Ratings incorporating systemic support placed on review for further possible downgrade; outlook on three banks' financial strength ratings changed to negative from stable
London, 16 February 2011 -- Moody's Investors Service has taken various rating actions on a
number of Danish banks. These actions follow the bankruptcy and
transfer of Amagerbanken to a government-backed entity, Financial
Stability, on February 6th 2011, demonstrating both the willingness
and ability of the Danish government to use resolution tools provided
under new legislation to impose losses on depositors and senior creditors
in a bankruptcy.
The long-term ratings of Danske Bank A/S, Spar Nord Bank
A/S, FIH Erhvervsbank A/S, Ringkjobing Landbobank A/S and
BankNordik P/F were downgraded, and the long-term ratings
of Danske Bank, FIH Erhvervsbank, and BankNordik remain on
review for further possible downgrade. The long-term ratings
of Nordea Bank Danmark A/S, Sydbank A/S, and Jyske Bank A/S
were placed on review for possible downgrade, and the outlooks on
the standalone bank financial strength ratings of Spar Nord Bank A/S,
FIH Erhvervsbank A/S, and BankNordik P/F were changed to negative
from stable. The short-term ratings of Spar Nord Bank and
FIH Erhvervsbank were also downgraded, and the short-term
rating of BankNordik was placed on review for possible downgrade.
(See below for a full list of rating actions.)
SYSTEMIC SUPPORT ASSUMPTIONS REDUCED TO LOW FROM HIGH
"Today's rating actions reflect a reduction in Moody's
systemic support assumptions for Danish banks," says Oscar
Heemskerk, Vice President. "Last week's bankruptcy
of Amagerbanken demonstrated both the willingness and ability of the government
to allow depositors and senior creditors of Danish banks to take losses
in bankruptcy, where bank operations are continued as a going concern."
As a consequence, Moody's has reduced the systemic support
assumptions it uses for Danish banks, downgrading the senior debt
and deposit ratings of five banks by between 1 and 2 notches and removing
systemic support from all but the four largest banks in Denmark.
To date, Moody's considered the probability of government
support for Danish banks to be high, reflecting the absence of deposit
losses in the past 20 years, the importance of the Danish banking
system for the national economy, and the support the government
has extended in the recent past, including substantial volumes of
bank debt guaranteed by the government in support of the banks.
However, the enactment of the Bank Package III law in October 2010
provides a framework for the resolution of ailing banks in which losses
can be allocated not only to core equity, hybrid capital,
and subordinated debt, but also to senior debt and deposits.
Combined with its implementation with respect to Amagerbanken in February
2011, this law implies that the Danish government is now far less
willing to continue to support bank creditors at the expense of tax payers
than it was only a few months ago. Consequently, we have
changed our assumption on systemic support to 'low' for Denmark,
the lowest category within our systemic support framework.
Moody's expects to learn more over the coming months of the implications
of the Danish government's actions for the Danish financial system,
which may in turn shed light on the feasibility of maintaining a less
supportive stance in future. We will therefore undertake a further
assessment of the Danish government's intentions over the coming
months, in line with Moody's recent publication "Supported
Bank Debt Ratings at Risk of Downgrade Due to New Approaches to Bank Resolution".
Consequently, debt and deposit ratings of the four banks that retain
systemic uplift in their ratings -- Danske Bank (A1 incorporating
two notches of systemic support), Nordea Bank Danmark (Aa2 incorporating
two notches of systemic support), Jyske Bank (A1 incorporating one
notch of systemic support), and Sydbank (A1 incorporating one notch
of systemic support) -- have been placed on review for further
possible downgrade. The review reflects our opinion that the Danish
law and practice are substantially different to our historical expectations
on government support, while taking into account the size and systemic
importance of these banks.
NEGATIVE OUTLOOK ON STANDALONE FINANCIAL STRENGTH RATINGS REFLECTS POSSIBLE
FUNDING PRESSURE
The change in outlooks to negative from stable on three banks' standalone
bank financial strength ratings -- FIH Erhvervsbank (D BFSR mapping
to a Ba2 baseline credit assessment, BCA), Spar Nord Bank
(C-/Baa1), and BankNordik (C-/Baa2) --,
results in all Danish banks now having negative outlooks for their BFSRs.
