Swedbank plans second rights offer

Swedbank AB, the Baltic region’s biggest bank, announced a second rights offer in less than a year as it seeks 15 billion kronor ($2.1 billion) to shore up reserves and help it exit the Swedish state’s bank support plan.

Swedbank fell as much as 9.5 percent in Stockholm trading. About 46.6 percent of the sale will be taken up by shareholders, including Folksam Group, 48 independent savings banks and state- owned pension funds AP2 and AP4, Stockholm-based Swedbank said today. The rest is guaranteed by Bank of America Corp. and Credit Suisse Group AG, which are underwriting the sale.

Swedbank, which raised 12.4 billion kronor from shareholders last year, has had to rely on Swedish government guarantees when it borrows from other banks. The company faces soaring loan losses and provisions in Latvia, Lithuania and Estonia, which are in the steepest recessions in the European Union, and reported a net loss in the first and second quarters.

“With this strengthening of the capital base we want to, once and for all, remove the perception that Swedbank is, or could become, a burden on Swedish taxpayers,” Chief Executive Officer Michael Wolf said. “If the bank continues to be the sole participant among peers in the state-guarantee, there is a high risk of that becoming a restriction for the bank.”

Swedbank posted its biggest intraday drop since June 3, and was down 2.5 kronor, or 3.8 percent, to 63.50 kronor at 10:30 a.m. in Stockholm. The stock has gained 43 percent in 2009.

Independent Financing

The share sale will accelerate Swedbank’s return to independent financing, Wolf told a telephone conference.

“This helps remove the uncertainty that has been surrounding the stock about their Tier 1 ratio and capital requirement,” Magnus Oppenstam, head of equities at HQ Bank AB, said in a telephone interview from Stockholm today. “We think this will definitely help Swedbank compared to the other banks valuation-wise. We think this is the right move.”

SEK AB, which helps fund Swedish companies’ exports and which owns 3.3 percent of Swedbank’s shares, said the share sale was “positive and will strengthen Swedbank.” The government- owned agency said it would take part in the issue, although it doesn’t regard itself as a long-term owner of the shares.

Estonia, Latvia and Lithuania are reeling after a property bubble burst, cheap credit evaporated and ebbing demand in foreign markets undermined exports. The three countries, which had the European Union’s fastest-growing economies from 2004 to 2006, now have the steepest declines of all developing regions, the World Bank said on June 22.

Soaring Defaults

Swedbank reported on July 17 its second consecutive quarterly net loss as bad loans in Estonia, Latvia, Lithuania and Ukraine soared. The loss of 2.01 billion kronor in the second quarter compared with net income of 3.6 billion kronor a year earlier. Loan losses in the period soared to 6.67 billion kronor from 423 million kronor a year earlier. In the first quarter, Swedbank had a net loss of 3.36 billion kronor.

Through the rights offer, Swedbank will increase its core Tier 1 capital ratio, a measure of financial strength, to 12.1 percent from 9.8 percent at the end of June.

Source: Bloomberg

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