Norwegian banks: Q3'24 outcome vs. expectations

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). ...

Estimates up, but distributions down

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

Estimates up from changed rate path & FTEs

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 Nord-Norge (Buy, TP: NOK118.00) - Continued ROE tailwinds

Fuelled by strong core revenues and low loan losses (4bp), NONG reported a Q2 ROE of 18.9% (>13% target), despite somewhat soft trading income and sustained cost pressure. Helped by improved lending margins and decent lending growth, ‘real NII’ rose 1.8% QOQ, while fees and other operating income improved ~11% YOY. We have raised our 2025–2026e EPS by ~1%, driven by higher NII and fees, and our target price to NOK118 (115). With the stock trading at a 2025e P/E of ~8.8x, we continue to find the ...

Fine-tuning estimates

Adj. PTP in line with ABGSCe, -2% vs. cons; Adj. EPS '25e down by 2%, unchanged for '24e and '26e; Strong fundamentals reflected in fine valuation: HOLD

Revisions to be impacted by costs

Adj. PTP 0% vs. ABGSCe, -2% vs. cons driven by softer costs and muted by lower losses. Cons. '24e-'26e EPS rev. likely down 1%.

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.

Attractive ROE well reflected in valuation

Q2e: Adj. PTP of NOK 944m, +2% q-o-q. Short-term margins down from competition. Fundamentals well reflected in pricing: HOLD.

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

SpareBank1 Nord-Norge (Buy, TP: NOK115.00) - Loan-loss downtick

Helped by continued NII momentum and moderate loan losses, NONG reported a strong Q1 ROE of 17.8%, even with somewhat elevated cost inflation. Boosted by improved lending margins and decent lending growth, ‘real NII’ rose 1.7%, despite one less interest day and deposit margin pressure. While the CET1 ratio fell ~10bp QOQ, the bank has a solid ~120bp buffer to its 15.8% requirement, boding well for further generous dividend distributions. With the stock trading at a 2025e P/E of ~8.7x, we continu...

Margins still to peak

Adj. PTP up 2%, driven by associates and asset quality. Adj. EPS'24e-25e up by 2% and 6% amid higher lending & NIM. Strong fundamentals shown in its fine valuation: HOLD.

Higher costs weigh on results

Adj. PTP -1% vs. ABGSCe, -3% vs. cons driven by weaker costs vs. cons. Cons. '24e-'26e EPS rev. likely down 1-4%

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.

SpareBank1 Nord-Norge (Buy, TP: NOK117.00) - Outlook for strong distri...

SpareBank 1 Nord-Norge reported a Q4 ROE of 18.8% and a pre-tax profit of NOK928m, 10% stronger YOY as continued NII momentum helped offset a rise in opex and loan losses. The board proposed a DPS of NOK7 for 2023 while the Q4 CET1 ratio of 17.1% should be supportive of capital distributions going forward. Owing to somewhat higher opex entering 2024, we have cut our 2024–2025e EPS by 2–3% but reiterate our BUY and NOK117 target price.

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...