Press Release: S&PGR Raises Danica Rtg To ‘A’; Affirms Danske Bank At ‘A’
The following is a press release from Standard & Poor's: -- Danske Bank's capital levels have improved materially, with the risk-adjusted capital (RAC) ratio moving above 10%, and we expect it will remain higher than 10% in the coming 12-18 months, improving the group credit profile (GCP). -- However, at this higher capital and earnings level, the bank's additional loss-absorbing capacity (ALAC) buffer no longer leads to one notch of uplift for the rating. -- As a result, we are raising the rating on Danske Bank's core insurance subsidiary Danica Pension to 'A' from 'A-' and upgrading the bank's and insurance company's subordinated debt and hybrid instruments. -- We are affirming our ratings on Danske Bank at 'A/A-1'. -- The stable outlook reflects our expectations of stable capital ratios and further earnings improvements. STOCKHOLM (S&P Global Ratings) July 8, 2016--S&P Global Ratings today affirmed its long- and short-term counterparty credit ratings on Denmark-based Danske Bank A/S and its subsidiary Danske Bank PLC at 'A/A-1' and raised its long-term counterparty credit and insurer financial strength ratings on Danske Bank's insurance subsidiary Danica Pension Livsforsikringsaktieselskab (Danica) to 'A' from 'A-'. The outlook for all entities is stable. In addition, we have upgraded Danske Bank's subordinated debt to 'BBB+' from 'BBB' and its junior subordinated debt to 'BBB-' from 'BB+'. We also upgraded Danica's subordinated debt instruments to 'BBB+' from 'BBB'. The rating action reflects our view that Danske Bank's capital levels have improved. We have revised our capital and earnings assessment to strong from adequate, as the bank's RAC ratio increased to 10.1% on Dec. 31, 2015, from 9% on Dec. 31, 2014, and we expect it will remain between 10.5% and 11.0% in the coming 12-18 months. While the ratio is relatively close to our 10% threshold, we believe that the bank has additional flexibility, given its ability to reduce the currently high buyback activity and dividend accruals in the event of stress that resulted in higher-than-anticipated losses or turbulent capital markets. As a result of our revision of Danske Bank's capital and earnings position to strong, we have revised the unsupported GCP to 'a' from 'a-'. At the same time, we are removing the one notch of ALAC support from our rating on Danske Bank. We estimate ALAC of 2.4% of S&P Global Ratings risk-weighted assets (RWAs) as of year-end 2015 and do not expect it will go above our adjusted threshold of 4.5% in the coming two years. We apply a 50-basis-point-lower threshold to Danske Bank because of its significant insurance operations. These activities represent about 14% of total S&P Global Ratings RWAs, which we believe would be out of scope for any resolution process. Our ratings on Danske Bank's core insurance subsidiary, Danica, at 'A', are now at the level of our unsupported GCP on Danske Bank. We believe that Danica, as an insurance subsidiary of Danske Bank, would not benefit from ALAC at the bank. Danica is one of the leading life insurers in Denmark, ranking second in terms of gross premiums written, with developing insurance operations in Sweden and Norway. Danica is also the main life insurance risk carrier within the Danske Bank group. In our view, Danica plays a core role in Danske Bank's strategy to fortify its position as a leading and well-diversified player in Denmark's financial services market as part of its newly formed wealth management division. The stable outlook on Danske Bank reflects our view that the bank will be able to maintain its recent improvements in capital and profitability, which have enhanced the bank's long-term capital flexibility. We anticipate that Danske Bank will continue to pay out a significant share of annual profits via dividends and share buyback programs, maintaining capital ratios close to 10.5% by our measures. We believe that the prospect of higher regulatory capital requirements and flexibility to discontinue its high payout levels supports this view. The stable outlook also reflects our expectation that the bank will maintain its current stock of instruments that we consider