Earnings call transcript: Rogaland Sparebank's Q3 2025 performance and strategic growth

Rogaland Sparebank, a leading financial institution in Norway, held its Q3 2025 earnings call, highlighting a pretax profit increase and strategic initiatives aimed at long-term growth. The bank reported a pretax profit of $2.12 billion, a $70 million increase from the previous quarter and $280 million higher than the same quarter last year. The bank's stock remained stable at 137 NOK, reflecting a steady investor sentiment.

Key Takeaways

• Pretax profit rose by $70 million quarter-over-quarter.
• Return on equity (ROE) stands at 13%, with a target of 14% by 2027.
• Operational synergies target increased to $450 million.
• New share buyback program established.
• Dividend policy revised to at least 50% cash distribution.

Company Performance

Rogaland Sparebank demonstrated robust financial performance in Q3 2025, with significant growth in pretax profit and a stable net interest income. The bank's strategic focus on reducing operating expenses and enhancing operational synergies has contributed to its improved profitability. The successful technical merger, which transferred 350,000 customers, underscores the bank's commitment to expanding its customer base and enhancing service delivery.

Financial Highlights

• Pretax Profit: $2.12 billion, up $70 million from the previous quarter.
• Return on Equity: 13%, with a long-term target of 14%.
• Net Interest Income: Stable quarter-over-quarter.
• Impairments: 150 million NOK (12 basis points).
• Common Equity Tier One Ratio: 18.5%.

Outlook & Guidance

Rogaland Sparebank remains optimistic about its future prospects, targeting a 14% ROE by 2027. The bank plans to reduce its Pillar Two requirements by year-end and expects profitable organic lending growth. The revised dividend policy, with at least 50% cash distribution, reflects the bank's strong capital distribution plans.

Executive Commentary

Group CEO Inge Ennasen emphasized the bank's strategic positioning for growth, stating, "We are well positioned for profitable growth." He also highlighted the importance of capital discipline, noting, "Capital discipline stands very high in our bank."

Risks and Challenges

• Macroeconomic pressures could impact lending growth.
• Potential regulatory changes affecting capital requirements.
• Market competition in the corporate segment.
• Fluctuations in the Norwegian economy.
• Exposure to global economic conditions.

Rogaland Sparebank's Q3 2025 earnings call highlighted its strong financial performance and strategic initiatives aimed at enhancing shareholder value and achieving long-term growth objectives. The bank's focus on operational efficiencies and capital discipline positions it well for future challenges and opportunities.

Full transcript - Rogaland Sparebank (ROGS) Q3 2025:

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: Good afternoon, everybody, and a warm welcome to this third quarter presentation from the Sberbank one Sonogia Group. My name is Inge Ennasen. I'm group CEO of the company. Together, me with me, mister Erik Brover Monsen, who is group CFO and also mister Moten Fogger, who is head of investor relations. We will give you a brief presentation of the highlights of the third quarter, and then we would, will hand over the word to you if you have any questions.

So to begin with our financial targets, we have long term ambition of delivering at least 14% return on equity. This has been a target for a few quarters now, but what is new this quarter is that we have increased the operational synergies from our merger with the other bank from 300,000,000 up to $450,000,000. Also due to the very strong common equity tier one ratio, We have increased our, dividend policy that formal was about 50% to at least 50% in cash. And also if we flip to the next page, Martin, we have established a share buyback program, as a supplement to paying cash dividends, and that would, potentially come, in addition to solid cash dividend. This has been a very interesting and nice year from the Sberbank one Sonog Group.

We have successfully merged both our accounting companies and our real estate broker. And as of September, we also had a very successful technical merger in the parenting bank. That means that we transferred approximately 350,000 customers and really a lot of data from the other bank to the platform of the former Sberbank one SR bank. This technical merger put us in a position of working even more with realization We have a lot of processes on the harmonization of products and work processes.

And by this, we should be able to increase efficiency and competitiveness even further and and also, of course, deliver on the new ambition of the 450,000,000 of synergies. If we look at, the environment surrounding, us and our market area, we have a benign environment for running a profitable bank. We have a low low unemployment rate that has remained low for a long time both in in the regions and in Norway as a country. And if we look at our business survey, as you will see in in all the relevant regions, the score is above 50, which means that there are, more, optimists than pessimists, and this should be a good environment for running a profitable bank. Also, if we look further into the oil companies, many would might expect the oil price of 65 to be challenging, but the Norwegian oil companies, they have, adopted to a lower oil price by significantly reducing cost, and still the investments on the Norwegian continental shelf remain at a high level.

