The A- issuer rating reflects Totens Sparebank’s (Totens) strong market position in its local area, solid earnings and sound prudential metrics. As a savings bank, Totens’ business is focused on personal customers and residential mortgage lending in its local area, the Mjos region in south-eastern Norway. The bank’s business model is strengthened by its membership in the Eika Alliance, the fourth largest financial group in the country.

With solid earnings and a sound asset quality profile, the bank can comfortably absorb credit provisions out of ordinary pre-provision profit. Management targets a return on equity of 10% and a cost income ratio below 40%.

Supported by internal capital generation, Totens maintains comfortable buffers to current and future regulatory solvency requirements. The systemic risk buffer will increase to 4.5% from 3% at year-end and the countercyclical capital buffer will revert to 2.5% next year from the current level of 1.5%.

While customer deposits are the primary source of funding, the use of market funding is material. In addition to senior unsecured debt, the bank has access to covered bond funding from two sources, Eika Boligkreditt, the issuing entity of the Eika Alliance, and Totens Sparebank Boligkreditt, its own vehicle. To mitigate risks related to the use of market funding, the bank maintains a high-quality liquidity portfolio.

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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