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 'BBB+' senior unsecured issue ratings have also been affirmed, in accordance with our revised financial institutions rating methodology. The ratings are no longer under criteria review.
Rating rationale
The long-term issuer rating reflects Sparbanken Lidköping's exceptional capital position, moderate risk appetite, good market position in Lidköping in western Sweden, and relationship-based funding profile. We expect that Swedish interest rates will decline but remain above the lows of the past decade. This, along with dividends from the bank's shareholdings in Swedbank AB, implies continued support for its strong core earnings profile.
The rating is constrained by Sparbanken Lidköping's concentration in its core market and the related exposure in its loan book to regional commercial and residential real estate and the agricultural sector. Due to a high proportion of transferred mortgages, the bank has significantly higher single-name concentrations in its loan book than its domestic savings bank peers.
NCR has reviewed its long-term and short-term issuer ratings, issue ratings, and outlook on Sparbanken Lidköping following the revision of its methodology for assigning ratings to financial institutions (see media release). We consider that our amendments to the methodology have not had a material impact on our view of Sparbanken Lidköping's creditworthiness, and that there have not been significant changes in its overall risk profile.
Stable outlook
The stable outlook reflects our expectation that Sparbanken Lidköping will maintain solid profitability combined with moderate loan growth. The outlook balances our base-case projections, in which we project low loan losses, with exceptional capital buffers that should be sufficient to protect the bank against higher losses. We expect that the regional economy will remain stable and note that it has little direct connection with current uncertainty about global trade. We believe that the bank will maintain its modest risk appetite and an ongoing cooperation agreement with Swedbank, while paying prudent levels of dividends to its owner.
We could raise the rating to reflect reduced single-name concentrations in the loan book and deposits and continued or improved economic prospects in the bank's core market, enabling sustainable loan growth.
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 in the event of a sustained decline in the common equity Tier 1 capital ratio to below 22%, or increased risk appetite in the loan or liquidity portfolios.
| 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, 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 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.