Good morning, everyone, and welcome to the 4th Quarter and full year 2024 results call for Morrow Bank. My name is Øyvind Oanes, I'm the CEO of the bank, and with me, as always, I have Eirik Holtedahl, the bank's CFO. And as usual, we will first go through a short presentation before we open up for questions at the end. If you should have a question, you can raise your hand in the chat, and we will make sure that your channel is open and you can ask your question. It's also okay to ask questions in Norwegian if you wish to do so. So with that, let's just get into it, turning now to page two of the presentation. I'm happy to report that we have delivered another strong quarter and a strong overall performance in 2024, generating significant shareholder value.
The scalable banking platform that we have built over the past couple of years enabled us to grow the loan book by 38% in the year to 15.4 billion NOK, drive income up 21%, improve the cost-income ratio further down to under 26%, and ultimately deliver a strong full-year profit before tax of 281 million NOK. And that's actually up 36% year on year. Return on target equity is an output of all the above and came in at 10.6% in the quarter, up from 7.1% in Q4 of 2023. Additionally, we executed on multiple structural opportunities, acquiring two loan portfolios of a total of 2.3 billion NOK and initiated the re-domiciliation to Sweden by submitting an application for a Swedish banking license at the end of October. It's also great to see that the strong progress is being noticed in the capital markets.
We saw a share turnover of more than 20% in 2024 and a significant improvement of our share price, delivering total shareholder return of 140% in the year. On the back of the strong results for 2024, the board will propose a dividend payment of NOK 0.40 per share, the first dividend payment since we launched the turnaround. Now moving to the next page, page four of the presentation. Exactly three years ago, we stood here at the Q4 2021 results call. We laid out a turnaround plan for the bank, previously Komplett Bank. We focused the plan on balanced growth and cost efficiency, or said it another way, building a scalable banking platform. As we have been reporting on every results call since, we have been progressing ahead of plan, and the results can be seen in the graph to the right-hand side of this page.
We managed to deliver on both growth with a CAGR of 27% in the period, as well as significantly reducing our cost base down to a cost-income ratio of now under 26%. As reported for Q4 and full year 2024, we are now really seeing the results of the turnaround in both profits and return levels. We therefore conclude that the turnaround of the bank is complete. Looking ahead, we have some strong value drivers in place. One, the macro environment. We see growth coming back, driving demand up, and maybe more importantly, inflation, and then also interest rates coming down, easing pressure on households, and again, driving both demand and debt-serving capacity up. Two, loan losses improving in the bank.
Eirik will talk more about this in a minute, but we see loan loss ratio coming down for the fourth consecutive quarter, reporting a loan loss ratio for Q4 of 4.6%. And three, as we will illustrate, and we illustrated on our last call, with improving returns, we are now increasingly generating excess capital going forward. And all in all, this puts us in a very good spot when looking at both organic growth and structural opportunities ahead. Now over to Eirik, who will review the financials in a bit more detail. Eirik.
Thank you, Øyvind. As always, we'll start with the balance sheet, which is essentially center stage for the bank. And this also is a testament to what Øyvind has been talking about, that we've been building a scalable platform. And because, as you can see here, the gross loan balance grew by more than 30% over the year. The main driver for this was, as you know, the acquisition of the two Swedish portfolios that we did in the second half of the year, which are the largest contributor that you can see. But nevertheless, we also had good underlying growth. We keep investing, particularly in Finland and Sweden. We find those two markets most attractive.
First, they have attractive margins, that is, risk-adjusted margins in both countries, as well as the capital requirements are lower for these two countries, for loans in these two countries than they are for Norway. In the 4th Quarter, the nominal development was flattish. The focus for the quarter was to implement securely our new portfolios and to ensure that they were taken care of in a proper fashion, and also to further improve the credit quality. Also, we undertook an NPL sale, Finnish loans of EUR 16 million, and as always, we keep selling Norwegian credit card loans on forward flow, so if you adjust for these sales, the net development in the quarter was slightly positive. Going forward, we expect, as we have previously guided, to grow annually at around 5% per year.
Hence, we would end up around more than NOK 17 billion kroner at the end of 2026. But this doesn't preclude that if there are any other non-organic opportunities, such as portfolio purchase that we have undertaken before, we would clearly be open to look at those. Now, jumping on to the next slide and the yield picture, you can see that the net yield is fairly resilient in Q4. The loan yield, which is a graph in the middle, decreased somewhat. This is partly driven by the Swedish loans being taken on book, as they have a somewhat lower net yield than our other Swedish loans, and hence the average yield is brought down.
But also, some of our new loans are coming in at a bit lower yield now, reflecting the overall market conditions, as the underlying rate, that is, the central bank rates, are dropping, as you know, particularly in Sweden and Finland. Also, on credit cards, the yield is a little bit going down. This is because the Swedish credit card Finnish, sorry, the Finnish credit card loans are taking up a larger portion of our loan book. And in Finland, there is, as many of you know, a usual maximum rate of 20% interest rate, and hence this will drive down the overall yield for our credit cards a little bit. Now, looking at the bottom line here, that is our funding yield. It is going down somewhat.
