September 18, 2014 / 10:23 AM / 3 years ago

Fitch Assigns Nordea's Additional Tier 1 Capital Instruments 'BBB' Final Rating

(The following statement was released by the rating agency) PARIS/LONDON, September 18 (Fitch) Fitch Ratings has assigned Nordea Bank AB's (Nordea; AA-/Stable/F1+) USD1.5bn issue of Additional Tier 1 capital notes a final rating of 'BBB'. The final rating is in line with the expected rating Fitch assigned to the notes on 8 September 2014 (see "Fitch Rates Nordea's Additional Tier 1 Capital Instruments 'BBB(EXP)''' at www.fitchratings.com). KEY RATING DRIVERS The notes will be CRD IV compliant perpetual non-cumulative Additional Tier 1 instruments. USD1bn and USD500m of the notes are callable after five years and 10 years, respectively. The notes are subject to partial or full temporary write-down if Nordea's Common Equity Tier 1 (CET1) ratio falls below 8%, and any coupon payments may be cancelled at the discretion of the bank. The rating is five notches below Nordea's Viability Rating (VR) of 'aa-' in accordance with Fitch's criteria for assessing and rating bank subordinated and hybrid securities. The notching reflects the notes' higher expected loss severity relative to senior unsecured creditors (two notches) and higher non-performance risk (three notches). The notching for non-performance risk reflects the instruments' fully discretionary coupon payment, which Fitch considers as the most easily activated form of loss absorption. Nordea is subject to stringent capital requirements by the Swedish regulator, including a Pillar 1 CET1 requirements of 10.2% based on end-June 2014 risk weights and an additional 4.5% CET1 Pillar 2 buffer, with a total CET1 requirement of 14.7%. Fitch expects the Swedish regulator to impose restrictions on interest payments on the notes if Nordea's capital were to approach the Pillar 1 limit of 10.3% CET1. Fitch does not believe that a breach of the Pillar 2 buffer would automatically trigger a coupon cancellation. In light of Nordea's reported CET1 ratio of 15.2% at end-June 2014, as well as the bank's strong financial track-record, the notching for non-performance has been limited to three notches. Given the securities are perpetual, their deep subordination, coupon flexibility and going concern mandatory write-down of the instruments, Fitch has assigned 100% equity credit. RATING SENSITIVITIES As the notes are notched from Nordea's VR, their rating is primarily sensitive to any change in this rating. The notes' rating is also sensitive to a wider notching if Fitch changed its assessment of the probability of the notes' non-performance risk relative to the risk captured in Nordea's VR, including a reassessment of the impact of a possible breach of the Pillar 2 buffer. Contact: Primary Analyst Olivia Perney Guillot Senior Director +33 144 299 174 Fitch France S.A.S. 60 Rue de Monceau 75008 Paris Secondary Analyst Bjorn Norrman Director +44 20 3530 1330 Committee Chairperson Gordon Scott Managing Director +44 20 3530 1075 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable criteria, 'Global Financial Institutions Rating Criteria' and 'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria', both dated 31 January 2014, is available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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