Nordic Credit Rating (NCR) said today it believes that Nordic niche banks are entering 2022 with strong earnings and capital buffers. This offers adequate protection against continued margin pressure and impacts, as it appears the ongoing pandemic and renewed social-distancing measures could affect yet another year of economic activity.
"The banks, which seemed primed for growth opportunities as recently as October, are likely to be less optimistic about growth prospects as we enter 2022, given the resurgence of the pandemic," said NCR credit analyst Sean Cotten. "However, even as the pandemic moves back into focus, we do not anticipate a rise in loan loss provisions, as occurred at the onset of the pandemic due to the extreme uncertainty then."
NCR expects regulatory focus on the segment to increase amid concerns about sustainable lending practices, which could result in regulatory changes or measures designed to protect consumers. Lower growth will add to existing pressure on lending margins, and we expect banks to continue to diversify away from traditional consumer loans and into credit cards, short-term buy-now-pay-later loans and non-traditional mortgages to support profits.