SpareBank 1 SR-Bank ASA (SRBANK): Increased loan impairments and reduced financial income
In connection with the presentation of its results for the fourth quarter of 2019, SpareBank 1 SR-Bank ASA stated that its return on equity after tax target for the financial year 2020 was 12%. At the time, the Norwegian economy was virtually unaffected by the Covid-19 situation.
As a result of the significant consequences in connection of the partial lockdown of society, combined with the substantial fall in oil prices, the marked downturn in activity has resulted in uncertainty and weaker profitability for many of our customers.
SpareBank 1 SR-Bank ASA is a solid bank and at the end of 2019 had a common equity tier 1 capital ratio of 17.0%, which took into account a dividend of 45%. In its market announcement of 15 April 2020, SpareBank 1 SR-Bank ASA reported that a final decision concerning payment of a dividend for the financial year 2019 would be postponed until further notice. Corrected for the retained dividend, the common equity tier 1 capital ratio at the end of the fourth quarter of 2019 amounted to 18.1%, which is significantly above the authorities’ requirement.
In advance of the result for the first quarter of 2020, which will be presented on 7 May, SpareBank 1 SR-Bank ASA wants to notify stakeholders of certain accounting matters.
The group’s net impairments on loans and financial liabilities are expected to be around NOK 560 million for the first quarter of 2020. The higher impairments are a result of changed market conditions for offshore related activities, where also a larger impairment has been required for one commitment. Given the Covid-19 situation and the uncertainty associated with economic development, there has also been a need to increase IFRS 9 provisions.
Net income from financial investments is expected to be around NOK - 30 million. Included in this is the transfer of personal risk products from SpareBank 1 Forsikring AS to Fremtind Forsikring AS of around NOK 340 million. This has previously been announced.
In total, the effects will impact the return on equity after tax for the quarter, which is expected to end up in the range of 3% to 4%.
The final results, updated targets and estimates, and further details will be published in connection with the presentation of the results for the first quarter on 7 May at 07:30 AM.
Stavanger, 22 April 2020
Contact persons:
Inge Reinertsen, CFO, Tel. +47 909 95 033
Arne Austreid, CEO, Tel. + 47 900 77334
Stian Helgøy, Vice President Investor Relations, Tel. +47 906 52 173
This information is disclosed in compliance with section 5-1 of the Securities Trading Act.