Nordic Credit Rating (NCR) has lowered its long-term issuer rating on Sweden-based niche lender Resurs Bank AB (publ) to 'BBB-' from 'BBB'. The outlook is stable. The 'N3' short-term issuer rating has been affirmed, while the senior unsecured issue rating has been lowered to 'BBB-' and the Tier 2 issue rating has been lowered to 'BB'.
Rating rationale
The rating action reflects our expectation that Resurs Bank's asset quality, earnings, and capital generation will remain weaker than previously for the next few years. Since the beginning of 2024, the bank has increased loan-loss provisions significantly. While quarterly losses improved during the course of the year, the improvements were nonetheless below our expectations. In addition, net Stage 3 loans have risen beyond our expectations and the bank has a high volume of Stage 2 loans, indicating a risk of increased non-performing loans and slow recovery in provisions. We now expect provisions to decline gradually through 2026 to around 3.2% of net loans, a higher level than the 2-2.5% reported in the past. We believe this change in asset quality metrics is indicative of the bank's credit risk being higher than we previously assessed and have revised our assessment downwards to reflect this.
Resurs Bank is undergoing a strategic transformation following a change in ownership in 2024. This led to a sharp increase in costs, and we now expect costs to outpace income through 2026. While risk-adjusted earnings remain high, we have revised our assessment of the bank's earnings to reflect the impact of higher costs on capital generation and the likelihood of low profitability over our forecast period through 2027. We expect dividend payments to continue, possibly at reduced levels, in light of the change in ownership and limited ability to generate capital due to low return on equity.
The long-term rating reflects Resurs Bank's strong earnings metrics, sound funding and liquidity, and demonstrated access to deposit and capital market finance. It also reflects the bank's diverse business model and strong partnerships with merchants. The rating is constrained by the higher-than-average risk appetite associated with consumer lending, a market characterised by strong competition, low customer loyalty, and high regulatory scrutiny.
Stable outlook
The stable outlook reflects our view that Resurs Bank has embarked on a course of strategic investments that will have a negative impact on its costs over the next few years. It also reflects our expectation that asset quality metrics will continue to improve, but at a slower pace than we previously believed. In addition, we believe that loan losses will stabilise at a higher level than previously. We expect weak, though positive, capital generation before dividend payouts. The outlook also reflects the weak, but improving, economic outlook for the Nordic countries.
We could raise the rating to reflect a sustainable improvement in asset quality metrics to pre-2023 levels, in terms of loan losses and net Stage 2 and 3 loans, an improved operating environment for consumer lenders in the Nordic countries, or a strengthened competitive position in terms of market position and business diversity.
We could lower the rating to reflect a worsening operating environment caused by a deep economic downturn or regulatory changes, or a further deterioration of asset quality metrics and earnings that severely impacts capital generation.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB- | BBB |
| Outlook: | Stable | Negative |
| Short-term issuer credit rating: | N3 | N3 |
| Senior unsecured issue rating: | BBB- | BBB |
| Tier 2 issue rating: | BB | BB+ |
Contacts:
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 14 Feb. 2024, 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.