Nordic Credit Rating (NCR) has affirmed its 'A-' long-term issuer rating on Norway-based Sparebanken Narvik. The outlook is stable. The 'N2' short-term rating and 'A-' senior unsecured issue rating have also been affirmed, in accordance with NCR's revised financial institutions rating methodology. The ratings are no longer under criteria review. The bank has no issued Tier 2 or Additional Tier 1 instruments, but we would assign future issues an issue rating one and three notches below the issuer rating at 'BBB+' and 'BBB-', respectively, if it chooses to do so.
Rating rationale
The affirmation reflects our expectations that Sparebanken Narvik will maintain strong earnings and robust cost efficiency through 2027, despite a gradual decline in interest margins. We have revised our assessment of Sparebanken Narvik's capital, based on our projected Tier 1 ratio above 23% through 2027, despite heightened double-digit loan growth. The bank benefited from the implementation of the EU's Capital Requirements Regulation III (CRR3) in Apr. 2025, which increased its Tier 1 ratio by about 3pp, supported by a high proportion of low loan-to-value residential mortgages. We anticipate Sparebanken Narvik will maintain its low-risk profile and slightly increase the share of residential mortgages in its lending. The ongoing development of large-scale projects in the Narvik region, along with preparations to host the Winter Championships in 2029, positively influences our operating environment assessment.
The long-term issuer rating also reflects the bank's low risk appetite and strong earnings. The bank has a cooperation agreement with the Eika banking alliance, which we view as positive, as it provides product diversity, shared development costs, and the opportunity to finance residential retail mortgages through mortgage company Eika Boligkreditt.
The rating is constrained by the bank's concentrated exposure to real estate in the Narvik and Mid-Troms regions. It is also constrained by strong competition and a low market share in Mid-Troms.
Stable outlook
The stable outlook reflects our view that a weak economic climate and late-cycle loan losses will be offset by robust pre-provision income. We believe Sparebanken Narvik's outstanding capital position, strong cost-efficiency, low risk appetite and high proportion of real-estate collateral enable resilience to a moderate slowdown in the economy. We expect the bank to maintain strong capital ratios, following the boost by CRR3, despite projected double-digit lending growth ahead.
An upgrade is unlikely at this time, given the bank's regional and sectoral concentrations.
We could lower the rating to reflect a material deterioration in the regional operating environment or increased risk appetite, a lasting reduction in the Tier 1 capital ratio to below 20%, or risk-adjusted earnings metrics below 2% of risk exposure amount or cost/income above 50% over a protracted period.
| 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+ | None |
| Additional Tier 1 issue rating: | BBB- | None |
Contacts:
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@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.