Foreign banks raise deposits at Nordic peers

COPENHAGEN, March 27 (Reuters) - The global credit crisis has caused international financial institutions to turn to Nordic banks as safe havens for deposits.

“We can tell by looking at banks’ liquidity, which show an increase in deposits from foreigners as well as from other banks,” Moody’s Nordic chief analyst and Senior Vice President Janne Thomsen told Reuters on Thursday.

Moody’s ratings are based on public information as well as privileged knowledge, allowing the rating agency to examine deposit data at Nordic banks.

“Compared to U.S. banks, Nordic banks have kept the car on the road and not based their mortgage lending on assumptions of future price rises,” Fox-Pitt Kelton banking analyst Kim Bergo said.

“The liquidity issue is only a symptom of the underlying credit quality and that’s probably why some would prefer Nordic banks,” Bergo added.


Recent central bank boosting of liquidity facilities have not managed to re-ignite international interbank lending and banks remain cautious of new writedowns and credit related losses in the industry.

“Money is not in short supply right now, but trust between banks continues to be disrupted,” Bergo said.

Since the end of the second quarter last year, the DJ Stoxx Nordic financials index .TBNKF has lost 24.6 percent compared with the European financials index .SX7P, which is down 32.7 percent.

Banks in Sweden, Norway, Denmark and Finland rely heavily on local funding and bond issuance in addition to Nordic interbank markets. Also, they have pursued cautious business models and investment strategies, largely avoiding subprime-related investments.

“There have been no nasty surprises from Nordic banks, which also have good ratings making them an attractive option for deposits”, Thomsen said.

She added regional banks remain strongly focused on retail banking in the Nordics, and said they were helped by unchanged loan-to-value limitations on mortgage lending.

The only Nordic bank with a negative Moody's outlook is Swedbank SWEDa.ST. All others have stable outlooks, including pan-nordic industry leaders Danske Bank DANSKE.CO and Nordea NDA.ST, which both have Aa long-term ratings.

Reporting by Peter Levring; editing by Elaine Hardcastle