STOCKHOLM (Reuters) - Moody’s cut ratings for DNB (DNB.OL), Handelsbanken (SHBa.ST) and Nordea NDA.ST on Friday in an expected move, pointing to vulnerability in terms of the Nordic banks funding and asset quality, as well as modest profitability.
Moody’s said it had downgraded Nordea’s and Handelsbanken’s debt ratings one notch to leave their deposit rating at Aa3, from Aa2 previously.
Norwegian group DNB was downgraded to A1/C- from Aa3/C due to its reliance on market funding and exposure to volatile asset classes such as commercial real estate and shipping.
The debt ratings for Swedbank (SWEDa.ST) and SEB (SEBa.ST), both of which hold lower ratings than their two larger Swedish peers, were left unchanged. The outlook for the ratings was stable for all banks, Moody’s said.
The euro zone debt crisis has left ratings downgrades the order of the day for banks and sovereigns alike across Europe, though the Nordic country’s banks have so far been little affected by the turmoil.
Swedish banks are well capitalized in a European perspective and Moody’s noted their ratings were higher than for many European peers and that they were in a stronger position overall to handle the credit risks spawned by the crisis.
Still, Moody’s noted risks also for the Nordic banks, pointing to their high reliance on wholesale funding, modest profitability due to price competition for retail loans and risks to asset quality.
A spokesman at the region’s biggest bank, Nordea, said the decision would likely have only a marginal impact on funding costs, adding it remained one of the strongest banks in Europe.
The asset risks mainly stemmed from the fact that Sweden’s economy is highly reliant on exports to the rest of Europe while the banks’ large, mostly variable-rate mortgage books would be vulnerable to a credit deterioration if interest rates rise.
Reporting by Niklas Pollard and Mia Shanley; Editing by Dan Lalor