So then.
Okay, we are one.
Now we're ready to go then, yeah.
Excellent. Good afternoon, everybody. It's 1:30 P.M. here local time, Oslo, and we are ready to give you a brief presentation on the Q3 figures for SpareBank 1 SR-Bank. My name is Inge Reinertsen. I'm CFO of the bank. Together with me is Mr. Morten Forgaard, who is head of investor relations. We will try to run you through the figures and also we are open for questions after that. We just have to have the keyboard here. SpareBank 1 SR-Bank, our strategy is to become a financial group for the southern part of Norway. As shown on left-hand side, we have a significant growth, especially outside our own market area of Rogaland.
Strong branch network with altogether 35 branches and with an operation model, what we call, phygital. That means the combinations of physical resources and a state-of-the-art internet bank. This gives us a strong distribution. After a few years of slowdown in growth in the Rogaland county, we now have a strong growth within the entire SpareBank 1 SR-Bank group. If we look at some of the macro in Norway, we have sound development of housing prices in Stavanger and the nearby area of 7%, which was impacted by the slowdown in the oil sector. Now, also the housing prices in the southwestern part of Norway is growing. The unemployment rate is very low.
It's 2% on average for Norway as such, and in our market area it's even lower with 1.8% in the Rogaland county. If we look at the investments on the Norwegian continental shelf, they are expected to be relatively stable for the upcoming years. Of course, with the situation in Europe with lack of energy, we strongly believe that the Norwegian continental shelf has become even more important than it has been. If we look at the PMIs, they are neutral now. Of course, what happens in the international economy has an impact on our region as well, with pretty neutral expectations when it comes to PMIs.
If we look at the main figures, the return on equity after tax was 12.5% for the quarter. Year to date figures shows 12.0%, which is aligned with our ambition when it comes to return on equity. So far, we have reversed NOK 31 million on loan losses. As shown in the middle, we have a strong growth on the lending side. Also the deposits has shown a significant growth of 8.8%. If we look at the lending side, the retail market and the large corporate institution with 14.8% and also SME and agriculture shows a double-digit growth.
For the large corporate institutions segment of 14.8%, approximately 2.8% has occurred due to the weakening Norwegian kroner, and that some of our clients have exposure in dollars. The underlying growth is more in the area of 12% if we exclude the currency effect. The common equity tier one ratio stands at 17.8%, which is 95 basis points above the internal target of SpareBank 1 SR-Bank, which says 16.85%. The 16.85% is also with a fully turned on countercyclical buffer of 2.5 percentage points. If we look at the main financial targets and ambitions, we have a return on equity target that says above 12%.
Year to date, we are now on 12, that means spot on. We are almost 100 basis points above on the common equity tier one ratio, which stands at 17.82%. We're a bit above the ambition when it comes to cost efficiency. That says below 40%. Year to date shows 48.2%. Our dividend policy is to pay out approximately 50% of the profit each year as a dividend. Of course, by this quarter, we don't have dividend decision, but last year we were almost at exactly 50% dividend. If we look at the quarterly figures, 12.5% return on equity for the quarter. The common equity tier one ratio at 17.8, as commented on.
If we look at the cost to income ratio for the quarter, it says 39.2%. That means below the target of 40%. The earnings per share came in at 3.60 NOK, which is 0.13 NOK higher than the previous quarter. A quick dive into the main figures. We increased the net interest income from NOK 1,101 to NOK 1,150 this quarter. I will comment more in detail with respect to the margin, which we have both on the lending side and deposit. A bit slowdown on the net commission and other income, down from NOK 466 to NOK 421, which is mainly explained by seasonal variations from our real estate broker and our accounting company.
The net income from financial positions came in at NOK 190 million, which is higher than last quarter. We had outspread on the bond side. However, we had positive effect on the basis swaps and the NOK 190 million is what we regard as a totally normalized level for the net financial. On the cost side, cost came in at NOK 676 million, which is down NOK 26 million from last quarter. Here we have a positive one-off of NOK 17 million due to a change in the pension schedule for some senior employees that had defined benefit pension previously.
The write down on loans came in at NOK 6 million, and as shown year to date, we have reversed NOK 31 million. This underpins that the position of our financial position of our customers and also the provisions that we increased in 2020 has been sufficient and we have a very sound development within the portfolio. This gave us a net profit after tax of NOK 829 million, which then was equal to a 12.5% return on equity. Just to give you a short explanation of the net interest margin, which is probably of most interest. As you can see on the left hand side, the lending margin in the retail market was significantly reduced during the quarter from 104 basis points down to 40.
The reason for that is that we had a steep increase in the NIBOR during this quarter, with a 120 basis points increase, and we only had one rate adjustment towards the customers. In Norway, you have to give six weeks in advance notice if you increase interest rate. We had one rate change in effect from August 8. We have two more rate changes, one that came into effect October 4. The next one will be taking effect from November 8. That means that the net interest margin and the net interest income on the retail mortgages were kind of heavily impacted by the increasing NIBOR this quarter. We don't expect that to maintain.
