Danske Bank’s Credit Rating Outlook Raised to Stable at Fitch

Danske Bank A/S, Denmark’s largest lender, had its credit rating outlook raised to stable from negative at Fitch Ratings, which cited a reduction in risks related to its Irish division.

“The revision of the outlook reflects Fitch’s view that the downside risk from Ireland has been reduced to an easily manageable level in the context of the Danske group,” Fitch said in a statement today. It reiterated the lender’s A long-term issuer default rating.

Danske Bank in October raised 7.15 billion kroner ($1.3 billion) to help boost its capital buffers and bring them closer to those of Nordic peers in order to improve its credit ratings and lower its funding costs. The bank said then it aims to boost its credit ratings by at least one level “as soon as possible.” Still, Danske Bank’s rating has remained A at Fitch, A- at Standard & Poor’s and Baa1 at Moody’s Investors Service.

The lender also said in October that the capital increase will help “accelerate rating improvements and achievement of our capital targets, strengthen our funding position and better align us with our Nordic peers,” adding it aims for a core Tier 1 capital ratio in excess of 13 percent by the end of 2013. Danske Bank has suffered soaring loan losses in Denmark and Ireland after those countries’ property markets collapsed.

Fitch said it views “Danske as able to withstand a further moderate deterioration in Denmark, which Fitch considers possible but does not expect in its base case.”

Danske has risen 20 percent in Copenhagen trading this year, exceeding the 7.7 percent advance in the Bloomberg Europe Banks and Financial Services Index.

Sweden’s Svenska Handelsbanken AB, the best capitalized major lender in the European Union, reported a core Tier 1 capital ratio of 18 percent at the end of March, while Swedbank AB and SEB AB had ratios of 17.3 percent and 15.3 percent, respectively. Nordea Bank AB, the Nordic region’s largest lender, reported a core Tier 1 ratio of 13.2 percent.

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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