Nordic Credit Rating has assigned a 'A-' long-term issuer rating to Norway-based Grong Sparebank. The outlook is stable. An 'N2' short-term issuer rating has also been assigned, together with a 'A-' senior unsecured issue rating, a 'BBB+' Tier 2 issue rating and a 'BBB-' Additional Tier 1 issue rating.
Rating rationale
The long-term issuer rating reflects the bank's strong earnings, diverse funding access, low risk appetite and solid capital position. The bank has a strong market position in its operating region and faces less competition from similarly sized savings banks than its domestic peers. Grong Sparebank has proven access to capital market financing and few single-name concentrations. We perceive the bank's risk governance and internal risk reporting as strong, in view of its risk profile and complexity. Grong Sparebank is a member of the Eika Alliance banking association, which enables product diversity, shared development costs and the opportunity to finance residential retail mortgage loans through jointly owned covered-bond company Eika Boligkreditt AS.
The rating is constrained by the geographic concentration of the bank's loan book in northern Trøndelag county and Helgeland in Nordland county, and by a high proportion of residential housing collateral. It is also constrained by its markets' declining population. The bank is gaining market share in its northern market, but faces an increasingly competitive environment in its southern market towards Trondheim, where growth prospects are stronger.
Stable outlook
The stable outlook reflects our expectation that Grong Sparebank's strong earnings and solid capital position will compensate for a weakened domestic economy. We believe Grong Sparebank's asset quality will gradually improve from weakened levels over the past year. We expect the bank's solid foundation of risk governance resources to facilitate above-average growth during our forecast period through 2027. We forecast the bank will maintain its solid capital position following recent improvements from implementing the EU's Capital Requirements Regulations III.
An upgrade is unlikely at this time, given the low economic growth in the bank's operating environment.
We could lower the rating to reflect a deterioration in the local operating environment that weakens asset quality or profitability, a Tier 1 ratio below 19% over a protracted period, or pre-provision income to risk-exposure amount approaching 2%.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | A- |
| Outlook: | Stable |
| Short-term issuer credit rating: | N2 |
| Senior unsecured issue rating: | A- |
| Tier 2 issue rating: | BBB+ |
| Additional Tier 1 issue rating: | BBB- |
Contacts:
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@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.