Sogn Sparebank is a small Norwegian regional savings bank. It earns a ~8.6% return on equity — below the ~9.5% cost of equity — which on a strict Gordon framework would imply a sub-book valuation, yet the equity certificates trade at 1.25× book.
The discrepancy partly reflects the Norwegian savings-bank structure (equity certificates are not ordinary equity; primary-capital owners differ) and a high dividend yield typical of the format. Still, a sub-cost-of-equity return at a premium-to-book is a stretched valuation.
Gordon fair P/B = (8.6%−3%)/(9.5%−3%) ≈ 0.87×, versus the current 1.25× — i.e. the certificates look expensive on the formula. The savings-bank structure and dividend explain part of the premium, but the return does not cover the cost of equity.
Base NOK 300 (−9%, partial de-rate); bull NOK 360 (ROE rises above the cost of equity on rate/credit tailwinds); bear NOK 250 (ROE stays sub-COE and the premium normalises).
The operating reverse-DCF (NOPAT / invested capital / WACC) does not apply to a balance-sheet business — leverage is the raw material and "net debt" is not meaningful. The equity is valued on residual income: book equity plus the present value of returns above the cost of equity, discounted at Ke; the single-stage lens is the Gordon fair price-to-book, (ROE−g)/(Ke−g). The market prices in a sustainable ROE of 11.0% vs 8.2% currently earned; at a sustained 8.2% ROE the warranted P/B is 0.81× (NOK 216/sh, -35%).
| Scenario | 24m target | Impl. ROE | Upside | Prob. | Driver |
|---|---|---|---|---|---|
| Bull | NOK 360 | 12% | +9% | 30% | ROE rises above COE on rate/credit tailwinds |
| Base | NOK 300 | 10% | -9% | 40% | Partial de-rate; sub-COE return |
| Bear | NOK 250 | 9% | -24% | 30% | ROE stays sub-COE; premium normalises |
| Prob-weighted | NOK 303 | — | -8% | 100% | Scenario-weighted expected value |
| Ke \ ROE | 10% | 14% | 18% | 22% | 26% | 30% | 34% |
|---|---|---|---|---|---|---|---|
| 8.00% | 374 | 587 | 801 | 1014 | 1228 | 1441 | 1655 |
| 8.75% | 325 | 511 | 696 | 882 | 1068 | 1253 | 1439 |
| 9.50% (base) | 287 | 452 | 616 | 780 | 945 | 1109 | 1273 |
| 10.25% | 258 | 405 | 552 | 700 | 847 | 994 | 1141 |
| 11.00% | 234 | 367 | 501 | 634 | 767 | 901 | 1034 |
Green = fair value above the current price of NOK 330.00. For a financial the surface is dominated by cost of equity and sustainable ROE — not unit growth.
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Norwegian savings-bank certificates typically pay a high, well-covered dividend — the main support.
An established regional position with sticky retail relationships.
Higher rates can lift net interest income and ROE toward the cost of equity.
A predominantly secured (mortgage) loan book limits credit losses.
The savings-bank structure supports a structurally higher P/B than ordinary banks.
Sogn Sparebank earns below its cost of equity yet trades at a premium to the Gordon-justified P/B — expensive on the frame, with the savings-bank structure and dividend as mitigants. HOLD with a bearish lean, medium conviction; base target NOK 300 (−9%).
A rate/credit-driven ROE move above the cost of equity would justify the premium; otherwise the valuation is stretched.
Every adjustment traces to the cited note/page in the source filing — click to open it there. Source reports archived locally.
NOPAT adjustments: Not available from structured data
Company add-backs we reject: Not available without footnote extraction
Pages read — FY: — · Q: —
How the mttssn view has evolved — each prior dated note is preserved.