SpareBank 1 SR-Bank (SRBANK); Strong result with significant income growth, good cost control and lower losses
SpareBank 1 SR-Bank achieved a pre-tax profit of NOK 2,610 million for 2017 compared with NOK 2,158 million for 2016. The result was characterised by a good increase in ordinary operating income, a moderate increase in the group's operating costs and significantly lower impairment losses on loans compared with 2016.
The return on equity after tax was 11.0% compared with 10.0% in 2016. The common equity tier 1 capital ratio had improved from 14.7% to 15.1% as at 31 December 2017.
Impairment losses on loans and guarantees totalled NOK 543 million for the year, compared with NOK 778 million in 2016.
"I am very pleased that all of the business areas in the group have contributed to the good return on equity we have delivered in spite of the fact that total impairments for 2017 remain above what we regard as a normalised level," said the chief executive Arne Austreid.
The group's cost control is good and shows that it is among the leading financial groups in terms of costs measured as a percentage of income. The cost/income ratio for the full year was 40.7% compared with 40.9% in 2016.
The pre-tax profit for the quarter seen in isolation was NOK 700 million, compared with NOK 525 million for the same period last year, which is equivalent to a return on equity after tax of 11.4%, compared with 9.5% for the fourth quarter of 2016.
Financial performance – Q4 2017
- Pre-tax profit: NOK 700 million (NOK 525 million)
- Net profit for the quarter: NOK 559 million (NOK 429 million)
- Return on equity after tax: 11.4% (9.5%)
- Earnings per share: NOK 2.18 (NOK 1.68)
- Net interest income: NOK 819 million (NOK 733 million)
- Net commissions and other operating income: NOK 367 million (NOK 355 million)
- Net income from financial investments: NOK 204 million (NOK 139 million)
- Operating costs: NOK 570 million (NOK 540 million)
- Impairment losses on loans: NOK 120 million (NOK 162 million)
(Figures for Q4 2016 are shown in brackets)
Preliminary annual result for 2017
- Pre-tax profit: NOK 2,610 million (NOK 2,158 million)
- Net profit for the year: NOK 2,086 million (NOK 1,755 million)
- Return on equity after tax: 11.0% (10.0%)
- Earnings per share: NOK 8.16 (NOK 6.87)
- Net interest income: NOK 3,162 million (NOK 2,871 million)
- Net commissions and other operating income: NOK 1,524 million (NOK 1,443 million)
- Net income from financial investments: NOK 634 million (NOK 654 million)
- Operating costs: NOK 2,167 million (NOK 2,032 million)
- Normalised growth in costs: 0.1% (-3.5%)
- Impairment losses on loans: NOK 543 million (NOK 778 million)
- Total lending growth over last 12 months: 2.6% (-0.9%)
- Growth in deposits over last 12 months: 11.0% (-3.9%)
- Common equity tier 1 capital ratio: 15.1% (14.7%)
- Tier 1 capital ratio: 16.0% (15.6%)
- The board proposes a dividend of NOK 4.25 (NOK 2.25)
(As at 31 December 2016 in brackets)
"We have invested heavily in new technology in the last few years and were one of the first banks to use robots. We did this so we could both handle various types of customer enquiries better and increase the efficiency of manual, in-house processes. We are now seeing the effects with significantly better customer services and greater operating efficiency," said Arne Austreid.
The dividend proposed by the board for 2017 has been set at NOK 4.25 per share. This is a significant increase from NOK 2.25 in 2016. The level of the proposed dividend reflects the fact that the bank has achieved is planned capital build-up, in which the target was a common equity tier 1 capital ratio of 15%. Given the group's robust business model, its capacity for both growth and dividends going forward is considered good.
The complete interim report as at 31 December can be downloaded from www.sr-bank.no.
Stavanger, 7 February 2018
Arne Austreid, CEO, Tel. +47 900 77 334
Inge Reinertsen, CFO, Tel. +47 909 95 033
Stian Helgøy, Vice President Investor Relations, Tel. +47 906 52 173
Thor-Christian Haugland, Executive Vice President Communications, Tel. +47 480 31 633