However, we have significantly decreased our exposure to the oil sector, which now accounts for approximately only 2% of our total portfolio. But this, sector, which, of course, is still important to Norwegian economy, is also optimistic when it comes to activity, which, of course, is positive to us as a bank. If we look at our total portfolio now, approximately 50% of that is in the Western Part of Norway with the counties Westland and Ugarland. The other 50%, Andal, Oslo, Alcosus, and also Telmark, Westfall, and Biskur and other stands for the other 50%. This means that the old Spelman in Ugarland from Stavanger, we have become really a bank for the Southern Part of Norway with much more diversification with with respect to geography, less less concentrated in in certain industries, and altogether, we have become a very much diversified bank.

With the 50 branches, we have a very strong distribution network also taken into consideration that we, together with the other Sberbank one banks, we have a state of the art Internet banking services. That means that we are very well equipment equipped for running a very efficient bank and also with a very high customer satisfaction due to the combination of our physical presence and state of the art Internet services. If we look at the main figures, we delivered a 13% return on equity this quarter, taking into consideration one off costs related to the merger, which should be the last quarter with significant cost related to the merger and also goodwill that arise from the merger. The 13% can be compared to a 14% return on equity. Still, impairments are low, 12 basis point this quarter.

It had higher than previous quarter, but very strong underlying credit quality. The lending growth remains high in the retail market, where the total growth in the market is around 4% and where our growth is at 6.1. However, a bit lower growth in the large corporate market. But if you combine the corporate market and the SME and agriculture, it is approximately 1% annual growth. Very large growth on the deposit side.

This is, of course, positive to our deposit to loan, ratio. However, it has actually put some pressure on the interest margin as we have had some excess funding capital during the last two quarters. Very high cost efficiency with a low cost to income ratio of 35 37%. And as I mentioned as the background for the more the increased dividend policy, our capital one common equity tier one capital ratio stands at 18.5%, which is one point zero percentage points above the requirement. Also, with some positive migration when it comes to the requirements that will arise in the fourth quarter, we are very well positioned for a profitable organic lending growth and also a very strong capital distribution to our owners through the cash dividend and also a potential share buyback program.

And with those highlights, I will hand over to Mr. Greg Grover Monsen, who will give us some more details on the figures. Grisel?

Erik Brover Monsen, Group CFO, Sberbank one Sonogia Group: Thank you. In the third quarter this year, we have a pretax profit of $2,120,000,000 which is an increase of $70,000,000 from previous quarter and an increase of $280,000,000 from third quarter last year. And just to remind you that in the third quarter last year, we had a one off gain related to the merger between Fremtin and Eika Fossilken of which amounted to SEK $577,000,000. When it comes to net interest income, we have one more interest day in the third quarter compared to the second quarter. Adjusted for that, we have more or less flat stable development on the net interest income from the second to the third quarter.

Increased volume that increases the net interest income, but that's more or less neutralized by a small reduction in the interest margin explained by high excess liquidity in the quarter and also a negative effect equity effect on declining interest curve. When it comes to commission and other income, we have a decline from the second quarter to the third quarter of SEK80 million. This is explained or more than explained by the real estate agents and the accounting business, which have natural seasonality, low what do call it?

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: Very low season. Low season,

Erik Brover Monsen, Group CFO, Sberbank one Sonogia Group: yeah, in the third quarter. When it comes to financial investments, we have an increase of NOK 70,000,000 from the second to the third quarter, explained by increase in fair value of the certificate and bond portfolio and also increase in the fair value of the derivatives, including the basis swaps. Operating expenses, I will come back to on the next slide. When it comes to impairments, as Yng already mentioned, we have 150,000,000 in impairments in this quarter. 88% of this is on the specific loans.

Year to date, we have NOK $250,000,000 in impairments, which amounts to eight basis points. If you then move to operating expenses, we are happy with the development of the operating expenses in this quarter. As you see on the upper right side in the mother bank or parent bank, we have a decline of SEK 12,000,000 in the operating expenses from the second to the third quarter. And you also see on the lower right hand side that we have only a 12 sorry, 2,000,000 increase in the operating expenses from the third quarter last year to the third quarter this year. This shows that we have good cost control, and it also shows that we now are starting to see the synergy effects also in the P and L.

And if you move to the next slide. As already mentioned, we increased the synergy ambition from NOK 300,000,000 to NOK $450,000,000, an increase of 50% or NOK 150,000,000. Of this NOK 150,000,000, NOK 100,000,000 is related to the operational synergies. We see that we are able to take out more effect from standardization of the bank products. And we have SEK50 million related to the funding synergy that we see that we are able to take out even more reduction in funding.

And this is also related to the CP program or certificate program that we are now starting in Europe. When it comes to personal synergies, we are on track reducing FTEs with hundreds, by the end of next year, and we will continue to work to deliver on these, goals in the quarters to come. Just mentioned that we have had a successful technical merger. And with this, we also now have completed the total merger costs of the SEK 400,000,000, which we have guided on. So this is also now behind us when we end the third quarter.

