Nordic Credit Rating (NCR) said today that it sees increased competition and loss provisions as downside risks, but believes that Nordic consumer banks will perform better in 2021. Like most of the wider regional banking sector, niche banks have so far weathered the COVID-19 pandemic better than our earlier expectations. NCR believes that these lenders might have seen a peak in loan loss provisions in 2020, despite government relief packages and delayed amortisation, even if actual loan losses increase in 2021, as appears likely.
NCR also said in a report published today that margin pressure has increased given slower growth and higher competition for creditworthy customers, though earnings continue to provide meaningful capital generation and buffers for additional losses.
"We expect additional cost cutting and a likely increase in demand for consumer loans as the cycle turns," said NCR credit analyst Geir Kristiansen. "In addition, the region's consumer banks are generally well capitalised and an increase in saving during 2020 has generated more than sufficient funding via deposit growth."
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