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Three Swedish banks downgraded by Moody's

Three Swedish banks downgraded by Moody's

Published: 25 May 2012 07:26 GMT+02:00
Updated: 25 May 2012 07:26 GMT+02:00

“It doesn’t come as a complete surprise to me, even if I don’t agree that the banks should be downgraded,” said financial analyst Peter Malmqvist to daily Svenska Dagbladet (SvD).

Since mid-February when Moody’s announced that they were reviewing 114 European banks and among these the four major Swedish banks, the companies have been aware that a potential downgrade was in the cards.

Shortly after midnight Moody's announced that it was lowering its ratings on Nordea Bank AB and Svenska Handelsbanken AB by one notch to Aa3, its fourth highest rating.

Moody’s explained their decision by saying that Swedish banks have a comparatively high reliance on wholesale funding, leaving banks susceptible to potential changes in investor confidence amidst the ongoing euro area debt crisis.

Another reason was their modest profitability, driven by price competition for retail loans in what was described as a low interest rate environment.

According to Moody’s, the resulting low profit margins would potentially make it challenging for Swedish banks to rebuild capital in the event of unexpected losses.

The firm also said that there were risks to asset quality, despite the banks' robust performance to date, given that the weakness in Europe could potentially affect the Swedish economy, and thus corporate borrowers.

They also said that the Swedish banks’ large, mostly variable-rate mortgage books would be vulnerable to credit deterioration if interest rates rise.

However, at Nordea they are not fazed by the firm’s decision.

“We think this confirms that we are one of Europe’s strongest banks. We are one of three banks in Europe with a double A-rating,” said Erik Durhan, press spokesperson for Nordea to Expressen.

“We will see if it has any effect, but we don’t think it will.”

The firm also downgraded its ratings on specialized agricultural lender Landshypotek AB down to Baa2.

According to the company, this was done because its focus on a single business (agricultural lending) and reliance on covered bonds funding could make the institution particularly vulnerable to a deteriorating environment or market disruption.

However, Moody's also confirmed its ratings for the two other leading Swedish banks SEB at A1 and for Swedbank at A2 as the outlook is considered to be stable for these banks.

However, despite the downgrade, Moody’s noted that Swedish banks are in a stronger position than their European peers to manage the credit risks emanating from the challenging European operating environment.

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Your comments about this article

08:12 May 25, 2012 by foxpur
So they are saing that they are lowering them from AAA to AA because they MIGHT have something happen, that hasn't... but they are still the best compated to everyone else?

That's the dumbest reason to lowing I've ever seen. That's like saying the sun is shining so I will lower your quality because you might get sunburn. A does NOT equal B.
08:47 May 25, 2012 by Essingen
Well I am keeping my rating assessment of Moody's at CC+ due to their performance in the sub-prime crisis which results in a long term lack of creditibility.
09:44 May 25, 2012 by HYBRED
This article is putting a overly optimistic spin on the situation. The Swedish banks have a heavy investment in the Euro problem. The Euro problem has a extremely dim outlook and is getting worse by the day. The Swedish bank's and the Swedish economy as a whole are going to take some ongoing heavy hits soon. You ain't seen nothin yet. This article is actually candy coating the situation, sad to say.
14:08 May 25, 2012 by Mib
If Greece exits the Euro then all of Europe is in trouble. I believe that the French banks have the most to lose if Greece effectively goes bankrupt. That will then affect other banks that have lent money to French banks and so on. The Governments will have to bail them out causing more problemsand then the focus will move onto Spain, Italy etc until either the whole system collapses OR Germany accept Eurobonds and/or the EU focuses as much on growth as it does on austerity.

