Why is Swedbank doing a second rights issue?
Today, Swedbank, a Swedish bank with huge Baltic loan loss exposure, surprised investors with a second rights issue in less than a year. In going to investors for more money, the company said its doing so in a fully underwritten deal demonstrated “a position of strength.” “This is a forward-looking rights issue” to deal with “downside risk.”
Huh? I just reported on their dismal earnings two weeks ago (“Earnings results at Swedish banks show large writedowns in Baltics”). They had the worst results of the big four Swedish banks. It’s obvious to everyone that Swedbank needs the money; why else would they ask for it? Didn’t they just promise not to ask for more capital in June?
The only strength I see is in timing i.e. they are getting money from investors while the getting is good and bank stocks are still a relatively hot commodity – shrewd manoeuvre but hardly a sign of strength.
Watch the CNBC video and judge for yourself.
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Swedbank Plans Second Rights Offer to Bolster Funds – Bloomberg
Well the general consensus here in Sweden is that they are in deep deep doo-doo. The “analysts” say otherwise but the word on the street is that they will go under if they don’t get the money. (And in my opinion, even if they do). They just asked their stockholders for ~1.5 billion USD a year ago or so. Now they need $2+ billion more?
Although Swedbank is in the worst shape SE Bank and even Nordea are also in more or less the same boat. SE Bank is controlled by the Swedish ruling class Wallenberg family and I assume they will refill its coffers using cash from one of their many other concerns. Nordea was the old Swedish state-owned bank that was nationalized and bailed out back in the 1990’s during the first Swedish banking crisis. It’s the one the Swedes have been crowing about of late as a model for the US and other countries. It would be justly ironic if the Swedish government once again has to step in with their bad-bank/good-bank nationalization of the Nordea concern and doubly so if Bo Ljundgren’s sticky fingers are in the pot this time as well.
:-)