Today Nordic Credit Rating (NCR) affirmed its 'A' long-term issuer rating and 'N-1+' short-term rating on SpareBank 1 Østfold Akershus (Østfold Akershus). The outlook on the ratings remains stable. Our rating on Østfold Akershus reflects the bank's strong profitability and capitalisation, as well as its exposure to a growth region of Norway. The bank is part of the SpareBank 1 Alliance, which NCR views as supportive for business diversity, operating efficiency and liquidity.
"The bank has very strong pre-provision profitability and strong cost efficiency, driven by higher net interest margins and a higher share of fee income in revenues than its peers," said Geir Kristiansen, credit rating analyst at NCR.
Østfold Akershus is predominantly a mortgage retail bank but has also exposure to commercial real estate lending. There are no signs of a pricing bubble or overinvestment in commercial real estate in the region where the bank operates. We have made one change in our scoring of rating subfactors: market position has been notched down from 'bbb+' to 'bbb' due to loss of market share in the retail market following stronger competition and a higher-than-expected price sensitivity among the bank's customers which has affected growth.
Our full analysis of Østfold Akershus is available at:
https://nordiccreditrating.com/issuer/sparebank-1-ostfold-akershus
Positive rating drivers
-
An upgrade is unlikely at this time given already very strong earnings and capitalisation, and a benign loss environment.
Negative rating drivers
-
Growth significantly outpacing capital generation.
-
Increased competition leading to lower profitability.
-
An economic downturn leading to deteriorating credit quality.
Analyst contact details:
Geir Kristiansen, +47 907 845 93, geir.kristiansen@nordiccreditrating.com
Sean Cotten, +46 735 600 337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology and Rating Principles, published on 16 Sept 2019. For the full regulatory disclaimer please see the rating report which can be downloaded at nordiccreditrating.com/ratings-research/research.