DBRS Assigns New Ratings to Nordea Bank Abp Following Change in Domicile

DBRS Ratings Limited (DBRS) assigned new ratings to Nordea Bank Abp (Nordea or the Bank), including a Long-Term Issuer Rating at AA (low) and a Short-Term Issuer Rating at R-1 (middle). All ratings have a Stable trend. The Intrinsic Assessment for Nordea Bank Abp is AA (low) and the Support Assessment is SA3. Concurrently, DBRS has withdrawn its existing ratings on Nordea Bank AB and on the Danish, Finnish and Norwegian branches of Nordea Bank AB, as the company has now been dissolved. See the full list of ratings in the table at the end of this press release.

KEY RATING CONSIDERATIONS
The new ratings have been assigned following the announcement that the merger between the former Swedish parent entity, Nordea Bank AB, and the new Finnish parent entity, Nordea Bank Abp, has been successfully executed on October 1, 2018. As a result of the merger, Nordea Bank Abp assumed all assets and liabilities of Nordea Bank AB, which has subsequently been dissolved. Therefore, and effective October 1, 2018, Nordea is domiciled in Finland and the banking business in Denmark, Norway and Sweden is carried out by branches of Nordea Bank Abp. DBRS views that the change in domicile from Sweden to Finland does not have an impact on the Bank’s creditworthiness and as such DBRS is aligning the ratings of the new Finnish parent entity to those of the former Swedish parent entity, prior to withdrawal.

Following the change of domicile to Finland (a member state of the European banking union), regulatory supervision has been transferred from Finansinspektionen (Swedish FSA) to FIN-FSA (Finnish FSA) and to the European Central Bank (ECB), which is responsible for the supervision of large banks in the European banking union. As such, ECB is now the ultimate regulator and is therefore responsible for coordinating the monitoring activities that remain with the local authorities in Denmark, Norway and Sweden. Given the established collaboration across the regulatory authorities in the Nordic countries, DBRS would not expect any issues to arise as a result of this change in regulator. Furthermore, DBRS notes that Nordea has voluntarily committed to comply with the Swedish FSA’s 2018 Supervisory College Joint Decision following the re-domiciliation date and until late 2019, when the ECB is expected to publish its decision on prudential requirements for Nordea in accordance with the 2019 Supervisory Review and Evaluation Process (SREP). DBRS considers that this transition period should minimize any potential risks related to Nordea’s monitoring as a result of the change.

RATING DRIVERS
Given the already very high rating level, any further upward rating pressure is unlikely. However, there could be positive pressure on the IA (i) if the Bank is able to reduce its reliance on unsecured wholesale funding, and (ii) if the Bank continues to make progress with its refocused strategy towards less risky segments while maintaining strong earnings.

Negative pressure on the ratings would likely be driven by (i) a severe deterioration in asset quality potentially prompted by a drop in price in the Swedish residential and commercial property markets, or (ii) a reduction in investors’ confidence triggering liquidity concerns.

The Grid Summary Grades for Nordea are as follows: Franchise Strength – Very Strong/Strong; Earnings Power – Very Strong/Strong; Risk Profile – Strong; Funding & Liquidity – Strong/Good; Capitalisation – Strong.

Notes:
All figures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (July 2018). This can be found can be found at: http://www.dbrs.com/about/methodologies

The sources of information used for this rating include SNL Financial, company documents, Finansinspektionen (Swedish FSA) and FIN-FSA (Finnish FSA). DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

This rating concerns a newly rated issuer. This is the first DBRS rating on this issuer.
This is an unsolicited rating. This credit rating was not initiated at the request of the issuer.

This rating included participation by the rated entity or any related third party. DBRS had no access to relevant internal documents for the rated entity or a related third party.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Vitaline Yeterian
Rating Committee Chair: Elisabeth Rudman
Initial Rating Date: 4 October 2017
Last Rating Date: [Not applicable as no last rating date.]

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