Standard & Poor's has revised its outlook on the Danske Bank Group to negative, as it has with several other banks recently. But Standard & Poor's affirms its rating of the Group's creditworthiness (AA-).
The Danish economy to blame
The outlook revision primarily reflects Standard & Poor's expectation that the Bank's asset quality will be affected by the slowdown in the Danish and Irish economies and the continued fall in the Danish housing market.
Moreover, Standard & Poor's considers the Group's capitalisation moderate compared with similarly-rated peers. Even though the credit quality in Ireland is declining, Standard & Poor's considers the Group's overall credit quality good.
No noticeable consequences
The Danske Bank Group's status as a negative outlook bank is not likely to have noticeable consequences. The Group's funding will not be more expensive as the existing guarantee agreement with the Danish government provides a triple A rating in comparison with the Group's own AA- rating. And even without the guarantee agreement, funding would only be marginally more expensive for the Danske Bank Group.
Published on October 22, 2008