Rating action

Scope Ratings UK Limited (Scope) has affirmed and published BN Bank’s issuer rating of A-, senior unsecured preferred debt rating of A- and senior unsecured non-preferred debt rating of BBB+, all with a Stable Outlook.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business model assessment: Focused (High). BN Bank is a digital bank serving both retail and corporate customers in Norway. In the retail market, the bank focuses on residential mortgage lending in eastern Norway while in the corporate market, the bank is a specialized commercial real estate lender operating mainly in the Oslo region. The bank is wholly owned by 5 member banks of the SpareBank 1 Alliance: SB1 Sør-Norge (42.48%), SB1 SMN (35.02%), SB1 Nord-Norge (9.99%), SB1 Østlandet (9.99%), and SB1 Østfold Akershus (2.52%). At 2024YE the bank had 141 employees and total assets of 52.5bn NOK.

Operating environment assessment: Very Supportive (Low). The assessment reflects Scope’s view of Norway where the bank solely operates. Norway is a relatively small open economy with one of the highest levels of per capita income in the world and low unemployment. A very strong government fiscal position provides ample capacity to support the economy when needed. The regulatory framework is well established and rigorous, and the central bank has a good track record of providing refinancing facilities to banks in times of stress. While competition is high, there is also a long history of cooperation among domestic banks.

Scope arrives at an initial mapping of bbb based on a combined assessment of the issuer’s operating environment and business model.

Long-term sustainability assessment (ESG factor): Developing. The assessment reflects Scope’s view that the issuer is embracing changes to ensure the long-term sustainability of its business model. Progress made may be tangible but does not warrant further credit differentiation.

As a fully digital bank, BN Bank’s digital capabilities remain strong and a core pillar of the bank as it continues to invest resources into technology. The bank also benefits from being able to leverage on the IT systems of the SpareBank1 Alliance. The owner banks are represented on the bank’s board of directors, contributing to the strategic direction of BN Bank. The bank demonstrates awareness of the potential risks stemming from sustainability related issues and has incorporated them into both strategic priorities and risk assessment procedures. BN Bank ensures that sustainability responsibilities are embedded throughout the organisation and supports the training and education of its staff. BN Bank continues to score highly on sector wide customer satisfaction surveys.

The long-term sustainability assessment leads to an adjusted rating anchor of bbb.

Earnings capacity and risk exposures assessment: Supportive (+1 notch). The assessment reflects Scope’s view that earnings capacity is stable through economic cycles and provides a strong buffer against losses. Risks are well managed and are highly unlikely to lead to losses capable of undermining the issuer’s viability.

BN Bank continues to display strong profitability and growth supported by a lean cost base and sound credit quality. For Q1 2025 the bank reported a return on equity of 13.5% and a cost-to-income ratio of 23.5%. The bank targets a return on equity above 13% and a cost income ratio of below 23%. Asset quality remains sound overall despite a more significant exposure to the commercial real estate sector compared to peers. The bank’s solid profitability continues to provide a shield against potential further softening of credit quality. The bank’s stage 3 ratio at Q1 2025 stood at 1.64%.

Financial viability management assessment: Comfortable (+1 notch). The assessment reflects Scope’s view that the issuer’s maintains comfortable buffer to relevant regulatory requirements and Scope expects it to continue to do so. The issuer’s financial viability is largely resilient to tail-risk events.

BN Bank’s capital position remains solid. At Q1 2025 the bank’s CET1 ratio stood at 17.9% and the leverage ratio was 7.6%, above their respective supervisory requirements of 15.74% and 3%. Following the implementation of CRR3, the bank expects its CET1 ratio to benefit by ca. 100bps. The bank continues to operate with a 70bps CET1 addon whilst it awaits approval of its new models for its corporate loans. BN Bank uses advanced internal rating-based models to calculate its risk weighted assets.

Deposits remain the bank’s primary source of funding. Deposit growth stood at 2% in the first quarter of 2025. The bank has implemented measures to increase its growth in deposits and strengthen its deposit coverage level. BN Bank’s liquidity metrics remain strong, with its liquidity coverage ratio standing well above requirements at 236% in Q1 2025.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that the risks to the current rating are balanced.

The upside scenario for the ratings and Outlooks is:

1. Further strengthening of market position accompanied by sustained profitable growth, without an increase in the bank’s risk profile, leading to a more positive assessment of the business model

The downside scenarios for the ratings and Outlooks are (individually or collectively):

1. A deterioration in operating conditions which materially impact asset quality, leading to a shift in the earnings capacity and risk exposures assessment
    
2. A significantly lowered ability to generate capital organically leading to less conservative management of capital buffers, leading to a shift in the financial viability management assessment
    
3. Loss of advantages from being affiliated with the SpareBank 1 Alliance

Debt ratings

Preferred senior unsecured debt: A-. The rating is aligned with the issuer rating and applies to senior unsecured debt ranking above other classes of senior unsecured debt.

Non-preferred senior unsecured debt: BBB+. The rating is one notch lower than the issuer rating, reflecting statutory subordination.

Environmental, social and governance (ESG) factors

Please refer to the ‘long-term sustainability assessment’ under the ‘key rating drivers’ section above for the ESG analysis.

All rating actions and rated entities

BN Bank

Issuer rating: A-, Stable

Preferred senior unsecured debt rating: A-, Stable

Non-preferred senior unsecured debt rating: BBB+, Stable

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/or Outlooks, (Financial Institutions Rating Methodology, 10 January 2025), 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: Andre Hansen, Analyst
Person responsible for approval of the Credit Ratings: Karlo Fuchs, Managing Director
The issuer Credit Rating/Outlook was first released by Scope Ratings on 8 August 2019. The Credit Rating/Outlook was last updated on 13 August 2024.
The preferred senior unsecured debt Credit rating/Outlook was first released by Scope Ratings on 8 August 2019. The Credit Rating/Outlook was last updated on 13 August 2024.
The non-preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 28 September 2021. The Credit Rating/Outlook was last updated on 13 August 2024.

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, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab 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. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.