Morrow Bank (MORROW) Q2 2024 earnings summary

Executive summary

• Pre-tax profit rose 16% to NOK 67 million in Q2 2024, with after-tax profit at NOK 51 million and ROE improving to 8.5%.

• Achieved 12% year-over-year loan book growth to NOK 12.5 billion, with strong performance in Finland and Sweden.

• Cost/income ratio reached an industry-leading 26%, reflecting significant cost efficiency progress.

• Loan loss ratio declined to 5.1% as credit policies tightened and collection processes improved.

• Acquisition of a NOK/SEK 700 million Swedish performing loan portfolio, expected to be neutral for 2024 KPIs and boost profitability from 2025.

Financial highlights

• Total income grew 13.5% year-over-year and 3.1% sequentially to NOK 305 million, aided by higher commissions and fees.

• Net interest income was NOK 287.4 million in Q2 2024, with a net interest margin of 8.5%.

• Operating expenses remained stable at NOK 80 million for the third consecutive quarter.

• Loan loss ratio improved to 5.1% from 5.2% in Q1 2024; loan losses flat at NOK 158 million.

• Earnings per share increased to NOK 0.20 in Q2 2024.

Outlook and guidance

• 2025 targets maintained: ~10% annualized loan growth, cost/income ratio of ~26%, and ROTE of 10-12%.

• Loan loss ratio expected to fall below 5% in Q3 and target 4.0–4.5% by Q4 2025.

• ROTE could reach 12-14% with NOK 4-5 billion loan balance increase, and 15-20% if capital requirements align with Swedish peers.

• Guidance excludes additional inorganic growth; updates expected with Q3 results.

• Ongoing IT platform transition to complete in Q1 2025, expected to reduce IT ownership costs.