Swedbank AB

The outlook is stable because we believe that Swedbank will be able to deal with a short-term economic shock and maintain resilient earnings and solid capital, with the RAC ratio at 13.5%-14.5% over the next 18-24 months, while the economic environment gradually recovers. Swedbank's current outstanding bail-inable liabilities lead to an ALAC (additional loss-absorbing capacity) that exceeds our 3% threshold. We also believe that Swedbank's ALAC buffer will continue to exceed 3% of our RWA metric over the medium term to ensure it fulfills its MREL (minimum requirements for own fund and eligible liabilities), and as a result we factor in one notch of uplift for ALAC support in our long-term rating. We could lower our rating if the worsening

...We expect Swedbank will maintain its leading retail market position in its home country, Sweden. Sweden's retail lending landscape has become increasingly competitive because of strong mortgage market growth. However, we believe Swedbank will continue to hold about 21%-22% of the retail market and 23%-24% of lending to small and midsize enterprises (SMEs). We also consider the bank to be committed to the Baltic region, which represented around 20% of operating revenues as of end-year 2021. As a result, Swedbank's offering is expected to lead to annual revenue of Swedish krona (SEK) 47 billion-SEK 49 billion (about 4.5 billion-4.7 billion) over the coming two years. Asset quality and earnings are anticipated to remain robust. For the full-year 2021, Swedbank reported a cost of risk of 1 basis point and a return on equity of 13.2%, as conditions remained relatively benign compared to 2020, which also saw higher than average provisioning feeding into a management overlay that is still in place...

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