London, 01 September 2017 -- Moody's Investors Service has today affirmed the long-term deposit
ratings, long-term senior unsecured debt ratings and Baseline
Credit Assessments (BCAs) of Nordea Bank AB (Aa3/Aa3 stable, a3),
Svenska Handelsbanken AB (Aa2/Aa2 stable, a2), SEB (Aa3/Aa3
stable, a3), Swedbank AB (Aa3/Aa3 stable, a3) and Länsförsäkringar
Bank AB (publ) (A1/A1 stable, a3), as we expect the banks
to be broadly resilient to the elevated risks in the residential housing
market and household sector in Sweden (LT issuer rating Aaa). Moody's
has captured these elevated risks by lowering its Banking System Macro
Profile score for Swedish banks to "Strong+" from "Very Strong-".
The rating outlooks of all these five banks remain stable. The
ratings of other rated Swedish banks remain unaffected.
Concurrently, Moody's placed the A2 (stable) long-term
deposit ratings, the baa3 BCA and the Aa3(cr) Counterparty Risk
Assessment (CRA) of SEB AG, SEB's German subsidiary,
on review for upgrade. SEB has communicated its plan to integrate
most of its operations in Germany into a single branch as of 1 January
2018. The review for upgrade reflects the rating agency's assessment
of a high likelihood that this streamlining of the bank's German
operations will lead to greater integration with SEB over time,
and to some degree of convergence in credit quality between the German
and Swedish entities.
The full list of the affected ratings can be found at the end of this
press release.
RATINGS RATIONALE
MACRO PROFILE CHANGE
A primary driver for today's rating affirmations is the expected
resilience of the banks to a potential deterioration in credit conditions
in Sweden due to the growing embedded risks in the housing market.
Should house prices correct, confidence, household spending,
and economic growth would weaken, thereby dampening repayment capacity.
These growing risks have led the rating agency to lower its score for
the Swedish Banking System Macro Profile, a rating input to determine
the banks' credit assessments, to "Strong+" from "Very
Strong-".
Moody's assessment is based on our view that the rapid pace and
extent of house price appreciation (increasing by more than 30%
over the last three years), and household indebtedness (reaching
183% of disposable income by the end of 2016) have now attained
untested levels in Sweden. This could pose material challenges
in the event of unexpected economic developments or when the interest
rate cycle turns. While Moody's recognizes that the pace
of house price appreciation has moderated in recent months and that initiatives
have been taken by the regulatory authorities and the banks, the
extent to which household indebtedness is stretched creates latent risks
to the economy and the banks.
Sweden's Macro Profile of "Strong+" also takes
into consideration other factors, such as the funding conditions
of the banking industry, where Moody's captures the risks
posed by the banks' high dependence on market funding, which
expose them to shifts in investor sentiment and refinancing risks.
Conversely, the Macro Profile also captures the benefits of the
concentrated structure of the system, as it protects the banks'
pricing power and allows them to generate more robust earnings than peers.
Please refer to our "Sector In-Depth; Sweden Macro Profile:
Strong+; https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1087299)
for further detail.
Under Moody's bank rating methodology, the Macro Profile captures
the relative risks of the banks' operating environment and reflects
Moody's view that bank failures are very often associated with systemic
crises, and driven by macroeconomic and system-wide,
rather than idiosyncratic factors. Moody's country and banking
industry analysis focuses on economic strength, institutional strength,
susceptibility to event risk, credit conditions, funding conditions
and industry structure.
RATIONALE BEHIND THE AFFIRMATION OF RATINGS OF THE FIVE SWEDISH BANKS
Despite the elevated risks in the Swedish economy and the sensitivity
to potential adverse economic conditions, Moody's has affirmed the
four large Swedish banks' and Länsförsäkringar Bank's
ratings. The main reason is protective features in the banks'
underwriting standards, the households' high wealth levels
despite rising leverage and a very strong payment culture. In addition,
in Moody's opinion, the banks' generally have sufficient buffers
against those risks, in terms of robust capital and profitability
to ensure that the key financial indicators remain in line with Moody's
expectations for the respective rating levels.
Additional bank-specific reasons for the affirmation of ratings
are outlined below (all key financial indicators are as of Q2 2017).
Nordea Bank AB
The rating affirmation of Nordea Bank AB (Nordea Bank) (a3 baseline credit
assessment (BCA), Aa3 stable long-term (LT) deposit and senior
unsecured debt ratings, Aa2(cr) LT Counterparty Risk Assessment
(CRA)) reflects the bank's diversified regional footprint in the
Nordic region (with 31% of its lending excluding reverse repos
in Sweden), its stable and resilient earnings stream, solid
operational efficiency and credit quality, counterbalanced by the
bank's high reliance on market funding.
