Nordic Credit Rating said today that it had raised its long-term issuer credit rating on Sweden-based Resurs Bank AB (publ) to 'BBB' from 'BBB-'. The outlook is stable. At the same time, NCR affirmed the 'N-1+' short-term issuer rating on the bank.
Rating rationale
The upgrade reflects better conditions for regional consumer lenders than we expected 12 months ago and a generally improved outlook for the niche lending sector. It also reflects an improvement in the bank's competitive position thanks to its ability to attract new partners in the market for payment solutions.
The rating reflects Resurs Bank's strong risk-adjusted earnings, good access to funding, and higher-than-average risk appetite relative to its Nordic peers. In line with the wider Nordic banking sector, the bank has weathered the COVID-19 recession well and we now have a more positive view of the operating environment. Resurs Bank benefits from strong creditor rights across the Nordic region. These provide strong incentives for borrowers to repay debt and result in higher collection rates than in other European regions. This has contributed to Resurs Bank's demonstrated control of its credit losses over its 44-year history.
The rating is constrained by high credit risk in consumer lending and the bank's relatively low market share. Our rating reflects the creditworthiness of Resurs Bank and its subsidiaries. The bank is directly owned by Resurs Holding, which is listed on the Stockholm stock exchange.
Stable outlook
The stable outlook reflects our expectation of an economic recovery across Resurs Bank's core markets following increased vaccination and a reduction in COVID-19-related restrictions by mid-2021. We note that the bank faces the risk of higher non-performing loans when COVID-19-related government support is withdrawn, and a possible lower rebound of consumption levels than currently expected, which could directly impact consumption-driven indebtedness and limit growth opportunities. However, we believe that Resurs Bank's strong capitalisation and earnings would make it resilient to any new economic downturn. We could raise the rating to reflect an improvement in regional economies and the operating environment for consumer lenders. We could lower the rating to reflect a material economic deterioration in the Nordic region, regulatory changes affecting interest rates and recovery prospects for consumer loans, or materially lower capital ratios, for example as a result of deteriorating asset quality.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB | BBB- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N-1+ | N-1+ |
| Senior unsecured issue rating: | BBB | BBB- |
| Tier 2 issue rating: | BB+ | BB |
If you have any questions, please contact:
Geir Kristiansen, credit rating analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 14 Aug. 2018 and NCR's Rating Principles published on 16 Sep. 2019. For the full regulatory disclaimer please see the rating report.