Despite generous capital distributions, most Nordic banks have retained the robust capital levels supported by strong earnings that have historically underpinned bank ratings in the region. Economic growth in Denmark and Iceland is expected to slightly outpace that in the rest of the region. We anticipate that muted economic growth, higher-than-targeted inflation, and lower real disposable income will weigh on Nordic households and businesses and weaken banks' business prospects. About three-quarters of the Nordic banks we rate have a stable outlook, in line with our broadly stable outlook for the sector.