Nordic Credit Rating (NCR) said today that it had assigned a 'BBB' long-term issuer rating to Norway-based consumer bank Bank Norwegian. The outlook is stable. An 'N3' short-term issuer rating and a 'BBB' senior unsecured issuer rating were also assigned.
Rating rationale
Bank Norwegian is a wholly owned subsidiary of Nordax Bank AB (publ). The long-term issuer rating reflects our view that the subsidiary is a 'vital' entity within Nordax Bank's group structure, as defined by our Group and Government Support Methodology. Under our definition, the long-term issuer rating on a 'vital' group entity is aligned with the long-term issuer rating on the parent.
Our assessment of Bank Norwegian's status reflects an ongoing intragroup merger between the two entities. The transaction has already been approved by the Swedish and Norwegian financial supervisory authorities as well as the boards of directors of the respective entities. The bank has said it expects the merger to be completed on or about the end of November. We believe there is an extremely high likelihood of support from the parent in the interim.
Following the merger, Nordax Bank will be the surviving entity, while Bank Norwegian will operate as the merged entity's Norwegian branch. As a result of the merger, Nordax Bank will become the de facto issuer of Bank Norwegian's outstanding bonds.
Stable outlook
The stable outlook on Bank Norwegian reflects our stable outlook on our long-term issuer rating on Nordax Bank. Our outlook on Nordax Bank reflects our view that the Bank Norwegian acquisition continues to provide benefits in terms of scale and improved earnings capacity, although these factors are partly offset by the higher risk profile of the acquired loan book and high projected loan growth. We anticipate that the resulting added value will increase gradually as additional synergies and capital improvements are achieved. We believe Nordax Bank will prove resilient to an economic downturn as we expect its earnings to remain strong on the back of rising interest rates.
| Rating list (Bank Norwegian ASA) | Rating |
|---|---|
| Long-term issuer credit rating: | BBB |
| Outlook: | Stable |
| Short-term issuer credit rating: | N3 |
| Senior unsecured issue rating: | BBB |
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 18 Feb. 2022, NCR's Rating Principles published on 24 May 2022 and NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022. For the full regulatory disclaimer please see the rating report.