The ratings of Landkreditt Bank are based on the credit fundamentals of the group, Landkreditt SA, a leading provider of financial services to Norway’s agricultural sector. In recent years, management has pursued a growth strategy in the agricultural segment as well as with retail customers to achieve greater scale and to diversify the business. The aim is for a roughly equal balance between the two customer segments, with the mix currently more skewed to farmers.

The bank maintains a low risk profile. Over 99% of lending is secured by residential property or agricultural property and land, and credit losses have remained minimal. The bank’s cooperative ownership structure further reinforces a fairly low risk business, with members understanding the need to ensure the solidity of the group. As of YE 2019, the group’s CET1 capital ratio stood at 20.3%, well above requirements of 13.8%.

In response to Covid-19, fiscal and monetary measures are being implemented to support households and businesses, including farmers. Norway is in a sound budgetary position, with significant resources available for sustaining the economy. While the eventual magnitude of the impact on the bank’s asset quality is uncertain, Scope takes comfort from the relatively low risk and secured nature of the loan portfolio.

Like with other Norwegian banks, the bank relies on market funding. However, Landkreditt maintains comfortable liquidity buffers and successfully accesses the domestic unsecured and secured debt markets regularly.

This is not a rating action; the initial ratings were assigned on 4 April 2018.

The rating report can be downloaded here.