Nordic niche banks experienced decline in credit losses, reaching a two-year low, and improvements in risk-adjusted earnings and cost efficiency in the third quarter, Nordic Credit Rating (NCR) said in a report published today.
The agency said most of a sample of eight niche banks maintained capital ratios and strong earnings, which offset elevated loan-loss provisions in the period.
Despite an uptick in transaction activity, non-performing (Stage 3) loans continued to rise as a proportion of overall lending for most banks, NCR said. Positively, some banks have found solutions since mid-year to reduce their on-balance-sheet non-performing loan (NPL) exposures to protect their capital ratios from the punitive impact of the European NPL backstop.
"Further reductions in policy rates and clear signals that rates will continue to fall, combined with increased risk appetite, have created positive momentum in the capital markets. The banks in our sample have issued senior unsecured bonds and Tier 2 capital instruments multiple times since September," said NCR credit analyst Sean Cotten. " This access could prove important given the Swedish regulator's revised guidance for calculating regulatory funding and liquidity metrics, which has caused a stir among banks using deposit distribution platforms."
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com