Sparebanken Norge: a ground-breaking merger in the Norwegian savings bank space
Sparebanken Norge is now the largest domestic savings bank in Norway. The entity originated from the recently agreed legal merger of Sparebanken Vest and Sparebanken Sor. As of their first quarterly reports, in 1Q25, they have closed to 800,000 customers and NOK450bn in gross loans.
Sparebanken Norge uses the equity certified capital structure, a two-part structure broadly used in Norway, in which the primary capital is owned by the bank's society, consisting of original capital and retained earnings. The second part, ie, the equity certificate capital, represents paid-in capital from certificate holders plus associated reserves.
Sparebanken Norge is expected to report strong recurring earnings going forward driven by its strong regional presence, efficient operations, and digital growth, particularly through Bulder, its digital banking platform. Key capital & asset quality metrics
CET1 ratio of 17.9% and 16.1% (for Vest and Sor, respectively), comfortably above their minimum CET1 requirements of 14.8% and 14.9% under the Supervisory Requirement and Evaluation Process (SREP). Comfortable liquidity metrics, with an LCR ratio of 198% and NSFR of 123%.
Very strong asset quality with 0.37% and 1.06% of NPLs for Vest and Sor as of 12/2024, highlighting the solid features of the prime residential mortgage market in Norway.
Vest, the largest entity in the merger, has best-in-class profitability metrics with a 20.1% RoE and cost-to-income ratio of 27.7%.
Norway: macro & fiscal outlook
Solid GDP growth expected in 2025 (1.7%) and 2026 (1.6%), just slightly down from 2024 (2.1%), with a still-positive economic momentum driven by real wage growth and higher disposable income.
Stable outlook for the Norwegian banking sector with asset quality remaining sound. Market funding is a significant source of banking financing, making them sensitive to investor sentiment, but with still-strong capitalization thanks to regulatory changes.
The Norges Bank reduced its policy interest rate by a total of 50 basis points to 4%, by 25bp on 18 June 2025 and another 25bp on 17 September 2025, marking its first rate cut since 2020 from 4.5%, a 17-year-high, as the weakening of the NOK and pick-up in wage growth, coupled with expansionary fiscal policy have so justified maintaining rates when other central banks have already begun easing. The decision was driven by a faster-than-expected decline in inflation. Core inflation fell to 2.8% year-on-year in May, below the central bank's forecast of 3.1%, though still above the 2% target.
Sparebanken Vest and Sor covered bond programs
Sparebanken Norge (SNOBNO) will use the Norwegian legal framework and issue through a specialized credit institution, Sparebanken Norge Boligkreditt AS.
Sparebanken Norge Boligkreditt AS will hold the cover pool assets that back the bonds, providing strong segregation and hence protection for investors who will have direct recourse to the cover bond issuer.
SNOBNO covered bonds will be Aaa rated, supported by strong collateral metrics (Moody's collateral risk at 2.7% points at best-in-class asset quality), and the bank's substantial capital and liquidity buffers. Furthermore, the covered bond structure provides significant rating leeway (four notches by Moody's), ensuring that even in the event of a moderate downgrade in the bank's credit profile, the covered bonds would likely retain their top-Aaa rating.
Vest and Sor's cover pools are centered around prime residential assets (94.6% and 93.1% respectively). Moody's assigns a TPI leeway for the Aaa-rated covered bonds of four notches.
Regulatory treatment: SNOBNO's Covered Bond Program meets the requirements to be categorized in the European Covered Bond (Premium) Programme, Level 1 HQLA eligibility under LCR treatment, and ECB repo eligible.
Secondary market: Norwegian covered bonds are trading online or even inside German covered bonds. Norway's covered bonds issuance activity is the highest YtD in the EUR market among the Scandi countries. We have already seen ten EUR-denominated Norwegian covered bond deals YtD, with a total issued volume of EUR9.25bn, the third-largest issuance country YtD by volume, behind Germany and France, and the only country along with Sweden and Australia that has already surpassed its YtD issuance activity compared with 2024 as a whole.