Nordic Credit Rating (NCR) has affirmed its 'BBB+' long-term issuer rating on Norway-based Tolga-Os Sparebank. The outlook is stable. The 'N2' short-term issuer rating, the 'BBB+' senior unsecured issue rating, the 'BBB' issue rating on the bank's Tier 2 instrument and the 'BB+' issue rating on the bank's Additional Tier 1 instrument were also affirmed.
Rating rationale
Our 'BBB+' long-term issuer rating on Tolga-Os reflects the bank's strong earnings, robust capital position and low risk appetite. We have lowered our assessment of the bank's capital position, as we expect above-average loan growth to weaken the Tier 1 ratio to 19.9% in 2028. In addition, the bank reported 52bps in credit losses and a net stage 3 ratio of 1.4% in 2025, and non-performing loans remain elevated in 2026. Current loss reserves are concentrated among a few customers; however, we believe there is a risk that additional losses may be booked, prompting us to lower our assessment of loss performance.
We expect the bank to resume its strong earnings metrics in 2027 and 2028, after an investment in IT during 2026, and to continue to target residential loan growth in Elverum and Hamar. The rating is constrained by geographic concentration in the relatively rural local economy of Østerdalen in eastern Norway and a high proportion of real estate collateral in the bank's core markets. It is also constrained by stronger competition in the bank's growth markets of Elverum and Hamar.
Stable outlook
The outlook is stable, reflecting our view that Tolga-Os Sparebank's strong pre-provision earnings will compensate for a potentially weaker domestic economy and elevated credit provisions over the next few years. We forecast that the bank's cost efficiency will remain in line with its peers in the long run, after somewhat elevated costs in 2026, and expect it to maintain robust capital ratios despite strong loan growth.
We could raise our rating on Tolga-Os to reflect improved scale and diversification, while maintaining a Tier 1 ratio above 22%, and pre-provision income to REA sustainably above 3%.
We could lower our rating to reflect a material deterioration in the local operating environment that negatively affects asset quality; a consolidated Tier 1 capital ratio sustainably below 18% or pre-provision income to consolidated risk exposure amount below 2% for a protracted period.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB+ | BBB+ |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N2 | N2 |
| Senior unsecured issue rating: | BBB+ | BBB+ |
| Tier 2 issue rating: | BBB | BBB |
| Additional Tier 1 issue rating: | BB+ | BB+ |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Sean Cotten, lead senior analyst, +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.