Sandnes Sparebank’s A- issuer rating is anchored by its well-established local savings bank franchise in the county of Rogaland in South-West Norway. The rating also reflects the significant benefits from being a member of the Eika Alliance, including the ability to offer a broad range of financial services, economies of scale and strong digital capabilities. Further, the bank’s focus on retail clients and mortgage lending supports earnings stability. The planned merger with neighbouring savings bank Hjelmeland Sparebank in H2 2024 is not expected to materially change Sandnes’ business model nor financial position.

As a local savings bank, Sandnes’ business franchise is underpinned by close ties to the local community. In addition, management actively embraces developments in the area of sustainability. This includes developing further competence to evaluate and report on potential ESG risks in the loan portfolio, supporting the transition efforts of clients and investing in the bank’s digital infrastructure.

Operating performance is consistently solid and is expected to remain so, with management targeting a return on equity of 10% for 2024. Following years of de-risking and a shift in focus to personal customers from corporate customers, asset quality remains sound.

Sandnes’ solvency metrics remain reassuring on an absolute basis, with the CET1 capital ratio at 17.8% and the leverage ratio at 9% as of YE 2023. However, the combination of higher requirements and strong loan growth has reduced the distance to requirements. Management targets a buffer of at least 1% above the CET1 requirement of 15.2%. As with many other Norwegian banks, Sandnes has a material reliance on market funding, including more stable covered bonds. Customer deposits meet about half of funding needs. The bank maintains liquidity metrics comfortably above requirements.

The A- issuer rating of SSB Boligkreditt AS, a wholly owned subsidiary, is aligned with that of Sandnes Sparebank. Through the issuance of covered bonds, SSB Boligkreditt provides secured funding for its parent. The covered bonds of SSB Boligkreditt are rated AAA.

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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