Update: 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%-14% over the next 18-24 months while the economic environment gradually recovers. We also anticipate that Swedbank will continue to build additional loss-absorbing capacity (ALAC) as it fulfils its minimum requirements for own funds and eligible liabilities requirements. This is likely to be via replacing a large share of senior unsecured debt with senior subordinated debt before the revised 2024 deadline. As such, we believe Swedbank's ALAC buffer will continue to exceed 5% of our RWA metric by 2021, allowing us to maintain the notch of uplift for ALAC

...S&P Global Ratings expects Swedbank to 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. We believe Swedbank will continue to hold about 20% of the retail market and 24% with small and midsize enterprises. Domestic offerings will still dominate revenue at approximately 80% versus 20% generated in the Baltics, reflecting the bank's narrower geographic focus relative to peers. In addition to offering lending services, Swedbank generates fee income from asset management, payment processing, and card transactions. These provide some revenue diversification compared with peers (see chart 1), supporting our forecast of annual revenue of Swedish krona (SEK) 45 billion-SEK46 billion (about $5.4 billion-$5.5 billion) over the next two years....

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