We assess that Nordea's solid credit quality, adequate capitalisation
(22.7% Tangible Common Equity (TCE) to Risk-Weighted
Assets (RWAs)), and stable and resilient earnings stream (0.6%
Net Income (NI) to Tangible Banking Assets (TBAs)) provide sufficient
buffers against risks embedded in the Swedish operating environment.
Nordea Bank's Aa3 LT deposits and senior unsecured debt ratings include
a two-notch uplift resulting from our advanced Loss Given Failure
(LGF) analysis, and one notch from our moderate assessment of government
support.
Svenska Handelsbanken AB
The rating affirmation of Svenska Handelsbanken AB (Handelsbanken) (a2
BCA, Aa2 stable LT deposit and senior unsecured debt ratings,
Aa1(cr) LT CRA) reflects the bank's very strong credit quality,
which we expect to remain as it expands outside Sweden, as well
as its resilient earnings and a solid capital position. However,
similarly to many Nordic peers, these inherent strengths are counterbalanced
by the bank's high reliance on market funding.
Moody's expects that Handelsbanken's very strong credit quality,
solid capital position (26.3% TCE/RWAs) and stable earnings
(0.6% NI/TBAs), which are supported by a significant
contribution from the bank's international operations, provide
resilience against the elevated risks in Sweden.
Handelsbanken's Aa2 LT deposit and senior unsecured debt ratings include
a two-notch uplift resulting from our advanced LGF analysis,
as well as an additional notch resulting from our moderate assessment
of government support.
SEB
The rating affirmation of SEB (a3 BCA, Aa3 stable LT deposit and
senior unsecured debt ratings, Aa2(cr) LT CRA) reflects the bank's
strong credit quality, solid capitalisation and improved recurring
earnings, in addition to which the bank's focus on corporate banking
add limited earnings cyclicality. These positive credit attributes
are balanced against the bank's high reliance on market funding.
Moody's expects SEB's strong credit quality, solid capitalisation
(21.6% TCE/RWAs) and improved recurring earnings (0.7%
NI/TBAs) to provide a sufficient buffer against the uptick in risk in
Sweden.
SEB's Aa3 LT deposits and senior unsecured debt ratings include a two
notch uplift resulting from our advanced LGF analysis and an additional
notch due to our moderate assessment of government support.
Swedbank AB
The rating affirmation of Swedbank AB (Swedbank) (a3 BCA, Aa3 stable
LT deposit and senior unsecured debt ratings, Aa2(cr) LT CRA) captures
the bank's strong credit quality and stable earnings, underpinned
by its established franchise in Sweden and the Baltic countries.
However, similarly to many Nordic peers, the BCA is counterbalanced
by the bank's high reliance on market funding.
Moody's is of the opinion that the bank's strong credit quality,
with mortgages accounting for more than 60% of lending, and
solid regulatory capitalisation (29.6% TCE/RWAs),
along with its stable and recurring earnings (0.8% NI/TBAs)
will provide sufficient buffers against the increased risks in the Swedish
operating environment. Swedbank has also reduced its reliance on
market funding compared to previous years.
Swedbank's Aa3 LT deposit and senior unsecured debt ratings include a
two-notch uplift resulting from our advanced LGF analysis and one
notch from our moderate assessment of government support.
Länsförsäkringar Bank AB (publ) (LF Bank)
The rating affirmation of LF Bank (a3 BCA, A1 stable LT deposit
and senior unsecured ratings, Aa3(cr) LT CRA) is driven by an increasingly
diversified franchise in terms of revenues and profitability. The
lender benefits from a very high degree of cross selling with the regional
insurance companies of the Länsförsäkringar Alliance,
and a funding profile that is dominated by sticky deposits and covered
bonds, which Moody's considers to be very stable in Sweden.
Moody's is of the opinion that the bank's consistent financial
performance, with strong asset quality (mortgages are 75%
of lending), high capitalization (20.7% TCE/RWAs),
and modest but stable profitability (0.4% NI/TBAs) will
provide resilience against the moderately higher risks in Sweden.
The long-term ratings reflect the large cushion of senior debt
providing loss absorption to creditors, which results in a two-notch
uplift of the long-term senior ratings over the adjusted BCA of
the bank, in accordance with our advanced LGF analysis. LF
Bank, which is not considered a systemically important bank in Sweden,
does not benefit from any government support uplift.
WHAT COULD MOVE THE RATINGS OF THE FIVE SWEDISH BANKS UP
Moody's does not expect any immediate upward pressure on the ratings of
the affected institutions, as implied by the stable outlook on the
banks' ratings.
However, bank outlooks could be revised to positive if the affected
banks were to significantly improve their leverage ratios, and/or
funding and liquidity profiles in a sustainable way going forward.
