This rating action reflects Sparebanken Rogaland's (SR-Bank) sustainable improvement in profitability along with its cautious credit risk management, all underpinned by its dominant market position in the region of Rogaland (south-west of Norway). SR-Bank, the second largest savings bank in Norway after Gjensidige NOR, is the leading player in its local market. It has also been an active and fruitful member of the SpareBank 1 Alliance. According to Moody's, membership in the Alliance benefited the bank, especially in terms of cost synergies and transfer of know-how.

 

In recent years, profitability has been a key management priority, especially to counteract negative pressures on net interest margins. Along its preparation work for Basel 2, SR-Bank has been re-pricing its corporate loan portfolio, which positive effect is visible in its third quarter results 2003. Today, corporate lending is very selective. In addition, Moody's highlighted the successful revenue diversification resulting from management strict cross-selling efforts, including in off-balance sheet savings related-products. As a result, SR-Bank enjoys a lower reliance on net interest activities, even though cross-selling remains a difficult and slow exercise.

 

SR-Bank is, finally, characterised by a good risk profile. Risk management has been traditionally conservative while procedures were enhanced and strengthened over time. Despite the more difficult economic environment, asset quality remains solid. Moody's added that ambitions in shipping are modest and the bank's exposure to Norway's troubled fish farming industry is limited.

 

The rating agency cautioned that SR-Bank's growth prospects remain challenged by intense competition, especially in light of Norway's restructuring banking industry. A prudent management of liquidity and funding is also essential given the ongoing savings disintermediation in Norway and the consequent increasing reliance on market funds.

 

The following ratings were upgraded:

- Long-term deposit rating to A2 from A3

- Short-term deposit rating to Prime-1 from Prime-2

- Financial strength rating to C+ from C