S&P assigns Arion Bank notes BB

S&P said it assigned its BB long-term issue rating to Arion Bank’s proposed low-trigger additional tier 1 perpetual capital notes. This is the bank’s first issuance of AT1 notes.

The BB issue rating reflects S&P’s analysis of the proposed instrument and Arion Bank’s bbb+ stand-alone credit profile. To derive the rating on the proposed notes, S&P said it notches down from its SACP assessment of Arion Bank. The resulting issue rating is four notches below the SACP.

“We estimate that the announced AT1 issuance will partially offset the bank’s proposed ISK 10 billion dividend payout and ISK 8 billion ongoing share buyback program,” said S&P in a press release. Overall, Arion Bank’s common equity tier 1 ratio remained at 21.2% as of December, which leaves it with a relatively ample buffer above its maximum distributable amount threshold of 15.4%.

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