Moody’s And The Latest Danish Bank Rescue

I’m translating from Berlingske Tidende the major Danish daily newspaper:

Moody's And The Latest Danish Bank Rescue

Especially the 17 bio. DKK transfer of real estate loans from FIH is recieved positively, but also the transfer of bad agricultural debt into a new agricultural finance institute is noted with satisfaction.

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But more interesting are the comments from Steen Blaafalk responsible for Group Treasury in Danske Bank:

Danish banks are priced appreciably above other Nordic banks on the Credit Default Swap (CDS) market despite all four countries are “AAA” rated. That has an effect when you as a Danish bank approach the international finance markets.

Anders Blaafalk said on the annual conference of Stockbrokers Association.

That is what I’ve called: The Danish economy is reasonably sound – it is Danske Bank that is a major problem.

Blaafalk added: “The higher prices for Danish Banks are relevant for both secured and unsecured funding.” He explained, that more often than not there are only very short “windows” where the banks can fund at a reasonable price.

A somewhat circumspect way of reformulating: NO!

As to the new fund (LFI) for reconstructed agricultural debt: The institute needs equity of 300 mio. DKK where Government and banks have – up to now – only raised about 125 mio. DKK

Rumour now has it that ATP (Yes: Major shareholder in FIH Bank that in the rescueplan ditched 17 bio. DKK – after impairment 13 bio. DKK. ATP is a pension fund) is actively considering putting up the equity balance of 175 mio. DKK.

“We are always looking at interesting investment opportunities!”  – smug bast…

The reconditioned agricultural loans might very well indeed be interesting. The farmers that are in trouble have generally over invested. But liberated of an unrealistic debt burden they are liable to operate with a profit – especially as food prices are slowly picking up. And as the banks have been forced to impair these farms before transferring them to the public trash bin of Finansiel Stabilitet the debt to be serviced might be reasonable.

Typically the 5th rescue plan will not benefit Danske Bank, as they are not seriously exposed to agriculture.

There is no news from Moody’s of reassessment of banks as a result of latest rescue plan.