Nordic Credit Rating (NCR) said today that its average credit assessment of over 300 Nordic banks remains at the 'bbb+' level, despite downward revisions of country and segment-level creditworthiness and increased uncertainty due to the COVID-19 pandemic.
However, the large number of savings banks in the region is weighing heavily on the average scoring, and two subsectors, namely mortgage banks and private banks, have seen a downgrade of their average credit assessments, the agency said in a report published today.
"Unlike the credit scores published by some banks, NCR's credit assessments are forward-looking and not solely based on historical data," said NCR credit rating analyst Geir Kristiansen, who wrote the report.
NCR recently lowered its assessment of the Norwegian banking sector to 'a-' from 'a' and the Swedish banking sector to 'bbb+' from 'a-' due to the economic effects of the pandemic. In line with these revisions, we have lowered our scores for the operating environment by one notch for most Nordic banks. In addition, we have reduced our operating environment score for consumer lenders by two notches given increased political risk and challenges to banks' business models.
Moreover, NCR sees a significantly increased risk of lower pre-provision profit due to margin pressure and losses on net financials, as well as higher credit losses.
"We have lowered our scoring of key performance indicators by two notches for most banks. Exceptions include low-risk mortgage and national banks, for which we have made no adjustments from the 2019 assessment," said Mr Kristiansen.
Analyst contact details:
Geir Kristiansen, credit rating analyst, +47 90784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, +46 735 600 337, sean.cotten@nordiccreditrating.com