for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up
Financials

TEXT-Fitch affirms Nordea Bank AB ratings

(The following statement was released by the rating agency)
    July 12 - Fitch Ratings has affirmed Nordea Bank AB's (Nordea) 
Long-term Issuer Default Rating (IDR) at 'AA-', Short-term IDR at 'F1+', and 
Viability Rating at 'aa-'. The Outlook for the Long-term IDR is Stable. A full 
list of rating actions is at the end of this comment.

The affirmations reflect Nordea's strong Nordic franchise, solid 
revenue-generating capacity, sound capital and adequate asset quality. They also
factor in its reliance on wholesale funding - albeit diversified and with a 
lengthening maturity profile.

Fitch's view that Nordea will maintain its diversified revenue-generating 
capacity, while keeping loan impairment charges manageable, drive the Stable 
Outlook. Upside potential for Nordea's ratings is limited given its wholesale 
funding reliance and already high ratings. Nordea's ratings are sensitive to 
investor sentiment turning against the Nordic region or the bank. The ratings 
would also be sensitive to any building up of a material reliance on 
international investors to fund domestic long-term assets or to any significant 
asset quality deterioration from a longer-than-expected difficult European 
economic environment.   

Fitch expects Nordea's profitability to be resilient in 2012 and 2013 driven by 
a strong focus on further cost efficiency measures and re-pricing of assets 
offsetting costs from additional regulations, both on capital and liquidity. The
global downturn affects Nordea's loan portfolio, in particular its Danish and 
shipping portfolios where impaired loans are increasing, but at a slow pace. 
Loan impairment charges for these portfolios will remain high in 2012, but are 
manageable for the bank. The unreserved impaired loans to equity ratio was a 
moderate 12% at end-March 2012; in addition, over half of Nordea's reported 
impaired loans are still performing. 

Nordea's funding is well diversified, although like its Nordic peers a 
significant reliance on wholesale funding remains. Given the necessity of 
predominately domestic financial institutions, insurance companies and pension 
funds to hold highly liquid, high quality, securities in domestic currency, 
Fitch expects domestic demand for Nordea's securities, in particular covered 
bonds, to remain stable. This is reinforced by the relatively limited 
outstanding volume of Nordic government bonds. Nordea has a diverse 
international investor base for its debt securities and around half of its 
short-term issuance is sourced from the USD market. While Fitch understands that
short-term debt is not used to fund long term assets, Nordea's ratings would be 
sensitive to a shift towards a material reliance on international investors to 
fund its long term domestic assets. Fitch expects Nordea to retain its focus on 
long-term funding sources and to maintain its sound liquidity buffer. 

Nordea's capital adequacy ratios compare well with those of international peers,
but lag those of some domestic peers. Capital optimisation measures will support
the bank in complying with further regulatory requirements. However, leverage is
relatively high for a bank in this rating category, with a tangible common 
equity to tangible assets ratio around 3.3% (4.7% excluding derivatives and 
insurance assets).

Fitch has also affirmed Nordea Bank Danmark, Nordea Bank Finland and Nordea Bank
Norge's ratings, including their Long-term IDR at 'AA-' with a Stable Outlook, 
Short-term IDR at 'F1+, and Support Rating at '1'. Given the close integration 
of the three subsidiaries in the Nordea group, Fitch does not assign Viability 
Ratings to the subsidiaries.

Fitch considers that there would be an extremely high probability that support 
from the authorities would be forthcoming if required. Fitch would also expect 
coordinated state support from the Nordic countries where Nordea operates, 
should this be necessary. The Support Rating Floors of Nordea and its 
subsidiaries reflect the extremely strong ability and propensity for each of the
national authorities to support the banks, should this ever be needed. For 
further details see 'Updated Support Rating Floors for Major Banks in High-Grade
Sovereigns', dated 9 April 2009, available on www.fitchratings.com.

 

The rating actions are as follows.

Nordea Bank AB:
Long-term IDR: affirmed at 'AA-', Outlook Stable
Short-term IDR: affirmed at 'F1+' 
Viability Rating: affirmed at 'aa-'
Support Rating: affirmed at '1'
Support Rating Floor: affirmed at 'A-' 
Senior unsecured debt: affirmed at 'AA-' 
Subordinated debt: affirmed at 'A+' 
Hybrid debt: affirmed at 'BBB+' 
Certificate of Deposit: affirmed at 'F1+'

Nordea Bank Finland
Long-term IDR: affirmed at 'AA-'; Outlook Stable
Short-term IDR: affirmed at 'F1+'
Support Rating: affirmed at '1'
Support Rating Floor: affirmed at 'A'
Senior unsecured debt: affirmed at 'AA-' 
Upper tier 2 debt: affirmed at 'A-' 

Nordea Bank Danmark 
Long-term IDR: affirmed at 'AA-'; Outlook Stable
Short-term IDR: affirmed at 'F1+'
Support Rating: affirmed at '1'
Support Rating Floor: affirmed at 'A-'

Nordea Bank Norge 
Long-term IDR: affirmed at 'AA-'; Outlook Stable
Short-term IDR: affirmed at 'F1+'
Support Rating: affirmed at '1'
Support Rating Floor: affirmed at 'A'

Nordea North American Inc.:
Short-term IDR: affirmed at 'F1+'
US commercial paper: affirmed at 'F1+'

For all of Fitch's Eurozone Crisis commentary go to here
 
    

 (Caryn Trokie, New York Ratings Unit)
for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up