SPAREBANK 1 ØSTLANDET (SPOL) Q2 2024 earnings summary

Executive summary

• Return on equity reached 14.2% in 2Q24, up from 12.2% in 2Q23, driven by strong core banking, positive subsidiary contributions, and profit after tax of NOK 716 million.

• Net interest income increased 1.8% quarter-over-quarter to NOK 1,098 million, with solid loan growth in both retail and corporate markets; loan portfolio surpassed NOK 200 billion.

• Commission income and other operating income improved, especially in real estate and insurance, with high activity levels.

• Operating costs rose 19% year-over-year, mainly due to an administrative fine, Siffer, and customer-focused initiatives.

• Merger with Totens Sparebank cleared by authorities, expected to complete in November 2024.

Financial highlights

• Total income for Q2 was NOK 1,596 million, up from NOK 1,381 million year-over-year.

• Operating profit before losses on loans and guarantees was NOK 960 million, up from NOK 846 million.

• Net interest income (including covered bond commissions) reached NOK 1,098 million, up 1.8% from previous quarter.

• Commission and other income (excluding covered bond commissions) totaled NOK 355.5 million, up from NOK 295.2 million in 1Q24.

• Cost/income ratio at 39.9%.

Outlook and guidance

• Long-term return on equity target raised to at least 13%.

• Dividend policy updated to target a payout ratio above 50% of annual profits.

• Management notes a challenging macroeconomic backdrop but sees less pessimism among companies and consumers.

• Norges Bank expected to keep policy rate at 4.5% through 2024, with gradual reductions thereafter.

• Continued moderate growth in investments and credit demand expected, with strong long-term prospects due to market position and merger.