DBRS confirmed the A/R-1 (low) long- and short-term issuer ratings of Danske Bank A/S and revised the trend on the long-term rating to negative from stable.
The embattled Danish banking group's intrinsic assessment remains at A.
The trend revision reflects the extended scope of the investigations into the Copenhagen-based bank and its Estonian unit over possible money laundering. The bank faces probes from authorities in Denmark and Estonia, as well as Switzerland, the U.K. and the U.S.
Danske Bank has already agreed to increase its capital backstop as recommended by the Danish Financial Supervisory Authority, but DBRS said it remains unclear to what extent the bank's franchise, earnings, funding and ultimately capital may be impacted by possible fines, which could reach billions — not to mention reputational damage.
Although Danske Bank's capacity to generate earnings is strong and resilient, DBRS noted that significant risk and control issues could negatively affect this. The agency added that it could revise back to stable the outlook on the rating if the bank can demonstrate limited franchise and financial impact due to the Estonia affair. However, any upside pressure is unlikely in the short term.