Moody’s snips Danske Bank, view to stable

Moody’s Investors Service said it downgraded all long-term debt ratings of Danske Bank A/S, including the senior unsecured debt ratings to A3 from A2 and junior senior unsecured debt ratings to Baa3 from Baa2. The senior unsecured debt ratings now carry a stable outlook.

“The rating action follows the announcement that the bank lowered its earnings expectations, which will likely bottom out at an expected return on equity (ROE) of between 5-6% in 2020. This indicates that the bank’s earnings have taken a more significant hit compared to what Moody’s previously expected, as the fallout of the bank’s alleged money laundering through its Estonian branch between 2007-2015 continues to impact compliance as well as funding costs at the same time as net interest margins are under pressure and trading income has fallen significantly,” said Moody’s in a press release.

The stable outlook on the senior unsecured debt ratings reflects Moody’s view the bank will maintain its financial performance over the next 12-18 months in the context of moderate economic growth and ultra-low interest rates.

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