Sparbanken Sjuharad AB

The stable outlook on Sparbanken Sjuhärad AB reflects our view that, in the next 12-24 months, the bank will maintain its established business position, with close ties to Swedbank continuing to support its high cost efficiency. This will allow the bank to continue to offer local customers the services of a universal bank and satisfy credit demand. In our base case, we expect the bank to continue to navigate any negative effects caused by the COVID-19 pandemic, with its RAC ratio likely to remain above 15% over the next two years and liquidity remaining robust. We could lower our rating if economic conditions meaningfully hamper the bank's capitalization beyond our current base-case expectations, and its projected RAC ratio trends below

... Swedbank will support its core local business. S&P Global Ratings expects the bank's close ties to Swedbank and strong regional position to continue to support revenue generation. As a result of Sparbanken SjuhSrad's size, Swedbank provides support by equipping the bank with lending and savings products, IT infrastructure, and, if needed, short-term liquidity. We consider that this long-standing partnership will remain in place as it supports Sparbanken SjuhSrad's earnings capacity and efficiency gains. The bank's relatively small size and focus on the Swedish region of Borss will continue to pose concentration risks, in our view. The bank's limited size and regional and single-name concentrations pose some risks to its core business activities. However, its relatively straightforward product offering, low level of nonperforming loans (NPLs) and loan losses, and adequate risk management somewhat offset these concentration risks, in our view....

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