Our 'BBB-' issuer and issue ratings for Resurs Bank AB are unchanged following Resurs Holding's (RH) first quarter 2020 results. The rating outlook for our issuer rating on Resurs Bank is negative. Resurs Bank reports semi-annually, but below we comment on takeaways for Resurs Bank from RH's quarterly report.
Limited COVID-19 effect in the first quarter
Lending growth slowed in March. Management commented on improved demand in April. The effects of the COVID-19 pandemic negatively affected net financials in the insurance company, which is not part of Resurs Bank. The financial effects on bank earnings were more modest given the low-risk liquidity assets. Credit losses were negatively impacted by the earlier announced SEK 75m extraordinary provision, which was based on a forward-looking assessment.
Resurs Holding reported a CET1 ratio of 13.7% vs 13.6% year-end 2019. This is adjusted for expected SEK 195m dividend payment in the second half of 2020. The target CET1 ratio is above 11.5%, but NCR expects moderate lending growth to improve the CET1 ratio in the short-term.
Lower lending growth
Lending increased by 7% in the first quarter, growth adjusted for currency effects was 9%. The Consumer Loans segment continues to drive year-on-year lending growth (8%) compared to Payment Services (4%). The bank is targeting a growth rate of above 10%, which may be challenging in the current climate; we note that quarter-on-quarter lending growth was -0.6% due to lower activity in Payment Solutions. The net interest margin was 7.2%, lower than the 2019 level (8%) and our forecast for 2020 (7.5%). Operating expenses remain in control, cost/income in RH is 38.5%. Credit losses was 3.4% of lending, or 2.4% adjusted for the extraordinary provision. We have forecasted 3.1% for the full year for Resurs Bank.
This commentary does not reflect a rating action.
If you have any questions, please contact:
Geir Kristiansen, credit rating analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com