Fitch upgrades NIBC to 'BBB+'; outlook stable

On Monday 17 June, Fitch Ratings upgraded NIBC Bank’s Long-Term Issuer Default Rating (IDR) to ‘BBB+’ from 'BBB' and its Viability Rating (VR) to ‘bbb+’ from 'bbb'. The outlook on the Long-Term IDR is Stable. NIBC’s long-term senior preferred debt rating is one notch above the Long-Term IDR at “A-“.

Key rating drivers according to Fitch Ratings:

• The upgrades reflect NIBC’s improved risk profile resulting from its de-risking process. The reduced concentrations to cyclical corporate sectors and increased exposure to low-risk Dutch residential mortgage loans is expected to lead to more resilient credit quality and less earnings variability.
• According to Fitch Ratings NIBC’s ratings reflect its niche franchise and business model, and stronger risk profile. Risk concentrations in cyclical sectors, while still significant, have been reduced. The ratings also reflect the bank's satisfactory profitability, adequate capital buffers, and stable funding, although this remains more confidence- and price-sensitive than those of peers.
• NIBC remains a niche bank compared to larger and more diversified peers. This is despite its steady expansion in residential mortgage lending, which now accounts for about two-thirds of total loans, and its retail business contributes the largest share of its operating income. The bank has narrowed its corporate offering. It now focuses on asset-based financing, in specific segments, in which it has considerable expertise.
• NIBC’s exposure to cyclical sectors has significantly decreased in recent years. This makes the bank less vulnerable while its well-performing residential mortgage lending activities cushion likely performance swings in its remaining cyclical corporate credit exposure.
• NIBC has modest levels of impaired assets but elevated risk concentrations through its Commercial Real Estate and Shipping exposure, together representing close to 15% of loans, which Fitch Ratings views as more vulnerable to an economic downturn.
• NIBC's earnings stability has improved following its de-risking process, which combined with good cost discipline and moderate loan impairment charges, has resulted in adequate profitability in recent years.