The credit rating agency Moody’s has downgraded Danske Bank, Sydbank and Jyske Bank to its Baa1 level.

“Moody's Investors Service has today downgraded the ratings for nine Danish financial institutions and for one foreign subsidiary of a Danish group by one to three notches,” Moody’s says.

Of the banks; Danske Bank’s creditline assessment was downgraded by two notches, as were Sydbank and Jyske Bank. Spar Nord Bank and Ringkjøbing Landbobank were both downgraded by a single notch as was Danske Banks Finnish subsidiary Sampo Bank.

Of the specialised credit institutions; Nykredit Realkredit and Nykredit Bank dropped three notches as did DLR Kredit and Danmarks Skibskredit.

In its rationale, Moody’s says that Denmark has weak economic growth, weakening real estate prices and higher levels of unemployment. It adds that the International Monetary Fund (IMF) projects Denmark's gross domestic product (GDP) growth for 2012 at a low 0.5%.

It says that unemployment has risen and another factor weighing on the Danish economy is the weakened real estate market. It says that Danish households are particularly susceptible to difficult conditions because of their high debt burden.

According to Moody’s, the total financial liabilities of households amounted to 142% of GDP at the end of 2010, about twice as high as the 79% European Union average.

While Danske Bank has noted the downgrade, it questions Moody’s negative view.

“We have had a close dialogue with Moody’s in recent months. We are sure that Moody’s has heard our views, but we do not feel that these are reflected in the rating the bank has received,” says Danske Bank’s Financial Director Henrik Ramlau-Hansen.

Thursday’s Moody downgrade came following a downgrade for Danske Bank from another major rating agency, Standard & Poor’s.

S&P downgraded Danske Bank a notch to A/A-2 from A/A-1, but at the same time notched up its outlook from negative to stable.

“The rating action reflects our expectation that Danske Bank will continue to suffer high impairment losses in its Irish banking business as a result of continued weakness in the Irish property market,” Standard & Poor’s said Wednesday adding it expected projected losses to be higher than the agency had previously anticipated.

Nonetheless, it notched up the bank’s outlook to stable saying this move reflected its “expectation that Danske Bank will succeed in working out its remaining asset quality problems over the next three years, and that management will remain focused on consolidating its current business.”

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