SpareBank 1 Nordmøre

Regulatory Filings • Jan 21, 2022

Credit Rating Announcement 21 January 2022

Scope affirms SpareBank 1 Nordmore's A- issuer rating with Stable Outlook

Rating affirmation reflects bank's sound credit fundamentals and successful completion of merger with Surnadal Sparebank.

Rating action

Scope Ratings UK Limited ("Scope Ratings") has today affirmed SpareBank 1 Nordmore's issuer rating of A-, its preferred senior unsecured debt rating of A- and its non-preferred senior unsecured debt rating of BBB+, all with a Stable Outlook.

Rating rationale

The A- issuer rating of SpareBank 1 Nordmore reflects the following considerations:

• A well-established local savings bank franchise in central Norway with a focus on retail customers and mortgage lending supports earnings resilience. In May 2021, SpareBank 1 Nordvest and Surandal Sparebank merged, with the new bank being renamed to SpareBank 1 Nordmore. The merger further strengthens the bank's market position in its local area and provides growth opportunities. ●
• Membership in the SpareBank 1 Alliance enables the bank to meet the broader financial needs of clients and provides important economies of scale, particularly in digital capabilities. Collectively, the alliance represents the second largest provider of financial products and services in the country. ●
• Solid profitability underpinned by good cost efficiency and sound asset quality. FY2021 results will be impacted by merger costs but material cost savings are expected from 2022 onwards. For 9M 2021, the reported return on equity was 5.5% based on combined results from the merger date. While the economic uncertainty caused by the pandemic has had a limited impact on the loan book to date, the bank maintains discretionary credit provisions. ●
• Reassuring prudential metrics, with a policy to manage growth to preserve sound prudential metrics and meet regulatory requirements. Minimum solvency requirements for Norwegian banks are comparatively high and are set to rise following announced increases in the countercyclical buffer rate and the systemic risk buffer for banks using standardised models such as SpareBank 1 Nordmore. As of 30 September 2021, the bank's CET1 capital and leverage ratios were 16.9% and 10.7%, respectively (proportional consolidation basis). ●

Outlook and rating-change drivers

The Stable Outlook reflects the ongoing resilience of the bank's business and operating performance as well as the successful merger between the former SpareBank 1 Nordvest and Surnadal Sparebank.

What could move the rating up:

● Sustainable and profitable growth with greater diversification of the loan portfolio

What could move the rating down:

• A deterioration in the operating environment which impacts earnings
• A change in strategic direction which increases the bank's risk profile

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

External support: Not applicable

Issuer Rating: A-

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 (Bank Rating Methodology, 26 January 2021) is available on https://www.scoperatings.com/#!methodology/list.

Scope Ratings GmbH and Scope Ratings UK Limited apply the same methodologies/models and key rating assumptions for their credit rating services, while Scope Hamburg GmbH's methodologies/models and key rating assumptions are different from those of Scope Ratings GmbH and Scope Ratings UK Limited.

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-andpolicies/rating-scale. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://www.scoperatings.com/#!governance-and-policies/regulatory-UK. 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-scale. 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://www.scoperatings.com/#!methodology/list.

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 the 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/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures

These Credit Ratings and/or 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/or Outlooks are EU-endorsed.

Lead analyst: Pauline Lambert, Executive Director.

Person responsible for approval of the Credit Ratings: Nicolas Hardy, Executive Director.

The issuer Credit Rating/Outlook was first released by Scope Ratings on 9 December 2019. The Credit Rating/Outlook was last updated on 3 March 2021.

The preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 9 December 2019. The Credit Rating/Outlook was last updated on 28 September 2021.

The non-preferred senior unsecured debt Credit Rating/Outlook was first released by Scope Ratings on 28 September 2021.

Potential conflicts

See www.scoperatings.com under Governance & Policies/UK Regulation/Disclosures for a list of potential conflicts of interest related to the issuance of Credit Ratings.

Conditions of use / exclusion of liability

© 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services 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.

About Scope Group

With more than 250 employees operating from offices in Berlin, Frankfurt, Hamburg, London, Madrid, Milan, Oslo and Paris, Scope Group is the leading European provider of independent credit ratings, ESG and fund analysis. Based on forward-looking and innovative methodologies, Scope offers a European perspective that contributes to greater diversity of opinion for institutional investors worldwide. Scope Ratings is the largest European credit rating agency, registered in accordance with EU and UK rating agency regulation, offering opinion-driven and non-mechanistic credit risk analysis. Scope ESG Analysis provides tools for analysing and reporting on ESG impact and risk, as well as second-party opinions on green, social and sustainable bonds. Scope Fund Analysis rates more than 10,000 funds and asset managers across all major asset classes. The shareholders of Scope Group include CEO and founder Florian Schoeller and anchor shareholder Stefan Quandt, numerous senior personalities in European finance and industry as well as institutional investors from several European countries. More on www.scopegroup.com

Contact

Analyst Team leader Pauline Lambert Marco Troiano

p.lambert@scoperatings.com m.troiano@scoperatings.com

Scope Ratings UK Ltd • 16 Great Queen Street • WC2B 5AH Covent Garden, London

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