Nordic Credit Rating (NCR) has lowered its long-term issuer rating on Norway-based Trøndelag Sparebank to 'BBB' from 'BBB+'. The outlook is stable. At the same time, the short-term issuer rating has been lowered to 'N3' from 'N2', the senior unsecured issuer rating to 'BBB' from 'BBB+', the Tier 2 rating to 'BB+' from 'BBB' and the Additional Tier 1 issue rating to 'BB-' from 'BB+'.
Rating rationale
The downgrade reflects our view that the bank’s operating performance will remain under pressure over our forecast horizon, even after adjusting for one-off costs related to the planned merger with Ørland Sparebank. Earnings have weakened due to lower net interest margins, driven by strong competition and ambitious growth targets, as well as relatively low cost efficiency. In addition, loan losses have exceeded expectations and are expected to remain elevated, given persistent net Stage 3 loans, which rose to 4.2% at end-2025.
We believe the planned merger will eventually strengthen Trøndelag Sparebank's capitalisation, which would otherwise be under pressure from strong growth relative to capital generation. The merger is also expected to improve overall asset quality, expand the bank's deposit base and may improve cost efficiency over time. Ørland Sparebank operates in the same core region as Trøndelag Sparebank, but will establish a new stronghold in the municipality of Ørland.
Our 'BBB' long-term issuer rating reflects the bank's moderate risk appetite, robust capital position and stable funding access. The bank's cooperation agreement with the Eika Alliance is viewed positively, as it supports product diversification, shared development costs and access to residential mortgage financing through the jointly owned covered bond company Eika Boligkreditt AS. The rating is constrained by concentrated exposure to real estate and agriculture in the core region, as well as a high level of non-performing corporate loans and historically weak credit risk governance. While the bank maintains a strong market share in its core region, the rating also reflects its low, though increasing, market share in other parts of Trøndelag county.
Stable outlook
The outlook is stable, reflecting our view that earnings, adjusted for merger-related costs with Ørland Sparebank, will stabilise at relatively weaker levels, with pre-provision income (PPI)/risk exposure amount (REA) below 2% and a cost-income ratio above 60%. Once completed, we expect the merger to have a positive impact on credit quality and capitalisation. The outlook also reflects our expectation that the bank's asset quality metrics will remain weaker than peers but should show measured improvement over the next 12–18 months.
We could raise the rating if asset quality improves, as evidenced by lower loan losses and non-performing exposures, PPI/REA remains sustainably above 2%, with cost to income below 60%, or Tier 1 ratio remains sustainably above 20%. Conversely, we could lower the rating if loan losses increase and asset quality metrics deteriorate further, the Tier 1 ratio falls below 18%, or PPI/REA approaches 1%.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB | BBB+ |
| Outlook: | Stable | Negative |
| Short-term issuer credit rating: | N3 | N2 |
| Senior unsecured issue rating: | BBB | BBB+ |
| Tier 2 issue rating: | BB+ | 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, 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.