Jyske drops Moody’s, citing methodology and negative Danish view

Jyske Bank has decided to drop Moody’s and continue with one rating, from Standard & Poor’s, the Danish bank announced yesterday (Wednesday), and an official at the bank said that Moody’s methodology and negative view on Denmark influenced its decision to stop working with the rating agency.

The announcement was made on occasion of the release of Jyske’s H1 2013 interim financial report, in which the bank said that it decided to discontinue cooperation with Moody’s based on a “business assessment”.

The rating agency has rated Moody’s since the early 1990s, and most recently rated Jyske Baa1, with a P-2 short term rating and a C- bank financial strength rating (BFSR), all on stable outlook. Jyske is also rated by Standard & Poor’s, which in the middle of July confirmed Jyske’s rating at A-/A-2, on stable outlook.

Merete Poller Novak, head of debt IR and capital market funding at Jyske Bank, said that Moody’s fundamental rating methodology and its long held view of Denmark as a risky area have substantially reduced the perceived cost-benefit from Moody’s rating services.

“To provide value to Jyske a credit rating should be ‘through the cycle’ and truly forward looking,” she said. “However, the past few years have revealed that Moody’s to a high degree uses historical information to forecast the future (with an emphasis on quantitative analysis with very little room for less measurable information), which tends to increase the rating volatility and results in strongly pro-cyclical ratings.”

Novak pointed out that Jyske was rated Aa2 in 2007 with a CET of 7%, and since spring 2012, with a CET of 13%-14%, the bank’s rating has been Baa1. She noted that a Moody’s report on the Danish financial sector from July did not give Jyske reason to anticipate a change in Moody’s view on Denmark and the rating agency’s approach to ratings.

Based on Jyske’s solid capitalisation and the designation of Jyske as a Danish systemically important financial institution (SIFI) in the spring of 2013 the bank’s management therefore decided to terminate the cooperation with Moody’s and currently considers one rating to be sufficient for Jyske, said Novak.