Stockholm, April 02, 2019 -- Moody's Investors Service (Moody's) has affirmed all ratings of Swedbank
AB (Swedbank), including the long-term deposit and senior
unsecured debt ratings of Aa2. The rating agency has also changed
the outlook on Swedbank's long-term deposit, senior
unsecured debt and long-term issuer ratings to negative from stable.
The rating action follows the sequence of events around alleged money
laundering, and governance issues that resulted in the Swedish Economic
Crime Authority (SECA) undertaking preliminary investigations, including
into whether the bank had mislead the public and markets regarding the
occurrence of money laundering in the bank's Baltic operations.
The sequence of events also lead to the departure of its previous President
and CEO.
The affirmation reflects the strength and expected resilience of Swedbank's
franchise and financial profile, as strong asset quality,
capitalization and profitability remain supportive of the bank's
creditworthiness. Likewise, the affirmation also recognizes
that the bank has already taken steps to tighten internal control functions
and address any money laundering failures.
The negative outlook reflects, nevertheless, potential reputational
and financial risks that may arise from potential investigations and regulatory
penalties, in addition to the need to repair trust with customers,
investors and counterparties.
The full list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
The rating affirmation primarily reflects the strength of Swedbank's franchise
and financial profile. Swedbank's a3 BCA is underpinned by
strong asset quality, with a focus on Swedish mortgages, which
Moody's considers low-risk, solid capitalisation, and
robust recurring earnings. However, similarly to many Nordic
peers, the BCA also reflects the bank's high reliance on market
funding.
The affirmation of the deposit and senior unsecured debt ratings also
reflects Moody's Advanced Loss Given Failure (LGF) analysis, giving
three notches of uplift to the deposit and senior unsecured debt ratings.
Furthermore, one notch of government support is incorporated into
these ratings given Moody's assessment of moderate probability of
support from the Swedish government.
NEGATIVE OUTLOOK
The negative outlook reflects the balance of risks from potential further
investigations and regulatory penalties, in addition to the task
of repairing trust of customers and investors. Besides the financial
impact that could result from any monetary penalties, Swedbank faces
heightened reputational risks, given its response to previous concerns
by external stakeholders, which have cast doubts over the corporate
culture of the bank, and could in turn reduce the confidence of
some customers, investors and counterparties.
WHAT COULD CAUSE RATINGS TO GO DOWN
The ratings could be downgraded if further concerns come to light regarding
governance, control functions or compliance, along with any
indications of a renewed strategy resulting in heightened credit or operational
risks. The ratings could be downgraded were there: (i) a
sustained loss in clients, business or investor confidence,
exerting pressure on the bank's financial profile, (ii) heightened
risks of a significant fine or operational constraints that would reduce
the bank's earnings or capital, or (iii) signs that funding becomes
significantly more costly or access to certain markets becomes more limited.
The long-term deposit and senior unsecured debt ratings could also
be downgraded if the Swedish subordination requirements under MREL were
to fall, for instance, due to harmonization with proposed
EU rules.
WHAT COULD CHANGE THE OUTLOOK TO STABLE
The outlook could return to stable if the company demonstrated it had
addressed shortcomings and associated risks have dissipated without a
material negative impact on Swedbank's financial profile.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
LIST OF ALL AFFECTED RATINGS
Issuer: Swedbank AB
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed a3
.... Baseline Credit Assessment, Affirmed
a3
....Long-term Deposit Note / CD Program,
Affirmed (P)Aa2
....Short-term Deposit Note / CD Program,
Affirmed P-1
....Short-term Deposit Note / CD Program,
Affirmed (P)P-1
....Other Short-term, Affirmed
(P)P-1
....Commercial Paper, Affirmed P-1
.... Long-term Counterparty Risk Assessment,
Affirmed Aa2(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Counterparty Risk Rating,
Affirmed Aa2
.... Short-term Counterparty Risk Rating,
Affirmed P-1
.... Long-term Issuer Rating,
Affirmed Aa2, Outlook Changed To Negative From Stable
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Aa2
....Subordinate Medium-Term Note Program,
Affirmed (P)Baa1
....Pref. Stock Non-cumulative
Preferred Stock, Affirmed Ba1 (hyb)
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa2, Outlook Changed To Negative From Stable
....Subordinate Regular Bond/Debenture,
Affirmed Baa1
....Long-term Bank Deposits,
Affirmed Aa2, Outlook Changed To Negative From Stable
.... Short-term Bank Deposits,
Affirmed P-1
..Outlook Action:
.... Outlook Changed To Negative From Stable
Issuer: Swedbank AB, New York Branch
..Affirmations:
.... Long-term Deposit Note / CD Program,
Affirmed Aa2, Outlook Changed To Negative From Stable
..Outlook Action:
.... Outlook Changed To Negative From Stable
Issuer: Swedbank Mortgage AB
..Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed a3
.... Baseline Credit Assessment, Affirmed
a3
.... Long-term Counterparty Risk Assessment,
Affirmed Aa2(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Counterparty Risk Rating,
Affirmed Aa2
.... Short-term Counterparty Risk Rating,
Affirmed P-1
.... Long-term Issuer Rating,
Affirmed Aa2, Outlook Changed To Negative From Stable
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Aa2
....Other Short-term, Affirmed
(P)P-1
..Outlook Action:
.... Outlook Changed To Negative From Stable
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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
