Net interest margins for Norwegian savings banks have widened significantly on the back of rising interest rates since 2021. This, together with strong lending growth, has boosted earnings across the sector. We believe that falling interest rates, heightened competition and marginally increased loan losses will lead to slow earnings growth and lower return on equity in 2025 and 2026.
"High interest rates and weaker economic conditions led to somewhat higher loan-loss provisions among domestic savings banks in 2023 and 2024, " said NCR credit analyst Geir Kristiansen. "We expect a more flattish development in provisions during the next two years."
Norwegian savings banks are well capitalised and have strong pre-provision profitability, which makes them relatively resilient to increased credit losses. The EU's Capital Requirements Regulations III (CRR3), which will be implemented in 2025, will increase the capital buffer for banks that use the standardised method, which in turn may trigger more aggressive loan growth for these banks.
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com