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 bonds and its 'A+' senior unsecured issue rating. The issuer and issue ratings are no longer under criteria review.
Rating rationale
On 18 Feb. 2022, NCR published its new Group and Government Support Methodology and placed the issuer rating and covered-bond issue ratings on Danske Hypotek under criteria review. Danske Hypotek is a subsidiary of Danske Bank A/S (Danske Bank). While our rating has always considered Danske Hypotek's role within the Danske Bank group, the new methodology provides clearer guidelines for describing Danske Hypotek's role as a 'vital' entity within the group structure. Under our definition, the issuer rating on a 'vital' entity is aligned with NCR credit assessment of the parent, in the absence of a public parent issuer rating from NCR. Danske Hypotek is financed in part by Danske Bank and is highly integrated with the group's Swedish operations. In addition, we expect any financial resolution (as defined by the EU's Bank Recovery and Resolution Directive) involving Danske Bank to result in the Swedish subsidiary maintaining its current relationship with the parent. For this reason, Danske Hypotek is not eligible to be rated above the level of our credit assessment of the parent. Our current assessment of Danske Bank is 'a', which is already in line with our standalone credit assessment on Danske Hypotek. We have therefore affirmed our 'A' long-term issuer rating and 'AAA' covered-bond issue ratings.
Stable outlook
The stable outlook reflects 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 Danske Hypotek due to changes in our credit assessment of Danske Bank, 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
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@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 and NCR's Rating Principles published on 16 Sep. 2019. For the full regulatory disclaimer please see the rating report.