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

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.

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

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%

The stronger 2025e is reflected in valuation

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.

Sparebanken Vest (Buy, TP: NOK148.00) - Expanding in the south

This morning, SVEG announced its intention to merge with SOR, creating Norway’s largest savings bank (cNOK429m combined lending). While seeing the greatest benefit for SOR’s shareholders, we expect an accretive effect on BV, and the capital and operating synergy guidance leave potential for a ~6% positive EPS effect (on 2025e EPS). We continue to find the valuation undemanding at a 2025e P/E of ~9.3x, and reiterate our BUY and NOK148 target price.

Looks like a win-win transaction

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...

Sparebanken Vest (Buy, TP: NOK148.00) - Still-strong earnings momentum

Fuelled by strong core revenues, sound cost efficiency and robust asset quality, SVEG reported a standout Q2 ROE of 20.1%. Aided by continued lending growth momentum and improved retail lending margins, NII rose by 5.1% QOQ. We have raised our 2025–2026e EPS by ~3–4%, driven by higher NII, and edged up our target price to NOK148 (141). We still like the bank’s strong earnings generation capabilities, and at a 2025e P/E of ~9.3x, continue to find the valuation undemanding. Thus, we reiterate our ...

High growth, margins and valuation

Better margins make the beat

Adj. PTP beat of 9% vs. ABGSCe and cons. driven by strong margins. Cons. est. rev. likely up 2-4%; Stock up 2-4%

Norwegian banks Q2'24: NII still to peak

Sector trading at '24e- and 25e adj. P/Es of 8.5x and 8.8x. Higher-for-longer policy rate raises estimates for '25e-'26e. Prefer SR-Bank ahead of the Q2 results, SVEG's premium looks fair.

At a fair premium valuation

Q2e: Last quarter with lagged effects. Estimate revisions driven by new rate path and margin outlook. Trading at a fair premium valuation of 1.54x P/NAV.

Robust profitability outlook

With the key policy-rate trajectory indicating still-high interest rates, we see prospects for NII remaining at solid levels, despite expecting some margin pressure. Helped by additional support from robust asset quality, we expect continued strong sector profitability. Trading at an average 2025e P/E of ~8.9x, we continue to find the valuation undemanding and keep our positive sector view. SRBNK is our top sector pick.

Norwegian FSA suggest again stricter RW

N-FSA propose again to N-MoF to increase RW to 25% for mortgages, if implemented, largest impact for SVEG (-6%), least for DNB (-2%). DNB (HOLD) is our preferred Norwegian bank at the moment

Cost efficiency and growth story priced in

Q1: Adj. net profit +3% vs. ABGSCe and -4% vs. cons. on cost & tax. Adj. EPS up 2% and 4% for '24e-'25e (income, costs & LLP). At 1.5x P/NAV it's a well priced growth & efficiency story: HOLD (Buy).

Sparebanken Vest (Buy, TP: NOK139.00) - Continued strong ROE and growt...

Boosted by the tax advantage of customer dividends, continued strong lending growth, YOY cost reductions and robust asset quality, SVEG reported a Q1 ROE of 21.6%. Moreover, with the approval and implementation of new IRB risk models, in addition to strong earnings, the CET1 ratio rose ~70bp QOQ. Trading at a 2025e P/E of ~9.2x, we continue to find the valuation undemanding, and reiterate our BUY and NOK139 target price.

Q1: Stronger growth than expected

Adj. PTP beat of 2% vs. ABGSCe and cons. 2-7% better costs gives CI/ of ~25%. Cons. est. rev. likely +/-1%; Stock down 0-2%.