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
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 percent in 2016,
ahead of the bank’s own 12.5 percent 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
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 percent, Scope calculates that the distance to
trigger is at a comfortable 8.5 percent, 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