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08. Jun 2017 Rating news  – Cross-sector

Danske Bank’s Issuer Rating upgraded to A+ by Scope

Scope Ratings cited steadily improving fundamentals as underpinning its decision to upgrade Danske Bank’s long-term ratings by one notch, and the rating of AT1 securities by two notches; all ratings have now a Stable Outlook.

Scope Ratings has today upgraded the long-term ratings of Danske Bank (Issuer Rating to A+ from A, and senior unsecured debt ratings to A from A-) citing improved profitability and the successful run down of the non-core division as key drivers for the rating action. The outlook for the ratings is now Stable. Scope has also upgraded Danske Bank’s AT1 securities’ rating by two notches, to BBB- from BB (with Stable Outlook).

Scope highlighted that Danske is currently one of the most profitable banks in Europe, with ROE of 13.1% in 2016, ahead of the bank’s own 12.5% target. Annual profits (DKK 20bn in 2016) have exceeded the pre-crisis peak level (DKK 15bn in 2007), supported by better asset quality across divisions.

Danske’s non-core division, which comprises primarily mortgages in Northern Ireland and the Baltic region, has declined to DKK 13bn at the end of 2016, from over DKK 50bn in 2012. Scope considers that this level, which amounts to only a fraction of the Danish bank’s annual profit, can no longer be considered a threat.

Referring to the two-notch upgrade of the rating for Danske Bank’s AT1 securities, Scope highlighted its opinion that this rating can now be positioned at only four notches below the unsecured debt rating – which is the lowest possible notching gap for these instruments based on Scope’s methodology for rating bank capital securities. Against the AT1 instruments’ high trigger of 7%, Scope calculates that the distance to trigger is at a comfortable 8.5%, due to Danske Bank’s strong capital levels.

Concomitant to this rating action, Scope has also assigned a new BBB- rating to the DKK 3bn Perpetual non-cumulative AT1 notes issued in November 2016 (series 608 of the EMTN programme).

The following ratings were upgraded with Stable Outlook:

  • Issuer rating: A+ from A
  • Senior unsecured debt rating: A from A-
  • Additional Tier 1 Ratings: BBB- from BB

The short-term rating was affirmed at S-1, also with Stable Outlook.

Legal and regulatory disclosures

Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013

Responsibility
This report is issued by Scope Ratings AG, Berlin, District Court for Berlin (Charlottenburg) HRB 161306 B, Executive Board: Torsten Hinrichs (CEO), Dr Stefan Bund.
The Lead Analyst is Marco Troiano, Executive Director.
Responsible for approving all rating actions: Sam Theodore, Managing Director.

Rating history
Rating for DANSKE BANK A/S was first assigned 19.11.2014 and last updated on 02.02.2017
Rating for XS1190987427/XS1190987427 were first assigned 24.09.2015 and last updated on 24.09.2015

The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months. A rating change is, however, not automatically ensured.
The ratings were not requested by the issuers (unsolicited rating) and were prepared with participation of the issuers.

Key sources of information for the rating
Key sources: Third parties and Public domain. Key information: Website of the rated entity | Annual reports/semi-annual reports of the rated entity | Data provided by external data providers | other public information
Scope Ratings considers the quality of the available information on the evaluated company to be satisfactory. Scope uses information and data that it considers to be accurate and reliable. Scope cannot, however, independently verify the reliability and accuracy of such information and data.

Examination of the rating by the rated entity prior to publication
Prior to publication, the rated entities were given the opportunity to examine the rating and the rating drivers, including the principal grounds on which the credit rating or rating outlook is based. The rated entity was subsequently provided with at least one full working day, to point out any factual errors, or to appeal the rating decision and deliver additional material information. Following that examination, the ratings were not modified.

Methodology
The methodologies applicable for this rating actions “Bank Rating Methodology” (May 2017) and “Capital Instrument methodology (May 2017)” are available on www.scoperatings.com. The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s default rating, definitions of rating notations and further information on the analysis components of a rating can be found on www.scoperatings.com.

Conditions of use / exclusion of liability
© 2017 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings AG, Scope Analysis, Scope Investor Services GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope cannot, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided “as is” without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or otherwise damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party, as opinions on relative credit risk and not as a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings AG at Lennéstraße 5 D-10785 Berlin.

Rating issued by
Scope Ratings AG, Lennéstrasse 5, 10785 Berlin
 

Contact

Scope Ratings AG    Phone: +49 30 27891-0
Marco Troiano    m.troiano@scoperatings.com
Samuel Theodore    s.theodore@scoperatings.com
Oliver Müller    press@scopegroup.com