Nordic Credit Rating (NCR) said today that it had assigned a 'A-' long-term issuer rating on Sweden-based Sparbanken Alingsås AB. The outlook is stable. At the same time NCR assigned an 'N2' short-term rating and a 'A-' senior unsecured issue rating.
Rating rationale
The long-term issuer rating reflects Sparbanken Alingsås' strong capital position, moderate risk appetite, solid competitive position and relationship-based funding profile. The bank has a cooperation arrangement with Swedbank AB, which we view as positive, as it provides material diversity of product offerings, shared IT costs and the opportunity to finance retail mortgage loans. We expect higher interest rates to support the bank's core earnings profile, which is complemented by dividend revenues from holdings of Swedbank shares.
The rating is constrained by the bank's relatively higher single-name concentration and significant exposure to non-mortgage segments in its loan book compared with savings bank peers. It is also constrained by the increased risk to real-estate values, in view of the bank's significant real-estate collateral through retail and commercial customers. In addition, we view Sparbanken Alingsås' risk governance and liquidity management as slightly weaker than that of its peers.
Stable outlook
The stable outlook reflects our expectation that Sparbanken Alingsås will counter the risk of higher loan losses and non-performing loans through higher earnings driven by improved net interest margins. It also reflects our expectation that the bank will maintain its solid competitive position and that the regional economy, which has strong links to Gothenburg, will perform in line with or better than the national economy, with healthy population growth and low unemployment. We expect Sparbanken Alingsås to protect its strong capital ratios through prudent dividends to its owner foundation and to maintain its relationship with Swedbank.
An upgrade is unlikely at this time, given the uncertain economic environment.
We could lower the rating to reflect a deteriorating operating environment leading to reduced regional growth, asset quality and collateral values. We could also lower the rating to reflect increased risk in the loan or liquidity portfolios, or to take account of a prolonged decline in the common equity Tier 1 capital ratio to below 20%.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | A- |
| Outlook: | Stable |
| Short-term issuer credit rating: | N2 |
| Senior unsecured issue rating: | A- |
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 18 Feb. 2022, NCR's Rating Principles published on 24 May 2022 and NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022. For the full regulatory disclaimer please see the rating report.