As a consequence of the Corona crises the Financial Supervisory Authority of Norway in a letter dated March 16th asked the Board of Directors of all Norwegian banks and holding companies in bank-dominated financial groups to make a new assessment of proposed allocations for the fiscal year 2019.
The Board of Directors of Sparebanken Møre regards the current situation as very serious. The Bank has implemented several measures to ensure our customers, both retail and corporate, having access to financing and other services in the time to come.
At the end of 2019, Sparebanken Møre’s capital adequacy was well above the regulatory capital requirements. Common Equity Tier 1 (CET 1) capital ratio was 17.4 per cent, Tier 1 capital ratio was 19.3 per cent and The Capital Adequacy Ratio was 21.5 per cent. Leverage Ratio at year-end 2019 was 8.0 per cent, hence a good margin to the total requirement of 5.0 per cent. Sparebanken Møre had a deposit-to-loan ratio of 57.5 per cent and a Liquidity Coverage Ratio (LCR) of 165 at year-end 2019. Sparebanken Møre is thus well capitalized facing the new market situation, with a good liquidity buffer and a diversified and long-term financing. This enables the Bank to face an increased level of defaults and losses, while still having capacity for good growth in lending.
Sparebanken Møre has two groups of owners: equity certificate (EC) holders and the local community. The Bank’s dividend policy states that the owners should be treated equally.
Important criteria when determining the level of dividend is that the Bank should appear predictable and a long-term perspective must apply. In this way, the Bank will strengthen its access to national and international capital markets, both in this period of market turmoil, as well as in the future. Predictability and transparency are important, both for equity investors as well as investors in the Bank’s debt capital instruments.
The local communities in Møre og Romsdal own 50.4 per cent of Sparebanken Møre, which implies that half of the distributed profits is channelled back to the region through dividend funds to local communities for purposes of public benefit. Through supporting culture, sports, the local environment, transportation, competence and business development, the Bank is an important contributor. In this way, the Bank’s profits create development in our region.
A significant part of the dividend from Sparebanken Møre to the equity certificate holders is also channelled back to the local community. As of now there are 3,927 local owners of the Bank’s equity certificates, which in capital amounts to almost 54 per cent. The total dividends channelled back to the local communities will contribute by strengthening the liquidity as well as the income of individuals, companies and local organisations.
The Board of Directors has after a new assessment decided to propose to the General Meeting a reduced dividend pay-out from 50.7 per cent to 40.6 per cent of the Bank’s profit after tax for the fiscal year 2019. Dividend per EC are hence reduced from NOK 17.50 to NOK 14.00. The dividend funds for local communities are reduced accordingly from MNOK 176 to MNOK 141, in accordance with the Bank’s dividend policy regarding equal treatment and maintaining a stable ownership ratio.
Allocations to the dividend equalisation fund and the primary capital fund will increase accordingly. This capital will thus be available for potential future dividends for EC owners and the local community.
This proposed change in allocation of profits results in a CET 1 of 17.7 per cent, Tier 1 capital of 19.5 per cent and a Capital Adequacy Ratio of 21.7 per cent by year-end 2019.
The Board of Directors considers this adjustment of dividends to balance the need for stable and predictable dividends with the desire to further strengthen the Bank’s capital adequacy through retained earnings, hence securing continued strong lending capacity as well as loss absorbing ability in a challenging period of time.
Contacts
Trond Lars Nydal, CEO, Mobile: +47 951 79 977
Runar Sandanger, EVP Treasury & Markets, Mobile: +47 950 43 660
This information is published in accordance with the requirements of the Continuing Obligations.