Sweden Increases Nordea Share Sales Size on Strong Demand

Sweden sold 260 million shares in Nordea Bank AB for 19.5 billion kronor ($3.03 billion) to reduce public debt after boosting the size of its divestment in the Nordic region’s largest lender because of strong demand.

The government cut its stake in the Stockholm-based bank to 7 percent from 13.4 percent, after it sold 20 million more shares than it had planned yesterday, according to a statement. The final price was 75 kronor apiece, at the low end of an original range of 75 kronor to 76 kronor.

“Our role is not as an owner of banks,” Financial Markets Minister Peter Norman said at a press conference in Stockholm. Bank stocks are “risky” and “we should not expose the Swedish citizens and Swedish taxpayers to unnecessary risks.”

Prime Minister Fredrik Reinfeldt’s government earmarked Nordea for sale after coming to power in 2006 as part of a strategy to sell state holdings including the largest phone company, TeliaSonera AB. It cut its Nordea stake from 19.8 percent in February 2011 after selling shares at 74.5 kronor.

The government will put more than half of the proceeds from today’s sale in its bank stability fund, while the rest will be used to cut debt, the National Debt Office said. The fund, set up during the financial crisis, is financed by the banks and will be used as a backstop in the event of a financial crisis.

Bill Sales

Proceeds from the Nordea sale “will, in the near term, be handled in liquidity management and by lower volumes in treasury bills,” the debt office said. “The debt office will gradually use the income to repay maturing loans” as “supply of government bonds continues to be stable,” it said.

Nordea’s shares had jumped 27 percent this year as of yesterday. They reached a five-year high of 83.8 kronor on May 22, fueling speculation of a share sale. The stock fell 4.4 percent to 75.3 kronor as of 3:19 p.m. in the Swedish capital.

Morgan Stanley was global coordinator and joint bookrunner of the sale with Credit Suisse Group AG and SEB AB. Carnegie was co-lead manager. Sweden has agreed not to sell any additional Nordea shares for 90 days.

State ownership of Nordea traces its roots to the nation’s banking crisis in the early 1990s, when predecessor Nordbanken was nationalized after loan losses wiped out its equity. Nordbanken was later merged with Nordic lenders such as Finland’s Merita Bank to create Nordea. Its largest shareholder is Finland’s Sampo Oyj, which owns the biggest Nordic non-life insurer If, with a 21.4 percent holding.

Cutting Debt

Since coming to power, the government has cut public debt to 38.1 percent of gross domestic product at the end of last year, helped by the sale of Absolut vodka maker Vin & Sprit AB, real estate company Vasakronan and stakes in stock-market operator OMX AB and TeliaSonera. The National Financial Management Authority forecast on June 17 that public debt will rise to 42.1 percent of GDP this year before gradually falling to 33.3 percent by the end of 2017.

Sweden’s government is pushing through some of the world’s strictest bank capital requirements to make them more resilient in a crisis. It last month decided to raise banks’ risk-weights on mortgages to tame record-high Swedish household debt.

“We should be a thumb in the eyes if the banks. We should regulate it hard,” Norman said at the press conference. “That’s what we’ll do also in the future.”

Asset Sales

Sweden’s debt office did not include any proceeds from asset sales when it yesterday forecast that state net borrowing will increase to 183 billion kronor this year, from 25 billion kronor last year, before falling to 65 billion kronor in 2014. The government in April forecast it will post budget deficits this year and in 2014 as the economy struggles amid a recession in the euro area.

Sweden “will maintain the auction volume of government bonds at 3.5 billion kronor in 2014,” the debt office said in a statement today. Yesterday it forecast that the volume would rise to 4 billion kronor next year.

“Borrowing in foreign currency will decrease,” the debt office said. “The revenue from the sales transactions will reduce the funding requirement and the national debt.”

Shares owned directly by state and the Swedish stability fund were sold on a pro rata basis, the government said today. Mannheimer Swartling was the government’s legal adviser on the sale while Morgan Stanley provided financial advice.

“The state through this transaction has committed to not sell more during a 90-day period and when that’s over we will have to, once again, as we always do, try the circumstances to see if we should continue” Norman said. “We have no finished plan for that today.”

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