Nordic Credit Rating (NCR) has assigned an 'A-' long-term issuer rating to Norway-based SpareBank 1 Gudbrandsdal. The outlook is stable. An 'N2' short-term issuer rating was also assigned, together with an 'A-' senior unsecured issue rating and a 'BBB+' Tier 2 issue rating. The bank currently has no outstanding Additional Tier 1 instruments, but we would rate such instruments three notches below the issuer rating at 'BBB-'.
Rating rationale
The long-term issuer rating reflects SB1 Gudbrandsdal's strong earnings, robust capitalisation, and good access to funding. The bank is part of the SpareBank 1 Alliance, which we view as supportive of business diversity, operating efficiency, and liquidity. SB1 Gudbrandsdal's pre-provision profitability and cost efficiency are strong in comparison with those of the bank's peers. The bank is predominantly a provider of retail residential mortgage loans, but also has significant exposure to commercial real estate lending, agriculture and construction.
The rating is constrained by the highly competitive environment in SB1 Gudbrandsdal's key growth markets in Oslo and Lillehammer, a high level of real-estate collateral in the bank's core markets in Norway's Innlandet county, and uncertainty about the construction and commercial real estate sectors.
Stable outlook
The stable outlook reflects SB1 Gudbrandsdal's low risk appetite, strong real estate collateral, and improved earnings, which we believe will enable resilience to a moderate slowdown in the economy. Moreover, we expect moderate loan growth in the course of our forecast period through 2027. We expect the bank's capital ratios to be boosted by the prospective positive impact of implementing the EU's Capital Requirements Regulations III.
We could raise the rating to reflect stronger economic conditions and asset quality relative to those of peers and improved capital and earnings (Tier 1 capital ratio sustainably above 25%).
We could lower the rating to reflect a lasting reduction in the consolidated Tier 1 capital ratio to below 20% or risk-adjusted earnings metrics sustainably below 2% of risk exposure amount. We could also lower the rating to reflect a material deterioration in the operating environment or increased risk appetite that negatively affects asset quality.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | A- |
| Outlook: | Stable |
| Short-term issuer credit rating: | N2 |
| Senior unsecured issue rating: | A- |
| Tier 2 issue rating: | BBB+ |
| Additional Tier 1 issue rating: | BBB- |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 14 Feb. 2024, 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.