Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Russia Overshadowed by Weak EU as Swedbank Maps Baltic Future

Russia’s economic plight following its standoff with Ukraine is proving less of a threat to Swedbank AB’s Baltic operations than weak economic growth in Europe and Finland.

“This year is going to be subdued” in terms of lending growth “and this is the entire market and very much dependent on Europe -- it’s more the subdued situation in Europe than Russia and Ukraine,” Birgitte Bonnesen, head of Swedbank’s Baltic Banking unit, said yesterday in an interview during a conference in Stockholm. “We haven’t actually seen any impact on our business from the situation in Russia and Ukraine.”

Instead, weak European demand for Baltic exports and a sclerotic Finnish economy are holding back growth in Estonia, Latvia and Lithuania. Swedbank will cut this year’s 1.8 percent growth forecast for Estonia to “a little below 1 percent” because of the Finnish economy, which contracted an annual 0.6 percent in the first quarter, Bonnesen said.

Swedbank’s Baltic operations attracted political attention at the height of the financial crisis after credit losses started to jeopardize the stability of Sweden’s financial system. After suffering losses there in 2009, when a housing bust rolled through Latvia, Lithuania and Estonia and led to the EU’s deepest recessions, the region has since rebounded. Swedbank generated 19 percent of its operating profit at its Baltic unit in the first quarter.

Russian Recession

While Martins Kazaks, Swedbank’s chief economist for Latvia, forecasts a recession in Russia this year and a stagnation or very little growth in 2015, the Baltic countries have so far seen “very little” impact from the developments in Russia and Ukraine, he said yesterday in a presentation. As the three Baltic nations export 11 percent to 20 percent of their goods to Russia, the main impact would be via trade flows and a decline in investments in Russia, said Kazaks.

Russia’s economic prospects have dimmed as fighting between Ukrainian government troops and rebels claiming allegiance to Russia continues in the eastern parts of the country following Russia’s annexation of the Crimea peninsula. Ukraine’s U.S. and EU allies have imposed sanctions on Russia and threatened to tighten them unless President Vladimir Putin acts to halt the conflict.

“The impact so far is minor and limited to specific companies, mostly via the ruble devaluation,” Kazaks said.

Consumer Market

The Bank of Finland on June 10 lowered its forecast for Finnish economic growth, now projecting a stagnation this year before the economy returns to expansion of 1.4 percent in 2015. The European Central Bank forecasts growth of 1 percent in the euro zone this year and 1.7 percent in 2015, it said on June 5.

While consumer lending is growing in the Baltic countries, there is little demand for corporate credit, according to Swedbank. Still, there are signs appetite is increasing.

“The consumer market is very strong and it’s getting better in Latvia as well -- it’s quite strong in Estonia and Lithuania,” Priit Perens, head of Swedbank in Estonia, said at the same event in Stockholm. “The corporate market in the first quarter was quite quiet but we see growing interest not yet realized in an actual portfolio increase. Frankly, the companies don’t complain that they don’t have access to money.”

Swedbank’s lending volumes in the Baltics declined 1 percent in the first quarter in local currencies compared with the end of 2013, mainly because of a decline in new credit. Its total loans in the region dropped to 118 billion kronor ($17.6 billion) from 119 billion kronor, according to Swedbank’s first-quarter report. Its market share remained at 28 percent.

Bonnesen and Perens said the ECB’s decision to cut rates last week won’t have any impact on lending growth in the Baltics or at the bank’s local unit because it finances all lending through deposits rather than market funding.

“So today so we’d like lending to pick up, but it’s not really there,” Bonnesen said.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.