Sparebanken Møre (Hold, TP: NOK95.00) - Higher margin pressure and cos...

With elevated margin pressure and higher costs YOY, Q1 ROE was 11.2%, despite modest loan losses. Given the composition of the lending growth, MORG increased its risk-weight assets, leading to a ~ 20bp lower CET1 ratio QOQ. That said, the bank guided for a net positive effect of ~1.5%-points from the pending implementation of Basel IV in Q2 and Q3, leaving an ample buffer to its 16.15% requirement (including P2G), boding well for solid distributions. We have lowered our 2026–2027e EPS by ~5% on ...

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.

Sparebanken Møre (Hold, TP: NOK97.00) - ROE target raised after strong...

Boosted by solid core revenues and reduced costs YOY, Q4 ROE was ~12%, despite negative trading income. The board proposed a 2024 DPS of NOK6.25, implying a ~63% payout ratio and 6.4% dividend yield. With the report, MORG raised its ROE target to >13% (>12%), levelling with other larger regional banks’ current targets. While we have raised our target price to NOK97 (92), we still find a more attractive risk/reward elsewhere in the sector, with the stock trading at a 2026e dividend-adjusted P/E o...

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.

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...

Sparebanken Møre (Hold, TP: NOK90.00) - Strong quarter despite cost pr...

Fuelled by loan-loss reversals and further NII expansion, MORG reported a strong Q2 ROE of ~14% (>12% target), despite cost inflation remaining elevated. Moreover, the CET1 ratio rose ~60bp QOQ to 19.1%, leaving an ample ~3.0%-points headroom to its 16.15% regulatory requirement (including P2G). That said, with the stock trading at a 2025e P/E of ~9.6x, we continue to find the valuation fair. Thus, we reiterate our HOLD and NOK90 target price.

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.

Sparebanken Møre (Hold, TP: NOK92.00) - Strong capital position

With NII at still-high levels and moderate loan losses, MORG reported a Q1 ROE of ~13% (>12% target), despite elevated cost inflation. Even with solid lending growth, the CET1 ratio rose ~25bp QOQ, leaving ample 2.3%-points headroom to its 16.15% requirement (including P2G). We have cut our 2025–2026e EPS by ~2–4%, driven by lower core revenues and higher costs, and in turn trimmed our target price to NOK92 (95). With the stock trading at a 2025e P/E of 9.5x, we continue to find a more attractiv...

Scope for continued strong earnings

Seeing support from still-high interest rates and sound fundamentals, we expect solid NII and robust asset quality to contribute to continued strong earnings generation for the banks, despite the stable and eventually falling key policy rate trajectory. Trading at an average 2025e P/E of ~8.5x (adjusted for undistributed 2023 dividends), we continue to find the valuation undemanding. We maintain a positive view on the sector and highlight SVEG as our top pick.

Sparebanken Møre (Buy, TP: NOK95.00) - Strong Q4 and generous dividend...

Boosted by offshore-related reversals and continued core revenue momentum, MORG reported a strong Q4 ROE of ~17%, despite low trading income and elevated cost inflation. The board proposed a 2023 DPS of NOK7.5, implying a ~74% payout ratio (~50% policy) and an ~8.8% dividend yield. The bank reiterated its financial ambitions, including its ROE target, which was raised from >11% to >12% in December. With the stock trading at a dividend-adjusted 2025e P/E of ~8.5x, we continue to find the valuatio...

Sparebanken Møre (Buy, TP: NOK95.00) - Set for strong Q4 on offshore t...

Helped by offshore reversals and sustained NII momentum, we expect a strong Q4 ROE of 17.3%, despite elevated cost pressure. With incorporation of its approved model changes set to improve its already solid capital position, we forecast a generous 2023 DPS of NOK7.7, indicating a ~75% payout ratio (~50% policy) and a 9.1% dividend yield. Trading at a 2024e P/E of ~8.7x, we continue to find the valuation attractive. We have raised our target price to NOK95 (93) on improved dividend prospects, and...

Scope for further generous distributions

With repricing efforts yet to take full effect and sound fundamentals boding well for manageable loan losses, we see prospects for solid earnings generation ahead, despite likely margin pressure from high levels longer-term. Given the banks’ solid capital positions, a more moderate growth outlook, and an enhanced profitability focus in the sector, we forecast further generous shareholder distributions, with an average dividend/ buyback yield of ~8% for 2023e. At an average 2024e P/E of ~8.4x, we...

Sparebanken Møre (Buy, TP: NOK93.00) - Improved asset-quality outlook

Sparebanken Møre reported a Q3 ROE of 13%, and PTP of NOK333m, up 32% YOY. NII momentum remained solid during the quarter, driven by QOQ margin improvements and 8.3% YOY loan growth. Together with rebounding financial markets, this more than offset a QOQ uptick in loan loss provisions, although the bank now sees potential reversals as offshore/supply markets continue to improve. We have made limited changes to our 2024–2025e EPS, and we reiterate our BUY and NOK93 target price.

NII momentum to continue into 2024e

With recent repricing efforts yet to take full effect, we expect continued margin momentum for the rest of 2023 and into 2024. With additional support from relatively resilient asset quality, we see room for still-solid earnings for the sector ahead. Also, we believe enhanced profitability focus, comfortable capital positions and a more moderate growth outlook bode well for sustained generous dividend distributions. Trading at an average 2024e P/E of ~8.5x, we reiterate our positive sector view....

Norwegian bank survey 2023 - Supportive ROE focus

Helped by its NII-skewed income mix, the Møre og Romsdal market leader has been a key beneficiary of rising interest rates. With recent repricing efforts leaving scope for further margin momentum near-term, we estimate 2024–2025 ROEs roughly in line with the >11% target, despite elevated cost inflation. With approved model changes to be implemented and an updated Pillar 2 assessment expected by year-end, we see potential upside to its already comfortable capital headroom. We continue to find the...

Northern Lights

Sparebanken Møre (Buy, TP: NOK92.00) - Upside to solid capital headroo...

Helped by solid revenues and loan loss reversals, MORG reported a Q2 ROE of ~13%, despite elevated costs. With approved model changes to be implemented and an updated Pillar 2 assessment expected by year-end, we see upside potential to its already comfortable capital headroom. We have trimmed our target price to NOK92 (93) on estimate revisions. However, with 2024–2025e ROEs of ~11%, we still find the valuation attractive at a 2023e P/B of ~0.95x, and reiterate our BUY.

Nordea to acquire Danske’s Norwegian retail portfolio

This morning, Nordea announced that it has entered into an agreement with Danske Bank to acquire its Norwegian retail portfolio, increasing its mortgage market share in Norway from ~11% to ~16%. At end-2022, Danske’s operations consisted of ~EUR18bn in lending, ~EUR4bn in deposits and ~EUR2bn of savings assets. The transaction is expected to close in Q4 2024 and the exact amount paid will be determined by the assets left on Danske’s balance sheet at that date. We expect further consolidation fro...

Strong ROE and valuation support

Boosted by the full impact of recent repricing efforts and the still-positive rate trajectory, we expect further margin momentum ahead. Moreover, with sound fundamentals boding well for relatively resilient asset quality, we see scope for continued solid earnings generation, despite greater cost pressure. At an average 2024e P/E of ~8.3x, we still see an attractive valuation for the banks we cover and reiterate our positive sector view. SRBNK is our top sector pick.