Pareto Bank’s BBB issuer rating reflects a focused commercial banking business specialising primarily in real estate and corporate financing for medium-sized Norwegian companies, with a strong track record of operating performance.

The bank generates robust returns, underpinned by a strategic priority to achieve a level of profitability which provides strong capacity to absorb credit costs and to support growth. Management targets a return on equity of 15% over the long term. Asset quality is sound, reflecting the bank’s prudent underwriting criteria. While the cost of risk is subject to higher variability than peers due to the less granular and more cyclical nature of its credit exposures, the bank has a history of low credit losses. As of Q2 2023, the Stage 3 exposure ratio stood at 1.6%.

Through earnings retention and controlled lending growth, the bank maintains a strong solvency position in line with relatively high requirements. Management is committed to ensuring appropriate buffers to regulatory requirements. Given its business activities and funding profile, Scope considers the bank to be more sensitive to investor sentiment. At the same time, the bank maintains reassuring liquidity metrics.

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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