Nordic Credit Rating (NCR) said today that it had affirmed its 'BBB' long-term issuer rating on Sweden-based Resurs Bank AB (publ). The outlook is stable. The 'N3' short-term issuer rating, 'BBB' senior unsecured issue rating, and 'BB+' tier 2 issue rating were also affirmed.
Rating Rationale
The long-term rating reflects Resurs Bank's strong risk-adjusted earnings, sound liquidity position, demonstrated access to deposit and capital market financing, and long track record within its consumer banking niche. Strong creditor rights in its core markets provide powerful incentives for borrowers to repay debt and result in higher collection rates than in other European regions.
The rating is constrained by higher-than-average risk appetite associated with consumer loans and short-term payment lending. We also view the consumer lending market as having high levels of competitive pressure and low customer loyalty. In addition, we believe that consumer lending is under intensified regulatory scrutiny in all Nordic countries, which could negatively affect the bank's business model and profitability over time.
We have revised our assessment of the bank's operating environment downwards to reflect increasing risks for consumer lending customers given our expectations that the bank's customer base is more likely to be affected by higher interest rates and food and energy price inflation.
Stable outlook
The stable outlook reflects our expectation that Resurs Bank will expand its portfolio at a more moderate pace as conditions in the wider economy decline. We believe recent margin pressure will soften due to the return of growth in Norway and that an intensified cost efficiency focus will support pre-provision earnings. Resurs Bank's capital flexibility and strong earnings make it resilient to an economic downturn, though we project a material increase in loss provisions in 2023 and 2024 as borrowers with already weak financial profiles are more likely to be affected by food and energy price inflation.
We could raise the rating to reflect materially higher capital ratios (Tier 1 ratio sustainably above 18%), an improved economic and regulatory environment for consumer lenders, or improved business and revenue diversity.
We could lower the rating to reflect higher credit provisions than we currently expect or regulatory changes that negatively affect the bank's business model and recovery prospects for consumer loans. We could also lower the rating to reflect reduced access to deposit and/or capital market financing or a Tier 1 ratio continuously below 15%.
Rating list | To | From |
---|---|---|
Long-term issuer credit rating: | BBB | BBB |
Outlook: | Stable | Stable |
Short-term issuer credit rating: | N3 | N3 |
Senior unsecured issue rating: | BBB | BBB |
Tier 2 issue rating: | BB+ | BB+ |
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 18 Feb. 2022, NCR's Rating Principles published on 24 May 2022 and NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022. For the full regulatory disclaimer please see the rating report.