Nordic Credit Rating (NCR) said today that it had affirmed its 'A' long-term issuer rating on Sweden-based Danske Hypotek AB (publ). The outlook is stable. At the same time, NCR affirmed the 'N2' short-term rating and the 'AAA' issue rating on Danske Hypotek's covered bonds and the 'A+' issue rating on its senior unsecured obligations.
Rating rationale
Our 'A' issuer rating on Danske Hypotek reflects our current 'a' credit assessment of Danske Bank and the company's role as a 'vital' entity within the group structure. We also maintain our 'a' standalone assessment of Danske Hypotek. However, due to changes in the loan composition and a higher share of multi-family housing and non-performing loans, we have revised our view of loss performance. In addition, we have adjusted our expected earnings performance downwards to reflect our expectations that lending margins will remain tighter given high competition and low demand.
Given the stable outlook on our issuer rating on Danske Hypotek, we expect the covered bond ratings to remain stable. This reflects our view that Danske Hypotek and Danske Bank would maintain their status as systemically important financial institutions with a very high likelihood of resolution in the event of failure, which would exclude the bail-in of covered bonds.
Stable outlook
The outlook is stable, reflecting our credit assessment of Danske Bank. Upside to the issuer rating on Danske Hypotek remains constrained by our credit assessment of the parent. 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.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | A | A |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N2 | N2 |
| Covered bond issue rating: | AAA | AAA |
| Senior unsecured issue rating: | A+ | A+ |
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 14 Feb. 2024, NCR's Rating Principles published on 14 Feb. 2024, NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024 and NCR's Covered Bond Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.