Nordic consumer banks saw a further decline in credit losses and some improvement in risk-adjusted earnings in the second quarter, Nordic Credit Rating (NCR) said in a report published today.
The agency said most of a sample of nine regional consumer banks maintained strong earnings in the period under review, which offset elevated loan-loss provisions.
Negatively, non-performing (Stage 3) loans and loans showing signs of weakness (Stage 2 loans) continued to rise as a proportion of overall lending, NCR said. Positively, some banks have found solutions since mid-year to reduce their on-balance-sheet non-performing loan (NPL) exposures to protect their capital ratios from the punitive impact of the European NPL backstop regulations.
"Falling inflation and lower policy rates set by the Swedish, Danish and European central banks should help consumer and small business borrowers over the next few quarters," said NCR credit analyst Sean Cotten. "Despite some relief, we expect loan-loss provisions to remain elevated. The Norwegian central bank has yet to revise its policy rates and has indicated that they will likely remain at current levels into 2025."
Since NCR's last report in June, Lea Bank has received a bank licence in Sweden via its Swedish subsidiary Lea Bank AB and is aiming to move its headquarters to Sweden through an internal merger. Similarly, Morrow Bank is actively discussing a move to Sweden or Finland and a new regulatory environment. NCR said such moves are focused on reducing capital requirements and improving return on equity for shareholders.
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com