In my mind, th EU including Germany are cutting their nose off to spite ther face. Either deal wth the issue or i will comeback and affcet your economies and possibly the world as the financial systems are all interlinked in some way. Merkel has an election coming up and I understand the principles that the Germans are protecting, but the alternative will be frightening. As HYBRED stated this article is the "candy coating the sitution"

The biggest mistake was allowing Greece and some others into the Euro without due dilgence, but then don't let the hard truth get in the way of a dream in the United States of Europe!
14:47 May 25, 2012 by Rishonim
I wish they would also downgrade SEB as I would like to see that raging maniac Annika Falkengren ousted. Rumors has it that she is running around screaming and her staff like a bipolar monkey high on snus. I also heard she is taking stock options instead of salary increase to cash them in upon her departure.
15:12 May 25, 2012 by HelmiVainikka
"Merkel has an election coming up and I understand the principles that the Germans are protecting,"

Trust me mate, around here where I live people are sick and tired of Merkel and her "concrete" politics as they call of "of the sleeping hand" (a reference to the quote that she would do politics with a "quiet hand" like Schröder did).

I do not believe for a second that she will get re-elected again. The German Political Agenda is unequal what the German people think. People are sick of her.
17:06 May 25, 2012 by foxpur
Rishonim:

You have me a case of the giggles with that reply, well said
18:44 May 25, 2012 by viennacalling
Yes its been step by step Millimetre by Millimetre Merkel and Schaeuble, they have done this because at the end of the day they are Germans! German Bonds heaps of investment and low yields! they are getting money invested in Germany for nothing and at the expense of all the EZ countries who pay much higher yields Schaeuble Knows and he is just milking it for Germany

I have been saying this for 3 Years EuroBonds is the only Answer !

I have always agreed with George Papandreou ex Greece PM he requested Eurobonds in 2009 ! and by the way George was Born in Minneapolis St Paul USA and would sweep the floor with Merkel !
14:37 May 26, 2012 by HelmiVainikka
Can you blame them for trying to make the best for the country they represent?

Last time I checked, politicians are SUPPOSED to do what is needed FOR and not AGAINST their country.

Papandreou is just as much of a Mafia scumbag as the other Greek politicians.

So he was right about one thing?

Well, there is the saying "even a blind chicken sometimes picks some corn".

Greece has a problem that is a lot deeper than that, Greece has gone bankrupt four times (almost every 60 years), its currency has been depreciated innumerable times and there has never been a generation (in the 200 years of its existence) that has been brought up in conditions of normality.

Back then, there was no Euro, no Eurozone and no Eurobonds.

Maybe they should simply "get real" and used to the fact that not every toilet cleaner is supposed to bribe his/her way through life and have an illegal, untaxed swimming pool in the back of their house.
22:05 May 27, 2012 by B Slick
I have major investments in SEB and am thinking of cashing-out because im not excited about Annika Falkengren and the way she does business.
04:07 May 28, 2012 by mibrooks27
Moody's and that nest of thieves known as "Wall Street" needs to be downgraded. People have conveniently forgotten that the Greek economic crisis began when Wall Street and the corrupt Clinton Administration go them to park their healthcare, retirement, and other government reserves with these swine. They were bilked out of every dime and Goldman Sachs, piling on, helped the Greek government to hide that mess from the Greek voters and the European community. Fast forward and the same thing has happened to Spain, Italy, Portugal, Iceland, Ireland, most people in the US. Obama's economic policy is huge bloated corporations in a partnership with Washington. It's national socialism! The same damn stuff Hitler did, including the mass murder of civilian's, turning his Wall Street and corporate thieves lose on companies like Volvo and Saab. The downsizing that needs doing is what happens to these executives after an international trial and hanging -- donwsize them to ash.
10:34 May 29, 2012 by CJ from Sunshine Desserts
High time someone downgraded Moodys !......
22:26 May 30, 2012 by Scotty64
It would be a cynic that suggested that a great way of getting the US out of trouble would be to have every other nations banks downgraded by ratings agencies....

Sorry, wouldn't work unless those ratings agencies were largely American...

Hang on a minute......*!@£$
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