Nordic Credit Rating (NCR) said today that it had affirmed its 'A' long-term issuer rating on Sweden-based Danske Hypotek AB (publ) (Danske Hypotek). The outlook is stable. At the same time NCR affirmed the 'N-1+' short-term rating, its 'AAA' issue ratings on Danske Hypotek's covered bond bonds and its 'A+' issue ratings on its senior unsecured bonds.
Rating rationale
Our 'A' long-term issuer rating on Danske Hypotek AB (publ) reflects the operating environment for Swedish mortgage lenders, which has improved since our last review due to a lower risk of pandemic-related loan losses, as well as strong risk-adjusted earnings and low credit risk profile. It also reflects Danske Hypotek's role as a 'vital' subsidiary within the Danske Bank group and a permanent part of Danske Bank's long-term strategy in its core Swedish market.
Given the stable outlook on the issuer rating on Danske Hypotek, we do not anticipate a multiple-notch downgrade of the company and expect the covered bond ratings to remain stable. This reflects our view that Danske Hypotek and Danske Bank will maintain their status as systemically important financial institutions with a very high likelihood of resolution, which would be expected to exclude the bail-in of covered bonds. Proposed changes to the Swedish Covered Bond Issuance Act, to align with the EU's latest covered bond directive, will not impact the ratings on Danske Hypotek's covered bonds.
Stable outlook
The outlook is stable, reflecting our credit assessment of Danske Bank and the overall Swedish mortgage market. Upside to the issuer rating on Danske Hypotek remains constrained by our 'a' credit assessment of Danske Bank. Given our view of Danske Hypotek as 'vital' to Danske Bank, we could revise our rating on the company due to changes in our credit assessment of the parent, which we currently regard as stable.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | A | A |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N-1+ | N-1+ |
| Covered bond issue rating: | AAA | AAA |
| Senior unsecured issue rating: | A+ | A+ |
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Gustav Nilsson, analyst, +46735 42 04 46, gustav.nilsson@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 18 Feb. 2022, NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022, NCR's Rating Principles published on 16 Sep. 2019 and NCR's Covered Bond Rating Methodology published on 5 Jul. 2019. For the full regulatory disclaimer please see the rating report.