Updated analytical report on Landkreditt Bank AS
Scope Ratings has updated its analytical report on Landkreditt Bank, rated A- with Stable Outlook.
The A- issuer rating on Landkreditt Bank is based on a consolidated view of the cooperative group, Landkreditt SA, a leading provider of financial services to Norway’s agricultural sector. The bank is the main operating company of the group. Management’s strategy targets growth in the agricultural sector as well as with personal customers to achieve greater scale and to diversify the business, aiming for a roughly equal balance between the two customer segments. In recent years, efforts have also been made to develop insurance, asset management and real estate brokerage activities, enabling the group to offer a broad range of financial services.
While a digital bank since its founding, ongoing investments are being made to further digitalise customer interactions and automate processes. In addition, the bank has started incorporating ESG considerations into its credit procedures and aims to support the sustainability efforts of farmers.
Reflecting its cooperative business model and low risk culture, Landkreditt generates relatively stable but somewhat lower returns than domestic peers. Earnings, nevertheless, are more than sufficient to absorb credit costs. Asset quality remains sound with nearly all lending secured by residential property or agricultural property and land.
Landkreditt maintains reassuring solvency metrics and continues to be well positioned against current and future expected capital requirements. As of year-end 2022, the group’s CET1 and leverage ratios were 23.4% and 10.3%, respectively. Like with other Norwegian banks, Landkreditt relies to some extent on market funding, although deposits remain the primary funding source, with management targeting a deposit-to-loan ratio of at least 70%.
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