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26 Feb 2009
London, 26 February 2009 -- Moody's Investors Service today downgraded the bank financial strength
rating (BFSR) of Amagerbanken A/S to D- from C-.
The bank's long-term deposit rating was downgraded to Baa2.
The short-term deposit rating of Prime-2 was affirmed.
The outlook on the BFSR and long-term deposit rating is negative.
The downgrades were prompted by Moody's view that Amagerbanken's
financial strength has weakened following a rapid deterioration in its
asset quality and that further weakening is likely. The scale of
deterioration has been more pronounced than Moody's had anticipated
at the time of the previous rating action in November when the BFSR and
the deposit rating were downgraded to C- and A3, respectively.
The downgrade of the BFSR to D- takes account of the further decline
in Amagerbanken's profitability and pressure on its capital adequacy.
Moody's believes, based on its loss expectations for the bank's
loan portfolio, that capital could potentially erode to levels consistent
with a BFSR in the D range. As a result of adverse developments
in its property and investment credit exposures, the bank increased
loan loss provisions significantly in the fourth quarter of 2008.
Problem loans (defined as individually impaired loans) accounted for 4.9%
of gross loans and guarantees at the end of 2008, in comparison
with about 1% at end-2007.
Amagerbanken continues to display a high exposure to the Danish real estate
sector, which has experienced challenging conditions since mid-2008.
With property finance accounting for 36% of the bank's total
lending at end-2008, the portfolio exhibits significant concentration
risk. In light of current conditions, Moody's has concerns
about the viability of the bank's business model related to property
finance given the adverse developments in this sector. In addition,
about 10% of loans are investment credits, which are also
likely to remain under pressure given the downturn in the markets.
As regards the bank's capitalisation, its solvency ratio was
10.3% at year-end 2008, which remains above
the regulatory minimum requirement of 8%. However,
Moody's cautions that any increase in credit risk could exert additional
pressure on capitalisation. The rating agency also notes that the
individual solvency requirement which is set by the board of directors
has not been published and could be higher than the regulatory minimum.
Amagerbanken's Baa2 long-term deposit rating incorporates
a four-notch uplift from the bank's Ba3 Baseline Credit Assessment
(the measure of its standalone financial strength that maps from its D-
BFSR). This takes into account Moody's expectation that systemic
support for Amagerbanken would be forthcoming if needed including the
measures available under the state company Finansiel Stabilitet established
by the Danish government.
The negative outlook on Amagerbanken's ratings reflects Moody's
concern that the bank's credit quality may continue to deteriorate
further, especially given the adverse developments in the property
sector in Denmark and the continuing downturn in the securities market.
Moody's therefore believes that Amagerbanken's profitability
will continue to face increasing challenges, which could weigh on
its solvency measures.
Moody's last rating action on Amagerbanken was on 4 November 2008,
when the BFSR was downgraded to C- from C. At the same time,
the bank's long-term deposit rating was downgraded to A3
from A1 and the short-term deposit rating to Prime-2 from
Prime-1. The outlook on the BFSR and long-term rating
remained negative.
The principal methodologies used in rating Amagerbanken are "Bank
Financial Strength Ratings: Global Methodology" and "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings:
A Refined Methodology", which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating Amagerbanken can also
be found in the Credit Policy & Methodologies directory.
Headquartered in Copenhagen, Denmark, Amagerbanken reported
total assets of DKK35.7 billion (EUR4.8 billion) at end--December
2008.
London
Reynold R. Leegerstee
Managing Director
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Eeva Antila
Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades Amagerbanken to Baa2/D-; negative outlook
No Related Data.
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