Today Nordic Credit Rating (NCR) raised its assessments of the Swedish, Norwegian and Danish banking markets to reflect the reduced risk of COVID-19 to most banks operating in the three countries. For Sweden and Denmark, we have revised our assessment of the national operating environment to 'a-' from 'bbb+', and for Norway to 'a' from 'a-'. The revisions restore the operating environment assessment of each country to pre-pandemic levels to reflect recovering output and employment, and the resilience of most regional banks' earnings and asset quality.
We acknowledge that new variants could lead to sporadic lockdowns, but note that rising vaccination rates and pent-up demand are minimising the economic impact of the highly contagious delta variant in the Nordic region. In our view, the pandemic is unlikely to seriously damage the region's banking markets in terms of loan-loss reserves, access to funding, or the economic uncertainty that led to our original decision to revise the assessments downwards in April 2020.
Today's revisions indicate an improvement in our expectations for credit strength for most regional banks. These revisions alone have not had an immediate effect on any of our current public ratings or outlooks. Our updated assessments of the respective regional operating environments will, however, be incorporated in the assignment of new ratings to financial institutions as well as future reviews of existing ratings in the sector.
For more on our revised views of the Swedish, Norwegian and Danish banking markets, please see the full report.
Research contribution by Gustav Nilsson.
If you have any questions, please contact:
Sean Cotten, chief rating officer, +46735600337, firstname.lastname@example.org
Geir Kristiansen, credit rating analyst, +4790784593, email@example.com