The first quarter of 2024 saw a steadying of elevated credit losses but a further decline in net interest margins for niche consumer banks in the Nordic region, according to a report published by Nordic Credit Rating (NCR) today. Most of the banks in NCR's sample maintained strong earnings, which offset elevated loan-loss provisions in the first quarter. However, aside from one-off impacts, there was a continued underlying trend of a growing proportion of Stage 3 non-performing and Stage 2 impaired loans, which is typically a signal for additional loss provisions.
Nevertheless, there are positive signs for consumers that create uncertainty over the future path for credit losses. Policy rate paths in the Nordic region and the eurozone are beginning to deviate, and yield curves indicate a steep reduction in Sweden and the eurozone, and a more gradual decline in Norway.
"These declines should improve the repayment capacity of individuals and small businesses," said NCR credit analyst Sean Cotten. "Some banks have noted relative improvements in customer loan defaults, although we expect loan-loss provisions to remain elevated in the coming quarters."
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com