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      FRIDAY, 19/01/2024 - Scope Ratings UK Ltd
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      Scope affirms Totens Sparebank's issuer rating of A- and changes Outlook to Positive

      Positive Outlook reflects material potential upside to business model following proposed merger with SpareBank 1 Ostlandet

      Rating action

      Scope Ratings UK Limited (Scope) has today affirmed the ratings of Totens Sparebank and changed the Outlooks to Positive:

      • Issuer rating of A-
         
      • Senior unsecured debt rating of A-
         
      • Senior unsecured (subordinated) debt rating of BBB+. This category includes debt statutorily issued as non-preferred senior.

      Scope has also affirmed the A- issuer rating of the bank’s covered bond funding entity, Totens Sparebank Boligkreditt, and changed the Outlook to Positive.

      Rating rationale

      On 15 January 2024, the boards of Totens Sparebank and SpareBank 1 Ostlandet approved a plan for merging the two banks. This follows announcements in early January on the intention to merge. The completion of the merger will require the respective supervisory boards of the banks to make the necessary resolutions at meetings on 22 February 2024. Regulatory approvals are also pending.

      With NOK 175bn in assets as of Q3 2023, SpareBank 1 Ostlandet, will act as the acquiring bank, and will acquire all the assets, rights and obligations of Totens Sparebank (NOK 22bn in assets, Q3 2023) upon completion of the merger. The merged bank will continue under the name of SpareBank 1 Ostlandet and be part of the SpareBank 1 Alliance, the largest banking alliance in Norway. The banks aim to complete the merger in Q3 2024.

      Scope considers the proposed merger to be credit positive for Totens Sparebank. Geographic and business diversification would increase, strengthening its business model. Further, the merged bank would be the fourth largest savings bank in the country, with a leading position in the Inland region. The merged bank would be better placed to manage increasing competition and address growing regulatory requirements. Further, the two banks share a common goal to support the regional economy and community in the Inland region.

      Outlook and rating-change drivers

      The Positive Outlook reflects the material potential upside to Totens Sparebank’s business model following the proposed merger with SpareBank 1 Ostlandet.

      What could move the rating up:

      • Completion of proposed merger as planned, with the bank benefitting from a significantly strengthened business model

      Given the Positive Outlook, what could lead to a revision of the Outlook to Stable:

      • Proposed merger does not proceed

      Overview of rating construct

      Operating environment: Very supportive

      Business model: Focused

      Initial mapping refinement: High

      Initial mapping: bbb/bbb+

      Long-term sustainability (ESG-D): Developing

      Adjusted anchor: bbb

      Earnings capacity and risk exposures: Supportive

      Financial viability management: Comfortable

      Additional rating factors: Neutral factor

      Stand-alone assessment: a-

      External support: Not applicable

      Issuer rating: A-

      Totens Sparebank Boligkreditt

      The A-/Positive issuer rating on Totens Sparebank Boligkreditt is aligned with that of Totens Sparebank reflecting Scope’s expectation that the covered bond funding entity would benefit from full support from its parent in case of need.

      Scope would upgrade Totens Sparebank Boligkreditt’s issuer rating in the case of an upgrade of the parent’s issuer rating. Conversely, the issuer rating could be downgraded in the case of a downgrade of the parent’s issuer rating or if in Scope’s view the expectation of parental support diminished.

      Stress testing & cash flow analysis
      No stress testing was performed. No cash flow analysis was performed.

      Methodology
      The methodology used for these Credit Ratings and Outlooks, (Financial Institutions Rating Methodology, 7 February 2023), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions - Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/uk-regulation. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

      Solicitation, key sources and quality of information
      The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
      The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings’ internal sources.
      Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
      Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.

      Regulatory disclosures
      These Credit Ratings and Outlooks are issued by Scope Ratings UK Limited at 52 Grosvenor Gardens, London, United Kingdom, SW1W 0AU, Tel +44 20 7824 5180. The Credit Ratings and Outlooks are EU-endorsed.
      Lead analyst: Pauline Lambert, Executive Director
      Person responsible for approval of the Credit Ratings: Nicolas Hardy, Executive Director
      The Totens Sparebank issuer Credit Rating/Outlook was first released by Scope Ratings on 30 October 2018. The Credit Rating/Outlook was last updated on 21 August 2023.
      The Totens Sparebank senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 30 October 2018. The Credit Rating/Outlook was last updated on 21 August 2023.
      The Totens Sparebank senior unsecured (subordinated) debt Credit Rating/Outlook was first released by Scope Ratings on 28 September 2021. The Credit Rating/Outlook was last updated on 21 August 2023.
      The Totens Sparebank Boligkreditt AS issuer Credit Rating/Outlook was first released by Scope Ratings on 30 October 2018. The Credit Rating/Outlook was last updated on 21 August 2023.

      Potential conflicts
      See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings.

      Conditions of use / exclusion of liability
      © 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.

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