Summary: Swedbank AB

Retail banking market leader in Sweden, with a large customer base and wide distribution network. Strong risk-adjusted capital (RAC) levels, reflecting the low risk profile of domestic operations. Strong earnings capacity. More concentrated exposure to its domestic market and residential segment than peers. Greater reliance on wholesale funding than international peers. The stable outlook on Swedbank reflects our view that the bank will maintain resilient earnings and capital as Sweden's economy benefits from improvements in Europe's economic environment and the domestic housing market adjusts to higher volumes and stricter amortization requirements. We also anticipate that Swedbank will build considerable additional loss-absorbing capacity (ALAC) buffers in the coming years as it fulfills its minimum eligible liabilities (MREL) requirements, likely by replacing

...Outlook: Stable The stable outlook on Swedbank reflects our view that the bank will maintain resilient earnings and capital as Sweden's economy benefits from improvements in Europe's economic environment and the domestic housing market adjusts to higher volumes and stricter amortization requirements. We also anticipate that Swedbank will build considerable additional loss-absorbing capacity (ALAC) buffers in the coming years as it fulfills its minimum eligible liabilities (MREL) requirements, likely by replacing a large share of senior unsecured debt with senior subordinated debt instruments by the end of 2021. As such, our projected RAC ratio before diversification will remain between 12% and 13% in the next 18-24 months. Additionally, we expect a quick increase of Swedbank's ALAC buffers from 2019, which we anticipate will already exceed 5% of our risk-weighted assets (RWAs) figure by the end of that year. We could lower our ratings on Swedbank if excessive payouts or exposure growth...

Summary