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MoroBank reported a robust financial performance for the full year 2024, highlighted by a 36% increase in profit before tax, reaching 281 million kronor. The bank’s strategic focus on expanding its loan book and reducing costs has positioned it favorably in the Swedish and Finnish markets. With plans to launch a Swedish bank by early 2026, MoroBank is poised for continued growth. According to InvestingPro data, the company has maintained strong profitability with a 29.2% gross margin and is currently trading below its Fair Value, suggesting potential upside opportunity.
Key Takeaways
- Profit before tax rose by 36% year-over-year.
- Loan book expanded by 38% to 15.4 billion kronor.
- Cost income ratio improved significantly, dropping below 26%.
- First dividend proposed at 0.4 kronor per share.
- Strategic expansion into Sweden and Finland.
Company Performance
MoroBank’s overall performance in 2024 was marked by significant growth in its loan book and a strategic reduction in costs. The bank’s return on target equity improved to 10.6%, up from 7.1% at the end of 2023. This growth trajectory is supported by a comprehensive turnaround strategy and a focus on high-potential markets like Sweden and Finland, where the bank sees lower capital requirements and promising growth opportunities.
Financial Highlights
- Profit before tax: 281 million kronor (+36% YoY)
- Loan book growth: 38%, reaching 15.4 billion kronor
- Income growth: 21%
- Cost income ratio: Reduced to under 26%
- Return on target equity: 10.6%
Outlook & Guidance
MoroBank has set ambitious targets for the coming years, including a loan balance of 17 billion SEK by the end of 2026 and a return on equity of 12-14%. The bank also aims to reduce its cost income ratio to around 23% by the end of 2025, while exploring further inorganic growth opportunities. InvestingPro analysis indicates strong financial health with an overall score of 2.83 (GOOD), supporting the company’s growth trajectory. Analysts anticipate continued sales growth and profitability in the current year. The strategic focus on Finland and Sweden is expected to yield significant benefits, given the favorable macroeconomic conditions and lower capital requirements in these regions.
Executive Commentary
CEO Evan Juanes stated, "We have now completed the turnaround of the bank," highlighting the successful implementation of the bank’s strategic initiatives. CFO Erik Kortudal added, "We expect to reach 12% to 14% return on target equity by end of 2026," emphasizing the bank’s confidence in its growth trajectory. Juanes also noted the potential for delivering returns of 20% in the midterm following the redomiciliation to Sweden.
Risks and Challenges
- Macroeconomic fluctuations: Changes in interest rates and inflation could impact the bank’s profitability.
- Competitive pressures: Increased competition in the Swedish and Finnish markets could affect margins.
- Regulatory changes: Potential changes in banking regulations may pose challenges to expansion plans.
- Loan portfolio risks: The quality and performance of acquired loan portfolios need careful management.
- Funding costs: Achieving the target of reducing funding costs below 3% may be challenging in a volatile market.
MoroBank’s strategic initiatives and strong financial performance position it well for future growth. However, the bank must navigate macroeconomic and competitive challenges to maintain its momentum.
Full transcript - MOBA Network publ AB (MOBA) Q4 2024:
Evan Juanes, CEO, MoroBank: Good morning everyone and welcome to the fourth quarter and full year twenty twenty four results call for MoroBank. My name is Evan Juanes, I’m the CEO of the bank and with me as always I have Eyal Kortudal, the bank’s CFO. And as usual we will first go through a short presentation before we open up for questions at the end. If you should have a question you can raise your hand in the chat and we will make sure that your channel is open and you can, and you can ask your question. It’s also okay to ask questions in Norwegian if if you wish to do so.
So with that, let’s just get into it. Turning now to page two of the presentation, I’m happy to report that we have delivered another strong quarter and a strong overall performance in 2024 generating significant shareholder value. The scalable banking platform that we have built over the past couple of years enabled us to grow the loan book by 38% in the year to 15,400,000,000.0 kronor, drive income up 21%, improve the cost income ratio further down to under 26% and ultimately deliver a strong full year profit before tax of $281,000,000 kronor. And that’s actually up 36% year on year. Return on target equity is an output of all the above and came in at 10.6% in the quarter, up from 7.1% in Q4 of twenty twenty three.
Additionally, we executed on multiple structural opportunities acquiring two loan portfolios of a total of 2,300,000,000.0 kronor and initiating initiated the re domiciliation to Sweden by submitting an application for a Swedish banking license at the October. It’s also great to see that the strong progress is being noticed in the capital markets. We saw a share turnover of more than 20% in 2024 and a significant improvement of our share price, delivering total shareholder return of one hundred and forty years, in the year. On the back of the strong results for 2024, the board will propose a dividend payment of 0.4 kronor or per share, the first dividend payment since we launched the turnaround. Now moving to next page, page four of the presentation.
