Swedbank calls surprise $2.1 billion rights issue
Swedbank surprised markets on Monday with news of a 15 billion Swedish crown ($2.1 billion) rights issue to boost its balance sheet hit by bad debts in the Baltics, after saying a month ago its capital situation was “very resilient.”
Sweden’s financial watchdog said in June that the country’s banks had enough capital to pass its “worst-case” stress test for 150 billion crowns in Baltic loan losses, though that same day its central bank took a big loan from the European Central Bank to cushion the financial system.
The latest issue, Europe’s eighth biggest this year, was something of a U-turn for the Swedish bank, which as recently as July said it had a resilient capital base, and a month before that had insisted there was no need for extra capital.
“The difference between what we said then and what we are doing now is that we can clearly say to the market that even if the Riksbank’s stress scenario would happen, we would be well-capitalized,” Chief Executive Officer Michael Wolf told Reuters to explain the decision.
The Baltic states, to which Swedbank is the most exposed of Nordic banks, have taken a heavy blow due to the global downturn, with their most recent quarterly gross domestic product figures shrinking by about a fifth.
“It’s a signal to our customers that we have the ability to support them through this recession, no matter what happens,” said Wolf.
He told analysts that the lender stood by the outlook it gave for all its markets at its results briefing in July payday advance.
“They give good reasons for the issue,” said one analyst, who declined to be named. “At the same time, this news raises suspicions about the situation in the Baltic countries and its Lehman exposure. Although the bank has not changed the guidance they gave in Q2, concerns have increased.”
Sweden’s Markets Minister Mats Odell told Reuters that the move by Swedbank was a sign that Sweden’s financial markets were starting to recover and on the path to normalization.
“It means that Swedish banks, from an international perspective, are well-capitalized,” Odell said.
At 1419 GMT (10:19 a.m. EDT), Swedbank shares were down 3.4 percent at 63.75 crowns, having been down as much as 9.5 percent. The broader European banking sector was down 2.7 percent.
CASH CALL EPIDEMIC
Swedbank also made a $1.5 billion cash call last year, and other banks exposed to emerging Europe, such as SEB, Nordea, Poland’s PKO and National Bank of Greece, have also asked shareholders for cash to face the worst recession in decades.
Like Swedbank, those banks said they did not desperately need the capital but were exploiting improving market sentiment to raise money opportunistically.
Analysts said they were not concerned about any sort of contagion following Swedbank’s share call.