Moody's Confirms Nykredit's Long-Term Rating with Positive Outlook

Strategic Insights -

Moody's Investors Service has confirmed Nykredit's long-term issuer rating of A1 with a positive outlook, citing the company's solid capitalization, stable earnings, and very stable market funding. The agency also confirmed Nykredit Bank's long-term deposit ratings at A1 with a positive outlook and upgraded Spar Nord Bank's Adjusted BCA to a2 from baa1. Moody's acknowledged that the acquisition of Spar Nord by Nykredit would improve scale, business, and geographic diversification across Denmark in the banking business. The combined entity's credit profile would benefit from improved scale and business diversification, as well as cost synergies stemming from reduction in overhead headcount and operational efficiencies.

Key Takeaways:

  • Moody's confirmed Nykredit's long-term issuer rating of A1 with a positive outlook, citing the company's solid capitalization, stable earnings, and very stable market funding.
  • Nykredit's Baseline Credit Assessment (BCA) was affirmed at a2, reflecting Moody's view that the acquisition of Spar Nord would not materially change the solvency and liquidity profile of the group.
  • Spar Nord's BCA was affirmed at baa1, despite the company's higher level of nonperforming loans to gross loans compared to peers.
  • Moody's upgraded Spar Nord's Adjusted BCA to a2 from baa1, reflecting the very high dependence and high probability of support from Nykredit in case of need.
  • The combined entity's credit profile would benefit from improved scale and business diversification, as well as cost synergies stemming from reduction in overhead headcount and operational efficiencies.
  • Nykredit maintains comfortable headroom to current Common Equity Tier 1 (CET1) regulatory requirement of 13.3%.
  • Integration risk is viewed as manageable due to the shared IT platform and collaborated partnership through Totalkredit A/S.

Statistics:

  • A1 long-term issuer rating of Nykredit
  • A1 long-term deposit ratings of Nykredit Bank
  • A2 Adjusted BCA of Spar Nord
  • baa1 BCA of Spar Nord
  • 96.54% ownership of Spar Nord by Nykredit, excluding treasury shares
  • Completion of the voluntary public tender offer for Spar Nord on 28 May 2025
  • Merger of Nykredit and Spar Nord expected in the first half of 2026
  • 90% of the lending book constituting the low-risk mortgage portfolio
  • 50% of Nykredit's revenues coming from bank and wealth management business
  • 12 December 2024 - start date of the review for upgrade initiated by Moody's

Sources:

  • Moody's Investors Service
  • Nykredit Realkredit A/S
  • Nykredit Bank A/S
  • Spar Nord Bank A/S
  • TotalCredit A/S
  • Danish krone denominated covered bonds
  • Common Equity Tier 1 (CET1) regulatory requirement
  • Advanced Loss Given Failure (LGF) analysis
  • Rating Methodologies page on https://ratings.moodys.com
  • Banks published in November 2024
  • https://ratings.moodys.com/rmc-documents/432741