Nordic Credit Rating's (NCR's) 'A' issuer rating and 'AAA' covered bond ratings on Danske Hypotek AB (publ) are unchanged following the publication of its mid-2023 results and receipt of updated cover pool details.
Decreases in housing prices resulted in a higher loan-to-value ratio in Danske Hypotek's portfolio during the first half of 2023. While prices have stabilized, we see the potential for further declines in our base case given the increasing supply of homes for sale in Sweden. We also note an increasing trend in the weighted average probability of default for customers in the sample, likely reflecting the reduction in disposable income due to higher interest and living costs for households as policy rates rise.
In Q1 2022, Danske Hypotek transferred about SEK 8bn in multi-family rental housing loans from Danske Bank to its own cover pool. The volumes declined in the subsequent quarters to around SEK 4bn; however, the company increased the volume of loans to nearly SEK 10bn in Q2 2023, about 7% of the cover pool.
The latest full report by NCR explaining the components of the covered bond ratings is available here.
This commentary does not constitute a rating action.
Contacts:
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com