On 15 May 2019, Nordic Credit Rating assigned its 'BBB-' long-term and 'N-1+' short-term issuer credit ratings to Resurs Bank AB. The outlook is stable. In addition, the company's senior unsecured debt was rated 'BBB-'.
"Our 'BBB-' rating on Sweden-based Resurs Bank AB (publ) (Resurs) reflects the bank's strong risk-adjusted earnings, granular Nordic consumer loan portfolio and moderate risk appetite relative to its Nordic peers", said Sean Cotten, Rating Analyst at Nordic Credit Rating AS (NCR) and primary analyst for the company.
Rating rationale
Our 'BBB-' long-term issuer rating on Resurs reflects the bank's strong risk-adjusted earnings, granular consumer loan portfolio and risk appetite relative to its Nordic peers. Resurs's strong earnings and capital generation support its existing growth objectives, but NCR views capitalisation as a relative weakness compared with its Nordic peers. The bank is largely deposit funded, but it has increased its share of senior unsecured debt in recent years and has issued an asset-backed security encumbering 11% of tangible assets. Our rating reflects Resurs Bank and its subsidiaries. The bank is directly owned by Resurs Holding AB (Resurs Holding), which also owns Solid Försäkring AB and is listed on the Stockholm stock exchange.
Resurs benefits from strong creditor rights across the Nordic region. These provide strong incentives for borrowers to repay debt and result in higher collection rates than in other European regions. This has contributed to Resurs's demonstrated control over its credit losses over its 42-year history. However, a large share of Resurs's growth in recent years has been in larger-ticket consumer loans and outside of Sweden, reducing the share of smaller, short-term point-of-sale financing historically associated with Resurs's Swedish business. Compared with its Nordic peers, Resurs has a relatively high share of nonperforming loans, but loss provisions as a share of loans have remained stable, in part due to its strong loan growth. Resurs uses forward flow and third-party collection agreements with debt purchasers to manage its collection process and control nonperforming loan levels, which we view as a potential operational risk given the relatively high leverage and high-yield funding of these partners.
Outlook
Our stable outlook on Resurs reflects our view that the bank's earnings will continue to support its growth objectives without significantly increasing its risk profile. We expect the higher share of larger consumer loans and a change in Norwegian consumer loan profitability to reduce the net interest margin and for annual loan growth to remain in the 15% range, which still allows for excess capital generation and continued dividend payments given our projected credit losses.
Potential positive rating drivers
- Commitment to stronger capital buffers.
- Stabilisation or improvement of asset quality metrics.
- Tightening of overall risk appetite.
Potential negative rating drivers
- Material economic deterioration in the region.
- Regulatory changes affecting interest rates and recovery prospects for consumer loans.
- Excessive growth or increased risk appetite.
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology and Rating Principles, published on 14 August, 2018. For the full regulatory disclaimer please see the rating report which can be downloaded at nordiccreditrating.com/ratings-research/research.
Contact details:
Sean Cotten, Lead Analyst, +46 732 324 378, sean.cotten@nordiccreditrating.com
Geir Kristiansen, Credit Rating Analyst, +47 907 845 93, geir.kristiansen@nordiccreditrating.com