Nordic Credit Rating (NCR) has raised its long-term issuer rating on Sweden-based covered bond issuer Danske Hypotek AB (publ) to 'A+' from 'A'. The outlook is stable. NCR also affirmed its 'N2' short-term rating, its 'AAA' issue rating on Danske Hypotek's covered bonds, and its 'A+' issue rating on Danske Hypotek's senior unsecured obligations, in accordance with its revised financial institutions rating methodology. The ratings are no longer under criteria review.
Rating rationale
The upgrade reflects the recent change in our financial institutions methodology, under which we now include capital structure protection through senior non-preferred debt instruments at the issuer level. Previously, we considered this support only at the senior unsecured instrument level. The inclusion of capital structure protection at the issuer level improves our credit assessment of Danske Bank A/S to 'a+' from 'a'. This results in a one-notch upgrade of our issuer rating on Danske Hypotek to 'A+' from 'A' given our view of the company's role as a 'vital' entity within the Danske Bank group structure and the alignment of our rating on Danske Hypotek with our credit assessment of its parent. In our view, Danske Hypotek and Danske Bank will maintain their status as systemically important financial institutions, with a very high likelihood of resolution in the event of failure.
As of 31 Mar. 2025, Danske Bank had DKK 45bn in senior non-preferred debt instruments outstanding with maturities exceeding one year. These instruments account for 5.6% of Danske Bank group's total risk exposure amount (6.9% when adjusted for Realkredit Danmark's separate resolution requirements) and 23% of its DKK 199bn minimum subordination requirement for own funds and eligible liabilities buffers. Danske Bank has an additional DKK 39bn in senior non-preferred bonds maturing by 31 Mar. 2026, totalling DKK 84bn on its balance sheet. In addition, the bank has DKK 22bn in Tier 2 capital instruments, but we note that these are partially reflected in our assessment of its capital position.
We expect Danske Bank to maintain a total volume of senior non-preferred instruments around DKK 80bn and believe that these instruments offer a meaningful buffer for the bank's senior unsecured creditors in the event of resolution, benefitting all group subsidiaries. In our view, the bail-in of these instruments during a resolution is likely to provide substantial additional support for Danske Hypotek's creditors.
Stable outlook
The stable outlook on Danske Hypotek reflects our credit assessment of Danske Bank. We expect our ratings on Danske Hypotek's covered bonds to remain stable given our stable outlook on our issuer rating on the company.
Ratings upside on Danske Hypotek remains constrained by our credit assessment of the parent.
We could raise or lower our rating Danske Hypotek due to changes in our credit assessment of the parent, given our view of Danske Hypotek as 'vital' to Danske Bank
| 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
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 12 May 2025, 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 12 May 2025. For the full regulatory disclaimer please see the rating report.