eligible for ALAC buffers below our threshold of 4.5% of S&P Global Ratings RWA over the coming two years. A negative rating action on Danske is currently unlikely, given improvements in the domestic economy and the existence of meaningful ALAC buffers should we revise our stand-alone capital and earnings assessment. However, while the Northern Ireland division is relatively small and reasonably profitable, a significant loss there in the wake of Brexit or other material losses could affect our assessment of the bank's overall capital position. A positive rating action on Danske Bank could occur if the bank's development of ALAC buffers exceeded our expectations, reaching at least 4.5% of S&P Global Ratings RWA on a sustainable basis. The stable outlook on Danica reflects that on Danske Bank, based on Danica's core status and the rating being aligned with the unsupported GCP of Danske Bank. RELATED CRITERIA AND RESEARCH Related Criteria -- Criteria - Financial Institutions - Banks: Assessing Bank Branch Creditworthiness - October 14, 2013 -- General Criteria: Use Of CreditWatch And Outlooks - September 14, 2009 -- Criteria - Financial Institutions - Banks: Revised Market Risk Charges For Banks In Our Risk-Adjusted Capital Framework - June 22, 2012 -- Criteria - Financial Institutions - Banks: Banks: Rating Methodology And Assumptions - November 09, 2011 -- Criteria - Financial Institutions - Banks: Banking Industry Country Risk Assessment Methodology And Assumptions - November 09, 2011 -- Criteria - Financial Institutions - Banks: Bank Capital Methodology And Assumptions - December 06, 2010 -- General Criteria: Group Rating Methodology - November 19, 2013 -- Criteria - Financial Institutions - Banks: Quantitative Metrics For Rating Banks Globally: Methodology And Assumptions - July 17, 2013 -- Criteria - Financial Institutions - Banks: Commercial Paper I: Banks - March 23, 2004 -- Criteria - Financial Institutions - Banks: Bank Hybrid Capital And Nondeferrable Subordinated Debt Methodology And Assumptions - January 29, 2015 -- Criteria - Financial Institutions - Banks: Bank Rating Methodology And Assumptions: Additional Loss-Absorbing Capacity - April 27, 2015 -- General Criteria: National And Regional Scale Credit Ratings - September 22, 2014 -- General Criteria: S&P Global Ratings' National And Regional Scale Mapping Tables - June 01, 2016 -- Criteria - Financial Institutions - Banks: Methodology For Mapping Short- And Long-Term Issuer Credit Ratings For Banks - May 04, 2010 Related Research -- The Future Of Banking: Nordic Banks Looking Svelte In The Fintech Race, June 14, 2016 -- Banking Industry Country Risk Assessment: Denmark, Jan. 28, 2016 -- Danske Bank A/S, July 31, 2015 -- Danish Insurer Danica Pension Livsforsikringsaktieselskab's Proposed Subordinated Notes Rated 'BBB', Sept. 15, 2015 -- Denmark-Based Life Insurer Danica Pension Livsforsikringsaktieselskab Rated 'A-'; Outlook Stable, Sept. 11, 2015 Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at spcapitaliq.com. All ratings affected by this rating action can be found on the S&P Global Ratings public website at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009. Primary Credit Analyst: Sean Cotten, Stockholm (46) 8-440-5928; sean.cotten[a]spglobal.com Secondary Contact: Alexander Ekbom, Stockholm (46) 8-440-5911; alexander.ekbom[a]spglobal.com Additional Contact: Financial Institutions Ratings Europe; FIG_Europe[a]standardandpoors.com No content (including ratings, credit-related analyses and data, valuations, model, software, or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced, or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees, or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness, or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, Stock Market Quotes, Business News, Financial News from http://commodity-market-news.com
Press Release: S&PGR Raises Danica Rtg To ‘A’; -2-
exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment, and experience of the user, its management, employees, advisors, and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request[a]standardandpoors.com. Copyright (c) 2016 by Standard & Poor's Financial Services LLC. All rights reserved.