Exactly three years ago, we stood here at the Q4 twenty twenty one results call. We laid out a turnaround plan for the bank, previous complete bank. We focused a plan on balanced growth and cost efficiency. Or said in another way building a scalable banking platform. As we have been reporting on every results call since, we have been progressing ahead of plan and the results can be seen in the graph to the right hand side of this page.
We managed to deliver on both growth with a CAGR of 27% in the period as well as significantly reducing our cost base and a reducing our cost base down to a cost income ratio of now under 26%. As reported for Q4 and full year 2024 we are now really seeing the results of the turnaround in both profits and return levels and we therefore conclude that the turnaround of the bank is complete. Looking ahead, we have some strong value drivers in place. One, the macro environment. We see growth coming back driving demand up and maybe more importantly inflation and then also interest rates coming down easing pressure on households and again driving both demand and debt serving capacity up.
Two, loan losses improving in the bank. Eric will talk more about this in a minute but we see loan loss ratio coming down for the fourth consecutive quarter reporting a low loss ratio for Q4 of 4.6%. And three, as we will illustrate and we illustrated on our last call with improving returns we are now increasingly generating excess capital going forward. And all in all this puts us in a very good spot when looking at both organic growth and structural opportunities ahead. Now over to Erik, who will review the financials in a bit more detail.
Erik? Thank you, Evin.
Erik Kortudal, CFO, MoroBank: As always, we’ll start with the balance sheet, which is essentially center stage for the bank. And this also is a testament to what Evan has been talking about, that we’ve been building a scalable platform. And as because as you can see here, the gross loan balance grew by more than 30% over the year. The main driver for this was, as you know, the acquisition of the two Swedish portfolios that we did in the second half of the year, which are the largest contributor that you can see. But nevertheless, we also had good underlying growth.
We keep investing particularly in Finland and Sweden. We find those two markets most attractive. First, they have attractive margins, that is risk adjusted margins in both countries. As well as the capital requirements are lower for these two countries, for loans in these two countries than they are for Norway. In the fourth quarter, the nominal development was flattish.
The focus for the quarter was to implement securely our new portfolios and to ensure that they were taking care of in the proper fashion and also to further improve the credit quality. Also, we undertook an NPL sale, you know, Finnish loans of €16,000,000 And as always, we keep selling Norwegian credit card loans on forward flow. So if you adjust for these sales, you could the net development of the in the quarter was slightly positive. Going forward, we expect, as we have previously guided, to grow annually at around 5% per year. Hence, we would end up around seven more than SEK 17,000,000,000 at the end of twenty twenty six.
But this doesn’t preclude that if there are any other non organic opportunities such as portfolio purchase that we have undertaken before, we would clearly be open to look at those. Now jumping on to the next slide, we and the yield picture, you can see that the net yield is resilient fairly resilient in Q4. The loan yield, which is our graph in the middle, decreased somewhat. This is partly driven by the Swedish loans being taken on book as they have a somewhat lower net yield than our other Swedish loans. And hence, the average yield is brought down.
But also some of our new loans are coming in at a slower at a bit lower yield now, reflecting the overall market conditions as the underlying rate that is the central bank. The rates are dropping as you know, particularly in Sweden and Finland. Also on credit cards, the yield is a little bit going down. This is because the Swedish credit card Finnish, sorry, the Finnish credit card loans are taking up a larger portion of our loan book. And in Finland, there is, as many of you know, a usually maximum rate of 20% interest rate.
And hence, they will, this will drive down the overall yield for our credit cards a little bit. Now looking at the bottom line here, that is our funding yield. It is going down somewhat. It has been, fairly high during the quarter as since we have been wanting to build up our Swedish deposits to fill the funding needs in relation to the portfolio acquisitions we’re taking. We have now more than completed this funding, need of ours.
And we’re cutting the rates in both Euro countries and Sweden. And as a consequence, now the yield on our deposits are dropping. And at the end of this first quarter now, you will see that we will be below 3% in funding cost. Now as always, combining these two balanced growth as well as the yield picture, you can see this development. Year on year, we grew 24%.
And the reason why it is a little bit lower than our loan balance growth is because most of the growth came at the end of the year, namely effectively in the fourth quarter when the, two Swedish loan portfolios were fully taken on book. And then you can see that that the total income grew nicely from, in the fourth quarter. Going forward, the loan the total income will continue to grow and roughly in line with the loan balance development. Jumping to the cost picture, you can see here that if you concentrate on the dark turquoise bars, you can see that the cost underlying cost picture is flat. In the quarter, we also recorded a charge of approximately 10,000,000 kroners for going into Sweden that is working on the Swedish banking license or and lodging it as well as preparing for our Swedish operations.
