SpareBank 1 Ostlandet: 3 directors

A director at SpareBank 1 Ostlandet bought 800 shares at 125.500NOK and the significance rating of the trade was 41/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two years c...

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.

SpareBank 1 Østlandet (Buy, TP: NOK140.00) - Sustained NII uptick, but...

Supported by continued NII expansion (+5.7% QOQ), SPOL reported a Q4 ROE of 11.3%, despite elevated cost inflation and a YOY downtick in fee income. The board proposed a 2023 DPS of NOK7.8, implying a ~60% payout ratio (50% policy) and a 6.3% dividend yield. Trading at a dividend-adjusted 2025e P/E of ~7.8x, we find the valuation undemanding following the recent share price depreciation. Thus, while we reiterate our NOK140 target price, we have upgraded to BUY (HOLD).

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...

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

SpareBank 1 Østlandet (Buy, TP: NOK145.00) - Gradually regaining momen...

Q2 PTP rose by almost 60% YOY, as favourable capital markets and continued NII momentum more than offset higher loan losses following the reversals in 2022. Despite the strong NII, interest margins narrowed QOQ following sharp step-ups in money market rates, causing a lag effect and prompting us to cut our 2024–2025e EPS by 1–2%. We reiterate our BUY and NOK145 target price, and continue to find the stock attractively priced at a 2024e P/E below 9x.

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.

Northern Lights

SpareBank 1 Østlandet (Buy, TP: NOK142.00) - Further repricing benefit...

Boosted by a NOK76m tax benefit from customer dividends and maintained NII momentum, SPOL reported a Q1 ROE of 13.9%, well above its recently raised >12% target, despite elevated cost pressure. As margins continued to improve, NII increased by 11% QOQ. We have raised our 2024–2025e EPS by ~3%, as higher NII was only partly offset by higher costs and lower fee income, and edged up our target price to NOK142 (140). We continue to find the valuation undemanding at a 2023e P/B of ~1.0x, given our ~1...

Continued profitability momentum

With recent repricing efforts yet to take full effect and a still-positive rate trajectory, we expect margin gains to contribute to continued solid earnings generation in 2023. Moreover, helped by sound fundamentals, we also expect asset quality to remain relatively robust, and see limited risks of the Norwegian banks facing similar issues to the banks at the centre of the recent turmoil. Trading at an average dividend-adjusted 2024e P/E of ~7.6x, we still find the valuation attractive and reite...

Northern Lights

SpareBank 1 Østlandet (Buy, TP: NOK135.00) - >12% ROE target after str...

While raising its ROE target to >12% (>11%), SPOL reported a strong Q4 ROE of 12.9%, supported by continued NII momentum, solid non-interest income and a YOY decline in costs. The board proposed a 2022 DPS of NOK6.8, implying a payout ratio of ~60% versus its reiterated 50% dividend policy. We have raised our 2023–2024e EPS by ~8–7%, driven by higher NII, and our target price to NOK135 (128). Given our ~11% 2023–2024e ROEs, we still find the valuation undemanding at a 2023e P/B of ~1.0x, and rei...

Further repricing tailwinds ahead

With a further positive rate trajectory and recent repricing efforts set to take full effect, we see scope for margin tailwinds to continue to support earnings into 2023e. Given the comfortable headroom to fully phased-in capital requirements, we expect dividend distributions to remain rather generous, and estimate an average 2022 dividend yield of ~5.5% for the banks we cover. Trading at an average 2024e P/E of ~8.4x, we still find the valuation undemanding and thus reiterate our positive secto...

Northern Lights

SpareBank 1 Østlandet (Buy, TP: NOK130.00) - Outlook for continued NII...

Q3 pre-tax profit was NOK575m, as weak trading income and higher model-based loan losses led to softer earnings YOY. However, the underlying banking operations remained solid, with re-pricing momentum benefiting NII. We expect continued positive effects from higher rates in Q4 and 2023. We have raised our 2023–2024e EPS by 1%, increased our target price to NOK130 (128) and reiterate our BUY.

Solid fundamentals despite uncertainty

As rising interest rates and disciplined repricing create potential for further margin expansion, and relatively conservative lending books help mitigate the impact of the macroeconomic turbulence on asset quality, we continue to see scope for solid earnings generation ahead. Trading at what we view as an undemanding average 2023e P/E of ~8.6x, we reiterate our positive sector view. We again highlight SRBNK and MING as our top sector picks.

Set for further margin tailwinds

After a period of strong growth following the launch of ‘Nybygger.no’, SPOG has seen net volumes decline in recent quarters, emphasising focus on margin preservation and its expectation of lending growth converging towards overall credit growth over time. Meanwhile, highlighting unfavourable regulatory requirements for banks using standard models in Norway, it has lowered its ROE target from 10% to 9%. With the stock trading at a 2023e P/E of ~11.1x, we find a more attractive risk/reward elsewhe...