That means that we expect improvement of the margin for the upcoming quarters as we do not expect the same increase in NIBOR and the same lag effect. On the other side of the balance sheet, we have a significant increase on deposits. The margin, it shows a steep increase. If we then look at the volume growth on the lending side together with increased deposit margin, that was sufficient to offset the pressure that we had on the lending margin, leaving us with a net interest margin going down from 140 basis points down to 137. With a year-to-date interest margin, that only has changed 1 basis point from the same period last year. I believe that was the most important highlights from this quarter.
We will now leave the word to you, and I'll open for questions. Perhaps we should just push the escape button. I don't know whether you are able to see us, but please unmute. Use the unmute and ask your questions. Anyone with questions? Yes, here we have one from Thomas Benson. Please, Thomas. We are not able to hear you.
Just let go.
Not able to unmute. Okay. Thomas was not able to unmute. Perhaps that means that it is not for the participants. Perhaps Thomas, please you can try once more.
Yes. Hello.
Now we can hear you. Excellent.
Yes. On the net interest margin side, was it anything on the funding side that you are some sort of unlucky on the fixing, so you got more negative impact from the NIBOR, or was everything straightforward? I'm just thinking about underlying margin. It seems to be a little bit. The improvement was less than from the peers we looked at today.
Yeah. We don't have kind of any specific incidents on the funding side with respect to fixing. I believe that is kind of business as usual. Kind of what I kind of is least satisfied with is the margin on the lending side of the retail portfolio with the lag effect. Of course, losing 64 basis points in the quarter down from 104 basis points down to 40, of course, has a significant impact on the net interest income as such. We believe that is kind of a negative one-off and are now looking forward for the two rate hikes to take place in the Q4.
Oh, thank you. Just to follow up on the deposit margins, if you think about the marginal further positive effects into 2023, when looking ahead to what has already happened but what is going to happen, how much lower do you think the positive effect will be?
Of course, that's a very valid question. I mean, it's always kind of risky to have too much speculation on that topic. The increased interest margin on the deposit side has kind of offset the pressure that we have on the lending side. We are looking forward to kind of having a higher yield curve because it's more convenient to have margins on both sides of the balance sheet. We expect then the lending margin to increase. Of course, we adjust the deposit margin as much as possible due to kind of the competitive environment.
Still with the two rate hikes that now is to be taking into effect, we have adjusted less on the deposit side than we have done on the lending side. Of course, the deposits are cheap now as funding compared to senior and also covered bond. Of course, over time, the different funding sources will kind of be leveled more out. In the short term now, it's a very positive environment for deposit margins.
Okay. Final question from my side, on loan losses, given what's happening with the economy, disposable income, etc. Do you think 2023 will be a year with normal loan losses or is it too early?
We believe that both the corporate sector and the households in our market area is robust. We have seen deposits increase. We have not experienced any short-term non-performing engagements nor asking for postponed avdrag.
Installments.
Yeah, installments. Of course, the disposable income for the household will be reduced due to increased energy prices, increased rates. The unemployment rate is very low, so we believe that even though it will perhaps give the society as such a bit more headwind into 2023, we believe that the position is very sound. We don't expect any kind of credit losses exceeding what we can regard as a normalized level for a bank of our size.
Okay. Thank you for that.
Thank you, Thomas. I can see the hand of Mr. Vegard Toverud. Please Vegard.
Yes. Thank you for taking my question. It's trying to dig into the details, as we have discussed, a little difficult on the corporate margins here. Could you give us some pointers? Could you give us an update on how much of the lending on SME and on all the corporates that are NIBOR linked now and what you are repricing the remaining loans with?
Yes. If we look at the lending on the large corporates and institutions, that will be around 75%-80% related to NIBOR. You might expect that since a large share of it is related to NIBOR, that we will not have a pressure on the margin as NIBOR increases. The coupons are kind of decided three months in advance for every period. That means that even on the corporate segment, you have a lag effect due to the quarterly fixing as you have a NIBOR that has increased as much as it did through the Q3.
We have, of course, adjusted the margins, and that means that we also have kind of a reduction in the rate on the lending side, which is mainly driven by the steeply increasing NIBOR.
Just to follow up that the problem with the large corporates is that on the deposit side then, you don't have the same five months fixing. Because on the deposit side, you have fixing every day. You take the cost immediately when NIBOR rises, and then you have this offset difference between the lending and the deposit side. That could be an explanation for us having slightly more pressure on the interest rate margin.
Yes. The 75%-80%, is that the same also for the SME segment or?
That is for the large corporate institution, segment. If you look at the SME and agriculture, you don't have
I think it's quite the opposite.
Yeah
On the SME side, you will have 80%, which will be standard not six weeks notice, but two weeks notice. Then you have around 15%-20%, which is linked to NIBOR.
NIBOR.
Yeah.
Excellent. Thank you.
Anyone else with questions? It doesn't seem like more questions. On behalf of SpareBank 1 SR-Norge, I will thank you all for joining this meeting, and also give you an apology that the presentation was on the Norwegian version. Next time we will make sure that we have the English version on screen as well. Of course, both the Norwegian and English presentation is available on our website. Yes. Thank you very much, and have a good day.
Thank you.
Bye-bye.