SEB AB and Swedbank AB had their ratings raised by Standard & Poor’s after the Swedish government last month set stricter capital standards on its banks to limit risks in the largest Nordic economy.
After applying new criteria, the ratings on the Stockholm-based banks were raised to A+ from A and the short-term grades were affirmed at A-1, S&P said in a statement late yesterday. The moves reflect “adequate” business positions, capital, earnings, risk, average funding, and liquidity, S&P said. Svenska Handelsbanken AB’s counterparty ratings were affirmed at AA-/A-1+, the rating company said.
Sweden, whose biggest banks have combined assets more than four times the size of the largest Nordic economy, on Nov. 25 told lenders to target tougher capital requirements six years earlier than the Basel Committee 2019 deadline. The government argues more rigorous standards are needed to ensure taxpayers are protected from the risk of losses.
“The S&P upgrades in Sweden aren’t a bit surprising as the banks here are stable,” said Andreas Hakansson, a Stockholm-based analyst at Exane BNP Paribas. “The move shows the tougher capital demands facing the banks aren’t necessarily a bad thing and can be helpful for a bank’s funding.”
Sweden’s four biggest lenders, including the region’s biggest, Nordea Bank AB, must target common equity Tier 1 capital of at least 10 percent from January 2013 and 12 percent in 2015, the government said. Basel sets a 7 percent target, to be met by 2019.
Swedbank shares rose 1.2 percent, Handelsbanken gained 1.6 percent and SEB rose 3.7 percent as of noon in Stockholm. The 46-member Bloomberg index of European financials rose 3.7 percent.
Swedish banks have fared better than most of their European peers during the financial crisis allowing the government to protect taxpayers from losing money through an industry bailout. S&P on Nov. 29 affirmed the AA- rating on Nordea, the largest Nordic lender, citing its “strong business position” as well as “adequate funding and liquidity.”
Central bank Deputy Governor Barbro Wickman-Parak said in a Dec. 1 interview there is no need to set up a new dollar swap line with the U.S. Federal Reserve to support Swedish lenders because they already have access to dollar funds via the market.
“We have constant contact with the market and know what’s happening and the banks have access to the kind of financing they need, including dollar financing, and we then don’t need to do anything” at the moment, she said yesterday.
S&P’s ratings actions follow its application of new criteria for banks, published on Nov. 9.
Jyske Bank A/S, Denmark’s second-largest listed lender, had its rating cut to A- from A and the short-term counterparty credit ratings were lowered to A-2 from A-1, S&P said. The outlook on the ratings is stable, it said.
Denmark’s regional banks have been plagued by a funding crisis since the failure of Amagerbanken A/S in February triggered senior creditor losses after the European Union’s toughest resolution bill was enforced.
Danske Bank A/S had its long- and short-term counterparty credit ratings affirmed at A/A-1, S&P said. Denmark’s biggest lender has a “strong business position,” with “moderate capital and earnings, adequate risk position, average funding and adequate liquidity,” S&P said. Still, Danske is on a negative outlook because of the risk of losses at the bank’s Irish business, S&P said.
S&P affirmed the ‘A+/A-1’ long- and short-term counterparty credit ratings on Copenhagen-based Nykredit Realkredit A/S, Europe’s biggest issuer of mortgage-backed covered bonds, citing an “adequate business position,” as well as “adequate capital and earnings, strong risk position, average funding, and adequate liquidity. The outlook is stable, S&P said.