Nordic Credit Rating said today that it had affirmed its 'BBB' long-term issuer rating on Norway-based mortgage company Eiendomskreditt AS. The outlook is stable. The 'N3' short-term rating, 'AAA' issue ratings on the company's covered bonds, 'BBB' senior unsecured issue rating, 'BB+' Tier 2 issue rating, and the 'BB-' additional Tier 1 issue rating have also been affirmed, in accordance with NCR's revised financial institutions rating methodology. The ratings are no longer under criteria review.
Rating rationale
The affirmation reflects continued performance in line with our expectations. Loan growth was slow in the first half of 2025, but we expect it to have accelerated in the second half. The EU's Capital Requirements Regulation III (CRR3) improved capital ratios by approximately 5pp, reflecting the company's low LTV commercial mortgages. The company reported a Tier 1 ratio of 23.9% as of 30 Jun. 2025. We project this improvement will support accelerated growth in the coming years while allowing dividend payments of about 70% of net profit to shareholders. Net Stage 3 loans increased to 3.7% of the total loan book as of 30 Jun. 2025, due to a weakened Norwegian commercial real estate market. However, reported loss provisions over the past twelve months were only 6bps, and we do not expect significant increases despite the higher Stage 3 levels. We also expect property valuations to remain mostly stable, supporting stable or improved average LTVs in the loan book, as new loans generally have lower LTVs.
The long-term issuer rating continues to reflect the operating environment for Norwegian commercial real estate companies, as well as Eiendomskreditt's strong capitalisation, earnings and low historical and projected credit losses. The rating also reflects the company's concentrated loan portfolio, modest market position and concentrated funding profile.
The issue rating on Eiendomskreditt's covered bonds is ultimately based on the 'BBB' issuer rating and reflects the company's role as a commercial real estate lender and partner to small and medium-sized Norwegian banks. The covered bond ratings are supported by an 'a+' qualitative assessment and our analysis of up to four notches of support from the cover pool, indicating 'AAA'-level support for bondholders in the unlikely event that the pool were to become a standalone entity.
Stable outlook
The stable outlook on the issuer rating reflects our view that Eiendomskreditt will maintain its selective underwriting and moderate LTV profile, thereby avoiding significant losses. We also believe that Eiendomskreditt's continued access to capital market financing will allow it to continue to support its partner banks, as demand for real estate financing is likely to increase slowly.
We could raise the issuer rating to reflect significant improvements to credit risk diversification, via growth in the number and volume of loans, combined with a proven commitment to maintain a Tier 1 ratio above 20%, and maintained average annual loan loss provisions below 5bps.
We could lower the rating to reflect a material deterioration in the operating environment or a significant increase in loan loss provisions, a lasting reduction in the common equity Tier 1 capital ratio to below 17%, or risk-adjusted pre-provision income persistently below 1.5% of risk exposure amount.
Given the stable outlook on the issuer rating, we also expect the covered bond rating to remain stable.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB | BBB |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N3 | N3 |
| Covered bond issue rating: | AAA | AAA |
| Senior unsecured issue rating: | BBB | BBB |
| Tier 2 issue rating: | BB+ | BB+ |
| Additional Tier 1 issue rating: | BB- | BB- |
Contacts:
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@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 12 May 2025, NCR's Rating Principles published on 14 Feb. 2024, NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024 and NCR's Covered Bond Rating Methodology published on 12 May 2025. For the full regulatory disclaimer please see the rating report.