(The following statement was released by the rating agency)
LONDON, May 16 (Fitch) Fitch Ratings has affirmed Swedbank AB's
Long-Term Issuer Default Rating (IDR) at 'AA-', Viability Rating
(VR) at 'aa-',
and Short-Term IDR at 'F1+'. The Outlook on the Long-Term IDR is
Stable. A full
list of rating actions is at the end of this rating action
In addition, Fitch has assigned Swedbank a 'AA-(dcr)' Derivative
Rating (DCR) as part of its roll-out of DCRs to significant
counterparties in Western Europe and the US. DCRs are issuer
ratings and express
Fitch's view of banks' relative vulnerability to default under
contracts with third-party, non-government counterparties.
The ratings actions are part of a periodic portfolio review of
banking groups rated by Fitch.
KEY RATING DRIVERS
IDRS, VR, DCR AND SENIOR DEBT
Swedbank's ratings reflect the strong execution of the bank's
low risk strategy,
which we expect will continue to deliver strong and resilient
The bank benefits from resilient revenue generation, good cost
strong asset quality, both domestically and in the Baltics.
Swedbank's Swedish retail franchise is strong (over 20% market
deposits and lending), but the bank has fairly high geographical
with domestic loans accounting for over 85% of the group's
diversification is achieved through its activities in the
Swedbank is a market leader. As a predominantly retail bank,
close relationships with customers to attract a large share of
services and its strong operating efficiency is crucial. We
impairment charges to remain low.
Asset quality should remain solid, supported by a benign
good underwriting standards and a large low-risk domestic
portfolio. The bank has a significant property management
exposure, but this is
mostly made up of large strong corporate clients with sound cash
access to the debt and capital markets, a typical feature of the
property management sector. Swedbank's corporate lending
management) is smaller than of domestic peers.
Swedbank's capitalisation is strong, and risk-weighted ratios in
compare well with similarly rated peers. At end-March 2017, the
bank reported a
fully loaded common equity Tier 1 ratio of 24.2%. The bank's
leverage ratio of 4.7% was more in line with peers.
Like its Nordic peers, Swedbank is reliant on wholesale funding
due to a
structural shortage of deposits in Sweden. The risks are
mitigated by prudent
liquidity management and a strong focus on covered bonds, with a
portion placed with a domestic captive investor base consisting
of large Swedish
insurance and pension funds. Swedbank's senior unsecured debt
We have assigned a DCR to Swedbank due to its significant
The DCR is at the same level as the Long-Term IDR because under
legislation, derivative counterparties have no preferential
status over other
senior obligations in a resolution scenario.
SUPPORT RATING AND SUPPORT RATING FLOOR
Swedbank's '5' Support Rating (SR) and 'No Floor' Support Rating
reflect Fitch's view that senior creditors cannot rely on
extraordinary support from the Swedish sovereign in the event
that the bank
The EU's Bank Recovery and Resolution Directive (BRRD) provides
a framework for
resolving banks that is likely to require senior creditors
losses, if necessary, instead of or ahead of a bank receiving
Sweden has more flexibility to interpret and apply the BRRD than
member countries, but we believe in a resolution scenario the
intention of the
resolution authority is that non-preferred senior instruments
would be bailed
in, and when issued this will become Fitch's reference debt
class for setting a
bank's IDR. The Swedish resolution authority published on 23
February 2017 its
framework for banks' minimum requirements for own funds and
(MREL). The requirements introduce a minimum debt component that
cannot be met
with capital instruments.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The ratings on the subordinated and additional Tier 1 debt
issued by Swedbank
are notched off the bank's VR.
In accordance with Fitch's criteria, subordinated (lower Tier 2)
debt is rated
one notch below Swedbank's VR to reflect the above-average loss
severity of this
type of debt.
Additional Tier 1 securities are rated five notches below
Swedbank's VR to
reflect higher-than-average loss severity risk of these
securities (two notches)
as well as high risk of non-performance (an additional three
IDRS, VR, DCR AND SENIOR DEBT
The Stable Outlook on Swedbank's Long-Term IDR reflects Fitch's
Swedbank will maintain its robust capitalisation, strong asset
quality and a
healthy liquidity profile. Fitch expects Swedbank's financial
outperform most peers, offsetting the bank's reliance on its
domestic market and
its smaller equity base compared to similarly rated global
While not expected by Fitch, a downgrade could result from a
to competitively access the debt capital markets or renewed
uncertainty in its
Baltic portfolio. A shift away from long-term funding or
significant reliance on
international investors would likely be rating-negative.
Given Swedbank's high exposure to Sweden, the bank's ratings are
sensitive to a
severe downturn in Sweden. This would particularly be the case
should a downturn
lead to a significant correction in house prices and wider
losses in both
Swedbank's mortgage lending and corporate portfolios, including
management exposure. This is not Fitch's central scenario.
An upgrade is unlikely given Swedbank's already high rating.
SUPPORT RATING AND SUPPORT RATING FLOOR
An upgrade of the SR and upward revision of the SRF would be
contingent on a
positive change in the sovereign's propensity to support its
banks. While not
impossible, this is highly unlikely in Fitch's view.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The ratings on the subordinated debt and additional Tier 1
sensitive to a change in Swedbank's VR.
Additional Tier 1 securities are also sensitive to Fitch
changing its assessment
of the probability of their non-performance risk relative to the
in Swedbank's VR.
The rating actions are as follows:
Long-Term IDR: affirmed at 'AA-'; Outlook Stable
Short-Term IDR: affirmed at 'F1+'
Viability Rating: affirmed at 'aa-'
Support Rating: affirmed at '5'
Support Rating Floor: affirmed at 'No Floor'
Derivative Counterparty Rating: assigned at 'AA-(dcr)'
Senior unsecured debt: affirmed at 'AA-'/'F1+'
Commercial paper: affirmed at 'F1+'
Certificates of deposit: affirmed at 'F1+'
Subordinated debt: affirmed at 'A+'
Additional Tier 1 instruments: affirmed at 'BBB'
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Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530
Additional information is available on www.fitchratings.com
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