Our 'A-' issuer and issue ratings for Kredittforeningen for Sparebanker (KfS) are unchanged following the publication of its Q1/19 results. A high level of maturities in the quarter lead to a 6.9% fall in lending volumes. KfS funds only investment-grade savings banks, and has not incurred loan losses in its 15 year history.
Lower volumes due to high redemptions
Gross lending fell from NOK 5.2bn at year-end 2018 to NOK 4.8bn as of first quarter 2019 due to higher-than-normal redemptions of NOK 0.9bn. Redemptions are low in the second quarter, however, which we believe will give room for volume growth. The net interest margin was stable at 0.14% while operational costs increased. We expect the quarterly cost level to remain NOK 0.15m higher than last year going forward.
Improved capital ratio
KfS' reported CET1 ratio was 17.4% per Q1/19 vs 16.9% as of end 2018 while its capital ratio was 22.2% (21.6%). NCR places additional emphasis on KfS' total capital ratio since the additional capital above the CET1 consists of Equity Capital Certificates which have a higher priority than the member reserve, which counts as CET1 capital.
This commentary does not reflect a rating action.
For more information, please contact:
Geir Kristiansen, Credit Rating Analyst, +47 907 845 93, geir.kristiansen@nordiccreditrating.com
Sean Cotten, Lead Analyst, +46 703 232 43 78, sean.cotten@nordiccreditrating.com