And hence, we had a one off of 10,000,000 kroners in the quarter for that purpose. We will have some costs for Sweden in 2025, but not in the at the same magnitude for the quarters. But nevertheless, there will be some costs related to Sweden as there are setup costs. And also in the beginning, there will be some duplication of costs between the Swedish bank and the Norwegian branch. The cost income ratio was flat pretty much at 25.9%.
And this includes actually the 10,000,000 DKK for the Swedish for the Swedish operations, or preparing for the Swedish operations. Going forward, we maintain our guiding and that we expect that the cost income ratio will drop further. And we’re aiming at around 23% at the end of next year. Now to the loan loss pictures. We’re very happy to show this steadily declining trend.
We peaked at 5.4% annualized loan loss ratio a year ago. And now, at this fourth quarter, a year later, we’re down to 4.6%. Yes. The underlying, the nominal loan losses increased, but that is, that we now have a much larger loan balance and has the loan loss ratio in percent has dropped. We expect this trend to continue.
This will be driven by the fact that we don’t grow as rapidly as we’ve done before. We have a maturing loan book. The macro will, improve. And also, we have tightened our credit policies in 2023 and 2024. And that will also be results now in ’twenty five and onwards.
Now combining all these elements, total income, operating costs, and loan losses, you can see that we get the profits. And with the nice lift we had in total income, you can also see that we get a nice lift in profit before taxes going up to $84,000,000 and we landed at $60,000,000 after taxes. The return on target equity now exceeded 10%. We landed at 10.6% and we will expect it to reach 12% to 14% in, at the end of twenty twenty six. That is on a Norwegian license.
On a Swedish license, that their figure will be different. It’s also we’re very happy, as Eben said, that the board is now proposing to the AGM a dividend, which reflects 50% of the distributable profits for 2024, which translates to 0 point Norwegian to 0.4 NOK per share. And we expect that going forward that this dividend possibilities should continue. The outlook for the profitability for the year is that we, it will develop nicely with, a continued loan balance growth, the stable cost base and also that we will have decreasing loan loss ratios and hence increasing risk adjusted margins. And with that, we’ll just jump over to the capital situation on the capital adequacy.
As we announced in, December, the Norwegian FSA came forward and reduced the requirement for our Pillar two, capital, that it would no longer need to consist of 100% CET1, but it could now consist of the standard 56.25%. That was quite good news for us. And effectively, this brought down the CET1 requirement by 2.4 percentage point. As a consequence of that, the headroom to the CET1 requirement target was then 700,000,000 or $445,000,000 to our target. Our target is we target to have a 2% buffer above the minimum requirement.
But do keep in mind that this that the total capital situation is unchanged. So, hence, if we have a relief in CET1, we will need to replace it by other capital, such as alternative Tier one or Tier two capital. Another beneficial thing going forward is the implementation of CR3 in EEA. CR3 is a new capital requirements regulation. It took came EU on the January 1.
It is foreseen to come into place in EEA. That is Norway, Iceland, and Liechtenstein. During this year, we don’t have the exact date yet. But for us, it will be for us, Moro Bank, it will be quite beneficial because this will reduce our operational risk, exposure by about a billion kroners. And hence, the ensuing capital requirements will also decrease accordingly.
This is not reflected in the pictures you see there. This is to come. And as a consequence here, we can therefore formulate our dividend policy to distribute excess capital, not to allocate to growth to our shareholders. And with that, I leave the words to Evel.
Evan Juanes, CEO, MoroBank: Thank you, Eric. Turning now to page 15 of the presentation. And before summarizing today’s presentation and opening up for questions, I wanted to give you a flavor of how we’re stacking versus our key competitors on the market. And we’ve as we’ve seen on the previous calls, we have outperformed our peers on both growth with a CAGR of 27% over the past two years and on efficiency with an industry leading cost income ratio down to under 26% reported for fourth quarter. And as we’ve seen from the presentation today, our returns are now also improving and we could report a, an ROE of 10% for Q4.
Still a bit of way to go here but we have line of sight on further improvements that should take us further up on that list too. A couple of words on the process of becoming a Swedish bank. We talked about that also at our previous call and as reported last time we did submit an application for a swedish banking license on the October 31. All work streams are running on plan and we expect to receive a decision from the swedish fsa in May. Assuming a positive outcome of that process, we will spend the rest of 2025 getting our operations ready, merge the Norwegian and Swedish entities and ultimately launch the Swedish bank as well as move our listing to Nasdaq Stockholm in early twenty twenty six.
We’ll obviously be keeping you updated on the progress as we move forward. Now quickly on page 17, excuse me, comparing ourselves to our Swedish peers, we see that we have outperformed also in terms of shareholder returns in 2024 with 140% TSR as, as reported. However, also room here to further improve when we compare market valuation of our bank to the Swedish niche banks, as can be seen on the right hand side of this slide here illustrated by price book multiple. Obviously happy to see that we are bringing that steadily up towards at least price book one with a 0.9 I reported. But here again we believe that there’s more to, more to, to be seen going forward.
