Rising interest rates have significantly increased net interest margins among Norwegian savings banks for the past two years. Together with strong lending growth, this has boosted earnings across the sector. However, we believe that core earnings growth in the sector will come to an abrupt halt in 2024 due to increased competition, falling interest rates, and higher loan losses. We believe that loan-loss provisions will vary significantly between individual savings banks. Norway's savings banks are well-capitalised and have strong pre-provision profitability, which makes them resilient to increased credit losses.
A recent announcement that SpareBank 1 SR-Bank and SpareBank 1 Sørøst-Norge intend to merge has led to increased speculation about restructuring across the sector. We expect little change in the level of merger activity in 2024, but acknowledge that savings banks could face pressure to seek partners due to increasing reporting and compliance requirements and pressure on profitability. Broadly, however, we believe that a full-scale consolidation of the wider savings-bank sector would be a lengthy undertaking and currently unlikely.
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com