Nordic Credit Rating (NCR) has affirmed its 'A-' long-term issuer rating on Norway-based savings bank SpareBank 1 Hallingdal Valdres. The outlook is stable. The bank’s short-term issuer and issue ratings, including senior unsecured, Tier 2 and Additional Tier 1 instruments, remain mapped to the long-term rating in accordance with NCR’s Financial Institutions Rating Methodology.
Rating rationale
The affirmation is driven by SB1 Hallingdal Valdres’ resilient asset quality and strong capitalisation, which provide headroom against late-cyclical credit losses. Pre-provision earnings have softened on higher funding costs, compressing net interest margins through 2025 and the first half of 2026. We expect recent rate hikes to support margins in the second half of 2026 and into 2027, while ongoing cost-cutting initiatives should take full effect from the full year 2027. On this basis, we expect earnings before loan losses to remain strong and return on equity to approach the 9.5% target by 2028, supporting internal capital generation.
Credit losses peaked at 0.59% of net loans in 2025 and remained elevated at 0.34% as of the second quarter of 2026. In addition, net Stage 3 loans were 1.6% of net loans, slightly above the average for savings bank peers. We expect losses to remain above the bank’s historical average over the next 12–18 months as higher rates continue to pressure corporate borrowers, particularly in property project financing and construction. Reflecting this, we have lowered our assessment of SB1 Hallingdal Valdres' loss performance.
Structural strengths continue to underpin the rating. The bank’s core competence is retail mortgage lending (68% of on-balance-sheet loans), two thirds of which is outside its core region, complemented by fee-generating businesses in real estate brokerage and accounting. Membership in the SB 1 Alliance supports operating efficiency, product breadth and liquidity, while extensive use of alliance covered bond companies diversifies funding.
Rating headroom is constrained by competitive dynamics and growth execution risk. The bank has moderated its growth ambitions—now forecasting loan growth of 8% in 2027 and 9% in 2028, down from 12% previously—amid intensified mortgage competition following peers’ CRR3-driven capital improvements and its own capital constraints. Rapid expansion outside the core region also raises risk-governance demands and could pressure funding and capital if growth outpaces internal generation. Ongoing uncertainty in commercial real estate remains a key risk, though we expect the impact to be manageable within current capital buffers.
Stable outlook
The outlook is stable, reflecting our view that SB1 Hallingdal Valdres would be resilient to potential elevated, late-cyclical credit losses. This is based on the bank's low risk appetite, strong real estate collateral, and solid capitalisation. Moreover, we expect the bank to maintain strong earnings before loan losses, supported by the recent interest rate hikes.
An upgrade is unlikely at this time, as we do not expect a significant increase in capitalisation or performance metrics beyond what is already reflected in the current rating.
We could lower the rating if capitalisation weakens, for example if the consolidated Tier ratio falls 19%, if risk-adjusted earnings metrics below 2% of REA or cost/income above 60% over a protracted period or if we see lack of improvement in asset quality and loan losses.
| 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+ |
| Additional Tier 1 issue rating: | BBB- | BBB- |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Sean Cotten, lead senior analyst, +46735600337, sean.cotten@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.