Nordic Credit Rating (NCR) has revised the outlook on its 'BBB+' long-term issuer rating on Norway-based savings bank Flekkefjord Sparebank to positive from stable. The long-term rating, 'N3' short-term rating, 'BBB+' senior unsecured issue rating, 'BBB' Tier 2 issue rating, and 'BB+' Additional Tier 1 issue rating have been affirmed, in accordance with NCR's revised financial institutions rating methodology. The ratings are no longer under criteria review.
Rating rationale
The outlook revision reflects our expectations that the bank will gradually decelerate its growth pace, which in turn should lessen the strain on risk resources. We are also noting a positive trend in asset quality metrics, and believe these two factors, if continuing to develop in line with our expectations, could lead to a higher rating.
The bank's capital ratios benefited significantly from CRR3, with the consolidated Tier 1 ratio rising by more than 2pp to 21.8% in the second quarter of 2025 from the first quarter, despite 7% loan growth. However, we expect the bank to use this increase in capitalisation to support growth and have not revised our capital assessment.
The rating continues to reflect the bank's strong earnings and capital position, moderate risk appetite, and membership in the Lokalbanksamarbeidet banking cooperative The bank has a strong market position in its traditional core markets and faces less competition from similarly sized savings banks than its domestic peers. The rating is constrained by geographic concentration in the relatively rural local economy of south-west Norway and a high proportion of real-estate collateral in the bank's core markets.
Positive outlook
The positive outlook reflects Flekkefjord Sparebank's strengthened resources and improved processes within risk governance, together with reduced lending growth projections ahead. It also reflects sustained earnings and favourable development in the proportion of non-performing loans over the past year. We believe the bank's strong earnings and solid capitalisation make it resilient to potential late-cycle loan losses over the next few years.
We could raise the rating to reflect commitment to reduced loan growth, improving risk appetite, together with improved asset quality metrics, with net Stage 3 loans as a share of net loans around 1% over a protracted period. We could also raise the rating to reflect a Tier 1 ratio above 22% for a protracted period.
We could revise the outlook to stable to reflect growth significantly outpacing capital generation, a deterioration in the local operating environment or negative development in the bank's asset quality, or increased competition leading to lower profitability and a weaker market position.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB+ | BBB+ |
| Outlook: | Positive | Stable |
| Short-term issuer credit rating: | N3 | N3 |
| Senior unsecured issue rating: | BBB+ | BBB+ |
| Tier 2 issue rating: | BBB | BBB |
| Additional Tier 1 issue rating: | BB+ | BB+ |
Contacts:
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@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 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.