Nordic Credit Rating has affirmed its 'BBB+' long-term issuer rating on Norway-based Bien Sparebank ASA. The outlook is stable. The 'N2' short-term issuer rating was also affirmed. In addition, we affirmed our 'BBB+' issue ratings on the bank's senior unsecured bonds, 'BBB' issue ratings on its tier 2 bonds and 'BB+' issue ratings on its additional tier 1 bonds.
Rating rationale
Our long-term issuer rating reflects Bien Sparebank's low risk appetite, with a strong capital position and access to funding, as well as a low-risk loan portfolio. The bank has a cooperation agreement with the Eika alliance, which we view as positive, as it provides product diversity, shared development costs and the opportunity to finance residential retail mortgages through Norwegian covered bond issuer Eika Boligkreditt. We expect Bien Sparebank will report strong earnings in our 2025–2027 forecast period, despite pressure on its net interest margin from peaking interest rates and strengthening competition. We believe that improved cost efficiency will help support earnings. Strong pre-provision profit will likely aid in offsetting a moderate increase in loan losses due to a slowdown in the overall economy.
We have raised our scoring of risk governance to reflect increased resources allocated to anti-money laundering and credit risk governance, in particular. In addition, we have aligned our score for other risks with the risk governance score. On the other hand, we have offset this with a one-notch negative rating adjustment to reflect the stiff competition the bank faces and its low market share in its core region of Oslo, the capital of Norway. It also reflects the bank's concentrated exposure to real estate in its core region and a lack of scale that affects its ability to adapt to an increasing regulatory burden.
Stable outlook
The stable outlook reflects the bank's low risk appetite and strong cost efficiency, which we believe will enable resilience during a modest economic slowdown. We forecast that Bien Sparebank's loan growth will outpace its earnings capacity in 2025-2027. However, we anticipate a boost in capital ratios from 2025 following the implementation of the EU's Capital Requirements Regulations III (CRR3).
We could raise our rating on Bien Sparebank to reflect increased scale with maintained risk appetite and profitability; and improved capital and earnings, with a Tier 1 capital ratio sustainably above 25%. We could also raise the rating to reflect strengthened earnings at the bank, with pre-provision earnings above 3% and a cost-to-income ratio above 25% over a protracted period.
We could lower our rating to reflect a material deterioration in the bank's local operating environment that negatively affects its asset quality; a sustained reduction in the Tier 1 capital ratio to below 18%; or to reflect risk-adjusted earnings metrics sustainably below 1.5% of the risk exposure amount.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB+ | BBB+ |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N2 | N2 |
| Senior unsecured issue rating: | BBB+ | BBB+ |
| Tier 2 issue rating: | BBB | BBB |
| Additional Tier 1 issue rating: | BB+ | BB+ |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@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.