SNOR.OL — mttssn research

BUY

Conviction: MEDIUM

A conservative Norwegian savings bank earning a 10% ROE, trading at book (1.00×) versus a Gordon-justified ~1.12× (+12%), at under 10× earnings with a high dividend. Cheap on the frame. BUY, modest conviction.

Return on Equity

10.0%

Cost of equity ~9.5%

Price / Book

1.01×

1.00× book; below fair

Fair P/B (Gordon)

1.08×

(ROE−g)/(COE−g); g 3%

Price / Target

NOK 187 → NOK 200

+7% base; BUY

Price / Earnings

10.1×

≈9.8× earnings

P / TBV

1.02×

Price / tangible book

Economic Profit

+NOK 92M

+NOK 104M; ~10% ROE

Equity (book)

NOK 4.6B

Savings-bank equity

Thesis

Sparebank 1 Nordmøre is a Norwegian regional savings bank (part of the SpareBank 1 alliance) with conservative, largely secured lending, a strong regional retail/SME position and a ~10% return on equity. The savings-bank model pairs stable net interest income with a high dividend payout.

On the ROE/P-B frame the equity is cheap — at 1.00× book against a Gordon-justified ~1.12× (ROE 10%, COE ~9.5%, g 3%), trading below 10× earnings with a high dividend. A benign Norwegian credit backdrop and rate tailwind support the ROE.

Valuation · residual income (equity frame) & scenarios

Gordon fair P/B = (10%−3%)/(9.5%−3%) ≈ 1.12×, versus the current 1.00× — ~12% upside to the formula, plus a high dividend, at <10× earnings.

Base NOK 200 (+8%) toward fair value plus dividend; bull NOK 230 (rate/credit tailwind lifts ROE and the multiple); bear NOK 160 (a Norwegian credit/housing downturn lifts loan losses).

Market-implied ROE

9.6%

sustainable ROE the price already demands — vs 10.0% observed

Current → Fair P/B

1.01× → 1.08×

at a sustained 10.0% ROE, K_e 9.5%, g 3%

Excess-return premium

NOK 14 / sh

value above NOK 185.36 book from the +0.5pp ROE−K_e spread

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 K_e; the single-stage lens is the Gordon fair price-to-book, (ROE−g)/(K_e−g). The market prices in a sustainable ROE of 9.6% vs 10.0% currently earned; at a sustained 10.0% ROE the warranted P/B is 1.08× (NOK 199/sh, +7%).

Scenario	24m target	Impl. ROE	Upside	Prob.	Driver
Bull	NOK 230	11%	+23%	35%	Rate/credit tailwind lifts ROE + multiple
Base	NOK 200	10%	+7%	45%	Re-rate toward Gordon P/B + dividend
Bear	NOK 160	9%	-14%	20%	Norwegian credit/housing downturn
Prob-weighted	NOK 202	—	+8%	100%	Scenario-weighted expected value

Sensitivity — fair value / share at K_e × ROE

K_e \ ROE	10%	14%	18%	22%	26%	30%	34%
8.00%	260	408	556	704	853	1001	1149
8.75%	226	355	484	612	741	870	999
9.50% (base)	200	314	428	542	656	770	884
10.25%	179	281	384	486	588	690	793
11.00%	162	255	348	440	533	626	718

Green = fair value above the current price of NOK 186.90. For a financial the surface is dominated by cost of equity and sustainable ROE — not unit growth.

Method & data. ROE 10.0% and book equity are observed (net income / total equity). Cost of equity 9.5% and terminal g 3% are assumptions, shown explicitly and overridable. The underwriting bridge (combined ratio → float → ROE) is [DATA SAKNAS] — it requires a financial deep-dive to extract the combined ratio and investment yield, and is omitted here rather than estimated.

⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.

Key drivers

1. Trades at book vs fair ~1.12×

1.00× book against a Gordon-justified ~1.12× — cheap on the frame.

2. High dividend

A high, well-covered savings-bank dividend underpins total return.

3. Conservative lending

A predominantly secured (mortgage) loan book limits credit losses.

4. SpareBank 1 alliance

Alliance membership provides scale in products, IT and funding.

5. Rate tailwind

Higher Norwegian rates support net interest income and ROE.

Key risks

Norwegian credit/housingA Norwegian housing/credit downturn would lift loan losses — the key risk.
Rate normalisationFalling rates compress net interest income.
Regional concentrationExposure to one Norwegian region's economy.
Small/illiquidA small, illiquid savings-bank certificate.
Equity-certificate structureSavings-bank certificate dynamics differ from ordinary equity.

Conclusion

Sparebank 1 Nordmøre is a conservative Norwegian savings bank trading at book — below its Gordon-justified P/B — with a high dividend at under 10× earnings. BUY, modest conviction; base target NOK 200 (+8%).

A benign credit backdrop and rate tailwind support the ROE; a Norwegian housing downturn is the principal risk.