Swedbank to raise $2.1 billion through rights issue as Baltic loans surge

18 Aug 2009

Sweden's largest bank, Swedbank, is raising $2.1 billion through issue of preferred stock after disclosing last month that bad loans from the Baltic States and Ukraine had surged due to the global economic turmoil.

 The Stockholm, Sweden-based Swedbank said that its board has resolved to raise approximately SEK 15 billion ($2.1 billion) through a rights offering to strengthen the bank's competitive position.

The rights offering also aims to reduce Swedbank's reliance on the government guarantee and accelerate the bank's return to independent long-term financing on fully competitive terms.

The rights offering is fully underwritten, with 46.6 per cent of the pre-emptive rights taken up by existing shareholders, while the rest guaranteed by its underwriters, Bank of America-Merrill Lynch and Credit Suisse Group.
 
In June, the chief executive of Swedbank Michael Wolf had said that the bank would not require any new fund raising to boost its capital since it had raised $1.5 billion from shareholders at the end of last year.
 
Swedbank had followed other Nordic banks in expanding aggressively in the Baltic states of Latvia, Lithuania and Estonia after their entry into the European Union in 2004, which had prospered until the onset of the current global economic turmoil starting August last year.
 
In posting the second consecutive quarterly loss in July, the second largest lender in the Baltic, suffered net losses of 2.01 billion kronor ($257million), compared with net profits of 3.6 billion kronor a year earlier.
 
The bank said that it already has a sufficient capital position to withstand the impact of severe macro-economic scenarios, as confirmed also by the stress tests published recently by the Swedish FSA and Sweden's central Bank, Riksbanken.
 
Swedbank, which has 9.4 million retail customers and 600,000 corporate customers with 419 branches in Sweden, 278 branches in the Baltic countries and another 215 branches in Ukraine, said that its board thinks it is in the best interest of its shareholders to further strengthen the capital base through raising additional Core Tier 1 capital.

The bank also said that it would reduce 3,600 jobs by this time next year, with most of them coming from the Baltics and Ukraine.