Swedbank upgraded to ’AA-’ by S&P on solid performance

Investing.com -- S&P Global Ratings has upgraded Swedbank AB and its core subsidiary Swedbank Mortgage AB to ’AA-/A-1+’ from ’A+/A-1’ with a stable outlook.

The upgrade reflects S&P’s view that residual risks from legacy financial crime investigations are decreasing. Over the past six years, Swedbank has significantly improved its governance, risk management, and control framework following findings by Swedish and Estonian authorities between 2019-2020.

The SEC closed its investigation in early September without enforcement action, though investigations by the U.S. Department of Justice and New York Department of Financial Services remain ongoing. S&P believes Swedbank could manage any potential financial impact from these investigations.

S&P highlighted Swedbank’s strong earnings capacity and capitalization as mitigating factors against potential financial impacts. The bank is expected to generate risk-adjusted returns of 2.6% relative to S&P’s risk-weighted assets in 2026-2027, compared to 1.4% for European peer banks.

As of year-end 2024, Swedbank’s risk-adjusted capital ratio stood at 16.6%, with S&P projecting it will remain at 14.0%-15.0% through 2027. The bank is forecast to achieve earnings of SEK 28 billion-SEK30 billion with a return on equity of 14.0%-15.5%.

S&P has restored Swedbank’s stand-alone credit profile to ’a+’, placing its creditworthiness among the highest of commercial banks globally, comparable to Nordea Bank Abp, Svenska Handelsbanken AB, and DNB Bank ASA.

The rating agency expects Sweden’s economic recovery to accelerate with GDP growth of 2.5% in 2026 and 2.2% in 2027, while Baltic countries are anticipated to see economic growth above 2% during the same period.

Swedbank’s strong market position as the leading retail and SME corporate bank in Sweden and the Baltic countries, combined with prudent underwriting standards, is expected to maintain nonperforming loan ratios of about 0.5%-0.6% and a stable cost of risk of 5-10 basis points through 2027.

The stable outlook reflects S&P’s expectation that Swedbank will maintain sound asset quality amid economic recovery in its home markets while sustaining effective risk management, governance, and compliance structures over the next two years.

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