Stockholm, February 25, 2021 -- Moody's Investors Service has today affirmed Svenska Handelsbanken AB's
(Handelsbanken) long-term bank deposit and senior unsecured debt
ratings at Aa2 with a stable outlook, as Moody's expects the
bank's financial profile to demonstrate continued resilience to
the coronavirus induced economic downturn. All other ratings,
the Baseline Credit Assessment (BCA) and Adjusted BCA of a2 and long-term
Counterparty Risk Assessment (CRA) of Aa1(cr) were also affirmed.
The affirmation of the bank's ratings reflects Handelsbanken's
strong asset quality and solid capital balanced against its high reliance
on market funding. Moody's also expects that the recent cost
initiatives will help restore the bank's efficiency and profitability
over the medium term.
The full list of the affected ratings can be found at the end of this
press release.
RATINGS RATIONALE
BASELINE CREDIT ASSESSMENT (BCA)
Handelsbanken's a2 BCA reflects the bank's strong asset quality and solid
capitalization (tangible common equity / risk weighted assets at 25.0%
at year-end 2020), which Moody's expects will remain
resilient despite the coronavirus-induced economic downturn.
Profitability will improve gradually as the bank's cost-cutting
initiatives take effect. Like many Nordic peers, the bank's
BCA is constrained by its high reliance on market funding (market funds
/ tangible banking assets at 39.1% at year-end 2020).
Handelsbanken's BCA continues to benefit from a rare positive corporate
behaviour notch because of its track record of exemplary long-term
stewardship that has translated into below market credit costs over various
credit cycles. Moody's expects the bank to continue demonstrating
these characteristics but will closely monitor the implementation of the
bank's recent strategy update for any potential dilution of the bank's
historical strengths.
DEPOSIT, SENIOR UNSECURED AND JUNIOR DEBT RATINGS
The bank's long-term deposit and senior unsecured debt ratings
of Aa2 incorporate Moody's expectations of the bank's issuance of additional
loss-absorbing debt in response to bank-specific MREL (Minimum
Requirements for own funds and Eligible Liabilities). They include
a two-notch uplift from Moody's Advanced Loss Given Failure
(LGF) analysis, reflecting Moody's view that the bank's junior
depositors and senior creditors face a very low loss given failure.
Our moderate assessment of government support translates into a further
notch uplift included in these ratings.
The long-term junior senior (i.e. senior non-preferred)
and subordinated debt ratings of A3 reflect the limited subordination
cushion for these classes in our LGF analysis. This indicates a
high loss severity for these instruments in the event of the bank's failure,
leading to a position of one notch below the bank's Adjusted BCA.
Moody's also incorporates additional notching for preference share
instruments reflecting the coupon features. Moody's assumes a low
probability of government support for these instruments, resulting
in no additional uplift.
OUTLOOK
The outlook on Handelsbanken's ratings is stable as Moody's expects
the bank's financial performance to remain broadly resilient in the context
of the coronavirus-induced economic downturn. Moody's
expects that the bank will preserve its conservative risk strategy and
exemplary stewardship in running the bank also going forward but will
closely monitor the implementation of the recent strategy update for any
potential dilution of these historical strengths.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Handelsbanken's BCA and ratings could be upgraded if the bank were
to significantly improve its leverage ratio, along with its funding
and liquidity profiles in a sustainable way.
Conversely, the bank's BCA and ratings could come under pressure
if the bank's exemplary stewardship, franchise or operations are
diluted by the recent strategy update and reorganisation.
The BCA and the ratings could also be downgraded if the Swedish housing
market were to go through a significant fall, triggering a long
period of adverse economic developments in Sweden, for instance,
of slow or stagnant growth.
The long-term senior unsecured debt ratings could also be downgraded
if the subordination requirements under the Swedish MREL framework are
lowered following the implementation of the revised Bank Recovery and
Resolution Directive (BRRD2) in Sweden.
LIST OF AFFECTED RATINGS
Issuer: Stadshypotek AB
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed Aa1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Long-term Counterparty Risk Assessment,
affirmed Aa1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Commercial Paper, affirmed P-1
..No Outlook assigned
Issuer: Svenska Handelsbanken AB
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed Aa1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Long-term Bank Deposits,
affirmed Aa2, outlook remains Stable
....Short-term Bank Deposits,
affirmed P-1
....Short-term Deposit Note/CD Program,
affirmed P-1
....Long-term Counterparty Risk Assessment,
affirmed Aa1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
....Long-term Issuer Rating,
affirmed Aa2, outlook remains Stable
....Baseline Credit Assessment, affirmed
a2
....Adjusted Baseline Credit Assessment,
affirmed a2
....Senior Unsecured Regular Bond/Debenture,
affirmed Aa2, outlook remains Stable
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed Aa2, outlook remains Stable
....Senior Unsecured Medium-Term Note
Program, affirmed (P)Aa2
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)Aa2
....Junior Senior Unsecured Regular Bond/Debenture,
affirmed A3
....Junior Senior Unsecured Medium-Term
Note Program, affirmed (P)A3
....Backed Junior Senior Unsecured Medium-Term
Note Program, affirmed (P)A3
....Subordinate Regular Bond/Debenture,
affirmed A3
....Subordinate Medium-Term Note Program,
affirmed (P)A3
....Backed Subordinate Medium-Term
Note Program, affirmed (P)A3
....Preferred Stock Non-Cumulative,
affirmed Baa3 (hyb)
....Preferred Stock Non-Cumulative
Medium-Term Note Program, affirmed (P)Baa3
....Commercial Paper, affirmed P-1
....Other Short Term, affirmed (P)P-1
....Backed Other Short Term, affirmed
(P)P-1
..Outlook Action:
....Outlook remains Stable
Issuer: Svenska Handelsbanken, New York Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed Aa1
....Short-term Counterparty Risk Ratings,
affirmed P-1
....Long-term Bank Deposits,
affirmed Aa2, outlook remains Stable
....Long-term Deposit Note/CD Program
Takedown, affirmed Aa2, outlook remains Stable
....Long-term Counterparty Risk Assessment,
affirmed Aa1(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-1(cr)
..Outlook Action:
....Outlook remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Louise Lundberg
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service (Nordics) AB
Norrlandsgatan 20
Stockholm 111 43
Sweden
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Sean Marion
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service (Nordics) AB
Norrlandsgatan 20
Stockholm 111 43
Sweden
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
