Norway has a long tradition of local savings banks, and many of them are listed on Oslo Børs. Together with DNB, Norway’s largest bank, they make up a large and important part of the exchange. Many investors value the banks for stable earnings and high dividends.
But most savings banks are not listed with shares. They are listed with equity certificates, and it is worth understanding the difference before investing.
What is an equity certificate?
A savings bank has no owners in the usual sense. Historically, its equity has consisted of retained profit, often called the savings bank’s fund. To raise money from investors, savings banks can issue equity certificates.
An equity certificate resembles a share: it gives a right to part of the profit, it can be bought and sold on the exchange, and its value follows the bank’s results. The difference is that certificate holders own only part of the bank’s equity. The rest belongs to the savings bank’s fund, often described as the community’s capital.
The ownership share
The ownership share shows how much of the bank’s equity belongs to the equity certificate holders. If it is 60 per cent, 60 per cent of the profit goes to the certificate holders and 40 per cent to the savings bank’s fund.
When the bank pays a dividend, it is split according to the ownership share. Certificate holders receive their part as dividends, while the fund’s part is often used for donations to local good causes, or retained in the bank.
The ownership share varies a lot between banks and can change over time, for example through share issues or mergers.
Equity certificates and shares
| Equity certificate | Share | |
|---|---|---|
| Right to profit | According to the ownership share | All profit belongs to shareholders |
| Dividends | Split by ownership share | Paid to shareholders |
| Voting rights | Limited influence in the bank’s governing bodies | Voting rights at the general meeting |
| Tax | Like shares, with the shielding deduction | Like shares, with the shielding deduction |
| Share savings account | Can be held in ASK | Can be held in ASK (EEA companies) |
Influence is the key difference. In a savings bank, certificate holders share power with customers, employees and representatives of the fund. You get part of the profit, but less control over the bank than a shareholder has in a limited company.
What drives bank earnings?
Interest rates
Banks mainly earn money on the difference between the rate they charge on loans and the rate they pay on deposits and funding, the net interest margin. Higher interest rates have often meant better margins, especially on deposits. When rates fall, margins can come under pressure.
Lending growth
More lending means higher interest income. Growth depends on the housing market, businesses in the bank’s region and competition from other banks.
Loan losses
When borrowers cannot pay, the bank takes losses. In good times losses are often small, but they can rise quickly in a downturn, especially if the bank lends heavily to an exposed industry or region.
Costs and efficiency
The cost-income ratio shows how efficiently the bank is run. Digitalisation and mergers have been important ways to reduce costs in the sector.
Capital requirements
The authorities set requirements for how much equity banks must hold. Stricter requirements can limit dividends or growth, while easing can free up capital.
The banks on Oslo Børs
DNB is listed with shares, while the savings banks are listed with equity certificates. Several savings banks have merged in recent years, among other things into larger regional banks within the SpareBank 1 alliance and Sparebanken Norge. Below are some of the banks on the exchange. They are examples, not recommendations.
DNB Bank ASADNB304.00 NOK+0.5%HOLD
SpareBank 1 Sør-Norge ASASB1NO218.50 NOK−0.2%HOLD
SpareBank 1 ØstlandetSPOL195.70 NOK−0.6%SELL
SpareBank 1 SMNMING208.00 NOK−0.5%HOLD
SpareBank 1 Nord-NorgeNONG168.00 NOK−0.2%SELL
Sparebanken NorgeSBNOR198.22 NOK+0.4%HOLDLive prices from the latest close. Signals are model-based, not recommendations.
How to assess a bank share
- Return on equity: How much the bank earns relative to its equity.
- Price to book (P/B): For banks this is often more useful than P/E.
- Cost-income ratio: Lower is better.
- Loan losses and loan book: Which industries and regions the bank lends to.
- Dividend policy and ownership share: How much of the profit is paid out, and how much goes to certificate holders.
Next steps
- All companies on Oslo Børs A–Z
- Read about key figures such as P/B and return on equity
- Read about dividend stocks