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: And

Erik Brover Monsen, Group CFO, Sberbank one Sonogia Group: we're also ending the quarter with a solid CET1 capital ratio of 18.5% with a good margin to the requirement, a minimum requirement of 17.53 And in connection with this year's effort process, we also expect by year end to have a reduction in the Pillar two guidance from 1.25% down to 1% and also the Pillar two premium from 1.35% down to 1.13%. And based on this, we believe that we are well positioned for profitable growth and a strong capital distribution. Thank you.

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: And with these highlights, we believe that we are well positioned for a profitable growth. And of course, there are still some uncertainty in in the more international, space. But, so far, Norwegian economy and regional economies have performed well, and and also the position of of the bank to have profitable growth should be undoubtedly strong. So with these concluding remarks, we will hand the word over to you. If you have any questions, please just raise your hand and mister Tonvinjer will give you the word.

Please. Juan, you you don't see any raised hands from your side?

Juan, Moderator/Operator: No. I don't. So there's still a chance

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: Harry, say a from from my side, Yeah. I

Juan, Moderator/Operator: Yep. Yes. Hi. Good after yeah. Good afternoon.

So, on, on market shares and gaining market shares, what are your thoughts in the corporate segment there for opportunity to gain market shares over the next two to three years?

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: We are definitely very well positioned with both the position as a bank and also our jointly owned investment banking company, s p one market, that now has become a Nordic company. We should be well positioned for benefiting from each other's positions. And we believe that the growth in the corporate sector also will pick up again. And and if not, we are, of course, in a position where we can reduce cost even further if it's necessary to kind of take down the the capacity with respect to full time employees.

Juan, Moderator/Operator: Okay. Thank you.

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: Thank you, Thomas. Anyone else, please? Yes. Here's a question from Harman Sal. Please, Harman.

Harman Sal, Analyst/Investor: Yes. Thank you. The capital position seemed to be a bit stronger than expected this quarter. So just given your new and updated Pillar two requirements by year end, What's sort of your desired capital level? Do you seek to have a buffer on top of the 17.6% long term targets?

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: Of course, in in these capital requirements, there are a lot of buffers, and and you might also discuss how how much buffer should you have on the buffers. But I I believe over time, a buffer of approximately 50 basis points, 0.5% would be kind of convenient, over time. And and, this should, of course, position us very well with what we where we stand today and the change of the requirement to have both a strong capital distribution with respect to to cash and potential bay buybacks. And and also with with the question of of from Thomas, we should also be well positioned for for taking growth if if that's possible. But we will remain very disciplined when it comes to to capital and and will not, kind of take any growth that is not that is not profitable with respect to pricing and risk reward.

Capital discipline stands very high in our back.

Harman Sal, Analyst/Investor: Okay. Thank you. And then just on the since you state the ROE target is a long term target, should we interpret that as into 2028 when you have fully implemented all the cost synergies?

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: We have formally, we have said to the market that we need 2025 and 2026 to come up to full run rate with respect to taking out synergies. The long term ambition of the 14% should also be kind of viewed in correspondence with this. So as with where we stand today, the ambition and interpretation of that would be kind of 2027. Yeah. Discussing the the ambition.

Harman Sal, Analyst/Investor: Okay. Thank you. And and then just, finally, referring to, some of the comments given earlier today about, no growth in large large corporates. Do you feel like is it some of the volumes going to the bond market that you would like to have yourself, or or have you been too constraining on yourself in hindsight?

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: That is one of the explanation. We in in the the the kind of the reduction here is not the cause that we have kind of lost volumes to other banks. But, of course, the access or or or, yeah, the access of of of capital in in the bond market and and the pricing is favorable for some of our companies. So that is also one of the explanations why why you we we we have some lending volume that goes out of our our books. But, however, we are a large owner of of the SP one, markets, and this is kind of of of a natural flow where where companies in in in some phases, they they seek into bank finances, and and in other phases, they they seek into to the bond market.

And and what is important is that we are well equipped to support our customers whether they choose the bank, the lending market, or or the bond market as the alliance as such. So we don't try to put any kind of limitations on our customers. If if it this is the right for for our customers to do, then they choose the bond market, and and we will also assist them with with issuing debt in in in the bond market.

Harman Sal, Analyst/Investor: Okay. Thank you.

Erik Brover Monsen, Group CFO, Sberbank one Sonogia Group: Thank

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: you, Haman. Anyone else with questions? It seems like you are happy. I don't see any more hands. Tom, do you see any more hands?

Juan, Moderator/Operator: No. I don't. So

Erik Brover Monsen, Group CFO, Sberbank one Sonogia Group: No.

Inge Ennasen, Group CEO, Sberbank one Sonogia Group: I think we just And, actually, we can, yeah, conclude this session. At any time, if you have any follow-up question, you'll find our contact details at the end of the presentation, and we'll be happy to assist you, anytime. So thank you very much for taking your time, and have a good day. Thank you.

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