SpareBank 1 Østfold-Akershus Q1 2025 slides: Profit down, maintains full-year targets

Introduction & Market Context

SpareBank 1 Østfold-Akershus (SOAG) presented its first quarter 2025 results on May 15, revealing a challenging start to the year with profitability below target but maintaining solid capital positions. The Norwegian regional bank reported a return on equity of 9.4%, below its target of 11%, while facing pressure on net interest income amid strong competition in the banking sector.

The bank’s shares traded at 427.5 NOK following the presentation, down 2.4% (10.5 NOK), reflecting investor reaction to the mixed results. Despite the quarterly challenges, management expressed confidence in meeting the full-year return on equity target of 11%.

Quarterly Performance Highlights

SpareBank 1 Østfold-Akershus reported profit before tax of 145 million NOK in Q1 2025, down from 180 million NOK in the same quarter last year. The bank maintained strong capital adequacy with a Core Tier 1 Capital ratio of 17.0%, comfortably above its target of 16.07%.

As shown in the following chart of quarterly earnings development, the bank has experienced a gradual decline in profit before tax over the past five quarters, with return on equity dropping from 13.3% in Q1 2024 to 9.4% in Q1 2025:

The waterfall chart below illustrates the factors contributing to the 35 million NOK year-over-year decline in profit before tax. While net interest income improved by 9 million NOK, this was offset by negative impacts from financial instruments (-19 million NOK), increased operating costs (-16 million NOK), and higher loan losses (-11 million NOK):

Detailed Financial Analysis

The bank’s loan portfolio remains heavily weighted toward the private market, which constitutes 75.8% of total lending. The business market accounts for 24.2%, with real estate leasing representing the largest segment at 63% of business loans.

The following chart shows the breakdown of the loan portfolio between private and business markets, as well as the composition of business market loans:

SpareBank 1 Østfold-Akershus reported solid lending growth in both market segments. Private market lending increased by 1.5% in Q1 2025 and 6.4% on a 12-month basis. Business market lending grew by 3.3% in the quarter, though the annual growth rate moderated to 5.9%.

On the deposit side, the bank saw positive quarterly growth with private market deposits increasing by 2.1% and business market deposits by 2.7%. However, the annual trend in business deposits remained negative at -5.5%, contrasting with strong 10.5% annual growth in private deposits.

Net interest income showed signs of pressure, as illustrated in the following chart tracking both the percentage of average managed assets and absolute values:

Commission income and other revenue streams provided some positive momentum, with year-to-date figures showing improvement across most categories compared to the same period last year:

Credit quality remains solid despite an increase in loan losses to 13 million NOK in the quarter. The bank’s portfolio continues to show low default rates, as demonstrated in the following chart:

Strategic Initiatives & Forward-Looking Statements

Looking ahead, SpareBank 1 Østfold-Akershus acknowledged the competitive pressure in its markets but expressed confidence in its strategic positioning. Management highlighted several factors expected to support performance through 2025:

1. A one-time gain of 48 million NOK from the reduction of its ownership stake in SamSpar

2. Continued focus on capitalizing on investments in annual work processes

3. Positive outlook on the implementation of CRR3 regulations

4. New Pillar 2 capital requirements that have been incorporated into planning

Despite the below-target return on equity in Q1, management maintained its full-year ROE target of 11%, suggesting expectations for improved performance in upcoming quarters. The bank also affirmed its dividend policy with a current payout ratio of 50%, meeting its defined maximum threshold.

The mixed Q1 results reflect both external market challenges and internal strategic adjustments as SpareBank 1 Østfold-Akershus navigates a competitive banking landscape while maintaining its strong capital position and focus on balanced growth across its private and business segments.

Full presentation:

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