Scope Ratings today assigned a first-time issuer rating of A- to Norwegian online bank BN Bank ASA. The agency also assigned first-time ratings of BBB+ to senior unsecured debt issued by BN Bank. All ratings have a Stable Outlook.

The ratings reflect BN Bank’s solid credit fundamentals and its ownership by SpareBank 1 Alliance (SB1 Alliance) member banks. BN Bank operates in a prudent manner, generating sustainable earnings and dividends for its owners. Guided by relatively stringent regulatory requirements as well the bank’s experience during the financial crisis, prudential metrics are at reassuring levels.

BN Bank is an online bank serving both retail and corporate customers in Norway, with a target 70% retail / 30% corporate mix. In the retail market, the bank has a nationwide presence and focuses primarily on mortgage lending. The bank is also specialised commercial real estate lender operating mainly in the Oslo region. BN Bank’s focus on the Oslo area is a risk considering elevated property prices, although Scope expects the macro environment to remain supportive due to solid economic growth, low unemployment and high wealth levels.

Since December 2008, BN Bank has been wholly-owned by members of the SB1 Alliance, primarily large regional banks. BN Bank enjoys significant benefits from this relationship, including strong governance and access to the alliance’s resources – such as the use of common IT systems, the exchange of expertise and access to diverse financial product companies. Meanwhile, the owners consider BN Bank a solid investment and have expressed their intention to further strengthen the bank’s development.

Although the bank has pursued a more balanced growth strategy focusing on both loans and deposits in recent years, the reliance on market funding remains material. The use of covered bonds and maintaining a high-quality liquidity portfolio help to mitigate this risk. BN Bank accesses secured funding through the covered bond issuing entities of the SB1 Alliance, aiming to transfer 50% of mortgage loans and 40% of commercial real estate loans.

Among potential negative rating change drivers, Scope highlights the following: (i) the loss of benefits from being affiliated with the SB1 Alliance, (ii) a decline in the operating environment which materially impacts earnings, and (iii) a material negative outcome from an outstanding legal issue. Meanwhile, a potential positive rating change driver would be sustained and profitable growth without an increase in the bank’s risk profile.

The latest information on the rating, including rating reports and related methodologies are available on this LINK.

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Methodology
The methodologies used for this rating(s) and/or rating outlook(s) Bank rating methodology and Capital securities methodology are 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: Dierk Brandenburg, Managing Director
The ratings/outlooks were first released by Scope on 8 August 2019.

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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