London, 22 July 2009 -- Moody's Investors Service today placed on review for possible downgrade
the bank financial strength ratings (BFSRs) and/or long-term ratings
of seven Danish banks: Amagerbanken A/S, Nykredit Bank A/S,
Nordea Bank Danmark A/S, Jyske Bank A/S, Ringkjobing Landbobank
A/S, Spar Nord Bank A/S and Sydbank A/S.
In addition, the issuer ratings of three mortgage credit institutions
-- BRFkredit a/s, Nykredit Realkredit A/S and DLR Kredit A/S
-- and one specialised lender -- Danmarks Skibskredit A/S --
were placed on review for possible downgrade. At the same time,
the rating agency affirmed the ratings of Danske Bank A/S and P/F Foroya
Banki.
Moody's also notes that all the ratings of FIH Erhvervsbank A/S
remain on review for possible downgrade, the review having been
initiated on 25 March 2009.
Moody's expects to conclude its reviews on the majority of these
entities within a few weeks.
The rating agency anticipates that in most cases downgrades of the long-term
debt and deposit ratings will be limited to one or two notches.
Although Moody's expects the banks' BFSRs to come under increasing
pressure, it believes that banks in highly rated countries are likely
to receive support, depending on their level of systemic importance.
This should in general result in a more limited impact on the debt and
deposit ratings than the BFSRs.
The full list of the ratings affected for these institutions can be found
below.
Today's rating actions on the BFSRs were prompted by Moody's
expectation that Danish banks will experience increasing deterioration
in asset quality over the coming quarters. This is likely to lead
to higher credit-related write-downs than previously anticipated
in the ratings, exerting adverse pressure on profitability and capitalisation.
The anticipated deterioration in asset quality derives from the economic
weakness in the corporate sector especially, but Moody's also
cautions that Danish households are suffering from a very high level of
indebtedness. Although the economic slowdown in Denmark started
earlier than in the other Nordic countries, GDP contraction is expected
to continue into 2010 and unemployment is increasing, albeit from
a very low level.
Moody's has recently described the assumptions behind its framework
for estimating Nordic banks' credit losses in a special comment
entitled "Moody's Approach to Estimating Nordic Banks'
Credit Losses" published on 16 July 2009.
In this context, those Danish banks whose ratings have been placed
on review for downgrade today are those whose key credit drivers Moody's
views as being the most vulnerable to weaker performance in their BFSR
rating categories, under its anticipated (base) and worse-than-expected
(stressed) scenarios. Among the key credit drivers, Moody's
focus is in particular on current capital adequacy levels in relation
to the banks' specific asset composition and their respective anticipated
loss levels. The rating agency's expected macroeconomic scenario,
referenced in the preceding paragraph, is used to establish its
baseline expectations for a bank's performance, while its
worse-than-expected case helps to measure a bank's
potential vulnerability in the event of a shift to a more adverse environment.
More specifically, the banks that are most likely to have their
BFSRs downgraded are those with lower capital adequacy levels compared
with their exposures to asset classes embedding the highest expected losses,
in accordance with Moody's published assumptions in the aforementioned
Special Comment. These asset classes include for example exposures
to construction, shipping and real estate.
The financial performance of Danish banks has been affected by the deteriorating
economic outlook for Denmark, which has been particularly impacted
by the performance of the corporate sector. Bankruptcies have increased
significantly, in particular in the real estate sector. Therefore,
Moody's has in the past 12 months taken certain rating actions on
selected Danish banks with significant exposure to the property sector.
In addition, the rating agency notes that the downgrade of Danske
Bank earlier this year was prompted partly by deteriorating asset quality
in its exposures outside Denmark, including in Ireland and the Baltic
states.
REVIEW OF SENIOR DEBT AND DEPOSIT RATINGS
In reviewing each bank's deposit and senior debt ratings,
Moody's will consider (i) the support currently available to the
bank, as well as the probability of support once stability returns
to the markets and the system, (ii) the systemic importance of the
rated institution, (iii) the bank's intrinsic financial strength
rating, (iv) other sources of external support, in particular
parental support, and (v) the long-term viability of the
bank's franchise and its ability to withstand the current financial
crisis without being permanently impaired.
