SPAREBANK 1 HELGELAND (HELG) Q4 2023 earnings summary

Executive summary

• FY2023 profit before tax rose to NOK 650m from NOK 563m, led by higher net interest income; increased loan losses and operating costs offset part of the gain.

• Q4 profit before tax was NOK 137m, down NOK 46m QoQ, as higher impairments, costs and financial investment losses outweighed stronger net interest income.

• FY return on equity after tax, excluding hybrid capital, was 10.4%, below the 11% target; the target is expected to be met in 2024.

Financial highlights

• FY net interest and credit commission income was NOK 985m, up NOK 202m YoY; net interest income as a share of average assets rose to 2.61% from 2.01%.

• FY net profit was NOK 490m versus NOK 445m in 2022; EPS was NOK 13.9 versus NOK 12.8.

• Q4 net interest and credit commission income was NOK 265m, up NOK 11m QoQ; net financial investment result was negative NOK 13m, including a NOK 29m unrealized derivative loss and ~NOK 9m Vipps share impairment.

• FY loan impairment expense was NOK 100m versus NOK 11m in 2022; Q4 expense was NOK 43m, up NOK 32m QoQ.

• FY operating costs were NOK 414m versus NOK 381m; cost-to-income improved to 36.0% from 39.9%, while Q4 costs rose to NOK 113m from NOK 100m QoQ.

Outlook and guidance

• The 11% return-on-equity target is expected to be achieved in 2024; long-term expected loan losses are ~0.18% of gross lending.

• Rate increases are expected to strengthen net interest income, partly offset by higher funding costs and pricing adjustments.

• 2024 commission income, excluding housing-credit-company commissions, is expected to stabilize at ~0.35% of assets under management.

• Core operating costs are expected to remain near 2023 levels; cost-to-income is expected to stay below 40%, despite inflation and higher head-office depreciation.

• Near-term personal-market growth is expected to be weak; lending growth ambitions are at least in line with the Helgeland market, with profitability prioritized.