Lower risk level
Swedbank’s credit quality has been stretched as a result of the economic downturn, especially in the Baltic countries, Ukraine and Russia. Major efforts are being made to minimise losses. Analyses are being done continuously in order to implement the right measures in problem areas as early as possible.
Intensified customer contacts, stepped-up compliance with the credit policy and continuous monitoring of customers who are late on their payments are helping to limit credit impairments. Establishing contact with customers who are having problems paying their bills in many cases can significantly reduce losses for both the customer and the bank.
In addition to limiting credit impairments, Swedbank will reduce its overall risk level. Reducing exposure to markets outside Sweden is an important priority. The bank will also seek a more sustainable balance between lending and deposits in all its markets.
Activities and development in 2009
Swedbank took substantial measures in terms of asset quality in 2009. Financial Reconstruction and Restructuring (FR&R) units were strengthened and local teams were established in the Baltic countries, Ukraine and Russia. By year-end the FR&R units together had 462 employees, the majority of whom work in the Baltic countries and Ukraine. The FR&R teams work in a structured manner together with customers who incur payment problems in order to find solutions that work for both parties.
Lending was analysed several times during the year, and the FR&R teams took over corporate loans that were judged as being the most impaired. Based on these analyses, lending volumes were selectively reduced in sectors that are considered to have higher risk.
In Sweden, where it is one of the market’s biggest players, Swedbank tightened its credit applications and terms to avoid contributing to an overheated mortgage market. At the same time customer advisory support was improved. The property management company Ektornet was established during the year. It will manage and develop repossessed collateral, primarily real estate. The purpose is to recoup as much value as possible for the bank over time.
In 2009 Swedbank actively reduced its risk level by lowering exposure to markets outside Sweden. Lending in the Swedish operations as a share of total lending increased during the year to 84 per cent (78). At the same time the share of lending in the Baltic countries decreased to 12 per cent (16), and the share in Ukraine and Russia declined to 1 per cent (3). This work will continue in 2010. At the same time the Swedish banking operations, whose asset quality fared well in 2009 compared with the competition, have become more restrictive in lending to projects with higher risk.
The ratio between lending and deposits decreased during the year, primarily in the Baltic countries, as a result of slightly higher deposit volumes in combination with reduced lending. In Estonia and Lithuania, the ratio is approaching a more balanced level. In Latvia, the structural challenge is greater and adjustments will take more time.