REVIEW OF BANK FINANCIAL STRENGTH RATINGS
Moody's review of the BFSRs will focus in particular on: (i)
the amount of capital the bank has available to absorb expected credit
losses on its risk assets; and (ii) the entity's internal capital
generation capacity to replenish its capital cushion in the context of
lower revenue growth in the deteriorating economic environment.
Banks that would be more affected by the BFSR downgrades would be the
ones with lower capital adequacy levels and larger exposures to asset
classes embedding the highest expected losses, in accordance with
Moody's assumptions, including, for example, those
with exposures to construction, real estate, shipping and
agriculture. Moody's notes that the majority of Danish banks
and credit institutions have applied for or already received hybrid capital
from the government and will take this into account in its analysis.
Moody's BFSR methodology remains unchanged, although the weight
attached to certain rating considerations, particularly capital
and future earnings prospects, has been increased to better reflect
the present conditions. The refinement to Moody's approach
to rating banks in this environment is discussed in a Special Comment
entitled "Calibrating Bank Ratings in the Context of the Global
Financial Crisis", which was published in February 2009.
REVIEWS FOR POSSIBLE DOWNGRADE OF BFSRs AND/OR DEBT AND DEPOSIT RATINGS
The rating action on Nordea Bank Danmark A/S and other Nordea subsidiaries
-- BFSR and long-term ratings placed on review for possible
downgrade -- is commented on a separate press release together with
its parent, Nordea Bank AB.
Amagerbanken A/S
Moody's placed Amagerbanken's D- BFSR and Baa2 long-term
rating on review for possible downgrade. The review will focus
on potential losses on the loan portfolio; Moody's is particularly
concerned about the bank's commercial real estate exposures,
which have already resulted in significant provisions and the rating agency
cautions that the outlook for the sector remains negative.
The following ratings of Amagerbanken were affected:
- D- BFSR on review for possible downgrade;
- Baa2 long-term deposit rating on review for possible downgrade;
- Prime-2 short-term deposit rating on review for
possible downgrade.
Moody's last rating action on Amagerbanken was on 26 February 2009 when
the BFSR was downgraded to D- and the deposit ratings to Baa2/Prime-2.
Nykredit Bank A/S
Moody's placed Nykredit Bank's Aa3 long-term ratings
on review for possible downgrade. The rating action reflects the
fact that the parent, Nykredit Realkredit A/S, was also placed
on review. The C+ BFSR remains on review for possible downgrade.
The following ratings of Nykredit Bank were affected:
- C+ BFSR remains on review for possible downgrade;
- Aa3 long-term debt and deposit ratings on review for possible
downgrade;
- A1 subordinate ratings on review for possible downgrade;
- A2 junior subordinate ratings on review for possible downgrade;
- Prime-1 short-term ratings affirmed.
Moody's last rating action on Nykredit Bank was on 19 May 2009 when the
BFSR was placed on review for possible downgrade following the announcement
that Forstaedernes Bank (unrated) will be merged into Nykredit Bank over
the next year.
Jyske Bank A/S
Moody's placed Jyske Bank's B- BFSR and Aa2 long-term
ratings on review for possible downgrade. The review will focus
on potential losses on the bank's loan portfolio, especially
in relation to its exposures to agriculture and SMEs as well as its exposure
to structured investments and their impact on the bank's financial
fundamentals. The rating agency says that the potential downgrade
of the ratings could be of several notches.
The following ratings of Jyske Bank were affected:
- B- BFSR on review for possible downgrade;
- Aa2 long-term debt and deposit ratings on review for possible
downgrade;
- A2 subordinate ratings on review for possible downgrade;
- A3 junior subordinate ratings on review for possible downgrade;
- Prime-1 short-term ratings affirmed.
Moody's last rating action on Jyske Bank was on 25 March 2009 when the
ratings of its subordinated and hybrid debt instruments were downgraded.
Ringkjobing Landbobank A/S
Moody's placed Ringkjobing Landbobank's C+ BFSR and A1
long-term rating on review for possible downgrade. The review
will focus on potential losses on the loan portfolio, which exhibits
high exposure to the agricultural sector and SMEs, and the sustainability
of the bank's high earnings generation.
