Nordic Credit Rating (NCR) has affirmed its 'A-' long-term issuer rating on Norway-based Skudenes & Aakra Sparebank. The outlook is stable. The 'N2' short-term rating, 'A-' senior unsecured issue rating, 'BBB+' Tier 2 issue rating, and 'BBB-' Tier 1 issue rating have also been affirmed.
Rating rationale
The affirmation reflects the bank's low risk appetite, solid capital position, strong earnings, and diverse access to funding. The bank finalised the switch from the Lokalbanksamarbeidet banking cooperative to the Eika Alliance in November 2025. Through its new membership in the Eika Alliance and similar to the previous alliance, the bank benefits from diversification of business and cost advantages. Membership also enables the opportunity to transfer mortgages to jointly owned covered bond companies.
We expect the bank to maintain strong earnings and cost efficiency even as Norwegian policy interest rates decline. We also expect loan losses to remain moderate despite the current economic slowdown in Norway. The bank benefited from the implementation of the EU's Capital Requirements Regulation III (CRR3) in Apr. 2025, which increased its Tier 1 ratio by about 2.5pp, supported by a high proportion of low loan-to-value residential mortgages. Together with modest lending growth and significant gift contributions to the local community, we project capital adequacy metrics to remain outstanding and have improved our assessment of capital.
The rating is constrained by the bank's concentrated exposure to real-estate collateral in the municipality of Karmøy and the Haugalandet region on the west coast of Norway. It is also constrained by barriers to growth and stiff competition beyond Karmøy and its core markets.
Stable outlook
The stable outlook reflects our view that a weak economic climate and likely credit losses will be offset by Skudenes & Aakra Sparebank's solid earnings and capital position. We believe the bank's low risk appetite, strong real-estate collateral, improved earnings, and solid cost efficiency will enable resilience to a modest economic slowdown. We forecast the bank to maintain robust and stable capital ratios following recent improvements from implementing the EU's Capital Requirements Regulations III (CRR3).
An upgrade is unlikely at this time, given the bank's already strong capital position and earnings, as well as its regional concentrations.
We could lower the rating to reflect loan growth beyond our expectations, resulting in a Tier 1 capital ratio below 20%, or pre-provision income to risk-exposure amount below 2% or cost-to-income above 50% over a protracted period. We could also lower the rating to reflect a material deterioration in the local operating environment that negatively affects asset quality.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | A- | A- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N2 | N2 |
| Senior unsecured issue rating: | A- | A- |
| Tier 2 issue rating: | BBB+ | BBB+ |
| Additional Tier 1 issue rating: | BBB- | BBB- |
Contacts:
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Rating Principles published on 14 Feb. 2024, NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024 and NCR's Financial Institutions Rating Methodology published on 12 May 2025. For the full regulatory disclaimer please see the rating report.