SWEDEN’S central bank slashed its forecast yesterday for loan losses for its four major financial groups and said the country’s lenders were in a strong position to weather uncertain market conditions.
The Riksbank central bank said it expected loan losses at the four major banks – Nordea, SEB, Handelsbanken and Swedbank – to reach SEK61bn (£5.31bn) over the next three years.
It cut its forecast for loan losses this year to SEK28bn from a previous SEK65bn.
The bank said in its twice-yearly stability report that while risks remained, mainly due to the effect of Greece’s debt woes on markets and the possibility that a recovery in the Baltic region would stall, banks’ finances were robust.
“The banks are well equipped to meet unexpected and negative events in the period ahead,” the Riksbank said in a statement.
“But there are still large risks and uncertainty has recently increased.”
In the event of a more negative outcome, the Riksbank said the banks would still have enough capital to manage potentially higher loan losses but that they could face trouble obtaining funding.
Sweden’s top four lenders focused on reducing risk and boosting capital levels during the financial crisis which led to big losses for the banks, many of which had built up big exposures to the crisis-hit Baltic region.
Most indicators show Sweden is in good shape. Its economy grew a much better-than-expected 1.4 per cent in the first quarter from the previous three months.
FAST FACTS | Sweden
• Sweden’s economy grew by a better-than-expected 1.4 per cent in the first quarter.
• Losses at its top four lenders are expected to reach SEK61bn (£5.3bn) over the next three years, according to Sweden’s central bank.
City A.M. Reporter