(1888PressRelease)
May 12, 2009 - Swedbank AB (SWED-A.SK), Nordea Bank AB (NDA.SK) and Skandinaviska Enskilda Banken AB (SEB-A.SK), which together represent more than 50% of total lending in the Baltic states, are in talks with the EIB about possible loans, EIB spokeswoman Helen Kavvadia told Dow Jones Newswires. She said that another Swedish bank has also initiated discussions, but declined to name it.
Swedbank has already applied for a EUR200 million loan that may be processed by July and signed this year, Kavvadia said.
Thomas Backteman, Swedbank's executive vice president for corporate affairs told Dow Jones Newswires the loan will help lower the bank's funding costs and thereby free up money for other purposes, such as lending.
"All things being equal, it means we will be able to borrow money from the EIB at a lower cost than if we were to borrow on the wholesale market," he said. The bank currently raises funds mainly through bonds issued under the Swedish government's state guarantee.
Spokespeople for Nordea and SEB said they had also initiated talks with the EIB a few days ago on top of ongoing discussions with the EBRD. The move marks the latest step by Nordic lenders to improve their balance sheets as foreign markets, such as Estonia, Latvia and Lithuania, nosedive into double-digit recession after years of high-flying, credit-fueled boom.
The loans are intended to reduce funding costs and help support financing to small and midsize enterprises, or SMEs, in Baltic countries that are struggling to secure credit after many lenders quit the region. The EBRD, the EIB and the World Bank have pledged EUR24.5 billion for the bank sector in Central and East Europe, or CEE, over the next two years to fund lending to businesses there and to support the economy.
Last Thursday the EBRD invested EUR432.4 million in the CEE's biggest bank, Italy's UniCredit SpA (UCG.MI), to bolster lending to SMEs through eight of the bank's regional subsidiaries. SEB may be looking for a similar deal by obtaining senior funding at varying maturities, said the bank's head of treasury Anders Kvist. The cash won't be earmarked for specific SMEs but rather provide an additional funding source for the parent group to tap into, Kvist said.
A loan from the EBRD would be "a part of our continuing efforts to secure our financing, and something that all of our Baltic customers in general would benefit from, rather than a specific category," Kvist said. Hashing Out The Details Meanwhile, Nordea spokeswoman Helena Ostman said the bank has expanded talks with the EIB to include "Nordic projects" aimed at bolstering the group's lending to Nordic SMEs, some of which have been strapped for cash as international lenders have withdrawn from the region in the wake of the financial crisis.
The banks, the EIB and the EBRD are hashing out the details, including what the funds can be used for and under what terms. Broadly, new loans will be long-term with maturities ranging from five to 15 years and will be used to finance trade and working capital as well as fixed-asset costs, Kavvadia said. To be eligible, banks will need a diversified SME portfolio.
"We want the support to the financial sector to go directly into the real economy," Kavvadia said. Swedbank, the Baltic region's biggest lender, may also consider selling part of its Ukrainian unit, TAS-Kommerzbank, to the EBRD to raise funds under the program, Backteman said. The deal, he said, could resemble its sale of a 15% stake in its Russian subsidiary, OAO Hansabank, for $15 million in 2005. "Ukraine is definitely a market where we would consider collaborating with the EBRD," Backteman said.
While money raised from the stake may not directly boost Swedbank's lending in the region, the positive impact on its balance sheet could make it easier and cheaper for the bank to raise liquidity from other sources. Backteman added that Swedbank would also consider sharing ownership of other subsidiaries with the EBRD, including those in the Baltic states.
The EBRD, which invests in the CEE area on behalf of 61 countries and two intergovernmental institutions, is in talks with "the 12 or so most important banking groups in the region," its spokesman Anthony Williams told Dow Jones Newswires.
Williams declined to comment on Swedbank specifically but said the EBRD is "prepared to take stakes, make equity type investments and provide loans."
The EBRD, EIB and World Bank initiative - which comes in the form of equity and debt financing, credit lines and political risk insurance - was launched because of concerns that a lack of new lending in the CEE would jeopardize the region's economic recovery chances. Unless local businesses can obtain fresh loans, more people risk wage cuts and job losses that will eat into spending and hurt the partly consumption-driven economies, economists have said.
"The real danger now is that there could be no borrowing and the economies can seize up completely," Williams said. Now more funds are on their way in coming weeks as talks have intensified due to the region's economic backlash this year.
"We are clearly on track toward investing our EUR3 billion dedicated to the financial sector this year," Williams said.
http://www.swedbank.com
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