The following ratings of Ringkjobing Landbobank were affected:
- C+ BFSR on review for possible downgrade;
- A1 long-term deposit rating on review for possible downgrade;
- Prime-1 short-term deposit rating affirmed.
Moody's last rating action on Ringkjobing Landbobank was on 22 May 2007
when the ratings were assigned.
Spar Nord Bank A/S
Moody's placed Spar Nord Bank's C BFSR and A1 long-term
ratings on review for possible downgrade. The review will focus
on potential losses on the loan portfolio, which exhibits high exposure
to the agricultural sector and SMEs.
The following ratings of Spar Nord Bank were affected:
- C BFSR on review for possible downgrade;
- A1 long-term debt and deposit ratings on review for possible
downgrade;
- Baa1 subordinate ratings on review for possible downgrade;
- Prime-1 short-term ratings affirmed.
Moody's last rating action on Spar Nord Bank was on 25 March 2009 when
its subordinate rating was downgraded.
Sydbank A/S
Moody's placed Sydbank's Aa3 long-term ratings on review
for possible downgrade. The outlook on C+ BFSR was changed
to negative. The review will focus on potential losses on the loan
portfolio, especially in relation to exposures to agriculture and
SMEs and their impact on the entity's financial strength and potential
transition risk in the event that the bank's financials deteriorate
beyond Moody's expectations.
The following ratings of Sydbank were affected:
- C+ BFSR affirmed, outlook changed to negative;
- Aa3 long-term debt and deposit ratings on review for possible
downgrade;
- A3 subordinate ratings affirmed, outlook changed to negative;
- Baa1 preferred stock ratings affirmed, outlook changed
to negative;
- Prime-1 short-term ratings affirmed.
Moody's last rating action on Sydbank was on 25 March 2009 when the ratings
of its subordinated and hybrid debt instruments were downgraded.
Please note that backed ratings assigned by Moody's under the Bank
Package I and Bank Package II are not affected by this rating action.
REVIEWS FOR POSSIBLE DOWNGRADE OF ISSUER RATINGS
BRFkredit a/s
Moody's placed BRFkredit's A2 issuer rating on review for
possible downgrade. The review will focus on potential losses in
BRFkredit's loan portfolio and their impact on the entity's
financial strength. Moody's is particularly concerned about
the bank's exposure to commercial real estate where arrears have
increased significantly.
The following rating of BRFkredit was affected:
- A2 long-term issuer rating on review for possible downgrade.
Moody's last rating action on BRFkredit was on 29 August 2003 when the
rating was assigned.
Danmarks Skibskredit A/S (Danish Ship Finance)
Moody's placed Danish Ship Finance's Aa3 issuer rating and
senior unsecured ratings on review for possible downgrade. The
review will focus on Moody's expectation of credit losses given
the significant deterioration of the shipping industry and its potential
impact on Danish Ship Finance's financial fundamentals and overall
creditworthiness. Given the significant deterioration in the global
shipping industry combined with high credit concentrations in the entity's
loan portfolio, Moody's cautions that any downgrade might
not be limited to one notch.
The following ratings of Danish Ship Finance were affected:
- Aa3 long-term issuer and senior unsecured ratings on review
for possible downgrade.
Moody's last rating action on Danish Ship Finance was on 18 December 2006
when the Aa3 rating was confirmed.
DLR Kredit A/S
Moody's placed DLR Kredit's A1 issuer rating on review for
possible downgrade. The review will focus on potential losses in
the loan portfolio, which is concentrated on agricultural lending
and also has exposure to commercial properties, and their impact
on the entity's financial strength. In the review process,
the rating agency will also consider the financial strength of the owner
banks, which provide guarantees for the majority of loans transferred
to DLR Kredit.
The following ratings of DLR Kredit were affected:
- A1 long-term issuer rating on review for possible downgrade;
- A3 preferred stock rating on review for possible downgrade.
Moody's last rating action on DLR Kredit was on 11 September 2003 when
the rating was assigned.
Nykredit Realkredit A/S
Moody's placed Nykredit Realkredit's Aa3 issuer rating on
review for possible downgrade. The review will focus on potential
losses in the loan portfolio, especially in light of the weaker
outlook for commercial property and agriculture in Denmark and the impact
on the entity's financial strength.