All right, so turning to the last page of the presentation let me summarize the highlights. We have established a highly scalable platform enabling us to deliver solid long book growth and deliver a very strong result for both Q4 and for 2024 overall. We believe we have now some strong value drivers in place to further grow and improve our business going forward including both organic growth and inorganic opportunities as we saw in 2024. We confirm our updated guiding for year end 2026. Even Erik showed you those numbers on the previous pages and we believe that the redomiciliation to Sweden, could see us deliver returns of 20% in the midterm.
Last but not least, on the back of the strong results in 2024, the board will propose a dividend for the year of 0.4 kronor per share, which we are obviously very happy with. And this is the the first time we pay dividends since we started the turnaround three years ago. With that, thank you for for listening and we will now open up for questions. Again, if you if you have a question, you can raise your hand in the chat and heading here will help us, moderate that, open up your channel. You can ask your question in obviously in English but also Norwegian.
That’s that’s all fine. I think we have a first question coming in.
Call Moderator, MoroBank: Yeah. Ansel once asked a question. Your microphone is now open, so please unmute on your side and ask your questions. Ansel?
Ansel, Analyst/Investor: Yes. Thank you. Just wondering if you could give us some more color on what you see in terms of competition on the funding side in Sweden and also since, I guess, the decline in product deals is, are much explained by the acquisitions, but also if there are any new, since you also comment on a bit harder competition, who are driving at this competition currently? And also, in what markets do you feel it’s the best risk reward at the moment?
Erik Kortudal, CFO, MoroBank: Well, to start with your first part, I think you asked about the Swedish funding competition. And we, and there we have the the niche banks are usually the like, ourselves are the ones offering the highest rates. And we adjust the rates in accordance to our needs. We were at the top of the list for some time, so a little while ago. Now we’re not at the top of the list, and we’re going down there.
When I say the list, there are comparison sites in Sweden, which lists the relevant options. And we can essentially use that to manage our loan balance or deposit balance volume. Now for the as you pointed out, the new Swedish portfolios are reducing the yield a little bit on our loan book. The also the market situation is such that in order to attract loans of the proper quality, we have also need to adjust a little bit downwards, not much. We’re only talking some basis points here on the new on the front book, I.
E. The new loans that we sell. And that is also impacting a little bit. Not much now because they’re making a very small portion of the total loan bonds, but this is a bit of a trend to continue. And this is obviously, driven by, the market situation.
And, the market situation here is that the underlying rates are going down. And as a consequence, as I said also on the earlier, we will be reducing our, the interest rate that we pay on our deposits. But we have done it considerably in euro and in Sweden. And, that is also to continue downwards. We expect that to happen.
Now we don’t know what exactly will happen with interest rate cuts. Now it’s more uncertain. But we nevertheless, as the picture is right now, we still see, that the market can allow us to for further cuts, and that will also increase our interest margins. As to the most attractive margins markets, as you say here, they are actually quite similar Norway, Sweden, and Finland. However, Finland has the highest yield.
Sweden has the lowest loan losses. Finland has the lowest funding cost. Sweden is to follow. Norway has the highest funding cost, but also the loan losses are fairly low. So at the end of the day, they are more they’re similar.
But so and it’s a bit back and forth. But, in all, what’s driving our growth here is that the capital requirements in Finland and Sweden are lower. And that is, irrespective of us being an original bank or a Swedish bank.
Evan Juanes, CEO, MoroBank: Maybe just to give you one more thing on top of what Eric said in terms of, funding in Sweden, I believe since since last we talked we brought the funding rate, so the deposit rate in Sweden down by a hundred basis points. So our our app prices down to 3% it was above four, 24%. Yeah. So that is coming down not full effect we don’t see that much of that effect in q4 but as eric alluded to, through his presentation we will see funding rate come further down when we report the first quarter.
Ansel, Analyst/Investor: Okay, excellent and
Evan Juanes, CEO, MoroBank: Any further questions on the call today? If not, I just want to kind of repeat what we what we say on on every call. If you have questions, if you do want to talk to us, we’re we’re also available between the quarterly calls. Give us a call or send us simply an email to irmorobank dot com and we’ll be happy to answer questions also through that channel or have a call and or or and or meet with you if if that would be an option. We’ll give it an another minute here if if there are no questions I know people are busy there are a lot of reports coming out this morning.
Doesn’t seem that there are any more questions. In that case, thank you again so much for for dialing in this morning. And again feel free to contact us if not we’ll we’ll talk again at the q1 presentation which is scheduled for May thank you and have a good day
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