Swedish savings banks have reported robust results for the first half of 2023, driven by a significant rise in market interest rates since April 2022. The domestic housing market has regained stability following substantial price drops in 2022, although mortgage lending growth remains remarkably low, according to a report published by Nordic Credit Rating (NCR) today. Many banks also report increased competition for deposits, especially from household depositors, the primary funding source for all banks in the sample.
"Swedish savings banks' earnings metrics in the first half of 2023 are boosted by the rise in market interest rates," said NCR credit analyst Ylva Forsberg. "Actual credit losses remain low, while loan loss provisions fluctuate due to volatile economic forecasts and high uncertainty."
The first half of 2023 was dominated by expectations of a recession that has yet to materialize. The economy has proven more resilient than anticipated, despite persistent inflation and rapid increases in interest rates.
Most savings banks' corporate lending is heavily weighted towards the property management and agricultural sectors, which we expect will continue to experience difficulties going into 2024. Mortgage lending accounted for an average of 45.2% of Swedish savings banks' on-balance-sheet gross loans as of 30 Jun. 2023. However, even with an increase in loan-loss provisions and non-performing loans, we expect Swedish savings banks to remain strong, largely due to their exceptional capital positions and the benefit from increasing interest rates.
Contacts:
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com