Nordic Credit Rating (NCR) has assigned a 'BBB+' long-term issuer rating to Norway-based savings bank Aasen Sparebank. The outlook is stable. An 'N2' short-term issuer rating was also assigned, together with an 'BBB+' senior unsecured issue rating, a 'BBB' Tier 2 issue rating and a 'BB+' Additional Tier 1 issue rating.
Rating rationale
The long-term issuer rating reflects the bank's low risk appetite, solid capital position, diverse access to funding and strong earnings. We take a positive view of the bank's membership in the Lokalbanksamarbeidet banking cooperative, which enables product diversity, shared development costs and the opportunity to finance residential retail mortgage loans through jointly owned covered-bond company Verd Boligkreditt AS.
We expect Aasen Sparebank will maintain strong earnings metrics and stable cost efficiency over our forecast period through 2026, despite interest rate cuts. We believe loan losses and non-performing loans will remain at low levels.
The rating is constrained by the bank's concentrated exposure to real-estate collateral in the Innherred region north of Trondheim. It is also constrained by the bank's size and moderate market share in its operating region, as well as requiring a long commute to the metropolitan area of Trondheim.
Stable outlook
The stable outlook reflects our view that the bank's low risk appetite, strong real-estate collateral, improved earnings and solid cost efficiency will enable resilience during a modest economic slowdown. We forecast relatively strong loan growth in 2025 and 2026. However, we expect capital ratios will remain stable, apart from a significant boost in 2025 due to the implementation of the EU's Capital Requirements Regulations III (CRR3).
We could raise the rating to reflect Aasen Sparebank's commitment to maintaining material regulatory capital buffers and a Tier 1 ratio sustainably above 24%. We could also raise the rating if pre-provision earnings to risk exposure amount (REA) moves sustainably above 3% and share of net Stage 3 loans significantly below 1% for a prolonged period, or if the bank exhibits an improved market position without material increase in risk appetite.
We could lower the rating to reflect a material deterioration in the local operating environment that weakens the bank's asset quality, or if there is a sustained reduction in the Tier 1 capital ratio to below 18%. We could also downgrade Aasen Sparebank if risk-adjusted earnings metrics fall below 2% of REA over a protracted period.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | BBB+ |
| Outlook: | Stable |
| Short-term issuer credit rating: | N2 |
| Senior unsecured issue rating: | BBB+ |
| Tier 2 issue rating: | BBB |
| Additional Tier 1 issue rating: | BB+ |
Contacts:
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 14 Feb. 2024, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.