By Colm Fulton
STOCKHOLM (Reuters) – Swedbank on Thursday reported its first quarterly loss since 2009, hit by coronavirus-related credit losses and a record fine for poor anti-money laundering controls.
The Swedish bank faces the prospect of a large bill to address its money laundering issues, while grappling with the economic downturn caused by the coronavirus outbreak.
Swedbank was hit with a record 4 billion crown fine on March 19 when Sweden’s financial watchdog found serious deficiencies in the bank’s anti-money laundering policies in the Baltic region.
Shares in Swedbank were down 2% at 0810 GMT. The bank signalled the expected losses to investors on April 8, sending shares down over 5% on the day.
“We are now starting to see the beginning of the end of this very painful and incredibly costly money laundering crisis,” Henriksson told reports by phone.
Meanwhile, the coronavirus raises the prospect of loan losses and credit impairments for banks, as businesses shut their doors and lay off staff.
“We are seeing the consequences for the economy of the coronavirus and let’s be totally honest, a global recession is coming,” he added.
Swedbank recorded a net loss of 1.69 billion Swedish crowns ($167.32 million) compared to a 5.27 billion gain for the first quarter of 2019.
Henriksson said the coronavirus hit the bank with credit impairments of 2.2 billion crowns, compared to a year-ago 218 million.
Of this hit, 800 million was attributed to a drop in oil prices and 700 million to macroeconomic deterioration, with the rest spread around various sectors, the most affected being manufacturing, retail and hospitality.
Even though Sweden’s restrictions have been lighter than in other countries, the financial strain has been felt and a record number of hotels and restaurants went bankrupt in March.
“We have a strong starting position with satisfactory capital and liquidity buffers and strong underlying earnings,” said Henriksson, who was appointed in August after the Baltic scandal toppled ex-CEO Birgitte Bonnesen.
Henriksson backed the Swedish government’s approach to the coronavirus, which has made it an outlier among European economies, as shops, bars and restaurants remain open to a public not required to stay indoors.
“The actions that the Swedish government has taken are good and it perhaps makes the performance of Sweden’s economy less bad than other economies, and that is good for the banking system,” he said.
On Wednesday, local rival Handelsbanken reported a smaller-than-expected fall in first-quarter net earnings as loan loss provisions caused by the financial strain of the coronavirus pandemic grew less than many analysts had estimated.
Robin Rane, an analyst at Kepler Cheuvreux, said the biggest contributor to the Q1 loss was the AML fine and Swedbank would have posted a gain without this record penalty.
The bank also revised its cost target for 2020 to around 21.5 billion crowns, up 1.5 billion from its previous view, with much of the increase down to fixing anti-money laundering controls.
Net interest income, which includes income from mortgages, rose to 6.69 billion crowns from 6.42 billion a year ago, as the bank drew gains from the Riksbank’s interest rate hike in December. This beat the Refinitiv estimate of 6.46 billion.
“The NII and fees were a lot stronger … Swedbank’s core business looked fairly strong,” Rane added.
Shares in Swedbank are down 24% since the start of 2020.
The bank said late on Wednesday it was putting the decision on whether to go ahead with the payment of its annual dividend on hold until the consequences of the global outbreak of the novel coronavirus became clearer.
($1 = 10.1004 Swedish crowns)
(Reporting by Colm Fulton, Johan Ahlander; Editing by Johan Ahlander, Raju Gopalakrishnan and Giles Elgood)