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Rating Action:

Moody's confirms Swedbank AB's deposit and senior unsecured debt ratings at Aa3; negative outlook

01 Mar 2022

Stockholm, March 01, 2022 -- Moody's Investors Service ("Moody's") has today confirmed Swedbank AB's (Swedbank) long-term deposit and senior unsecured debt ratings and placed the ratings on negative outlook. This rating action concludes the review for downgrade on Swedbank's deposit and senior unsecured debt ratings initiated on 5 October 2021 following the Swedish resolution authority's proposal for updated Minimum Requirements for Eligible Liabilities and Own Funds (MREL) which will result in Swedish banks needing to issue lower levels of additional loss-absorbing debt. The rating action also takes into account the bank's current capital and funding plan.

Swedbank's Baseline Credit Assessment (BCA) of baa1 remains unaffected by the rating action.

The full list of the affected ratings can be found at the end of this press release.

RATINGS RATIONALE

AFFIRMATION OF DEPOSIT AND SENIOR UNSECURED RATINGS

The rating action reflects Moody's expectation that Swedbank will issue sufficient junior debt instruments to fulfil both the Swedish National Debt Office's (SNDO) revised MREL requirements by the 1 January 2024 deadline, as well as to maintain significant additional precautionary management buffers.

While the SNDO's updated MREL decision - implementing the updated Bank Recovery and Resolution Directive (BRRD2) in Sweden - will result in Swedbank issuing a lower volume of additional loss-absorbing junior senior instruments, (i.e. senior non-preferred debt, SNP) than under the requirements previously in force, Moody's on balance expects Swedbank to issue sufficient levels of senior non-preferred debt to support a three notch uplift under the agency's Advanced Loss Given Failure (LGF) analysis.

Moody's will continue to monitor the bank's capital and funding plan, including minimum issuance targets, closely to assess the sustainability of the expected liability structure over the longer term.

OUTLOOK

The negative outlook on the long-term deposit and senior unsecured ratings reflects the downside risk that Swedbank may not issue sufficient senior non-preferred debt to support the three notch uplift above the baa1 BCA, given uncertainties around the pace of balance sheet growth and as the bank may reduce its management buffer, which currently is planned to be very significant, above the minimum requirements.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Swedbank's BCA and Adjusted BCA could be upgraded if the company demonstrates it has fully addressed previous and ongoing governance, steering and cultural shortcomings. In addition, associated risks need to have dissipated without a negative impact on the bank's financial profile or its franchise compared to the current positioning of the BCA.

The BCA and Adjusted BCA could be downgraded were there: (1) further concerns come to light regarding governance resulting in a sustained loss in clients, business or investor confidence, exerting pressure on the bank's financial profile, (2) heightened risks of a significant fine or operational constraint that would reduce the bank's earnings or capital, or (3) signs that funding becomes significantly more costly or access to certain markets becomes more limited.

The deposit and senior unsecured debt ratings could also be downgraded should the bank's balance sheet management result in a thinner cushion of liabilities and capital ranking below Swedbank's junior depositors and senior unsecured creditors to the extent it no longer justify an extremely low loss given failure assessment for senior liabilities in Moody's LGF analysis.

LIST OF AFFECTED RATINGS

..Issuer: Swedbank AB

Confirmations:

....Long-term Issuer Rating, Confirmed at Aa3, Outlook Changed To Negative From Ratings Under Review

....Long-term Deposit Note/CD Program, Confirmed at (P)Aa3

....Senior Unsecured Medium-Term Note Program, Confirmed at (P)Aa3

....Senior Unsecured Regular Bond/Debenture, Confirmed at Aa3, Outlook Changed To Negative From Ratings Under Review

....Long-term Bank Deposit Ratings, Confirmed at Aa3, Outlook Changed To Negative From Ratings Under Review

Affirmations:

....Short-term Bank Deposit Ratings, Affirmed P-1

....Short-term Deposit Note/CD Program, Affirmed P-1

....Short-term Deposit Note/CD Program, Affirmed (P)P-1

Outlook Action:

....Outlook, Changed To Negative From Ratings Under Review

..Issuer: Swedbank Mortgage AB

Confirmations:

....Long-term Issuer Rating, Confirmed at Aa3, Outlook Changed To Negative From Ratings Under Review

....Senior Unsecured Medium-Term Note Program, Confirmed at (P)Aa3

Outlook Action:

....Outlook, Changed To Negative From Ratings Under Review

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Banks Methodology published in July 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1269625. 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 entities or their 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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

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 Welin
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

Simon Ainsworth
Associate Managing Director
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

No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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