WHAT COULD CHANGE THE RATINGS OF THE FIVE SWEDISH BANKS DOWN
The ratings could be lowered if trends in house prices and household indebtedness
were to continue unabated, or if there were any development that
would increase the risk of triggering a house price correction and broader
economic implications.
The BCAs of the banks could also come under pressure for other reasons
unrelated to housing, such as a severe decline in profitability
or, given the banks' material dependence on wholesale funding,
if there were indications that refinancing could become more difficult
and significantly more costly.
RATIONALE BEHIND THE REVIEW FOR UPGRADE ON SEB AG
SEB has communicated its plan to integrate most of its operations in Germany
in a single branch as of 1 January 2018. The review for upgrade
reflects the rating agency's assessment of a high likelihood that the
streamlining of the bank's German operations with the SEB group
will lead to greater integration as well as some degree of convergence
in credit quality between the German and Sweden entities. We also
see a potential for the capitalisation of SEB AG to strengthen after the
transaction. Moody's aims to conclude the review for upgrade
on SEB AG around the time of the transaction.
The review process will focus on the degree to which the operations of
the German entity will be integrated with its parent and the importance
that the parent bank is likely to attach to the German entity, which
will inform our assessment of affiliate support probability.
Nordea Bank AB is headquartered in Stockholm, Sweden, with
total assets of EUR 616 billion (USD 649 billion) as at 31 December 2016.
Svenska Handelsbanken AB is headquartered in Stockholm, Sweden,
with total assets of SEK 2,628 billion (USD 289 billion) as at 31
December 2016.
SEB is headquartered in Stockholm, Sweden, with total assets
of SEK 2,621 billion (USD 288 billion) as at 31 December 2016.
Swedbank AB is headquartered in Stockholm, Sweden, with total
assets of SEK 2,154 billion (USD 237 billion) as at 31 December
2016.
Länsförsäkringar Bank is headquartered in Stockholm,
Sweden, with total assets of SEK 276 billion (USD 30 billion) as
at 31 December 2016.
SEB AG (a subsidiary to SEB) is headquartered in Frankfurt, Germany,
with total assets of EUR 20 billion (USD 21 billion) as at 31 December
2016.
LIST OF AFFECTED RATINGS
Issuer: Svenska Handelsbanken AB
Affirmations:
....LT Issuer Rating, Affirmed Aa2 Stable
....LT Bank Deposits, Affirmed Aa2 Stable
....ST Bank Deposits, Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa2 Stable
....BACKED Senior Unsecured Regular Bond/Debenture,
Affirmed Aa2 Stable
....Subordinate, Affirmed A3
....Senior Unsecured MTN Program, Affirmed
(P)Aa2
....BACKED Senior Unsecured MTN Program,
Affirmed (P)Aa2
....Subordinate MTN Program, Affirmed
(P)A3
....BACKED Subordinate MTN Program,
Affirmed (P)A3
....BACKED Junior Subordinate MTN Program,
Affirmed (P)Baa1
....Other Short Term, Affirmed (P)P-1
....Pref. Stock Non-cumulative
MTN Program, Affirmed (P)Baa2
....Pref. Stock Non-cumulative,
Affirmed Baa2 (hyb)
....ST Deposit Note/CD Program, Affirmed
P-1
....Commercial Paper, Affirmed P-1
....Adjusted Baseline Credit Assessment,
Affirmed a2
....Baseline Credit Assessment, Affirmed
a2
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
Outlook Actions:
....Outlook, Remains Stable
Issuer: Svenska Handelsbanken, Inc.
