Standard & Poor’s Ratings Services (S&P) has downgraded the Danske Bank Group by one notch to A-/A-2 (from A/A-1). The outlook has been adjusted upwards, from “negative” to “stable”.
The rating action reflects S&P’s expectation that Danske Bank will continue to see high impair-ment charges in its Irish banking business as a result of continued weakness in the Irish property market. In addition S&P points out continued challenges for some sectors in Denmark.
Danske Bank takes note of S&P’s downgrades but also of the fact that S&P considers Danske Bank’s business position to be strong and views its liquidity as adequate.
“S&P’s decision to downgrade the Bank was unexpected in light of the decline in loan impairment charges in Ireland and Denmark from Q4 2011 to Q1 2012,” says Henrik Ramlau-Hansen, Chief Financial Officer. “At the same time, we have announced a new business model for Ireland and expect impairment charges to decline over the coming years.”
In its financial statements for Q1 2012, Danske Bank announced that it expects additional impair-ment charges in the DKK 5-7 billion range for National Irish Bank in the period from 1 April 2012 to the end of 2014. At the same time, the commercial and investment property portfolios will be transferred to a new, separate unit of the Group to optimise the value of the portfolio and ensure a controlled winding-up of this part of the loan portfolio.
Moreover, Danske Bank has taken several initiatives to increase income and reduce costs in order to significantly improve earnings and strengthen the capital base.
“Our clear aim is to re-establish our previous rating levels as soon as possible through the initia-tives already taken and new initiatives,” says Henrik Ramlau-Hansen. “We are among the best-capitalised banks in Europe, and with a capital base of DKK 159 billion and a solvency need of DKK 91 billion, we had a very comfortable capital buffer exceeding DKK 68 billion at the end of Q1 2012.”
Danske Bank A/S
Henrik Ramlau-Hansen, Chief Financial Officer, phone +45 45 14 06 66
Peter Rostrup-Nielsen, Chief Risk Officer, phone +45 45 14 07 60
Kenni Leth, Head of Press Relations, Phone +45 45 14 56 83 / +45 51 71 43 68
- 2 Nov 2012 Positive outlook for Danske Bank’s rating from Standard & Poor’s
- 31 Oct 2012 Articles of Association Danske Bank A/S
- 31 Oct 2012 Company Announcement No 20 October 31, 2012