs cons (NII & loan losses). EPS down 3%, 4% and 2% for '24e/25e/26e (NII driven). Valuation starts to look more tempting ahead of the 1 Oct merger.