The A- issuer rating reflects BN Bank’s solid credit fundamentals and ownership by SpareBank 1 Alliance member banks.

BN Bank is primarily a digital bank serving both retail and corporate customers in Norway. In the retail market, the bank focuses on residential mortgage lending in eastern Norway while in the corporate market, the bank is a specialised commercial real estate lender operating mainly in the Oslo region. Over the long-term, management aims for a 70% retail / 30% corporate lending mix.

Over the last few years, management has been successfully executing on its strategy to grow mortgage lending volume, increase margins by targeting customers willing to pay for better service, and improve efficiency. Consequently, financial performance is increasingly robust. For H1 2022, the reported return on equity was 11.4%, with the cost income ratio below 30%.

Strategic decisions such as ceasing unsecured consumer lending activities and restricting the geographic focus of the commercial real estate business support the bank’s sound asset quality profile. Nevertheless, high household debt levels (a country specific feature) and material exposure to the commercial real estate sector are structural risks. Given the current economic uncertainty, management is maintaining elevated levels of provisions in comparison to its past credit loss experience. As of 30 June 2022, non-performing and other doubtful commitments accounted for 0.4% of gross loans.

Supported by internal capital generation, the bank maintains comfortable buffers to regulatory solvency requirements. While the bank continues to actively grow customer deposits, the use of market funding remains material. BN Bank enjoys regular access to the domestic unsecured debt market as well as to secured funding through the covered bond issuing entities of the SpareBank 1 Alliance.

This monitoring note does not constitute a rating action, nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found on www.scoperatings.com

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