This view is guided by the expectation that, following Amagerbanken's
bankruptcy, Danish banks' funding will be more vulnerable
to investor and depositor transfers.
In Moody's opinion, Amagerbanken's bankruptcy and the
resulting losses will raise depositors' and creditors' awareness
of the risk of loss, particularly in Denmark. We foresee
increased pressure on Danish banks' funding, both from local
unguaranteed depositors (amounts above EUR 100,000 equivalent) and
from international investors (approximately 40% of deposits and
inter-bank funding). For a number of banks, this pressure
will be in addition to substantial future refinancing needs, since
the government's individual guarantees expire before the end of
2013 (for the rated banks with government guaranteed funding, on
average more than 20% of total funding benefits from an individual
government guarantee). We now maintain negative outlooks on all
Danish banks' standalone bank financial strength ratings,
and will evaluate these additional pressures as they unfold over the coming
months.
An in-depth discussion of the changes to Moody's support
assumptions for Denmark, along with a description of the Bank Package
III laws, will be published shortly in a Moody's Special Comment.
This press release does not address any rating impact that these rating
actions may have on the affected banks' covered bonds.
The principal methodologies used in above rating actions were "Bank
Financial Strength Ratings: Global Methodology", published
in February 2007, and "Incorporation of Joint-Default
Analysis into Moody's Bank Ratings: A Refined Methodology",
published in March 2007.
RATING ACTIONS IN SUMMARY
BankNordik P/F
- Outlook on C- BFSR (Baa2 BCA) changed to negative from
stable
- Long-term bank deposit rating downgraded to Baa1 from
A3; the rating is placed on review for possible downgrade.
During the review period we will reassess the probability of support from
the Faroe Islands local government (rated Aa2 stable) to the bank.
- P-2 short-term bank deposit rating on review for
possible downgrade
- Aaa government-guaranteed debt is not affected
Danske Bank A/S
- C BFSR (A3 BCA) is not affected and continues to have a negative
outlook
- Long-term senior unsecured debt, issuer, and
deposit ratings downgraded by one notch to A1 from Aa3. The ratings
continue to benefit from two notches of systemic support and remain on
review for possible downgrade.
- P-1 short-term ratings not affected.
- Baa2 (hyb) junior subordinated, Baa3 (hyb)Tier 1 hybrid,
and Aaa government-guaranteed debt rating are not affected
FIH Erhvervsbank A/S
- Outlook on D BFSR (Ba2 BCA) changed to negative from stable
- Long-term senior unsecured debt and deposit rating downgraded
to Ba1 from Baa3. The ratings remain on review for possible downgrade.
The review will focus on our assessment of the probability of parental
support from the bank's new owners.
- Short-term ratings downgraded to Non Prime from P-3.
- Outlook on B2 (hyb) junior subordinated debt changed to negative
Jyske Bank A/S
- C+ BFSR (A2 BCA) is not affected and continues to have a
negative outlook
- A1 long-term senior unsecured and deposit ratings placed
on review for possible downgrade. The ratings benefit from one
notch of systemic support.
- P-1 short-term ratings not affected
- Baa1 (hyb) junior subordinated debt and Baa2 (hyb) Tier 1 hybrid
ratings are not affected
Sydbank A/S
- C+ BFSR (A2 BCA) is not affected and continues to have a
negative outlook
- A1 long-term senior unsecured and deposit ratings placed
on review for possible downgrade. The ratings benefit from one
notch of systemic support.
- P-1 short-term ratings not affected
- Baa1 junior subordinated debt and Baa2 (hyb) Tier 1 hybrid ratings
are not affected
Spar Nord Bank A/S
- Outlook on C- BFSR (Baa1 BCA) changed to negative from
stable
- Long-term senior unsecured and deposit ratings downgraded
to Baa1 from A2. The ratings no longer benefit from systemic support
uplift. The outlook on the long term ratings was changed to negative.