It has been fairly high during the quarter since we have been wanting to build up our Swedish deposits to fill the funding needs in relation to the portfolio acquisitions we've taken. We have now more than completed this funding need of ours, and we're cutting the rates in both Euro countries and Sweden. And as a consequence, now the yield on our deposits are dropping. And at the end of this first quarter, now you will see that we will be below 3% in funding cost. Now, as always, combining these two, balanced growth as well as the yield picture, you can see this development. Year on year, we grew 24%.
The reason why it is a little bit lower than our loan balance growth is because most of the growth came at the end of the year, namely effectively in the 4th Quarter when the two Swedish loan portfolios were fully taken on book. Then you can see that the total income grew nicely in the 4th Quarter. Going forward, the total income will continue to grow and roughly in line with the loan balance development. Jumping to the cost picture, you can see here that if you concentrate on the dark turquoise bars, you can see that the underlying cost picture is flat. In the quarter, we also recorded a charge of approximately NOK 10 million for going into Sweden, that is, working on the Swedish banking license and lodging it, as well as preparing for our Swedish operations.
Hence, we had a one-off of NOK 10 million in the quarter for that purpose. We will have some costs for Sweden in 2025, but not at the same magnitude for the quarters. Nevertheless, there will be some costs related to Sweden as there are setup costs. Also in the beginning, there will be some duplication of costs between the Swedish bank and the Norwegian branch. The cost-income ratio was flat pretty much at 25.9%, and this includes actually the NOK 10 million for the Swedish operations or preparing for the Swedish operations. Going forward, we maintain our guidance and that we expect that the cost-income ratio will drop further, and we're aiming at around 23% at the end of next year. Now to the loan loss pictures. We're very happy to show this steadily declining trend.
We peaked at 5.4% annualized loan loss ratio a year ago, and now at this 4th Quarter, a year later, we're down to 4.6%. Yes, the nominal loan losses increased, but that is, that we now have a much larger loan balance, and hence the loan loss ratio in percent has dropped. We expect this trend to continue. This will be driven by the fact that we don't grow as rapidly as we've done before. We have a maturing loan book. The macro will improve, and also, we have tightened our credit policies in 2023 and 2024, and that will also bear results now in 2025 and onwards. Now, combining all these elements, total income, operating costs, and loan losses, you can see that we get the profits.
With the nice lift we had in total income, you can also see that we get a nice lift in profit before taxes going up to NOK 84 million, and we landed at NOK 60 million after taxes. The return on target equity now exceeded 10%. We landed at 10.6%, and we will expect it to reach 12%-14% at the end of 2026. That is on a Norwegian license. On a Swedish license, that figure will be different. It's also, we're very happy, as Øyvind said, that the board is now proposing to the AGM a dividend, which reflects 50% of the distributable profits for 2024, which translates to NOK 0.4 per share. And we expect that going forward, that this dividend possibilities should continue.
The outlook for the profitability for the year is that it will develop nicely with a continued loan balance growth, the stable cost base, and also that we will have decreasing loan loss ratios and hence increasing risk-adjusted margins. And with that, we'll just jump over to the capital situation on the capital adequacy. As we announced in December this year, the Norwegian FSA came forward and reduced the requirement for our Pillar 2 capital, that it would no longer need to consist of 100% CET1, but it could now consist of the standard 56.25%. That was quite good news for us, and effectively, this brought down the CET1 requirement by 2.4 percentage points. As a consequence of that, the headroom to the CET1 requirement target was then NOK 700 million or NOK 445 million to our target. Our target is we target to have a 2% buffer above the minimum requirement.
But do keep in mind that the total capital situation is unchanged. So hence, if we have a relief in CET1, we will need to replace it by other capital, such as alternative tier one or tier two capital. Another beneficial thing going forward is the implementation of CRR3 in EEA. CRR3 is a new capital requirements regulation. It came into force in the EU on the 1st of January this year. It is foreseen to come into place in EEA, that is, Norway, Iceland, and Liechtenstein during this year. We don't have the exact date yet, but for us, it will be for us, Morrow Bank, it will be quite beneficial because this will reduce our operational risk exposure by about NOK 1 billion. And hence, the ensuing capital requirements will also decrease accordingly. This is not reflected in the pictures you see there. This is to come.
As a consequence here, we can therefore formulate our dividend policy to distribute excess capital, not allocate it to growth, to our shareholders. With that, I'll leave the word to Øyvind.
Thank you, Eirik. Turning now to page 15 of the presentation. And before summarizing today's presentation and opening up for questions, I wanted to give you a flavor of how we're stacking versus our key competitors on the market. And as we've seen on the previous calls, we have outperformed our peers on both growth with a CAGR of 27% over the past two years, and on efficiency with an industry-leading cost-income ratio down to under 26% reported for the 4th Quarter. And as we've seen from the presentation today, our returns are now also improving, and we could report an ROE of 10% for Q4. Still a bit of way to go here, but we have line of sight on further improvements that should take us further up on that list too. A couple of words on the process of becoming a Swedish bank.
