Scope Ratings today is publishing first-time ratings on AT1 capital securities issued by Nordic banks in Denmark, Norway and Sweden. The ratings range from BB to BBB-. With these ratings, Scope’s coverage of bank capital securities (AT1 and Tier 2) increases to over 60 securities issued by 15 European banks in nine countries. The rating agency notes that the asset class has grown sufficiently so that it now offers investors a range of different risk profiles and returns.

The rating actions are supported by detailed individual analytical reports focused on risks investors face when investing in the securities. The ratings and analyses are based on Scope’s rating methodology for bank capital instruments published in September 2014. Last month Scope published an updated version of the methodology, with a call for comments. These documents can be downloaded from www.scoperatings.com.

The issuance of capital instruments and the terms and conditions of these securities are essentially driven by their role in strengthening banks’ capital positions, providing a viable private-sector alternative for recapitalization. When rating AT1 securities, Scope has assigned at least four notches down from the issuer credit-strength rating (ICSR) to capture inherent coupon cancellation and principal loss absorption risks. Scope has also notched down beyond the minimum of four notches due to either security- or issuer-specific factors. These include the level of the trigger, the distance to trigger and combined buffer requirement, the issuer’s liability and capital structure, as well as specific regulatory requirements or guidelines.

Regarding the AT1 securities of the four rated Nordic banks, Scope noted that they supplement the already strong CET1 base, thus enhancing further their overall capitalization. Reassuring prudential metrics, alongside viable and sustainable business models, continue to support the banks’ ICSRs in the A range.

The following ratings and outlooks were assigned:
Danske Bank ASA, 5.75% EUR 750m Perpetual Non-Cumulative Resettable AT1 Capital Notes: BB, Stable Outlook

Danske Bank ASA, 5.875% EUR 750m Perpetual Non-Cumulative Resettable AT1 Capital Notes: BB, Stable Outlook

DNB Bank ASA, 5.75% USD 750m Fixed Rate Reset Perpetual AT1 Capital Notes: BBB-, Stable Outlook

Nordea Bank AB, 6.125% USD 500m Perpetual Non-Call 2024 AT1 Notes: BBB-, Stable Outlook

Nordea Bank AB, 5.5% USD 1bn Perpetual Non-Call 2019 AT1 Notes: BBB-, Stable Outlook

Nordea Bank AB, 5.25% USD 550m Perpetual Non-Call 2021 AT1 Notes: BBB-, Stable Outlook

Nordea Bank AB, NOK 1.25bn Perpetual Non-Call AT1 Notes: BBB-, Stable Outlook

Nordea Bank AB, SEK 2.25bn Perpetual Non-Call AT1 Notes: BBB-, Stable Outlook

Swedbank AB, 5.5% USD 750m Fixed Rate Reset AT1 Convertible Notes: BB, Stable Outlook

The ratings were not solicited by the issuers. The ratings and analysis are based solely on public information.