- Short-term ratings are downgraded to P-2 from P-1
- Outlook on Baa3 junior subordinated debt and Ba1 (hyb) Tier 1
hybrid ratings changed to negative
- Aaa government-guaranteed debt is not affected
Nordea Bank Danmark A/S
- C BFSR (A3 BCA) not affected and continues to have a negative
outlook
- Aa2 long-term senior unsecured, issuer and deposit
ratings placed on review for possible downgrade. The ratings benefit
from one notch of systemic support.
- P-1 short-term ratings not affected
Ringkjobing Landbobank
- C+ BFSR (A2 BCA) not affected and continues to have a negative
outlook
- Long-term bank deposit rating downgraded to A2 from A1.
The rating no longer benefits from systemic support uplift. The
outlook on the long term ratings continues to be negative.
- P-1 short term ratings not affected
PREVIOUS RATING ACTIONS
Moody's most recent rating action on BankNordik P/F was implemented on
6 September 2010, when it concluded the review for possible downgrade
by confirming the C- BFSR and A3 long-term and Prime-2
short-term deposit ratings.
Moody's most recent rating action on Danske Bank A/S was implemented on
26 February 2010, when it downgraded the Junior Subordinated Debt
to Baa2 from A3 and the Tier 1 Securities to Baa3 from Baa1.
Moody's most recent rating action on FIH Erhvervsbank A/S was implemented
on 14 January 2011, when it maintained the review for possible downgrade
of the Baa3 long term debt and deposit and Prime-3 short term ratings
and affirmed the D BFSR with a stable outlook.
Moody's most recent rating action on Jyske Bank A/S was implemented on
26 February 2010, when it downgraded the Junior Subordinated Debt
to Baa1 from A3 and the Tier 1 Securities to Baa2 from Baa1.
Moody's most recent rating action on Sydbank A/S was implemented on 26
February 2010, when it downgraded the Junior Subordinated Debt to
Baa1 from A3 and the Tier 1 Securities to Baa2 from Baa1.
Moody's most recent rating action on Spar Nord Bank A/S was implemented
on 26 February 2010, when it downgraded the Junior Subordinated
Debt to Baa3 from Baa2.
Moody's most recent rating action on Nordea Bank Denmark A/S was implemented
on 8 September 2009, when it downgraded the BFSR to C from B-
(negative outlook) and the long term debt and deposit rating to Aa2 from
Aa1.
Moody's most recent rating action on Ringkjobing Landbobank A/S was implemented
on 8 September 2009, when it confirmed the C+ BFSR and A1 long
term deposit rating with a negative outlook.
Based in Tórshavn, Faroe Islands, BankNordik reported
consolidated assets of DKK 15.7 billion (EUR 2 billion) as of end-September
30 2010.
Based in Copenhagen, Denmark, Danske Bank reported consolidated
assets of DKK 3,214 billion (EUR 431 billion) as of end-December
31 2010.
Based in Copenhagen, Denmark, FIH Erhvervsbank reported consolidated
assets of DKK 109 billion (EUR 15 billion) as of end-December 31
2010.
Based in Silkeborg, Denmark, Jyske Bank reported consolidated
assets of DKK 249 billion (EUR 33 billion) as of end-September
30 2010.
Based in Aabenraa, Denmark, Sydbank reported consolidated
assets of DKK 154 billion (EUR 21 billion) as of end-September
30 2010.
Based in Aalborg, Denmark, Spar Nord Bank reported consolidated
assets of DKK 67 billion (EUR 9 billion) as of end-December 31
2010.
Based in Copenhagen, Denmark, Nordea Bank Denmark reported
consolidated assets of DKK 1,077 billion (EUR 145 billion) as of
end-June 30 2010.
Based in Ringkjobing, Denmark, Ringkjobing Landbobank reported
consolidated assets of DKK 18 billion (EUR 2 billion) as of end-December
31 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
The rating has been disclosed to the rated entities or its designated
agents and issued with no amendment resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
London
Oscar Heemskerk
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
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London
Simon Harris
MD - Financial Institutions
Financial Institutions Group
Moody's Investors Service Ltd.
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Moody's downgrades five Danish banks' senior ratings following reduction of systemic support
