Nordic Credit Rating (NCR) said today that the third quarter of 2022 saw an improvement in Nordic consumer banks' margins as interest rates rose, despite continued widening of their credit spreads. Banks have actively increased their deposit rates in all currencies to reflect not only higher market rates, but also to ensure they remain attractive to customers to protect liquidity buffers. Despite high inflation and increasing consumer pessimism, average loan loss provisions rose only modestly from the second quarter and non-performing loan metrics continued to fall. Average loans grew by over 5%, pushing capital ratios down somewhat from the previous quarter.
"We expect inflation and interest rates to have a greater impact on consumer banks and their customers in the fourth quarter of 2022 and the first half of 2023 before stabilising," said NCR credit analyst Sean Cotten. "Banks have been raising interest rates on customer loans, and individuals with already weak financial profiles are also affected by inflationary pressures. Homeowners face material increases in interest costs, and housing prices are coming down from record highs, affecting customer sentiment. We believe these factors could impact consumption patterns and demand for consumer loans through to the end of 2023."
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Vetle Holtan, analyst intern, +4794031204, vetle.holtan@nordiccreditrating.com