Sparebanken Sør (SOR) Q1 2025 earnings summary

Executive summary

• Q1 2025 net profit after tax was NOK 529 million, down from NOK 573 million in Q1 2024, with solid net interest income, positive commission income, and strong contributions from associated companies.

• Return on equity excluding merger costs was 13.4%, and earnings per equity certificate were NOK 4.9.

• The merger process with Sparebanken Vest is progressing, with legal merger set for May 2, 2025, and is expected to enhance competitiveness and efficiency.

• The bank maintains a strong capital position with a CET1 ratio of up to 16.4% and leverage ratio of 8.7%.

Financial highlights

• Net interest income was NOK 800 million, down from NOK 824 million in Q1 2024; commission income increased by NOK 13 million to NOK 98 million.

• Profit before tax was NOK 545 million, compared to NOK 620 million in Q1 2024.

• Operating expenses increased by NOK 63 million to NOK 393 million, including NOK 30 million in merger costs.

• Net financial income decreased by NOK 17 million to NOK 22 million; income from associated companies rose by NOK 22 million to NOK 27 million.

• Loan losses remained low at NOK 10 million, with total impairments at NOK 485 million (0.36% of gross loans).

Outlook and guidance

• Cost synergies from the merger are estimated at NOK 350–400 million annually from 2027–2028.

• Capital synergies are estimated at NOK 2 billion, with additional Basel IV effects of NOK 2.1 billion.

• The bank targets ROE above 12%, cost/income ratio below 40%, and a dividend payout ratio of ~50%.

• Policy rate is expected to decline in 2025, potentially boosting the housing and construction markets.