Nordic Credit Rating (NCR) has assigned a 'BBB+' long-term issuer rating to Norway-based SpareBank 1 Lom og Skjåk. The outlook is stable. An 'N2' short-term issuer rating has also been assigned, together with a 'BBB+' senior unsecured issue rating and a 'BBB' Tier 2 issue rating. The bank has not issued Additional Tier 1 instrument, but we expect to rate such instruments 'BB+', if it chooses to do so.
Rating rationale
The long-term issuer rating reflects SB1 Lom og Skjåk's strong capitalisation, good access to funding, and robust earnings. The bank is part of the SpareBank 1 Alliance, which we view as supportive of business diversity, operating efficiency, and liquidity. SB1 Lom og Skjåk's pre-provision profitability is strong and its cost efficiency average in the context of its peer group. The bank is predominantly a provider of retail residential mortgage loans, but also has significant exposure to commercial real estate, agriculture and construction.
The rating is constrained by high levels of corporate exposure in the bank's core markets in Norway's Innlandet county, where the population is in decline. It is also constrained by strong competition in key growth markets outside the core region.
Stable outlook
The stable outlook reflects SB1 Lom og Skjåk's low risk appetite, strong real estate collateral, and robust earnings, which we believe would enable resilience to a moderate slowdown in the economy. We expect that the bank will be able to generate sufficient earnings to keep capitalisation stable, despite the prospect of strong loan growth. We also expect the bank's capital ratios to be boosted by the prospective positive impact of implementing the EU's Capital Requirements Regulations III (CRR3).
We could raise the rating to reflect improved asset quality metrics (net Stage 3 loans below 1.5% of net loans over a sustained period). We could also raise the rating to reflect cost-to-income below 45%, pre-provision income/risk exposure amount (REA) above 2.5% for a protracted period, or improved market position in the bank's growth markets.
We could lower the rating to reflect a lasting reduction in the consolidated Tier 1 capital ratio to below 18%, risk-adjusted earnings metrics sustainably below 1.5% of REA, material deterioration in the operating environment, or increased risk appetite that negatively affects asset quality.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | BBB+ |
| Outlook: | Stable |
| Short-term issuer credit rating: | N2 |
| Senior unsecured issue rating: | BBB+ |
| Tier 2 issue rating: | BBB |
| Additional Tier 1 issue rating: | BB+ |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Rating Principles published on 14 Feb. 2024, NCR's Financial Institutions Rating Methodology published on 12 May 2025 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.