Nordic Credit Rating (NCR) has affirmed its 'A-' long-term issuer rating on Sweden-based savings bank Sparbanken Rekarne AB (publ). The outlook is stable. The 'N2' short-term issuer rating, the 'A-' senior unsecured issue rating and the 'BBB+' issue rating on Tier 2 bonds have also been affirmed, in accordance with NCR's revised financial institutions rating methodology. The ratings are no longer under criteria review.
Rating rationale
NCR has reviewed its long-term and short-term issuer ratings, issue ratings, and outlook on Sparbanken Rekarne following the revision of its methodology for assigning ratings to financial institutions (see Related publications). We consider that our amendments to the methodology have not had a material impact on our view of the bank's creditworthiness, and that there have not been significant changes in its overall risk profile. Consequently, we have affirmed our ratings and maintained the stable outlook on the ratings on Sparbanken Rekarne.
We expect the completion of the bank's merger with Sparbanken Västra Mälardalen by Q4 2025. Approval from the Swedish Financial Supervisory Authority (Finansinspektionen) is required, which we consider likely given recent approvals of similar mergers between Swedish savings banks. The Swedish Competition Authority (Konkurrensverket) gave its approval on 30 Apr. 2025.
Stable outlook
The stable outlook reflects that we are unlikely to change our rating on Sparbanken Rekarne as an immediate consequence of the announced merger, despite our belief that it will be positive for the bank. The merged bank would benefit from a larger market, an improved overall competitive position and broadened business diversity, in our view. We also expect the merged bank to see diversification benefits in its risk profile and exposures. We do not, however, view these positive effects alone as sufficient to immediately result in a higher rating. We consider that there are weaknesses in the local economies of both banks, as well as strategic uncertainty regarding the combined bank's capitalisation and anticipated loan growth.
On a stand-alone basis, we could raise the rating to reflect lasting improvements in Sparbanken Rekarne's capitalisation, with a common equity Tier 1 (CET1) ratio above 25% on a sustained basis, combined with maintained improvements in cost efficiency, with a cost-income ratio remaining below 50% and risk-adjusted earnings above 3.5% for a prolonged period, as well as an improved regional operating environment.
We could lower the rating on Sparbanken Rekarne to reflect a sustained reduction in the CET1 ratio to below 18%. We could also lower our rating if we observed a significant downturn in the operating environment, weakening asset quality, loan growth and/or funding access.
Related publications
i) NCR Comments: Ratings for Swedish savings banks unchanged after Swedbank's revised dividend policy, 29 Jan. 2025.
ii) Sparbanken Rekarne AB (publ) 'A-' long-term issuer rating affirmed; Outlook stable, 27 Jan. 2025.
iii) Nordic Credit Rating publishes amended Financial Institutions Rating Methodology, 12 May 2025.
| 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+ |
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.