Affirmations:
....BACKED Commercial Paper, Affirmed
P-1
Issuer: Svenska Handelsbanken, New York Branch
Affirmations:
....LT Bank Deposits, Affirmed Aa2 Stable
....LT Deposit Note/CD Program, Affirmed
Aa2 Stable
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
Outlook Actions:
....Outlook, Remains Stable
Issuer: Stadshypotek AB
Affirmations:
....Commercial Paper, Affirmed P-1
....LT Counterparty Risk Assessment,
Affirmed Aa1(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
Issuer: SEB
Affirmations:
....LT Issuer Rating, Affirmed Aa3 Stable
....LT Bank Deposits, Affirmed Aa3 Stable
....ST Bank Deposits, Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa3 Stable
....BACKED Senior Unsecured Regular Bond/Debenture,
Affirmed Aa3 Stable
....Subordinate, Affirmed Baa1
....Senior Unsecured MTN Program, Affirmed
(P)Aa3
....Subordinate MTN Program, Affirmed
(P)Baa1
....Junior Subordinate MTN Program,
Affirmed (P)Baa2
....ST Deposit Note/CD Program, Affirmed
P-1
....Pref. Stock Non-cumulative,
Affirmed Baa3 (hyb)
....Commercial Paper, Affirmed P-1
....BACKED Commercial Paper, Affirmed
P-1
....Adjusted Baseline Credit Assessment,
Affirmed a3
....Baseline Credit Assessment, Affirmed
a3
....LT Counterparty Risk Assessment,
Affirmed Aa2(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
Outlook Actions:
....Outlook, Remains Stable
Issuer: SEB AG
On Review for Upgrade:
....LT Bank Deposits, currently A2,
Outlook Changed To Rating Under Review From Stable
....Baseline Credit Assessment, currently
baa3
....LT Counterparty Risk Assessment,
currently Aa3(cr)
Affirmations:
....ST Bank Deposits, Affirmed P-1
....Adjusted Baseline Credit Assessment,
Affirmed a3
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
Outlook Actions:
....Outlook, Changed To Rating Under
Review From Stable
Issuer: Swedbank AB
Affirmations:
....LT Issuer Rating, Affirmed Aa3 Stable
....LT Bank Deposits, Affirmed Aa3 Stable
....ST Bank Deposits, Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa3 Stable
....Subordinate, Affirmed Baa1
....Senior Unsecured MTN Program, Affirmed
(P)Aa3
....Subordinate MTN Program, Affirmed
(P)Baa1
....Other Short Term, Affirmed (P)P-1
....Pref. Stock, Affirmed Baa3
(hyb)
....Pref. Stock Non-cumulative,
Affirmed Baa3 (hyb)
....LT Deposit Note/CD Program, Affirmed
(P)Aa3
....ST Deposit Note/CD Program, Affirmed
P-1
....Commercial Paper, Affirmed P-1
....Adjusted Baseline Credit Assessment,
Affirmed a3
....Baseline Credit Assessment, Affirmed
a3
....LT Counterparty Risk Assessment,
Affirmed Aa2(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
Outlook Actions:
....Outlook, Remains Stable
Issuer: Swedbank AB, New York Branch
Affirmations:
....LT Deposit Note/CD Program, Affirmed
Aa3 Stable
Outlook Actions:
....Outlook, Remains Stable
Issuer: Swedbank Mortgage AB
Affirmations:
....LT Issuer Rating, Affirmed Aa3 Stable
....BACKED Senior Unsecured MTN Program,
Affirmed (P)Aa3
....BACKED Other Short Term, Affirmed
(P)P-1
....BACKED Commercial Paper, Affirmed
P-1
....LT Counterparty Risk Assessment,
Affirmed Aa2(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
Outlook Actions:
....Outlook, Remains Stable
Issuer: Nordea Bank AB
Affirmations:
....LT Bank Deposits, Affirmed Aa3 Stable
....ST Bank Deposits, Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa3 Stable
....Subordinate, Affirmed Baa1
....Senior Unsecured MTN Program, Affirmed
(P)Aa3
....Junior Subordinate MTN Program,
Affirmed (P)Baa2
....Subordinate MTN Program, Affirmed
(P)Baa1
....Other Short Term, Affirmed (P)P-1
....Pref. Stock Non-cumulative,
Affirmed Ba1 (hyb)
....Pref. Stock Non-cumulative,
Affirmed Baa3 (hyb)
....Commercial Paper, Affirmed P-1
....Adjusted Baseline Credit Assessment,
Affirmed a3
....Baseline Credit Assessment, Affirmed
a3
....LT Counterparty Risk Assessment,
Affirmed Aa2(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
Outlook Actions:
....Outlook, Remains Stable
Issuer: Nordea Bank AB (publ), NY Branch
Affirmations:
....LT Deposit Note/CD Program, Affirmed
Aa3 Stable
Issuer: Nordea Bank Finland Plc
Affirmations:
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa3 Stable
Issuer: Nordea Bank Norge ASA
Affirmations:
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa3 Stable
Issuer: Lansforsakringar Bank AB (publ)
Affirmations:
....LT Bank Deposits, Affirmed A1 Stable
....ST Bank Deposits, Affirmed P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed A1 Stable
....Senior Unsecured MTN Program, Affirmed
(P)A1
....Other Short Term, Affirmed (P)P-1
....Commercial Paper, Affirmed P-1
....Adjusted Baseline Credit Assessment,
Affirmed a3
....Baseline Credit Assessment, Affirmed
a3
....LT Counterparty Risk Assessment,
Affirmed Aa3(cr)
....ST Counterparty Risk Assessment,
Affirmed P-1(cr)
Outlook Actions:
....Outlook, Remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
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-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service Limited, Stockholm Branch
Krejaren 2
Ostermalmstorg 1
Stockholm 114 42
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 Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
