Nordic Credit Rating (NCR) has assigned a 'BBB+' long-term issuer rating to Norway-based savings bank Søgne og Greipstad Sparebank. The outlook is stable. An 'N2' short-term issuer rating has also been assigned, together with a 'BBB+' senior unsecured issue rating, 'BBB' Tier 2 issue rating and a 'BB+' additional Tier 1 issue rating.
Rating rationale
The long-term issuer rating reflects the bank's robust capital position, with a Tier 1 ratio projected to remain above 23% through our forecast period, a moderate risk appetite, diverse access to funding and solid asset quality performance, with net Stage 3 loans expected around 1-1.5% of total net lending. We take a positive view of the bank's membership in the Lokalbanksamarbeidet banking cooperative, which enables product diversity, shared development costs and the opportunity to finance residential retail mortgage loans through jointly owned covered-bond company Verd Boligkreditt AS.
The rating is constrained by the bank's geographic concentration in western Kristiansand, a high proportion of real-estate collateral in its core markets, and some limitations in the risk governance framework. The rating is also constrained by the bank's small size, with net lending including transfers of around NOK 7bn, as well as high, and increasing, competition in and around Kristiansand.
Stable outlook
The stable outlook reflects our view that Søgne og Greipstad Sparebank' solid capitalisation and adequate earnings are sufficient to compensate for a continued weakened domestic economy and relatively high risk in the real-estate development sector. We expect that Søgne og Greipstad Sparebank will maintain its moderate risk profile and that asset quality metrics will remain stable. We also expect that the bank will protect its market position in both its traditional and newer markets, despite high competition. We forecast the bank will maintain strong capital ratios following recent improvement due to implementing the EU's Capital Requirements Regulations III (CRR3).
We could raise the rating to reflect improved scale and market position, combined with strengthened core earnings, with a cost-to-income ratio around 50% and risk-adjusted earnings around 2.5% over a protracted period, as well as improvements to the risk governance framework.
We could lower the rating to reflect a material deterioration in the local operating environment or significantly weakened asset quality. We could also lower the rating to reflect a consolidated Tier 1 ratio below 18% over a protracted period, or increased competition and margin pressure.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | BBB+ |
| Outlook: | Stable |
| Short-term issuer credit rating: | N2 |
| Senior unsecured issue rating: | BBB+ |
| Tier 2 issue rating: | BBB |
| Additional Tier 1 issue rating: | BB+ |
Contacts:
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Christian Yssen, analyst, +4740019900, christian.yssen@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 12 May 2025, 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.