TEXT-S&P takes various rating actions on Norwegian banks

Tue Nov 20, 2012 6:43am EST

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(The following statement was released by the rating agency)

Nov 20 -

-- In our view, economic risks for Norwegian banks are increasing. In particular, we believe weakening economic conditions across Europe could have an important impact on Norway.

-- We are revising our outlook on Norway-based Gjensidige Bank ASA to negative from stable and affirming the 'BBB+/A-2' ratings.

-- We are affirming the ratings on DNB Bank ASA and Storebrand Bank ASA. The outlooks remain stable owing to our view of the likelihood of government and group support for these banks.

-- We are also affirming our 'BB+/B' ratings on Eksportfinans ASA. The outlook remains negative.

Standard & Poor's Ratings Services said today it had revised its outlooks on Norway-based Gjensidige Bank ASA and its subsidiary Gjensidige Bank Boligkreditt AS to negative from stable. The 'BBB+' long-term and 'A-2' short-term counterparty credit ratings were affirmed.

At the same time, we have affirmed the ratings on the following banks:

-- DNB Bank ASA at 'A+/A-1',

-- Storebrand Bank ASA at 'BBB+/A-2', and

-- Eksportfinans ASA at 'BB+/B'.

The outlooks on DNB Bank and Storebrand Bank remain stable and that on Eksportfinans ASA remains negative.

We remain convinced of the financial strength of the Norwegian government and its capacity to support the labor market. Nevertheless, we believe economic risks in the Kingdom of Norway (AAA/Stable/A-1+) would increase if the recession in the eurozone (European Economic and Monetary Union) impacts important Norwegian trading partners for a prolonged period. The resulting reduction of external demand would hurt the country's export sector, and lower consumer confidence could lead to a drop in asset values, which have been inflated by increasing household debt. In our view, these trends point to the heightening of economic risks for Norwegian banks.

Our assessment of industry risk in Norway remains unchanged, and we view the trend for this risk as stable.

Our affirmations of the ratings on all five banks reflect our view that the economic risks in the Norwegian banking system remain low.

We revised our outlooks on Gjensidige Bank and its subsidiary Gjensidige Bank Boligkreditt to negative because we consider further support for these banks from the group to be uncertain. We believe that the bank is not yet a strategic part of the Gjensidige insurance group and, as such, we do not add an uplift to the bank's stand-alone credit profile (SACP) for group support. In our view, the bank has a relatively short history as a profitable institution and relies on nongroup consumer finance customers for the majority of its profit.

The stable outlook on DNB Bank reflects that, if the SACP were to deteriorate, we could include an additional notch of uplift in the rating. This is because we anticipate a high likelihood of extraordinary government support for the bank in a stress scenario in line with our view of the bank's high systemic importance in Norway. Nevertheless, if we revised our assessment of DNB Bank's SACP downward, this would directly affect the ratings on the bank's subordinated debt and hybrid capital issues.

The stable outlook on Storebrand Bank reflects its strategically important role within insurance group Storebrand ASA (BBB/Stable/--) and the stable outlook on the group's core operating company, Storebrand Livsforsikring AS (A-/Stable/--), which affords the rating up to three notches of uplift over the SACP for the likelihood of group support. We currently incorporate only one notch of uplift in the ratings.

We revised the outlook on Eksportfinans in February 2012.

RELATED CRITERIA AND RESEARCH

-- Subordinated Debt Of Several European Banks Downgraded On EC Draft Resolution Framework; Other Debt Ratings Unaffected, July 24, 2012

--

"here 6782163&rev_id=3&sid=912313&sind=A&", Nov. 9, 2011

--

"here 6921376&rev_id=6&sid=912313&sind=A&", Nov. 9, 2011

--

"here 6919278&rev_id=4&sid=912313&sind=A&", Nov. 1, 2011

--

"here 6909411&rev_id=3&sid=912313&sind=A&", Nov. 9, 2011

-- Rising Household Debt Could Become A Headache For The Nordic Countries, May 30, 2011

--

"here 6338060&rev_id=10&sid=912313&sind=A&", Dec. 9, 2010

--

"here 6338060&rev_id=10&sid=912313&sind=A&", Dec. 6, 2010

-- Use Of CreditWatch And Outlooks, Sept. 14, 2009

-- Group Methodology, April 22, 2009

BICRA SCORE SNAPSHOT*

Norway

To From

BICRA Group 2 2

Economic risk 2 2

Economic resilience Very low risk Very low risk

Economic imbalances Intermediate risk Low risk

Credit risk in the economy Low risk Low risk

Industry risk 3 3

Institutional framework Intermediate risk Low risk

Competitive dynamics Low risk Low risk

Systemwide funding Intermediate risk Intermediate risk

*Banking Industry Risk Assessment (BICRA) scores are on a scale from 1 (lowest risk) to 10 (highest risk). For more details on our BICRA scores on banking industries across the globe, please see "Banking Industry Country Risk Assessment Update," published monthly on RatingsDirect.

RATINGS LIST

Ratings Affirmed; Outlook Action

To From

Gjensidige Bank ASA

Gjensidige Bank Boligkreditt AS

Counterparty Credit Ratings BBB+/Negative/A-2 BBB+/Stable/A-2

DNB Bank ASA

Counterparty Credit Rating A+/Stable/A-1 A+/Stable/A-1

Storebrand Bank ASA

Counterparty Credit Rating BBB+/Stable/A-2 BBB+/Stable/A-2

Eksportfinans ASA

Counterparty Credit Rating BB+/Negative/B BB+/Negative/B

NB: This list does not include all the ratings affected.

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