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Rating action

Scope Ratings today assigned a first-time issuer rating of A- to Norwegian savings bank SpareBank 1 Nordvest. The agency also assigned first-time ratings of BBB+ to senior unsecured debt issued by SpareBank 1 Nordvest. All ratings have a Stable Outlook.

Rating rationale

The ratings reflect SpareBank 1 Nordvest’s well-established market position in its local area in north-west Norway and its sound financial profile. Macroeconomic conditions are supportive, with the country having recovered from the fall in oil prices in 2014 and the key policy rate at 1.5%. The bank operates primarily in the county of Møre og Romsdal, where the maritime sector, fishing as well as oil and gas are major industries.

SpareBank 1 Nordvest generates healthy returns underpinned by good cost efficiency and sound asset quality. Solvency metrics are also maintained at solid levels, in line with relatively stringent requirements. About 70% of the bank’s lending concerns residential mortgages and management has in-depth knowledge of the local market.

Key to the bank’s competitive position is its membership in the SpareBank 1 Alliance. Collectively, the alliance represents the second largest provider of financial products and services in Norway. In addition to enabling SpareBank 1 Nordvest to meet the broader financial needs of clients, the alliance is a source of expertise and provides important economies of scale, particularly in digital capabilities and IT development.

Like with other Norwegian banks, deposits are insufficient to fully support lending and SpareBank 1 Nordvest must rely on market funding – directly on its own and indirectly through the covered bond issuing vehicles of the alliance.

Rating-change drivers

Among potential negative rating change drivers, Scope highlights the following: (i) a deterioration in the operating environment which materially impacts earnings, (ii) the loss of benefits from being affiliated with the SpareBank 1 Alliance, and (iii) the inability to access market funding at a reasonable cost. Meanwhile, a potential positive rating change driver would be sustained and profitable growth without an increase in the bank’s risk profile.

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

Methodology
The methodology used for this rating and/or rating outlook Bank Rating Methodology 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: Dierk Brandenburg, Managing Director
The rating/outlook was first released by Scope on 9 November 2019.

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

Conditions of use / exclusion of liability
© 2019 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions 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. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.
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