The following ratings of Nykredit Realkredit were affected:
- Aa3 long-term issuer rating on review for possible downgrade;
- A1 subordinate rating on review for possible downgrade;
- A2 junior subordinate rating on review for possible downgrade;
- Prime-1 short term issuer rating affirmed.
Moody's last rating action on Nykredit Realkredit was on 25 August 2004
when the rating was assigned.
Please note that this press release does not deal with the possible implications
for the covered bond ratings of Danish mortgage credit institutions.
AFFIRMATION OF RATINGS
Danske Bank A/S
Moody's affirmed Danske Bank's C BFSR and Aa3 ratings.
The outlook on the BFSR remains negative and stable on the debt and deposit
ratings.
The following ratings of Danske Bank were affirmed:
- C BFSR with negative outlook;
- Aa3 long-term debt, deposit and issuer ratings with
stable outlook;
- A3 subordinate ratings with negative outlook;
- Baa1 junior subordinate ratings with negative outlook;
- Prime-1 short-term ratings.
Moody's last rating action on Danske Bank was on 25 March 2009 when the
ratings of its subordinated and hybrid debt instruments were downgraded.
P/F Foroya Banki
Moody's affirmed Foroya Banki's C- BFSR and A3 rating
with stable outlook.
The following ratings of Foroya Banki were affirmed:
- BFSR of C- with stable outlook;
- A3 long-term deposit rating with stable outlook;
- Prime-2 deposit ratings.
Moody's last rating action on Føroya Banki was on 16 May 2008 when
it assigned first-time ratings to the bank.
RATING METHODOLOGIES
The principal methodologies used in the above rating actions are "Incorporation
of Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology", "Bank Financial Strength Ratings: Global Methodology"
and "Revised Methodology for Government Related Non-Bank Financial
Institutions", which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Methodologies sub-directory. Other methodologies and factors
that may have been considered can also be found in the Credit Policy &
Methodologies directory.
Amagerbanken, headquartered in Copenhagen, Denmark,
reported total assets of DKK36 billion (EUR6.5 billion) at the
end of March 2009.
BRFkredit a/s, headquartered in Lyngby, Denmark, reported
total assets of DKK234 billion (EUR31 billion) at the end of December
2008.
Danmarks Skibskredit A/S, headquartered in Copenhagen, Denmark,
reported total assets of DKK81.6 billion (EUR11 billion) at the
end of December 2008.
Danske Bank A/S, headquartered in Copenhagen, Denmark,
reported total assets of DKK3,344 billion (EUR449 billion) at the
end of March 2009.
DLR Kredit A/S, headquartered in Copenhagen, Denmark,
reported total assets of DKK131 billion (EUR17.5 billion) at the
end of March 2009.
FIH Erhvervsbank A/S, headquartered in Copenhagen, Denmark,
reported total assets of DKK127 billion (EUR17 billion) at the end of
March 2009.
Foroya Banki, headquartered in Tórshavn, Faroe Islands,
reported total assets of DKK10 billion (EUR1.3 billion) at the
end of March 2009.
Jyske Bank A/S, headquartered in Silkeborg, Denmark,
reported total assets of DKK225 billion (EUR30 billion) at the end of
March 2009.
Nykredit Bank A/S, headquartered in Copenhagen, Denmark,
reported total assets of DKK205 billion (EUR27.6 billion) at the
end of March 2009.
Nykredit Realkredit A/S, headquartered in Copenhagen, Denmark,
reported total assets of DKK938 billion (EUR126 billion) at the end of
March 2009.
Ringkjobing Landbobank A/S, headquartered in Ringkjobing,
Denmark, reported total assets of DKK18 billion (EUR2.4 billion)
at the end of March 2009.
Spar Nord Bank A/S, headquartered in Aalborg, Denmark,
reported total assets of DKK65 billion (EUR8.8 billion) at the
end of March 2009.
Sydbank A/S, headquartered in Aabenraa, Denmark, reported
total assets of DKK161 billion (EUR21.7 billion) at the end of
March 2009.
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
Janne Thomsen
Senior Vice President
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's reviews 11 Danish financial institutions' ratings for downgrade
