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Nordea Bank Abp, New York Branch -- Moody's affirms Nordea Bank Abp's deposit and senior unsecured debt ratings at Aa3; outlook is stable

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Rating Action: Moody's affirms Nordea Bank Abp's deposit and senior unsecured debt ratings at Aa3; outlook is stableGlobal Credit Research - 25 Feb 2021Stockholm, February 25, 2021 -- Moody's Investors Service (Moody's) has today affirmed Nordea Bank Abp's (Nordea) long-term bank deposit and senior unsecured debt ratings at Aa3, as Moody's expects the bank to demonstrate continued resilience to the coronavirus-induced economic disruption. The outlook is stable. All other ratings, the Baseline Credit Assessment (BCA) and Adjusted BCA of a3 and long-term Counterparty Risk Assessment (CRA) of Aa2(cr) were also affirmed.The affirmation of Nordea's ratings is based on the bank's diversified Nordic presence, strong capital and healthy asset quality, balanced against its high reliance on market funding. Moody's also expects that continued progress on the bank's strategic plan will help restore efficiency and profitability over the medium term.Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL440730 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.RATINGS RATIONALEBASELINE CREDIT ASSESSMENT (BCA)Nordea's a3 BCA reflects the bank's diversified regional footprint in the Nordic region, strong capital (tangible common equity / risk weighted assets stood at 19.9% at year-end 2020), which Moody's expects will remain resilient in the current economic downturn, healthy asset quality, with management provisions mitigating the expected moderate increase in problem loans, and sound liquidity. However, similar to many Nordic peers, the BCA is constrained by the bank's high reliance on market funding.The bank has faced profitability pressures (net income / tangible assets at 0.46% in 2020) in recent years, following weakened efficiency and a deliberate strategy to de-risk the bank. The bank has, however, made good progress on its strategic plan, which focuses on growing revenues and reducing costs. Continued progress towards its financial targets will help restore the bank's financial performance.DEPOSIT, SENIOR UNSECURED AND JUNIOR DEBT RATINGSThe bank's long-term deposit and senior unsecured debt ratings of Aa3 incorporate Moody's expectations of the bank's issuance of additional loss-absorbing debt in response to bank-specific MREL (Minimum Requirements for own funds and Eligible Liabilities), even though Nordea will only receive its formal MREL decision by the Single Resolution Board (SRB) during the first half of 2021. Moody's Advanced Loss Given Failure (LGF) analysis indicates a very low loss given failure for junior depositors and senior unsecured creditors, resulting in a two notches uplift in the relevant ratings, from the bank's a3 Adjusted BCA. Our moderate assessment of government support translates into a further notch uplift included in these ratings.The long-term junior senior unsecured (i.e. senior non-preferred) and subordinated debt ratings of Baa1 reflect the limited subordination cushion for these classes in our LGF analysis. This indicates a high loss severity for these instruments in the event of the bank's failure, leading to a position one notch below the bank's Adjusted BCA. Moody's also incorporates additional notching for preference share instruments (i.e. additional tier 1 instruments) reflecting the coupon features. Moody's assumes a low probability of government support for these instruments, resulting in no additional uplift.OUTLOOKThe outlook on Nordea's long-term deposit and senior unsecured debt ratings is stable as Moody's expects the bank's robust capital and asset quality to remain broadly resilient to the coronavirus-induced economic downturn. Moody's expects that the bank's strategic initiatives will improve profitability over the medium term, reversing the previous downward trend in profitability.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSNordea's BCA could be upgraded if the bank significantly improves its profitability without increasing its risk profile, and/or reduces its reliance on market funding. A higher BCA would likely lead to a ratings upgrade.Conversely, the ratings could be downgraded if the bank's operating environment deteriorates beyond our current expectations, asset risk increases more than we anticipate, or profitability deteriorates further. A lower BCA would likely lead to a ratings downgrade.PRINCIPAL METHODOLOGYThe principal methodology used in these ratings was Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESThe List of Affected Credit Ratings announced here are a mix of solicited and unsolicited credit ratings. Additionally, the List of Affected Credit Ratings includes additional disclosures that vary with regard to some of the ratings. Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL440730 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items: ** EU Endorsement Status ** UK Endorsement Status ** Rating Solicitation ** Issuer Participation ** Participation: Access to Management** Participation: Access to Internal Documents ** Disclosure to Rated Entity ** Lead Analyst ** Releasing Office For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Louise Lundberg VP - Senior Credit Officer Financial Institutions Group Moody's Investors Service (Nordics) AB Norrlandsgatan 20 Stockholm 111 43 Sweden JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Sean Marion MD - Financial Institutions Financial Institutions Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service (Nordics) AB Norrlandsgatan 20 Stockholm 111 43 Sweden JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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