OREANDA-NEWS. On 17 February 2009 was announced, that Swedbank presented its year-end report for January through December 2008. The result shows a maintained solid earnings capacity, despite turbulent financial markets.

The profit for the period amounted to 12,290 million Swedish kronor, excluding goodwill write-offs, which is an increase of 2.5 percent compared to the full year 2007. The profit for the period, including goodwill write-offs, amounted to SEK 10,887 million.

- Swedbank maintained solid earnings in 2008, driven by stable earning capacity and an efficient organization, coupled with low exposures on financial instruments, says Jan Lidén, CEO of Swedbank.

Net interest income for the full year 2008 increased by 13 percent to SEK 21,702 million from 2007. The return on equity was 17.1 percent, excluding goodwill write-offs, or 15.2 percent including goodwill write-offs, compared to 18.9 percent in 2007.

Profit for the period for the fourth quarter 2008 amounted to SEK 3,318 million, excluding goodwill write-offs, which is an increase by 34 percent compared to the third quarter, 2008. Profit for the period including goodwill write-offs amounted to SEK 1,915 million.

Loan losses for the full year amounted to SEK 3,156 million, compared to SEK 619 million a year earlier. This corresponds to a loan loss ratio of 0.28 percent compared to 0.07 percent in 2007. Loan losses in the fourth quarter of 2008 rose to SEK 1,633 million, from SEK 812 million in the third quarter of 2008, due to deteriorating macro economic conditions. However, write-offs are still at a low level.

- The outlook for the economy worsened during 2008. During the second half of the year, the downturn was more extensive and faster than previously projected. Swedbank responded by accelerating preparations for slower times ahead, says Jan Lidén.

Swedbank has intensified a review of the lending portfolio to be able to react faster when problems arise. The organization responsible for financial reconstruction and recovery has been strengthened in the Baltics as well as in Russia, Ukraine and Sweden, and preparations are steadily being made for an expected increase in problem loans. A legal structure was put in place in Latvia during the fourth quarter to manage repossessed collateral in the form of real estate through a separate entity. The best, most experienced internal and external experts are working across the Group to minimize future losses.

Declining economic conditions in the Baltic countries pose challenges for Swedbank as the largest bank in the region. Ensuring continued high quality in the credit portfolio while finding workable solutions together with customers who incur payment problems remains the highest priority.

Due to the dramatic decline in market conditions during the second half of 2008, Swedbank revised its growth objectives for Ukraine downward for the years ahead. As a result, a portion of goodwill related to the acquisition in Ukraine, SEK 1,403 million, has been written-off. Although the short-term outlook in Ukraine is challenging, Swedbank is convinced of a positive long-term future.

During the fourth quarter, Swedbank implemented a rights issue totalling SEK12.4 billion. The issue was finalized in January and makes Swedbank among the best capitalised banks in Europe. This puts the bank in a better position of strength.

In November, Swedbank’s application to participate in the Swedish state’s guarantee programme was approved. With the help of the guarantee, Swedbank was able to reduce its relative funding costs, increase the liquidity reserve, extend the maturity on its credit facilities and thereby mitigate its liquidity risks. The guarantee further strengthens Swedbank´s preparedness for further challenges in the financial markets.

Swedbank´s proposed dividend is SEK 4.50 (9.00) per ordinary share and SEK 2.40 per preference share. The tier 1 capital ratio including total subscribed capital was 10.7 percent according to the new rules.