Nordic Credit Rating (NCR) has affirmed its 'BBB+' long-term issuer rating on Norway-based Lillesands Sparebank. The outlook is stable. The short-term rating is lowered to 'N3' from 'N2' to reflect the bank's relatively low average liquidity coverage ratio (LCR). The 'BBB+' senior unsecured issue rating has also been affirmed.
Rating rationale
The affirmation reflects the bank's robust capital position, moderate risk appetite and stable earnings. The bank has proven access to capital market financing and few single-name deposit concentrations. We take a positive view of the bank's membership in the Lokalbanksamarbeidet banking cooperative, which enables product diversity, shared development costs and the opportunity to finance residential retail mortgage loans through jointly owned covered-bond company Verd Boligkreditt AS. The bank has a strong market position in its traditional core market of Lillesand. We expect Lillesands Sparebank to maintain stable earnings and moderate credit losses over our forecast period throughout 2027.
The bank benefited from the implementation of the EU's Capital Requirements Regulation III (CRR3) in Apr. 2025, which increased its Tier 1 ratio by about 5pp, supported by a high proportion of low loan-to-value residential mortgages. We project a Tier 1 ratio well above 23% through 2027, despite elevated loan growth, and have revised our capital assessment. Lillesands Sparebank's liquidity buffers declined to 13.3% of customer deposits as of 30 Sep. 2025, compared with an average of 16.5% in 2023–2024, and we have lowered our assessment of funding and liquidity. Following a reduction in the average LCR to 184% over past four quarters, we have also lowered the short-term rating to 'N3' from 'N2'.
The rating is constrained by geographic and single name concentrations in Lillesand and a high proportion of real-estate collateral in the bank's core market. The rating is also constrained by a weak market position outside Lillesand municipality and relatively weaker earnings metrics compared to peers.
Stable outlook
The stable outlook reflects our view that a weak economic climate and projected credit losses will be offset by improvements in capital and stable earnings metrics. We believe the bank's moderate risk appetite, strong real-estate collateral and stable cost position will enable resilience to a moderate slowdown in the economy. We expect Lillesands Sparebank's capital ratios to remain at strong levels after the positive impact of implementing CRR3, despite projections of above-average loan growth.
An upgrade is unlikely at this time, given the bank's restricted competitive position with regional and sectoral concentrations.
We could lower the rating to reflect a deterioration in the local operating environment or weaker asset quality, weaker liquidity buffers, or a Tier 1 ratio below 20% over a protracted period.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB+ | BBB+ |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N3 | N2 |
| 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
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are 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 Financial Institutions Rating Methodology published on 12 May 2025. For the full regulatory disclaimer please see the rating report.