The A- issuer rating reflects Totens Sparebank’s strong market position in its local area and stable operating performance, with sound asset quality and prudential metrics. As a savings bank, Totens Sparebank 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 capabilities, the bank can comfortably absorb credit impairments out of ordinary pre-provision profit. Management targets a return on equity of 10% and a cost income ratio of below 40%.

Totens Sparebank maintains sound buffers to solvency requirements and is well positioned against the upcoming increase in the systemic risk buffer to 4.5% from 3% at 2023YE. Since end-March 2023, the bank has been subject to an updated Pillar 2 requirement of 1.5%, down from 1.6%. The Norwegian FSA also expects the bank to maintain a Pillar 2 buffer of 1%.

The bank primarily funds itself through customer deposits but also has a material reliance on market funding, including covered bonds. The bank accesses covered bond funding through its own covered bond entity, Totens Sparebank Boligkreditt and through the covered bond issuing entity of the Eika Alliance. To mitigate risks stemming from 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

Click here to access the full report.