SpareBank 1 SR-Bank ASA (SRBANK): Good underlying operations and strengthened solidity, but results marked by impairments and reduced financial income

SpareBank 1 SR-Bank posted a pre-tax profit of NOK 247 million at the end of the first quarter, compared with NOK 1,323 million for the same period last year. The results were marked by impairments and weak financial income. These resulted from the changed market conditions for offshore-related operations, a significantly poorer level of activity for companies in general, and weak financial markets due to the Covid-19 situation. 

The return on equity after tax was NOK 3.4%, compared with 21.2% in the same quarter last year. The Common Equity Tier 1 capital ratio as at 31 March 2020 was 17.7%, taking into account the decision to postpone payment of the dividend.

“I am pleased that we have maintained good operations during a period when most of the group’s activities have been handled by staff working from home. Thanks to earlier investments in new technology, we have been able to help a substantial number of customers in demanding situations. Competent employees combined with modern technology have ensured that our customers have had access to all of our products and services, despite the partially closed branches,” says Arne Austreid, chief executive of SpareBank 1 SR-Bank.

The group’s operating costs amounted to NOK 592 million in the first quarter of 2020, compared with NOK 583 million for the same period last year.

Q1 2020

• Pre-tax profit: NOK 247 million (NOK 1,323 million)
• Net profit for the quarter: NOK 221 million (NOK 1,146 million)
• Return on equity after tax: 3.4% (21.2%)
• Earnings per share: NOK 0.86 (NOK 4.48)
• Net interest income: NOK 1.081 million (NOK 938 million)
• Net commissions and other operating income: NOK 346 million (NOK 341 million)
• Net income from financial investments: NOK -28 million (NOK 676 million)
• Operating costs: NOK 592 million (NOK 583 million)
• Impairments on loans and financial liabilities: NOK 560 million (NOK 49 million)
• Total lending growth over last 12 months: 5.3% (8.7%)
• Growth in deposits over last 12 months: 6.6% (-0.6%)
• Common Equity Tier 1 capital ratio: 17.7% (14.7%)
• Tier 1 capital ratio: 19.2% (16.0%)
  (Q1 2019 in brackets)

The group recognised NOK 560 million in net impairment on loans and financial liabilities in the first quarter of 2020, compared with NOK 49 million in the same period last year and NOK 139 million in the fourth quarter of 2019.

The higher impairments are a result of changed market conditions for offshore related activities, where a larger impairment has also been required for one commitment. Given the Covid-19 situation and the uncertainty associated with economic developments, there has also been a need to increase IFRS 9 provisions. 

“Impairments are high for the quarter. They reflect a demanding situation for both oil-related companies and business in general. This has resulted from falling oil price and the fact that society has partially been locked down for large parts of March. The bank is financially strong and meets all of the regulatory requirements by a good margin. We are thus well-equipped to continue to help our customers in a difficult period,” says Arne Austreid.

The full interim report is available for download from www.sr-bank.no.

Stavanger, 7 May 2020

Contact persons:
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

This information is disclosed in compliance with section 5-12 of the Securities Trading Act.