Swedbank Warns Russia Sanctions May Delay Baltic Credit RecoveryNiklas Magnusson
Swedbank AB, the largest lender in the Baltic countries, said the crisis in Ukraine could hamper a recovery in loan demand in Estonia, Latvia and Lithuania and affect credit quality in the region.
The Stockholm-based bank, which reported a 12 percent increase in first-quarter profit today, said events in Ukraine have created concern in the Baltics and “will probably further delay an anticipated increase in credit demand.”
The U.S. and European Union will impose new sanctions as early as today on Russian companies and individuals close to President Vladimir Putin over the escalating crisis, officials said. Swedbank said it may see credit quality at individual companies worsen if Baltic trade with Russia falls.
“Sanctions against Russia have been limited to date, but if ratcheted up could threaten global growth, particularly in Europe,” Chief Executive Officer Michael Wolf said in today’s earnings statement. “Although the Baltic countries are particularly vulnerable in the event of sanctions against and by Russia, to date we have not seen any financial effects of the crisis in our business.”
The seizure of international inspectors by pro-Russian separatists last week added pressure to a confrontation made urgent by Russian military exercises on Ukraine’s frontiers. The North Atlantic Treaty Organization says 40,000 Russian troops are near the border. Ukraine’s southern air-defense forces are in “operational readiness,” the country’s defense ministry said yesterday on its website.
Net income at Swedbank, Sweden’s largest mortgage lender, rose to 3.95 billion kronor ($599 million) in the first quarter from 3.53 billion kronor a year earlier. That missed the average 4.01 billion-krona estimate in a Bloomberg analyst survey. Net interest income at Swedbank rose 2.4 percent to 5.48 billion kronor in the three months through March, while net commission income gained 13 percent to 2.69 billion kronor.
Sweden’s banks, which face some of Europe’s strictest reserve rules, have increased buffers by cutting costs and retaining earnings to become the best capitalized in the region. SEB AB, Nordea Bank AB, Svenska Handelsbanken AB and Swedbank already exceed a requirement for a core Tier 1 capital ratio of 12 percent by 2015 and all raised their dividend payments this year.
Swedbank, Europe’s second-best capitalized major lender, pays out 75 percent of its profit to shareholders -- the highest dividend ratio in the Nordic region. Its common equity Tier 1 ratio under Basel III regulation was 18.3 percent at the end of March, the same level as at the end of last year.