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Danish bank Nykredit drops Moody's as credit rating agency

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  • Danish bank Nykredit drops Moody's as credit rating agency

EUROPE - Danish bank Nykredit has dropped Moody’s as its credit rating agency, and Jyske Bank is considering following suit.

But the banks say pension funds and investors within Denmark are unconcerned by such a move.

Nykredit announced at the end of last week it had asked Moody’s Investors Service to stop rating the Nykredit group - including units Nykredit Realkredit, Nykredit Bank and Totalkredit, as well as their respective issues.

The bank said in a statement: “Nykredit has decided to terminate the rating agreement for business reasons.

“The cooperation has been satisfactory for several years, but, due to Moody’s volatile view of the Danish mortgage industry in recent years - despite the low loan loss and arrears ratios by international standards - the significance of the ratings to Nykredit and to Nykredit’s investors has diminished significantly.”

Last year, Danske Bank subsidiary and mortgage bond issuer Realkredit Danmark fired Moody’s over the possible downgrading of its bonds.

Jyske Bank, the second largest listed bank in Denmark, is now considering dropping Moody’s as its ratings agency. 

Steen Nygaard, head of treasury at Jyske Bank, told IPE: “At present, we are in an ordinary dialogue with Moody’s and have made no decision about our future relationship. We do not agree with their risk assessment of Denmark and the Danish banking sector.

“We have told Moody’s that, for the rating to have value for us, we need it to have some stability. But what Moody’s is threatening to do is to have a high degree of volatility in the rating.”

Without Moody’s to rate the bank’s debt and commercial paper, Jyske Bank would at present be left with Standard & Poor’s as the sole ratings agency.

“Institutional investors in Denmark have indicated they still have confidence in the bank,” Nygaard said.

“From the Danish investor side, I don’t think there will be any negative reaction, though it is a bit more uncertain how investors abroad will view it.”

Søren Holm, group managing director at Nykredit, said: “To our knowledge, investors prefer this solution. The market for our bonds is extremely strong, so there’s no indication that the market is concerned by this.”

As for pension funds specifically, Holm said there had been several indications in the Danish press that these institutions preferred having a rating from only one agency.

At statutory pensions institution ATP, chief investment officer Henrik Gade Jepsen said briefly that the moves by Danish banks to end their contracts with Moody’s would not have any consequences for it as an investor.

In February, Moody’s Investors Service announced it was reviewing the credit ratings of more than 100 financial institutions in 16 European countries, including banks in Denmark.

A spokesperson for Moody’s said: “Moody’s has accumulated extensive experience and analytical insight over many years assessing credit risk of Danish banks and covered bonds.

“At times, Moody’s will take analytical positions that certain issuers might disagree with, and they may seek to end our relationship.

“This is a risk we take and cost we may have to bear for maintaining the integrity of our analytical views.”

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