Swedbank AB

The outlook is stable because we anticipate that Swedbank will deliver resilient earnings and maintain a solid level of capital, with a RAC ratio of 14.25%-14.75%, over the next 18-24 months. The outlook also reflects our view that a one-notch downward revision of the stand-alone credit profile to 'a-' is unlikely to affect the ratings. This is due to Swedbank's high ALAC buffer and the additional notch of ALAC uplift that would be available in this scenario. Although unlikely at this stage, we could downgrade the bank if the ongoing money-laundering investigations still pending in Europe and the U.S. were to reveal material existing weaknesses in the risk management and governance framework and/or meaningfully harm the bank's financial strength, franchise,

...S&P Global Ratings expects Swedbank will maintain its leading retail market position in Sweden. We believe Swedbank will continue to hold about 20% of the retail market and 24% of lending to small and midsize enterprises (SMEs) in Sweden. We expect interest rates will support net interest income in 2023, although the operating climate may lead to softer noninterest income. We currently forecast net profits of about Swedish krona (SEK) 27 billion-SEK28 billion (2.3 billion-2.4 billion) and a cost-to-income ratio near 40%. We expect asset quality to deteriorate only slightly over the next 12-24 months. We forecast nonperforming assets will increase to 0.6%-0.8%, as a share of lending, from 0.4% as of Q3 2023. This is due to small and midsize enterprises, in addition to larger corporates, having to grapple with sluggish growth prospects and a higher cost of funding. We think...

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