Nordic Credit Rating said today that it had affirmed its 'A' long-term issuer rating on Norway-based savings bank SpareBank 1 Østfold Akershus. The outlook is stable. At the same time, the 'N2' short-term issuer was affirmed, as was the 'A' issue rating on the bank's senior unsecured debt, the 'A-' issue rating on its Tier 2 instruments, and the 'BBB' issue rating on its additional Tier 1 instruments.
Rating rationale
The affirmation of the long-term issuer rating reflects SB1 Østfold Akershus' stable performance, which remains in line with our expectations, and the bank's strong position in an otherwise weak economy. The rating continues to reflect SB1 Østfold Akershus' strong profitability and capitalisation, as well as its exposure to a growth region of Norway. The bank has a history of strong pre-provision profitability, driven by strong net interest margins and a higher proportion of fee income within revenues than its peers, as well as strong cost efficiency. SB1 Østfold Akershus is predominantly a retail bank providing residential mortgages, but also has exposure to commercial real-estate lending.
The rating is constrained by competition in the bank's operating region and geographic concentration in the loan book, as well as uncertainty about the commercial real-estate sector.
Stable outlook
The stable outlook reflects our view that SB1 Østfold Akershus has been able to benefit from interest rate increases and that the weakening domestic economy will therefore have little material impact on the bank's stability or profitability. We believe the bank will prove resilient to risk factors, including a slowing domestic housing market and margin pressure from price-competitive peers, thanks to strong capitalisation and earnings.
An upgrade is unlikely at this time, given that earnings and capitalisation are already strong. We could lower the rating to reflect a material deterioration in the regional operating environment that negatively affects the bank's asset quality. We could also lower the rating to reflect growth significantly outpacing capital generation, resulting in a Tier 1 ratio below 18% over a protracted period, or increased competition leading to lower profitability and a weaker market position.
| 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: | A- | A- |
| Additional Tier 1 issue rating: | BBB | BBB |
Contacts:
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 18 Feb. 2022, NCR's Rating Principles published on 24 May 2022 and NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022. For the full regulatory disclaimer please see the rating report.
NCR_-_SpareBank_1_stfold_Akershus_-_Full_Rating_Report_16_Nov._2023.pdf (577.44 KB) NCR_-_SpareBank_1_stfold_Akershus_-_Rating_Action_Report_16_Nov._2023.pdf (142.28 KB) SpareBank 1 Østfold Akershus A Stable Financial N2 Off On Off