Fitch Affirms KLP Banken at 'A-'; Outlook Stable

Mon May 12, 2014 11:50am EDT

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(The following statement was released by the rating agency) LONDON, May 12 (Fitch) Fitch Ratings has affirmed Norway-based KLP Banken AS Group's (KLP Banken) and its covered bond issuing subsidiary, KLP Kommunekreditt AS's Long-term Issuer Default Ratings (IDR) at 'A-' with Stable Outlooks. At the same time, the agency has affirmed both entities' Short-term IDRs at 'F2' and Support Ratings at '1'. KEY RATING DRIVERS - IDRS AND SUPPORT RATINGS Both entities' ratings are driven by institutional support from their ultimate parent, Kommunal Landspensjonskasse (KLP). KLP is one of Norway's largest life insurance companies with total assets of NOK370bn at end-2013. Fitch affirmed KLP's Long-term IDR at 'A' and Insurer Financial Strength Rating at 'A+' on 7 February 2014 with Stable Outlooks (see "Fitch Affirms KLP IFS at 'A+'; Outlook Stable" at www.fitchratings.com). Fitch considers that there continues to be an extremely high probability of support in case of need for both entities, given the high reputational risk for KLP. KLP has previously provided support to KLP Banken and KLP Kommunekreditt through loan purchases to provide liquidity and capital injections. The bank is small in relation to the parent, representing 7% of group at assets at end-2013, and Fitch believes that KLP's ability to support the two entities is high. KLP has a strong capital position, with a regulatory solvency ratio of 229% at end-2013, and excess capital would be readily available to provide support if necessary. The IDRs are one notch below KLP's IDRs, reflecting Fitch's view that while the entities are strategically important to KLP, they are not core subsidiaries. The strategic importance of the bank is driven by shared branding, a high level of integration and strong strategic synergies. The one-notch difference considers the bank's relatively small contribution to KLP's overall revenues and earnings and the fact that KLP is still primarily a provider of life insurance products. Due to the high level of integration, Fitch does not assign Viability Ratings to the entities. RATING SENSITIVITIES - IDRS AND SUPPORT RATINGS As they are support driven, KLP Banken's and KLP Kommunekreditt AS's IDRs and Support Ratings are sensitive to any change in KLP's IDRs or a change in Fitch's assessment of KLP's ability or propensity to support the two entities. In the longer term, the entities' IDRs could be upgraded and aligned with KLP's IDRs if the bank increased in importance to KLP and the entities became core subsidiaries. KEY RATING DRIVERS - SUBSIDIARY AND AFFILIATED COMPANY KLP Kommunekreditt AS is a wholly owned subsidiary of KLP Banken and a leading brand name in the Norwegian public sector lending space. Its ratings are equalised with those of KLP Banken due to the high level of integration between the two entities. Contact: Primary Analyst Bjorn Norrman Director +44 20 3530 1330 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Jens Hallen Director +44 20 3530 1326 Committee Chairperson Michael Dawson-Kropf Senior Director +49 69 76 80 76 113 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, 'Global Financial Institutions Rating Criteria' dated 31 January 2014 is available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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