Research Update: Outlook On Swedbank Revised To Positive As Governance Deficiencies Largely Addressed; 'A+/A-1' Ratings Affirmed

During the past several years, Swedbank's management has reconstructed its risk management framework to improve governance and strengthen its anti-money laundering (AML) functions. While the results of certain U.S. authorities' investigations remain outstanding, we expect the financial impact of a potential fine to be manageable given Swedbank's robust earnings and capitalization profile, while the findings of the investigations are unlikely to have lasting repercussions on Swedbank's reputation. We expect Swedbank to demonstrate sustained profitability with return on equity at about 13%-15% in 2024-2026 owing to its leading retail franchise and high operating efficiency, but risks arising from the current operating environment may affect its earnings stability. We revised our outlook on Swedbank AB to positive from stable and affirmed our

...- During the past several years, Swedbank's management has reconstructed its risk management framework to improve governance and strengthen its anti-money laundering (AML) functions. - While the results of certain U.S. authorities' investigations remain outstanding, we expect the financial impact of a potential fine to be manageable given Swedbank's robust earnings and capitalization profile, while the findings of the investigations are unlikely to have lasting repercussions on Swedbank's reputation. - We expect Swedbank to demonstrate sustained profitability with return on equity at about 13%-15% in 2024-2026 owing to its leading retail franchise and high operating efficiency, but risks arising from the current operating environment may affect its earnings stability. - We revised our outlook on Swedbank AB to positive from stable and affirmed our 'A+/A-1' long- and short-term issuer credit ratings on Swedbank and its core subsidiary Swedbank Mortgage AB. - The positive outlook reflects...

Research Update