Swedish Savings Bank Sparbanken Rekarne Assigned 'A-' Rating; Outlook Stable

On 4 December 2018, Nordic Credit Rating assigned its 'A-' long-term and 'N-1+' short-term issuer credit ratings to Sparbanken Rekarne, a Swedish regional savings bank. The outlook is stable. In addition, the bank's senior unsecured debt was rated 'A-'. To download the full rating report, visit our ratings and research page.

Rating rationale
Our 'A-' long-term issuer rating on Sparbanken Rekarne reflects the bank's regional market and its relationship and cooperation with 50% owner, Swedbank AB. Rekarne's operations are focused on private customers and small and medium-sized enterprises in Eskilstuna and Strängnäs counties in central Sweden, with a local population of 140,000 inhabitants. As with other savings banks, the arrangement with Swedbank provides material diversification of product offerings, shared IT costs and the opportunity to finance mortgage loans via Swedbank Hypotek AB. We view Rekarne’s cooperation with Swedbank as significant as it supports earnings, market position, the product offering, funding and liquidity and view the ownership as positive for the credit rating. However, we believe that the ownership and return requirements of Swedbank have contributed to the bank having a slimmer capital structure than similar peers across the Nordic region. The bank has total assets of SEK 13.0bn (SEK 22.6bn including transferred loans). Earnings metrics are in line with similar savings banks, and the bank's strong record on loan losses and impairment is expected to continue, given low interest rates and anticipated economic growth in the region.

Outlook
Our stable outlook for Rekarne reflects expectations of population and economic growth in the bank's primary market and the bank's modest risk appetite. We expect the bank to maintain or improve capital ratios and to continue its relationship with Swedbank. While we apply a notch of ownership support in the rating, improvements in the standalone credit assessment are likely to reduce the perceived upside from ownership.

Potential positive rating drivers

  • A rating upgrade is unlikely at this time given the current capitalisation and ownership of the bank.
  • Improvements in the standalone credit assessment are likely to reduce the perceived upside from ownership.

Potential negative rating drivers

  • Material economic changes in the region, such as factory closures, leading to reduced economic activity and employment.
  • Reduced cooperation with or ownership by Swedbank.
  • Material changes in underwriting leading to increased credit risk concentration.

The methodology used for this rating was NCR's Financial Institutions Rating Methodology, published in August 2018.

If you have any questions, please contact:
Sean Cotten, Lead analyst, +46 732 32 43 78, sean.cotten@nordiccreditrating.com
Geir Kristiansen, Analyst, +47 90 78 45 93, geir.kristiansen@nordiccreditrating.com

 

Nordic Credit Rating AS is a credit rating agency headquartered in Oslo with a branch in Stockholm. The company provides credit ratings to companies and financial institutions in the Nordic region, and bases its analysis on local insights. Nordic Credit Rating is registered with the European Securities and Markets Authority (ESMA).

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Our 'A-' rating on Sparbanken Rekarne reflects the bank's relative capitalisation, its regional operating environment and the potential for ownership support. The bank is growing by retaining a higher share of loans in its balance sheet and has demonstrated access to capital markets with two senior unsecured issues of SEK 500m in 2018 to complete its retail deposit base.
Sean Cotten, Lead Analyst at Nordic Credit Rating AS (NCR) and primary analyst for Sparbanken Rekarne