Nordic Credit Rating has assigned a 'A-' long-term issuer rating to Norway-based Aurskog Sparebank. The outlook is stable. An 'N2' short-term issuer rating has also been assigned, together with a 'A-' senior unsecured issue rating, a 'BBB+' Tier 2 issue rating and a 'BBB-' Additional Tier 1 issue rating.
Rating rationale
The long-term issuer rating reflects the bank's strong earnings, robust capital position and presence in a growth region. The bank demonstrates reliable access to capital market financing and maintains strong credit metrics relative to most other Norwegian savings banks. We consider the bank's risk governance and internal risk reporting above average. Aurskog Sparebank maintains a cooperation agreement with the Eika banking alliance, which we view positively as it supports product diversification, shared development costs and access to residential mortgage financing through Eika Boligkreditt.
The rating is constrained by the bank’s significant exposure to real estate in the Romerike region. Additional negative factors include intense competition in the greater Oslo area and the bank’s limited market share.
Stable outlook
The stable outlook reflects our expectation that Aurskog Sparebank will continue to generate stable pre-provision income and maintain low credit losses. The bank's moderate risk appetite, robust real estate collateral and strong capital position support its resilience to a modest economic slowdown. We forecast the bank to maintain robust capital ratios following recent improvements from implementing the EU's Capital Requirements Regulations III (CRR3).
Potential positive rating drivers include an improved market position with stable risk appetite and profitability and a consolidated Tier 1 capital ratio consistently above 22%,
Potential negative rating drivers include a deterioration in the operating environment affecting asset quality, a sustained decline in the consolidated Tier 1 capital ratio below 18%, pre-provision income to risk exposure amount (REA) falling below 2%, or a cost-to-income ratio exceeding 50% over an extended period.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | A- |
| Outlook: | Stable |
| Short-term issuer credit rating: | N2 |
| Senior unsecured issue rating: | A- |
| Tier 2 issue rating: | BBB+ |
| Additional Tier 1 issue rating: | BBB- |