DANISH BANK Danske had its credit rating downgraded by Standard and Poor’s due to the continuing problem in its Irish business, National Irish Bank.

The rating agency expects Danske to suffer high bad-loan costs because of the “continued weakness in the Irish property market”.

The agency cut Danske’s rating to ‘A-’ from ‘A’, which will raise the cost of borrowing for the bank.

Standard and Poor’s said the outlook for the bank was “stable”, meaning it did not expect to downgrade the bank again, as the lender would “succeed in working out its remaining loan problems over the next three years within expected loss assumptions”.

“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,” the ratings agency said.

“It also reflects our view that the resolution of the Danish financial crisis will create above-average impairment losses.”

Standard and Poor’s said that it expected Danske’s projected losses to be higher than previously expected, and for the turnaround in its fortunes to be delayed.

“In our view 2012 is unlikely to be a materially better year for Danske bank than 2011,” said Standard and Poor’s.

The Danish bank is merging NIB and its Northern Irish unit Northern Bank and rebranding the Irish operation as Danske.

The lender is taking greater control of the Irish operation as part of a wider restructuring of Danske’s overseas operations.

Earlier this month Danske announced the departure of NIB chief executive Andrew Healy and the creation a wind-down unit for €4.7 billion of commercial and investment property loans, some 56 per cent of NIB’s book.

The bank expects further impairments of €670 million to €940 million on its Irish loans until the end of 2014, and for bad debts to return to normal in 2015.