Stockholm, August 02, 2019 -- Moody's Investors Service (Moody's) has today assigned a (P)A3 rating
to the junior senior notes issued under the MTN programme of Svenska Handelsbanken
AB (Handelsbanken). This rating action follows the bank's updated
MTN programme under which Handelsbanken plans to issue non-preferred
senior debt (which Moody's calls junior senior).
At the same time, Moody's affirmed Handelsbanken's long-term
deposit and senior unsecured debt ratings at Aa2, subordinated ratings
at A3, Counterparty Risk Assessment (CRA) at Aa1(cr) and Counterparty
Risk Rating (CRR) at Aa1. The long-term deposit and senior
unsecured debt ratings maintain a stable outlook.
Moody's assessment is based on Sweden's current Minimum Requirements
for own funds and Eligible Liabilities (MREL) framework as well as the
Swedish National Debt Office's bank-specific MREL decision
for Handelsbanken, and is forward looking.
The full list of the affected ratings can be found at the end of this
press release.
RATINGS RATIONALE
ASSIGNMENT OF JUNIOR SENIOR NOTES' PROGRAMME RATING INCORPORATES
THE LIKELY HIGH LOSS SEVERITY FOR THIS TYPE OF INSTRUMENT
The (P)A3 rating assigned to the junior senior MTN programme reflects
(1) Handelsbanken's adjusted baseline credit assessment (BCA) of
a2; (2) Moody's advanced Loss Given Failure (LGF) analysis,
which indicates likely high loss severity for these instruments in the
event of the bank's failure, leading to a position one notch below
the bank's adjusted BCA; and (3) Moody's assumption of a low probability
of government support for this new instrument, resulting in no additional
uplift.
Handelsbanken is subject to the EU's Bank Recovery and Resolution Directive
(BRRD) and Moody's considers Sweden to be an Operational Resolution Regime.
The non-preferred senior class of debt has been introduced in Sweden
in order to allow banks to issue a class of debt which is senior to regulatory
capital instruments and junior to other senior obligations, facilitating
loss-absorption and recapitalisation via a debt conversion or write-down
of the junior senior notes in resolution. For this to be effective,
banks must have eligible capital and liabilities that fulfil the MREL
requirements.
Please see the report "Banks - Nordic Countries: FAQ:
Nordic banks' new non-preferred senior debt instruments ",
https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1122335,
for additional details on the junior senior notes and the risks they pose
to creditors.
AFFIRMATION OF DEPOSIT AND SENIOR UNSECURED DEBT RATINGS DRIVEN BY MAINTAINED
DEBT CUSHION AND SUPPORT ASSUMPTIONS
The affirmation of the deposit and senior unsecured debt ratings reflects
Moody's LGF analysis of the group's current balance sheet structure (excluding
the UK subsidiary as Moody's believes that Handelsbanken Plc would
be resolved separately) and its capital and funding plans up to 1 January
2022, when the subordination requirement for MREL is applicable.
Even though Handelsbanken -- under the current Swedish MREL rules
-- would need to build up a significant non-preferred senior
buffer up to year-end 2021, the subordination requirement
for the bank continues to fall short of justifying an additional uplift
in our LGF analysis. In addition, there is uncertainty around
the impact of the EU's revised Bank Recovery and Resolution Directive,
i.e. BRRD2, and how it will affect the Swedish subordination
requirements, and Handelsbanken's need for non-preferred
senior issuance.
Moody's LGF analysis continues to indicate that Handelsbanken's
depositors and senior creditors are likely to face very low loss-given-failure,
resulting in two notches of LGF uplift for deposits and senior unsecured
notes.
Moody's assumption of a moderate probability of government support for
Handelsbanken's deposits and senior unsecured notes results in a
further one-notch uplift, leading to long-term deposit
and senior unsecured ratings of Aa2.
STABLE OUTLOOK ON LONG-TERM DEPOSIT AND SENIOR UNSECURED DEBT RATINGS
DRIVEN BY STEADY FUNDAMENTALS AND LGF ANALYSIS
The outlook on Handelsbanken's ratings remains stable, as we expect
that the bank will continue to report resilient financial performance
in the context of a modest slowdown in economic growth. The stable
outlook also reflects the bank's robust capital and profitability,
balancing the ongoing risks related to high household leverage and the
housing market in Sweden.
WHAT COULD CAUSE RATINGS TO GO UP / DOWN
An upward or downward movement in the BCA and adjusted BCA would have
an impact on Handelsbanken's long-term deposit and debt ratings,
CRA and CRR, as well as any significant change in the liability
structure if it were to impact Moody's LGF assessment.
The bank's outlook could be revised to positive if it were to significantly
(i) improve its leverage ratio, and/or (ii) funding and liquidity
profile in a sustainable way going forward.
Conversely, the BCA and the ratings could be downgraded (i) if the
Swedish housing market were to go through a renewed and more significant
fall, resulting in a longer period of adverse economic developments
in Sweden, (ii) a severe decline in the bank's profitability,
or (iii) if there were indications that refinancing could become more
difficult and significantly more costly, given the banks' material
dependence on wholesale funding.
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.
FULL LIST OF ALL AFFECTED RATINGS
Issuer: Svenska Handelsbanken AB
..Assignment:
....Junior Senior Unsecured Medium-Term
Note Program, Assigned (P)A3
..Affirmations:
.... Short-term Deposit Note/CD Program,
Affirmed P-1
.... Commercial Paper, Affirmed P-1
.... Long-term Counterparty Risk Assessment,
Affirmed Aa1(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed Aa1
.... Short-term Counterparty Risk Ratings,
Affirmed P-1
.... Long-term Issuer Rating,
Affirmed Aa2, Outlook Remains Stable
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)Aa2
.... Backed Junior Subordinate Medium-Term
Note Program, Affirmed (P)Baa1
.... Backed Senior Unsecured Medium-Term
Note Program, Affirmed (P)Aa2
.... Backed Subordinate Medium-Term
Note Program, Affirmed (P)A3
.... Subordinate Medium-Term Note Program,
Affirmed (P)A3
.... Backed Other Short Term, Affirmed
(P)P-1
.... Other Short Term, Affirmed (P)P-1
....Senior Unsecured Regular Bond/Debenture,
Affirmed Aa2, Outlook Remains Stable
.... Backed Senior Unsecured Regular Bond/Debenture,
Affirmed Aa2, Outlook Remains Stable
....Subordinate Regular Bond/Debenture,
Affirmed A3
....Long-term Bank Deposits,
Affirmed Aa2, Outlook Remains Stable
.... Short-term Bank Deposits,
Affirmed P-1
..Outlook Action:
....Outlook Remains Stable
Issuer: Stadshypotek AB
..Affirmations:
....Commercial Paper, Affirmed P-1
.... Long-term Counterparty Risk Assessment,
Affirmed Aa1(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed Aa1
.... Short-term Counterparty Risk Ratings,
Affirmed P-1
..Outlook Action:
....No Outlook Assigned
Issuer: Svenska Handelsbanken, New York Branch
..Affirmations:
.... Long-term Deposit Note/CD Program,
Affirmed Aa2, Outlook Remains Stable
.... Long-term Counterparty Risk Assessment,
Affirmed Aa1(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Counterparty Risk Ratings,
Affirmed Aa1
.... Short-term Counterparty Risk Ratings,
Affirmed P-1
....Long-term Bank Deposits,
Affirmed Aa2, Outlook Remains Stable
..Outlook Action:
....Outlook Remains Stable
REGULATORY DISCLOSURES
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.
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
