Fitch affirms DnB NOR Bank at A+

Fitch Ratings has today Sept. 29 affirmed DnB NOR Bank’s Long-term Issuer Default Rating (IDR) of ‘A+’, Short-term IDR of ‘F1’, Individual Rating of ‘B’, Support Rating of ‘1’ and Support Rating Floor of ‘A’. The Outlook on the Long-term IDR is Stable.

The rating affirmation follows the announcement on Sept. 25 by DnB NOR ASA, the parent of DnB NOR Bank, of a NOK14bn share capital increase. DnB NOR ranks among the five largest banking groups in the Nordic region, and is the latest so far this year to announce capital increase initiatives.

“This measure puts the group’s capitalisation more in line with its Nordic peers and strengthens DnB NOR Bank’s ability to absorb losses, which supports the Stable Outlook on the Long-term IDR,” says Alexandre Birry, Director in Fitch’s Financial Institutions group. “The issuance of ordinary shares adds to the quality of DnB NOR’s capitalisation.”

DnB NOR’s largest shareholder is the Norwegian government, with a 34% stake. The announcement last week stated that the government is supportive of the capital increase. The government’s participation in the capital increase, to maintain its current stake, is subject to approval by Norway’s parliament, which is expected by end-November 2009. Two other large shareholders have entered into an agreement to subscribe to the share issue, with two investment banks underwriting the remaining shares. The share issue is expected to be completed by mid-December 2009.

As a result of the capital increase, DnB NOR’s Fitch eligible capital ratio would increase by 1.3% percentage points to around 9% at end-June 2009. Taking into account the full implementation of the Internal Rating-Based approach for credit risk, the pro-forma Tier 1 ratio would exceed 11%. Nevertheless, Fitch expects further deterioration in a number of markets and industries which DnB NOR Bank is exposed to, including the Baltics and the shipping and commercial property sectors. This is likely to put pressure on its performance, in the agency’s view, although the bank will likely benefit from the expected better resilience of the Norwegian economy to the global slowdown compared with other European countries.

DnB NOR Bank is wholly-owned by DnB NOR and represented almost 90% of group assets at end-June 2009. DnB NOR’s other main entity is Vital, a life insurance company. DnB NOR Bank is the leading banking group in Norway.

Source: Fitch Ratings

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