Nordic Credit Rating has affirmed its 'BBB+' long-term issuer rating on Sweden-based savings bank Sparbanken Lidköping AB. The outlook is stable. The 'N3' short-term issuer rating and the 'BBB+' senior unsecured issue ratings have also been affirmed.
Rating rationale
The affirmation reflects the bank's solid core earnings profile, which is expected to stabilise at a stronger level than before 2022, leading to an upward revision of our earnings assessment. The bank maintains a strong market position in Lidköping, and we expect improved local sentiment to support on-balance-sheet loan growth of 6-8% through our forecast period to 2028, despite transferring most new retail mortgages to Swedbank Hypotek. This results in a modest decline in capital ratios in our forecast, from 45.5% as of the first quarter of 2026 (including 90% of year-to-date profit) to 44.4% in 2028.
From 2024, the bank has strengthened its liquidity buffers, increasing liquid assets to deposits to 32.3% from 20.3% at year-end 2023. We expect it to maintain similar levels in the coming years. In 2024, the bank issued its inaugural senior unsecured bond and currently has SEK 600m outstanding. Our forecast assumes loan growth will primarily be funded by deposit growth; however, we view access to debt markets positively and expect the bank to refinance upcoming maturities to maintain its market presence. Consequently, we have revised our assessment of funding and liquidity upward.
Our rating on Sparbanken Lidköping remains constrained by the bank's significant single-name and regional concentrations. The bank has one of the lowest shares of retail mortgages on balance sheet among Swedish savings banks, and relatively high concentrations in its corporate loan book. We have revised our view of credit and market risk downwards to reflect this relative difference in loan book composition.
Figure 1. Sparbanken Lidköping key credit metrics, 2022–2028e
% | 2022 | 2023 | 2024 | 2025 | 2026e | 2027e | 2028e |
Net interest margin | 1.5 | 2.1 | 2.0 | 1.8 | 1.7 | 1.7 | 1.7 |
Core pre-provision income/REA | 2.3 | 3.4 | 3.3 | 3.0 | 2.9 | 2.7 | 2.6 |
Core cost-to-income | 48.1 | 39.6 | 41.7 | 45.3 | 44.6 | 44.0 | 43.8 |
Return on ordinary equity | 6.0 | 6.7 | 7.4 | 7.1 | 7.2 | 5.3 | 5.4 |
Loan losses/net loans | 0.08 | 0.12 | 0.04 | -0.04 | 0.08 | 0.08 | 0.08 |
Net Stage 3/net loans | 0.24 | 0.07 | 0.03 | 0.34 | 0.46 | 0.46 | 0.46 |
CET1 ratio | 34.6 | 39.7 | 42.8 | 48.8 | 45.1 | 44.8 | 44.4 |
Source: company and NCR. All metrics adjusted in line with NCR methodology. Core represents net interest income and net fee & commission income.
Stable outlook
The stable outlook reflects our expectation that Sparbanken Lidköping will maintain solid core profitability as it grows its loan book slightly above-market level. Our forecast assumes stable, moderate loan loss provisions and Stage 3 loans. The stable outlook also reflects that the bank’s strong capital ratios provide a buffer against downside risks associated with a concentrated loan book. We expect the regional economy to remain resilient to geopolitical uncertainty.
We could raise the rating to reflect a more diversified loan book, including reduced single-name concentrations in corporate lending.
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 an increased risk appetite, for example through further increases in loan book concentrations, or in the event of the common equity Tier 1 capital ratio falling below 22%.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB+ | BBB+ |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N3 | N3 |
| Senior unsecured issue rating: | BBB+ | BBB+ |
Contacts:
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Sean Cotten, lead senior analyst, +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 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.