Nordic Credit Rating (NCR) said today that it had assigned a 'BBB+' long-term issuer rating to Norway-based Bien Sparebank ASA. The outlook is stable. At the same time NCR assigned an 'N2' short-term issuer rating. NCR has also assigned 'BBB+' issue ratings to the bank's senior unsecured bonds, 'BBB' issue ratings to its tier 2 bonds and 'BB+' issue ratings to its additional tier 1 bonds.
Rating rationale
The 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 Eika Boligkreditt.
We expect Bien Sparebank to report strong earnings in the 2024–2026 period, despite pressure on the net interest margin due to peaking interest rates and stronger competition. We believe that improved cost efficiency will help support earnings. Strong pre-provision profit will help to offset an anticipated increase in loan losses due to a slowdown in the overall economy.
The rating is constrained by strong competition and low market share in the Oslo region. It is also constrained by the bank's concentrated exposure to real estate in its core region and a lack of scale which affects the bank's ability to adapt to an increasing regulatory burden.
Stable outlook
The stable outlook reflects our view that the weakening economic climate will be offset by strong capital and earnings metrics as interest rates have risen, despite higher projected credit losses. We believe the bank's low risk appetite, strong liquidity position, improved earnings and stable cost position provide resilience to a moderate slowdown in the economy.
We could raise the rating to reflect improved capital and earnings, with a Tier 1 capital ratio sustainably above 25%; improved earnings, with pre-provision earnings sustainably above 3% and cost to income sustainably below 45%; or if the bank undergo conversion to pure mortgage bank with sustained profitability.
We could lower the rating to reflect a material deterioration in the local operating environment that negatively affects the bank's asset quality; a sustained reduction in the Tier 1 capital ratio to below 16.5%; or to reflect risk-adjusted earnings metrics sustainably below 1.5% of the risk exposure amount.
| 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:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@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.