Nordic Credit Rating has affirmed its 'A-' long-term issuer rating on Norway-based Orkla Sparebank. The outlook is stable. The 'N2' short-term rating, 'A-' senior unsecured issue rating and 'BBB+' Tier 2 issue rating have also been affirmed, in accordance with NCR's revised financial institutions rating methodology. The ratings are no longer under criteria review. The bank has no outstanding Tier 1 debt. However if it issues Tier 1 instruments in the future, we would assign a 'BBB-' issue rating.
Rating rationale
The affirmation reflects our expectation that the bank will sustain its improved capital ratios and deliver strong earnings. We have revised our assessment of the bank's capital, based on our projected Tier 1 ratio above 23.5% through 2027. The bank benefited from the implementation of the EU's Capital Requirements Regulation III (CRR3) in Apr. 2025, which increased its Tier 1 ratio by about 3pp, supported by a high proportion of low loan-to-value residential mortgages. We have also improved our view of the bank's earnings capacity, given the likelihood of a stable policy rate and further gains in cost efficiency.
Orkla Sparebank's merger with Rindal Sparebank is expected to be completed in Nov. 2025, expanding its core market to the south-east. The combined bank will have about NOK 24bn in total assets, including loans transferred to Eika Boligkreditt.
The issuer rating also reflects Orkla Sparebank's established access to funding, solid liquidity position, and low risk appetite. We have revised our assessment of the bank's funding and liquidity to account for its relatively high reliance on capital market financing compared to peers, as well as our expectation that the loan-to-deposit ratio will exceed 130% in our forecast. We continue to view the bank's cooperation with the Eika alliance positively.
The rating is constrained by the bank's concentrated exposure to real estate and agriculture in the region south-west of Trondheim in central Norway. It is also constrained by strong competition and low market share in Trondheim, the bank's fastest growing market.
Stable outlook
The outlook is stable, reflecting our view that a weak economic climate and projected credit losses will be offset by strong and stable pre-loss earnings metrics. The bank's strong capital ratios, which have been boosted by modest on-balance-sheet loan growth and the positive effect of implementing CRR3, are stabilising factors in our credit risk assessment.
We could raise the rating to reflect improved economic conditions and asset quality metrics relative to those of its peers and pre-provision earnings to risk exposure amount sustainably above 3%, and improved market position.
We could lower the rating to reflect a material deterioration in the local operating environment that negatively affects asset quality, a lasting reduction in the Tier 1 capital ratio to below 20%, and risk-adjusted earnings metrics below 2% of risk exposure amount.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | A- | A- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N2 | N2 |
| Senior unsecured issue rating: | A- | A- |
| Tier 2 issue rating: | BBB+ | BBB+ |
| Additional Tier 1 issue rating: | BBB- | BBB- |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 12 May 2025, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.