Swedish banks avoid credit crunch damage

Sweden's major banks have so far avoided any major damage from the current international financial turbulence, to judge by the evidence of first quarter reports released this week.

Falls in Stockholm shares and difficulties in the international credit markets have pushed down profits, with the big four Swedish banks seeing combined operating profits fall 3 billion kronor year-on-year to 17 billion kronor in January-March.

The banks – SEB, Handelsbanken, Swedbank and Nordea have been affected by companies’ reluctance to make deals due to economic uncertainty and inavailability of credit. But overall margins have been sustained at a relatively high level, according to news agency TT.

Profits at SEB were down significantly, however, with operating profits down 40 percent in the first quarter. The bank’s large securities holdings were largely to blame. Nordea and Handelsbanken performed best during the period.

“Aside from the corporate side, the banks were earning more on mortgages during the quarter, and that’s a new trend,” said Rodney Alfvén, chief analyst at Chevreux Nordic, to TT.

Banks in the Nordic region have so far coped with the financial crisis better than competitors in North America and the rest of Europe, according to Alfvén, who predicted that the credit crisis would continue until the autumn.


Sweden ‘can live with’ EU bank deal: Borg

Swedish Finance Minister Anders Borg has said that he could accept the deal agreed in Brussels in the early hours of Thursday morning regarding how to deal with troubled banks.

Sweden 'can live with' EU bank deal: Borg

“As a balanced compromise we can live with this,” Borg said after the marathon meeting of EU finance ministers.

Borg expressed hope however of some adjustment to the deal in forthcoming negotiations with the European Parliament.

“I think that there is further work in trialogue that can move this forward, especially when it comes to using direct recapitalization by shareholders in the banks. There are further opportunities for improvement,” he said.

“But this is a significant step forward, and that means that in practice we have a solution for Swedish banks,” he added.

The deal basically reaffirms the so-called “bail-in” rule – meaning that banks are primarily saved by using their own resources, shareholders or even depositors.

“This establishes bail-in as the new rule. The goal is to have a common view on the matter throughout Europe so that our taxpayers will no longer have to shoulder the burden,” said Irish Finance Minister Michael Noonan according to AFP.

Although it is primarily shareholders and financiers who will be tapped for money, depositors with more than €100,000 also carry a risk of having to contribute.

“Swedish companies may very well become involved in paying for crisis-hit banks in ways that have not previously been the case. It will put more pressure on banks to act prudently. Both shareholders and their financiers will have to bear some of the risk,” Borg said.

States will however retain the possibility to intervene and save troubled banks.

“The Swedish government will go in when it comes to Swedish banks. Then Swedish taxpayers have an interest to act, if it creates serious risk of a long economic decline and high costs in terms of unemployment,” Borg said.

TT/The Local/pvs

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