Nordic Credit Rating (NCR) has affirmed its 'A-' long-term issuer rating on Norway-based Sparebank 68° Nord. The outlook is stable. The 'N2' short-term rating, 'A-' senior unsecured issue rating and 'BBB+' Tier 2 issue rating have also been affirmed.
Rating rationale
The affirmation reflects the bank's low risk appetite, strong capital position, diversified funding sources and robust earnings. We have revised our assessment of the bank's capital position, expecting it to maintain a consolidated Tier 1 ratio above 23% through 2027. Our forecast assumes annual loan growth of 6% in 2026 and 2027, a return on equity of approximately 8%, and that 25% of profits will be distributed to equity certificate holders and as gifts to the local community. As a result, we expect capital ratios to increase slightly through 2027. We believe asset quality metrics are likely to improve in 2026-2027.
We take a positive view of the bank's membership in the Lokalbanksamarbeidet banking cooperative, which enables product diversity, shared development costs and the opportunity to finance residential retail mortgage loans through jointly owned covered-bond company Verd Boligkreditt AS.
The rating is constrained by the bank's concentrated exposure to real-estate collateral located along the 68th parallel north in northern Norway, which includes the regions of Lofoten, Ofoten, Vesterålen and Harstad. It is also constrained by strong competition from larger banks.
Stable outlook
The stable outlook reflects Sparebank 68° Nord's low risk appetite, strong real-estate collateral, solid earnings and strong cost efficiency, which we believe will enable resilience during a modest economic slowdown. We expect the bank's capital ratios to remain at strong levels after the positive impact of implementing the EU's Capital Requirements Regulations III (CRR3), despite projections of above-domestic credit growth.
We view an upgrade as unlikely at this time, given the bank's regional and sectoral concentrations.
We could lower our rating on the bank to reflect a cost-to-income ratio above 50% over a protracted period, a sustained reduction in the Tier 1 capital ratio to below 22%, or a material deterioration in the local operating environment or weakening asset quality.
| 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:
Christian Yssen, analyst, +4740019900, christian.yssen@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 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.