Scope Ratings today has published its first long-term and short-term ratings on four large banks domiciled in the Nordic region, as follows:

• Danske Bank A/S (Denmark): Issuer Credit-Strength Rating (ICSR) and long-term unsecured debt rating at A-, stable outlook; short-term debt rating at S-1, stable outlook;

• DNB Bank ASA (Norway): ICSR and long-term debt unsecured debt rating at A+, stable outlook; short-term debt rating at S-1, stable outlook;

• Nordea Bank AB (Sweden): ICSR and long-term unsecured debt rating at A+, stable outlook; short-term debt rating at S-1, stable outlook;

• Swedbank AB (Sweden): ICSR and long-term unsecured debt rating at A-, stable outlook; short-term debt rating at S-1, stable outlook.

Ample capital positions and excellent asset quality metrics
Scope’s credit assessment of the four Nordic banks takes into account their strong prudential and credit metrics, notably ample capital positions and good-to-excellent asset-quality indicators. As opposed to a majority of banking markets in Europe, for example, large banks in both Sweden and Norway have navigated relatively well the financial crisis years. On the other hand, the Danish banking sector has been more affected by the crisis although recently the trend has been improving.

Possible risks arising on overheating housing prices
As challenges, Scope sees an overheating of housing prices in both Sweden and Norway as possibly affecting the large banks’ asset-quality metrics which are currently excellent. Extremely ample capital positions may also be reduced by an adjustment of asset risk weights more in line with international standards.

Stable funding thanks to a high share of covered bond financing
Scope considers the very high reliance of large Nordic banks on covered bond funding to be a strength as it provide funding stability and predictability – which was positively demonstrated during the crisis years when other market funding sources were impaired.

Scope’s ratings reflect new regulatory environment
According to Scope, the ratings assigned today reflect the banks’ own credit fundamentals, also taking into account the resolution and recovery regime about to be implemented in the EU/EEA. In this context, the agency added that bank ratings should become more stable and predictable over time if resolution steps are implemented in a timely and disciplined manner by regulatory authorities.

Conversely, Scope considers state support for banks in distress as increasingly unlikely -- with the possible exception of public sector-owned institutions or banks with a well-defined public mission. As such, the ratings do not benefit from any notching uplift on account of state support. This assessment applies also to DNB Bank despite the minority ownership by the Norwegian government.

Forward-looking analysis reinforced by financial forecasting
As ratings and assessments are geared towards future expected trends and developments, Scope is enhancing its analysis with financial estimates for balance sheet and earnings, based on public data. Its analysts adopt a cautious view and rely on plausible but conservative scenarios in the forecasts. Rating reports include both historical data going back to 2007 and financial forecasts for 2014-2016.

The ratings and the underlying analyses are based on Scope’s bank rating methodology, supplemented by its methodology on forecasting bank financials and published at www.scoperatings.com

The ratings were not solicited by the issuers. The rating reports for each bank indicates whether the issuer has participated or not in the rating process.

Scope has published research on each of the rated banks, detailing the rating drivers and the rating-change drivers. The research includes also peer-group analyses and financial forecasts.

Click here to read individual press releases:
Danske Bank
DNB Bank
Nordea Bank
PR Swedbank