Nordic Credit Rating has affirmed its 'A-' long-term issuer rating on Sweden-based savings bank Sparbanken Skaraborg AB (publ). The outlook is stable. The 'N2' short-term issuer rating and the 'A-' senior unsecured issue ratings have also been affirmed.
Rating rationale
The affirmation reflects our view that the bank will continue to strengthen its capital position towards a 39% common equity Tier 1 (CET1) ratio by end-2028, supported by robust core earnings, projected dividends from Swedbank shareholdings, and low credit losses. The bank maintains strong asset quality metrics but has increased single-name concentrations in recent years. In our view, the rise in large exposures indicates an increased risk appetite. As a result, we have lowered our assessment of the bank's risk governance and credit and market risk. Partially offsetting this is our positive revision of the bank's loss performance, as Stage 3 loans and credit losses remain benign. We also note the bank's continued growth and the establishment of new branches in Falköping and Mariestad, where it already has a strong SME presence. The new offices are expected to strengthen the bank's position in Skaraborg among retail customers, improving our overall view of its competitive position. These changes have eliminated the need for the previous borderline assessment adjustment notch.
Figure 1. Sparbanken Skaraborg key credit metrics, 2022–2028e
% | 2022 | 2023 | 2024 | 2025 | 2026e | 2027e | 2028e |
Net interest margin | 1.7 | 2.5 | 2.4 | 2.1 | 1.9 | 1.9 | 1.9 |
Core pre-provision income/REA | 2.4 | 3.9 | 3.6 | 3.0 | 2.6 | 2.4 | 2.3 |
Core cost-to-income | 47.9 | 38.1 | 39.8 | 45.0 | 49.3 | 50.5 | 51.4 |
Return on ordinary equity | 6.3 | 8.7 | 8.6 | 7.9 | 7.5 | 6.9 | 6.6 |
Loan losses/net loans | 0.13 | -0.04 | -0.01 | -0.06 | -0.02 | 0.06 | 0.06 |
Net Stage 3/net loans | 0.44 | 0.20 | 2.18 | 0.58 | 0.55 | 0.55 | 0.53 |
CET1 ratio | 32.1 | 34.3 | 34.5 | 37.9 | 38.0 | 38.8 | 39.3 |
Source: company and NCR. All metrics adjusted in line with NCR methodology. Core represents net interest income and net fee & commission income.
The rating reflects the bank's strong capitalisation, moderate risk appetite, solid local market position, and relationship-based funding profile. The bank's cooperation with Swedbank AB is viewed positively, as it provides greater product diversity, shared IT costs, and access to retail mortgage financing. We expect loan growth to support operating income, with risk-adjusted pre-provision income of 2.3–2.6% per year as the bank invests in its expanded core market. The rating is constrained by Sparbanken Skaraborg's relatively weak core markets and significant exposure to regional commercial real estate and agriculture. It is also limited by high single-name concentrations and a relatively high share of on-balance-sheet corporate loans compared to savings bank peers.
Stable outlook
The stable outlook reflects our expectation that Sparbanken Skaraborg's strong capitalisation and earnings can offset a moderate reduction in asset quality given strong collateral and low projections of realised losses. The opening of new branches in Falköping and Mariestad provide the ability to grow the loan book despite modest growth in the bank's core region. We expect the bank to further strengthen its very strong capital ratios, supported by modest credit growth, solid core capital generation and dividend income from Swedbank.
An upgrade is unlikely at this time, given the bank's single-name and regional concentrations, as well as the already strong capital and earnings.
We could lower the rating to reflect Stage 3 loans returning to higher levels (1.5-2% of total net loans over a protracted period), a deteriorating operating environment, a reduction in earnings performance with pre-provision income to risk exposure amount falling towards 2.0%, or a decline in the common equity Tier 1 capital ratio to below 22%.
| 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- |
Contacts:
Sean Cotten, lead senior analyst, +46735600337, sean.cotten@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@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.