The fourth quarter of 2023 saw Nordic consumer banks grapple with increased credit losses and weakening asset quality, according to a report published by Nordic Credit Rating (NCR) today. Despite these hurdles, most banks managed to maintain robust earnings and cost efficiency, offsetting the elevated loan-loss provisions in bottom-line profits in 2023. However, a steady increase in Stage 2 impaired loans and turbulence in the market for Nordic non-performing loans could lead to further provisions in 2024.
"Higher interest rates continues to strain the repayment capacity of Nordic households," said NCR credit analyst Sean Cotten. "We expect interest rates across the region to remain high before starting to diverge, providing varying levels of relief to borrowers."
Intense competition for profitable loan growth and deposit funding is likely to exert pressure on earnings margins. Additionally, the Swedish government's proposal to remove the interest rate tax deductibility of consumer loans could lead to higher costs for banks and contribute to weaker performance across the sector in 2024.
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com