Scope Ratings today assigned first-time issuer ratings of A- to Norwegian savings bank Totens Sparebank (Totens) and its wholly-owned subsidiary Totens Sparebank Boligkreditt AS (TSBB). The agency also assigned first-time ratings of BBB+ to senior unsecured debt issued by Totens. All ratings have a Stable Outlook.

The ratings reflect Totens’ strong market position in its local area in south-east Norway. Macroeconomic conditions are supportive with the country recovering from the fall in oil prices in 2014. The bank operates primarily in the Mjos region, an area where agriculture, manufacturing and the public sector are important industries.

As a savings bank, Totens targets primarily retail customers and over 70% of the loan portfolio is comprised of residential mortgages. With deep local roots and its membership in the Eika Alliance, the bank competes successfully against larger players despite its smaller size. Through the alliance, the Totens can provide a full range of products and services and benefits from economies of scale.

Totens generates healthy profits, supported by good cost efficiency and low credit costs. Solvency metrics are also sound underpinned by Totens’ savings bank business model. As with other Nordic banks, Totens relies to a non-negligible extent on market funding. The bank, however, has demonstrated the ability to regularly issue in the domestic market and makes use of covered bonds which remain a very stable source of funding.

TSBB is a wholly-owned, specialised credit institution, with the dedicated role of providing secured covered bond funding for its parent. Scope’s issuer rating on TSBB is based on its full ownership by Totens and on its specific purpose.

Among potential negative rating change drivers, Scope highlights the following: (i) a decline in the operating environment with a material impact on profitability, (ii) losing the benefits of being a member of the Eika Alliance, (iii) a change in strategy which increases the risk profile of the bank, and (iv) the inability to access market funding at reasonable cost. Meanwhile, prudently managed and sustained profitable growth accompanied by continued sound liquidity and solvency metrics would be a potential positive rating change driver.

For the rating report, please click HERE.

Cash flow analysis & stress testing
No cash flow analysis was performed, no stress testing was performed.

Methodology
The methodology used for this ratings and rating outlooks is Rating Methodology Bank Ratings is available on www.scoperatings.com.
Historical default rates of the entities rated by Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s definition of default as well as definitions of rating notations can be found in Scope’s public credit rating methodologies on www.scoperatings.com.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The rated entity and/or its agents participated in the rating process.
The following substantially material sources of information were used to prepare the credit rating: public domain, the rated entity and third parties.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Regulatory disclosures
This credit rating and/or rating outlook is issued by Scope Ratings GmbH.
Lead analyst Pauline Lambert, Executive Director
Person responsible for approval of the rating: Samuel Theodore, Group Managing Director
The ratings/outlooks were first released by Scope on 30.10.2018.

Potential conflicts
Please see www.scoperatings.com. for a list of potential conflicts of interest related to the issuance of credit ratings.

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