Thursday, October 23, 2008

Swedbank, Other Swedish Banks Present Relatively Stable Earnings

Compared to banks in for example America, which have suffered enormous losses, Swedish banks have so far been islands of relative stability. One bank, Handelsbanken, in fact presented rising earnings yesterday. The other big three Swedish banks, SEB, Nordea and Swedbank all saw their profits fall, but not that dramatically.

If you look at Swedbank, the bank around which most rumors have circulated and also the bank which my Baltic readers appears to be most interested of, their profits fell by about a third from year ago levels in Q3. This decline was mainly attributable to falling commission revenue as well as portfolio losses and increased loan losses. The portfolio losses were mainly related to Lehman's collapse and the increase loan losses was mainly a result of rising loan losses in the Baltic countries. Loan losses in Sweden increased dramatically too, but from a much lower level.

In their comments, the Swedbank management concedes that things aren't going so great right now, but they argue as they have done before that it is only temporary and nowhere near as bad as the rumors suggest. However, in this interview in Svenska Dagbladet, Swedbank CEO Jan Lidén concedes that they have been to optimistic about their Baltic division and that they will probably have to revise up their forecasted loan losses.
As the Baltic hard landing has only barely begun, and as Sweden too enters a cyclical downturn, that upward revision will probably be quite large.


Anonymous Anonymous said...

The profits are way down if you compare q3 for 2008 and 2007. Profits are likely to fall even more the next quarter.

Swedbank might look cheap when you compare to the profits they have for this year, but problems are likely to increase next year.

The risk in bank stocks are still to high.

1:49 PM  
Anonymous Anonymous said...

if banks are keen on attracting deposits but do not lend much, what do they do with all that cash and how do they avoid a negative carry?

7:13 PM  
Anonymous ninja said...

you said the situation of the swedish bank has been relatively stable , and i'd like to know the reason. Do you think there's some relation to the past bubble experience in 1985-90?

2:56 AM  
Blogger stefankarlsson said...

Anonymous2: That shouldn't be too hard. They could reduce other funding sources (which are usually more expensive). And if the worst came to the worst, they could always cut interest rates for depositors.

Ninja: Yes, presumably the Swedish banks were taught to be somewhat more prudent in their lending standards.

11:00 AM  
Anonymous ninja said...

Is there any paper or article about the prudent behavior of the swedish bank after the bubble's experience?

4:55 AM  

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