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27 Feb 2009
London, 27 February 2009 -- Moody's Investors Service has today downgraded the long-term
ratings of Swedbank AB to A1 from Aa3 and the Bank Financial Strength
Rating (BFSR) to C- from C+. The outlook on these ratings
remains negative. At the same time, the Prime-1 short-term
rating was affirmed. The government-backed ratings assigned
to the debt instruments benefiting from the Swedish government guarantee
retain a Aaa rating and are not affected by this rating action.
A separate press release has been issued on 27 February 2009 on the ratings
of Hansabank (Swedbank's fully owned Baltic subsidiary).
"The downgrades reflect Moody's expectation of a substantial
increase in impairments in the Baltic countries and to a lesser extent
in Sweden. As a result, Swedbank's financials --
particularly earnings generation capacity, asset quality and capitalisation
-- are expected to deteriorate over the short-to-medium
term, thereby positioning the bank at the lower end of its C BFSR
range. Moody's downgrade of the bank's long-term
ratings to A1 reflects the weaker BFSR, but also continues to incorporate
the rating agency's view of the very high probability of systemic
support for Swedbank as one of the leading Swedish banks with a significant
market share in the Swedish retail market," says Antonella
Pisani, a London-based Vice President - Senior Analyst,
and lead analyst for Swedbank.
DOWNGRADE OF THE BANK'S BFSR TO C- FROM C+, NEGATIVE
The downgrade of Swedbank's BFSR to C- is in line with Moody's
expectation that Swedbank's financial performance will continue
to be pressured by increasing loan losses and provisioning levels combined
with a lower earnings contribution deriving from its Baltic operations.
In addition, a slowing Swedish domestic economy would also contribute
to this negative trend. Moody's financial strength rating
incorporates an analysis of embedded losses in the loan books and considers
the bank's underlying capital adequacy to be of a bank with a BFSR
in the lower end of the C range.
Moody's notes that although the Swedish market still accounts for
the bulk of Swedbank's revenues and lending, Baltic exposure
is material for Swedbank group, accounting for around 17%
of lending and around 28% of total group revenues at year-end
2008. Exposure to Ukraine and Russia is more limited, representing
around 2.5% of group total lending. The Baltic countries
are undergoing a difficult and severe economic adjustment, the pace
and magnitude of which is deeper and more prolonged than previously expected.
In 2008 Swedbank reported a significant increase in gross nominal amount
of non-performing loans (NPLs), rising to SEK10.6
billion (EUR965 million) from SEK3 billion in 2007. Around 66%
of group NPLs derived from Swedbank's Baltic operations.
Loan loss provisions also increased substantially, with the Baltic
countries contributing around 60% of total provisions. In
2008 Swedbank also wrote off around half of a total SEK2.6 billion
goodwill of its Ukrainian subsidiary, OJSC Swedbank (rated Ba2/Not
With regards to the Swedish loan book, Moody's considers that
impairments in corporate lending and commercial real estate exposures
will accelerate due to the current slowdown in the Swedish economy.
On the positive side, however, Moody's notes that around
50% of Swedbank group's total lending is represented by retail
lending. Around 30% of total group lending is residential
mortgages on single-family homes in Sweden.
The negative outlook on Swedbank's C- BFSR reflects the remaining
uncertainty associated with potential further credit writedowns and impairments
beyond Moody's current expectations, given the difficult economic
environment in the bank's main markets.
DOWNGRADE OF THE SENIOR UNSECURED RATING TO A1
Moody's downgrade of Swedbank's senior long-term debt
and deposit ratings to A1 from Aa3 reflects the downgrade in the BFSR.
The rating also continues to factor in the importance of the bank to the
Swedish banking system and Moody's assessment that the probability
of systemic support for the bank remains very high. This results
in a four-notch uplift for the long-term debt and deposit
ratings from the Baa2
Baseline Credit Assessment (BCA), which is derived from the C-
BFSR. Moody's believes that Swedbank remains one of the key
retail and commercial banking groups in Sweden which supports the A1 long-term
As a result of the downgrade of Swedbank's ratings, the senior
and subordinated debt ratings of Swedbank Mortgage AB were downgraded
by one notch to A1 and A2, respectively, given that parental
support is factored into these ratings. At the same time,
Moody's has affirmed all ratings of Swedbank's two Ukrainian
subsidiaries, OJSC Swedbank and its subsidiary CJSC Swedbank Invest,
based on the large rating differential between Swedbank and these subsidiaries,
as well as the continued high probability of support from Swedbank.
The following ratings have been downgraded:
- BFSR to C- from C+. Negative outlook.
- Long-term bank deposit rating to A1 from Aa3. Negative
- Issuer rating and senior unsecured debt rating to A1 from Aa3.
- Subordinate debt rating to A2 from A1. Negative outlook.
- Hybrid debt rating to A3 from A2. Negative outlook.
The last rating action on Swedbank was in October 2008 when the bank's
ratings were downgraded to Aa3/C+ from Aa2/B- , while
maintaining a negative outlook.
The principal methodologies used in rating Swedbank were "Bank Financial
Strength Ratings: Global Methodology" (February 2007) and
"Incorporation of Joint-Default Analysis into Moody's
Bank Ratings: A Refined Methodology" (March 2007), which
can be found at www.moodys.com in the Credit Policy &
Methodologies directory, in the Ratings Methodologies sub-directory.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Credit Policy & Methodologies
Headquartered in Stockholm, Sweden, Swedbank AB reported total
consolidated assets of SEK1.812 trillion (EUR165 billion) at the
end of December 2008.
Reynold R. Leegerstee
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades Swedbank (Sweden) to A1/C-, negative outlook
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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