Aktia Bank PLC

Well-established local retail franchise in Finland. Very strong projected capitalization underpinned by sound earnings capacity. Focus on low-risk collateralized lending to retail clients and small and midsize enterprises. Concentration risk in loan book, due to focus mainly on residential mortgage lending in Finland. Limited geographic, business, and earnings diversification. Reliance on wholesale funding market as covered bond issuer. Standard&Poor's Ratings Services' negative outlook on Aktia Bank reflects our view of Finland's weak economic recovery, which could hamper the banking sector's performance over the next two years. Gradually increasing unemployment could further impede loan growth in Finland and lead to asset price corrections, namely in the housing market. If this meaningfully increased the risk costs for the banking sector,

...Reliance on wholesale funding market as covered bond issuer. Outlook: Negative Standard & Poor's Ratings Services' negative outlook on Aktia Bank reflects our view of Finland's weak economic recovery, which could hamper the banking sector's performance over the next two years. Gradually increasing unemployment could further impede loan growth in Finland and lead to asset price corrections, namely in the housing market. If this meaningfully increased the risk costs for the banking sector, we could revise downward our 'a-' anchor for Finnish banks, including Aktia Bank. This could, in turn, lead us to revise down our assessment of the bank's stand-alone credit profile (SACP) and lower our ratings on Aktia Bank. If we were to revise our view of the currently low economic risk in Finland, this would lead us to lower our projected risk-adjusted capital (RAC) ratio for Aktia Bank because we would use higher risk weights on exposures in our calculation. However, we do not believe that this would...

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