Today Nordic Credit Rating (NCR) affirmed its 'A-' long-term issuer rating and 'N-1+' short-term rating on Kredittforeningen for Sparebanker (KfS). The outlook on the ratings remain stable.

Our rating on KfS reflects the company's strong capitalisation and low risk appetite. KfS is a cooperative, non-profit credit institution serving its member Norwegian savings banks. The company funds only investment-grade savings banks, resulting in concentrated but high-quality credit exposure. NCR's weighted average credit assessment of KfS' loan portfolio is 'bbb+'.

"KfS has yet to experience credit losses and we believe that the company's own default risk is lower than the average of its customers, given the benefits of diversification," said Geir Kristiansen, Credit Rating Analyst at NCR. "Moreover, KfS is funded by senior loans with approximately the same maturity as its individual loans and has minimal refinancing and interest rate risk."

Changes in regulation are a risk factor for KfS' business model. The EU's recent bank capital and liquidity package (CRR II/CRD V) will likely have implications for KfS' attractiveness as a funding source for its member banks. We have notched down the scoring of KfS' competitive position score from 'bb' to 'bb-' to reflect the challenging regulatory environment and steady decline in lending volumes and customers. However, the company aims to provide member banks with access to sustainable financing by launching green bonds, an initiative which could provide a basis for new growth.

The stable outlook reflects the strong operating environment for Norwegian banks and KfS' modest risk profile. We believe that possible challenges for the company's business model due to regulatory changes will not result in higher default risk given its high asset quality and low refinancing and liquidity risk.

Our full analysis of Kredittforeningen for Sparebanker is available at:
https://nordiccreditrating.com/issuer/kredittforeningen-sparebanker

If you have any questions, please contact:
Geir Kristiansen, credit rating analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com

The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 14 Aug. 2018 and NCR's Rating Principles published on 16 Sep. 2019. For the full regulatory disclaimer please see the rating report.

About Us

Nordic Credit Rating AS is a credit rating agency headquartered in Oslo with a branch in Stockholm. The company provides credit ratings to companies and financial institutions in the Nordic region, and bases its analysis on local insights. Nordic Credit Rating is registered with the European Securities and Markets Authority (ESMA).

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NCR affirms its 'A-' rating and stable outlook on Kredittforeningen for Sparebanker