We talked about that also at our previous call. And as reported last time, we did submit an application for a Swedish banking license on the 31st of October. All work streams are running on plan, and we expect to receive a decision from the Swedish FSA in May. Assuming a positive outcome of that process, we will spend the rest of 2025 getting our operations ready, merge the Norwegian and Swedish entities, and ultimately launch the Swedish bank, as well as move our listing to NASDAQ Stockholm in early 2026. We'll obviously be keeping you updated on the progress as we move forward. Now, quickly on page 17, excuse me, comparing ourselves to our Swedish peers, we see that we have outperformed also in terms of shareholder returns in 2024 with 140% TSR as reported.
However, also room here to further improve when we compare market valuation of our bank to the Swedish niche banks, as can be seen on the right-hand side of this slide. Here illustrated by price book multiple. Obviously, happy to see that we are bringing that steadily up towards at least price book one with a 0.9 now reported. But here again, we believe that there's more to be seen going forward. All right, so turning to the last page of the presentation, let me summarize the highlights. We have established a highly scalable platform enabling us to deliver solid loan book growth and deliver a very strong result for both Q4 and for 2024 overall. We believe we have now some strong value drivers in place to further grow and improve our business going forward, including both organic growth and inorganic opportunities as we saw in 2024.
We confirm our updated guidance for year-end 2026. Eirik showed you those numbers on the previous pages. And we believe that the redomiciliation to Sweden could see us deliver returns of 20% in the midterm. Last but not least, on the back of the strong results in 2024, the board will propose a dividend for the year of NOK 0.4 per share, 40 øre, which we are obviously very happy with. And this is the first time we pay dividends since we started the turnaround three years ago. With that, thank you for listening, and we will now open up for questions. Again, if you have a question, you can raise your hand in the chat, and Henning here will help us moderate that, open up your channel. You can ask your question obviously in English, but also in Norwegian. That's all fine.
I think we have a first question coming in.
Yeah, Helmut Saal wants to ask a question. Your microphone is now open, so please unmute on your side and ask your questions. Helmut.
Yes, thank you. Just wondering if you could give us a more color on what you see in terms of competition on the funding side in Sweden and also since, I guess, the decline in product deals are much explained by the acquisitions, but also if there are any new, since you also comment on a bit harder competition, who are driving this competition currently? And also, in what markets do you feel it's the best risk-reward at the moment?
To start with the first part, I think you asked about the Swedish funding competition. There we have the niche banks are usually like ourselves are the ones offering the highest rates. We adjust the rates in accordance to our needs. We were at the top of the list for some time, so a little while ago. Now we're not at the top of the list, and we're going down here. When I say the list, there are comparison sites in Sweden which list relevant options. We can essentially use that to manage our loan balance or deposit balance volume. Now, as you pointed out, the new Swedish portfolios are reducing the yield a little bit on our loan book. Also, the market situation is such that in order to attract loans of the proper quality, we have also need to adjust a little bit downwards.
Not much. We're only talking some basis points here on the new front book, i.e., the new loans that we sell. And that is also impacting a little bit. Not much now because they're making a very small portion of the total loan balance, but this is a bit of a trend to continue. And this is obviously driven by the market situation. And the market situation here is that the underlying rates are going down. And as a consequence, as I said also earlier, we will be reducing the interest rate that we pay on our deposits. But we have done it considerably in euro and in Sweden. And that is also to continue downwards. We expect that to happen. Now, we don't know what exactly will happen with interest rate cuts now. It's more uncertain.
But nevertheless, as the picture is right now, we still see that the market can allow us for further cuts, and that will also increase our interest margins. As to the most attractive margins, markets, as you say here, they are actually quite similar: Norway, Sweden, and Finland. However, Finland has the highest yield. Sweden has the lowest loan losses. Finland has the lowest funding cost. Sweden is to follow. Norway has the highest funding cost, but also the loan losses there are fairly low. So at the end of the day, they are similar, but it's a bit back and forth. But in all, what's driving our growth there is that the capital requirements in Finland and Sweden are lower. And that is irrespective of us being a Norwegian bank or a Swedish bank.
Maybe just to give you one more thing on top of what Eirik said in terms of funding in Sweden. I believe since last we talked, we brought the funding rate, so the deposit rate in Sweden down by 100 basis points. So our price is down to 3%. It was above 4%.
Above 4%.
Yeah. So that is coming down, not full effect. We don't see that much of that effect in Q4, but as Eirik alluded to through his presentation, we will see funding rate come further down when we report the first quarter.
Okay, excellent. Thank you.
Any further questions on the call today? If not, I just want to kind of repeat what we say on every call. If you have questions, if you do want to talk to us, we're also available between the quarterly calls. Give us a call or send us simply an email to ir@morrowbank.com, and we'll be happy to answer questions also through that channel or have a call and/or meet with you if that would be an option. We'll give it another minute here. If there are no questions, I know people are busy. There are a lot of reports coming out this morning. Doesn't seem that there are any more questions. In that case, thank you again so much for dialing in this morning, and again, feel free to contact us. If not, we'll talk again at the Q1 presentation, which is scheduled for May. Thank you.
Thank you.
Have a good day.