The A- issuer rating reflects BN Bank’s solid credit fundamentals and ownership by SpareBank 1 Alliance member banks.

BN Bank benefits from a collaborative relationship with its owner banks and an affiliation with the SpareBank 1 Alliance, collectively the second largest lender in Norway. Over the last several years, management has successfully executed its strategy to grow financing volumes and improve efficiency. Residential mortgages account for over 60% of lending activity, with the remainder being to corporate customers.

Financial performance is increasingly robust, with management targeting a return on equity of 12% and a cost-to-income ratio below 30%. Underpinned by a digital business model, BN Bank displays high efficiency.

Despite being more exposed to the commercial real estate sector than peers, BN Bank maintains a sound asset quality profile. The bank has developed expertise in the sector and the risk profile of its exposures remains low. As of Q2 2023, the Stage 3 ratio stood below 0.6%. While high inflation and higher rates will place pressure on the commercial real estate sector, we expect potentially higher impairments to be readily absorbed through the bank’s solid earnings capabilities.

BN Bank maintains strong prudential metrics, comfortable buffers to regulatory requirements and a stable funding profile. The bank has a largely retail deposit base, but the use of market funding is material, including secured funding through the covered-bond-issuing entities of the SpareBank 1 Alliance.

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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