Rating action

Scope Ratings UK Limited (Scope) has today affirmed the ratings of Totens Sparebank: issuer rating of A-, preferred senior unsecured debt rating of A-, and non-preferred senior unsecured debt rating of BBB+. In addition, the A- issuer rating of the bank’s covered bond funding entity, Totens Sparebank Boligkreditt, has been affirmed. All credit ratings have a Stable Outlook.

Rating rationale

The A- issuer rating reflects Toten Sparebank’s strong market position in its local area in south-east Norway, resilient profitability, and sound solvency position. As a savings bank, the group continues to focus on retail customers in its local area with residential mortgages accounting for over 70% of lending. Despite the economic disruption caused by the pandemic, the group reported a return on equity of 10% for the nine months ending 30 September 2021.

Like with other Norwegian banks, Totens Sparebank relies to some extent on market funding, including covered bonds. Customer deposits account for about half of funding. At the same time, the group maintains a high-quality liquidity portfolio well in excess of upcoming maturities within the next twelve months.

Under Scope’s bank rating methodology, the “long-term sustainability” assessment (ESG factor) captures how relevant environmental, social and governance (ESG) factors as well as an issuer’s preparedness for digital transition (D), may impact creditworthiness and the ability to repay debt. As part of the first-time implementation of this methodology, Scope has assigned an assessment of “developing“ to Totens Sparebank. The group is in the process of upgrading its core technology infrastructure. Further, ESG-related risks are starting to be integrated into the credit underwriting process.

Totens Sparebank Boligkreditt (TSBB) is a wholly owned, specialised credit institution, with the dedicated role of providing secured covered bond funding for its parent. The issuer rating on TSBB is based on its full ownership by Totens Sparebank and its specific purpose. The rating on covered bonds issued by TSBB is AAA.

Outlook and rating-change drivers

The Stable Outlook reflects our expectation that Totens Sparebank’s operating performance will remain resilient, supported by a strong economic outlook for the Norwegian economy.

What could move the rating up:

• Sustained profitable growth with increased geographic diversification, accompanied by sound prudential metrics

What could move the rating down:

• Deterioration in operating environment which materially impairs the bank’s earnings capabilities

• Loss of benefits and economies of scale from being a member of an alliance

Overview of rating components

Operating environment: very supportive

Business model: focused

Initial mapping refinement: high

Initial mapping: bbb/bbb+

Long-term sustainability (ESG-D): developing

Adjusted anchor: bbb

Earnings capacity and risk exposures: supportive

Financial viability management: comfortable

Additional rating factors: neutral factor

External support: not applicable

Issuer rating: A-

One or more key drivers for the credit rating action are considered ESG factors.

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

Methodology
The methodology used for these Credit Ratings and Outlook (Bank Rating Methodology, 26 January 2021), is available on https://www.scoperatings.com/#!methodology/list.
Scope Ratings GmbH and Scope Ratings UK Limited apply the same methodologies/models and key rating assumptions for their credit rating services, while Scope Hamburg GmbH’s methodologies/models and key rating assumptions are different from those of Scope Ratings GmbH and Scope Ratings UK Limited.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions - Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/#!governance-and-policies/rating-scale. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://www.scoperatings.com/#!governance-and-policies/regulatory-UK. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/#governance-and-policies/rating-scale. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://www.scoperatings.com/#!methodology/list.
The Outlook indicates the most likely direction of the Credit Rating if the Credit Rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting the Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlook and the principal grounds on which the Credit Ratings and Outlook are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlook are issued by Scope Ratings UK Limited at 52 Grosvenor Gardens, London, United Kingdom, SW1W 0AU, Tel +44 20-7340-6347. The Credit Ratings and Outlook are EU-endorsed.
Lead analyst: Pauline Lambert, Executive Director.
Person responsible for approval of the Credit Ratings: Dierk Brandenburg, Managing Director.
The Totens Sparebank Issuer Credit Rating/Outlook was first released by Scope Ratings on 30 October 2018. The Issuer Credit Rating/Outlook was last updated on 13 November 2020.
The Totens Sparebank preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 30 October 2018. The Credit Rating/Outlook was last updated on 28 September 2021.
The Totens Sparebank non-preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 28 September 2021.
The Totens Sparebank Boligkreditt AS Issuer Credit Rating/Outlook was first released by Scope Ratings on 30 October 2018. The Issuer Credit Rating/Outlook was last updated on 13 November 2020. 

Potential conflicts
See www.scoperatings.com under Governance & Policies/UK Regulation/Disclosures for a list of potential conflicts of interest related to the issuance of Credit Ratings.

Conditions of use / exclusion of liability
© 2021 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis 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.