In preparing this report Nordic Credit Rating (NCR) looked at shifts in the different elements of the sector's profit and loss accounts in recent years and found consistent differences of performance related to size. Specifically, larger banks outperformed smaller banks due to higher non-interest income and better cost efficiency. We also noticed differences between bank alliances and independent banks, with alliance banks benefiting from extensive cooperation on infrastructure and better economies of scale.
"While we found that, on average, the banks in the Eika Alliance performed better in 2018 than independent savings banks, both groups significantly lagged the banks in the SB1 Alliance ", says credit analyst Geir Kristiansen at NCR. " This seems mainly to be driven by higher core non-interest income. A lower level of non-interest income is probably the main explanation for seemingly higher cost efficiency among independent banks."
Norwegian savings banks[1] reported an average return on equity (RoE) of 9.9% for 2018, marginally down from 10% in the previous year, while return on assets (RoA) increased to 1.08% from 1.07%. A strong build-up of equity in the sector seems to have run out of steam, however, as the average equity ratio was up by a mere 8bps to 10.6% in 2018.
You can download the full research report on https://nordiccreditrating.com/ratings-research/research.
If you have any questions, please contact:
Geir Kristiansen, Analyst, +47 90 78 45 93, geir.kristiansen@nordiccreditrating.com
Sean Cotten, Lead analyst, +46 732 32 43 78, sean.cotten@nordiccreditrating.com
[1]Based on data from 81 banks representing 97.4% of the sector's assets.
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