This rating action concludes the review initiated a month ago. It reflects Swedbank’s ability to weather weakness in Sweden’s housing market, reassuring financial metrics and steady growth strategy based on cost discipline and a strong digital offering.

Scope Ratings today upgraded Swedbank’s Issuer Rating to A+ from A, thus concluding a rating review initiated one month ago. The upgrade also covers the senior unsecured debt rating (to A from A-), the Additional Tier 1 (AT1) debt rating (to BB+ from BB) and the short-term debt rating (to S-1+ from S-1). All ratings have a Stable Outlook.

Scope’s analysis underpinning Swedbank’s ratings reflects the bank’s solid market position in Sweden, the much-improved performance of its foreign activities since the losses experienced during the financial crisis, its careful cost discipline, and the strong digital offering. In view of these factors, Scope expects Swedbank to preserve and strengthen its reassuring financial and prudential metrics.

At the same time, when initially assigned in November 2014, Swedbank’s ratings mirrored Scope’s concern that a potential hard landing of real estate prices in Sweden could hurt the bank’s solid financial position and potentially affect its funding costs (as, like the other large Nordic banks, Swedbank relies to a large extent on market funding). Another analytical caveat at that time was the scenario of future prudential regulatory adjustments negatively impacting the risk profile of the bank’s balance sheet and its ample capital position. At this time Scope expects that likely changes to capital requirements proposed by the Swedish FSA for Swedish mortgages will have a negative impact on reported capital ratios. However, given that the impact is from higher risk weightings imposed through Pillar 1 rather than any noticeable change in the riskiness of banks’ portfolios, Scope expects the effect to be neutral for capital in real terms.

Scope also pointed out that it no longer considers hard landing as likely for Swedish house prices, noting that these have come down in a measured way in recent months, a result of market dynamics and specific policy steps (including macroprudential measures).

Against this backdrop, Scope is more reassured that Swedbank’s strong credit fundamentals are likely to hold well, as the bank remains in a strong position to weather any expected downsides of the real estate market.

Upgraded are the following ratings of Swedbank:

Issuer rating: To A+ from A
Senior unsecured debt rating: To A from A-
AT1 securities ratings: To BB+ from BB
Short-term debt rating: To S-1+ from S-1