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Monday, January 21, 2008

Swedbank Downgraded By Moody's

This news in Bloomberg this morning is hardly surprising, but does give an indication of the fact that such banks can't continue to fund a difficult situation indefinitely without seeing damage to their own balance sheet, and their own credit rating. According to Bloomberg the Baltic business accounts for 30% of their total profit (or if you like one third of their business), and that is not insignificant, or "small beer".

Swedbank AB, the largest bank in the Baltic region, may have its credit rating lowered by Moody's Investors Service, which cited concerns about the strength of the economies in Estonia, Latvia and Lithuania.

Moody's cut its outlook for Stockholm-based Swedbank's financial strength and long-term deposit rating to ``negative'' from ``stable,'' it said in a statement dated Jan. 18. It also lowered its outlook on Swedbank's Baltic subsidiary, AS Hansapank, to ``negative'' from ``stable'' and placed its C+ financial strength rating on review for a possible downgrade.

Swedbank is the largest bank in Estonia as well as Latvia, the fastest-growing economy in Europe, and the second-biggest in Lithuania. The Swedish lender's Baltic banking operations account for more than 30 percent of its operating profit.

``The rating action was prompted by Moody's concerns over the bank's high exposure to the overheating mortgage, real- estate and construction markets in the Baltic countries,'' the credit rating company said in the statement.

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