Financial Stability Report June 2009. Increased loan losses are the greatest risk Swedish banks can...

Financial Stability Report

June 2009

Increased loan losses are the greatest risk

Swedish banks can cope with increased loan losses and are well-capitalised in an international comparison

Measures taken by the authorities are still an important condition for ensuring that the Swedish financial system is stable

There is great uncertainty and the external risks have increased

Financial Stability Report 2009:1

Results before loan losses and loan losses, net, in the major

Swedish banks Totalled over four quarters, SEK billion, fixed prices, 31

March 2009

Chart 3:13 Sources: The banks’ reports and the Riksbank

-20

0

20

40

60

80

100

The Riksbank’s main scenario Loan losses during the years 2009-2010

Based on publicly-available statistics at sector level in the banks

The real economic developments stated are the Riksbank’s forecasts and consensus

All industries and countries are affected, but credit quality is affected to different extents

Results before loan losses and loan losses, net, in the major Swedish banksTotalled over four quarters, SEK billion, fixed prices, 31 March 2009

Chart 3:13 Sources: The banks’ reports and the Riksbank

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0

20

40

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80

100

120

Increased loan losses

Breakdown of loan losses per region

in the Riksbank’s main scenarioPer cent

Sources: The banks’ reportsChart 3:14

Sweden27%

Nordic countries excl Sweden

27%

Baltic countries32%

Other Eastern Europe

6%

Other8%

Assessment of stability Increased loan losses…

…but good resilience

The banks can withstand higher losses than in the main scenario

Measures are an important condition for financial stability

External risks have increased

Developments in the financial markets

The effects of a poorer development in the real economy

Developments in the Baltic countries

Note. In Sweden refers to the difference between 3-month Stibor and T/N swap (STINA)

Chart 1.2 Source: Bloomberg


Basis spread

0

50

100

150

200

250

300

350

400

jan-07 jul-07 jan-08 jul-08 jan-09 jul-09

0

50

100

150

200

250

300

350

400

USA Euroområdet Storbritannien Sverige

The effects of a poorer development in the economy Recessions reinforced by and in

conjunction with financial crises can become more protracted and the recovery can be both weaker and more long drawn out

In such a scenario there is a risk that credit granting and loan losses will be affected

Swedish banks in the Baltic countries March 2009

The Baltic countries’ share of the banks’ lending and results before tax

Lending

SEB 12%

Swedbank16%

Nordea 3%

Operating profit, last four quarters (previous report)SEB Neg (20%)

Swedbank 1% (27%)

Nordea 2% (2%)

Market shares of lending in per cent and number of inhabitants per

country

Source: The banks’ reports and the Riksbank

No. inhabitants 1.3 million.

No. inhabitants 2.3 million

No. inhabitants 3.4 million.

45

26 24

24

14

30

13

13

10

18

47

36

0%

20%

40%

60%

80%

100%

Estland Lettland Litauen

Swedbank SEB Nordea Övriga

GDP in the Baltic countriesAnnual percentage change

-20

-15

-10

-5

0

5

10

15

mar-99 mar-00 mar-01 mar-02 mar-03 mar-04 mar-05 mar-06 mar-07 mar-08 mar-09


Source: Reuters EcoWin Chart 2:44

Unemployment in the Baltic countries

Per cent

0

4

8

12

16

20

jan-00 jan-01 jan-02 jan-03 jan-04 jan-05 jan-06 jan-07 jan-08 jan-09 jan-10


Source: EurostatChart 2:48

Late payments in Estonia and Latvia

Per cent of outstanding lending

0

1

2

3

4

5

6

7

8

de

c-0

0

de

c-0

1

de

c-0

2

de

c-0

3

de

c-0

4

de

c-0

5

de

c-0

6

de

c-0

7

de

c-0

8

de

c-0

9

Estland (mer än 60 dagar) Lettland (mer än 90 dagar)

Sources: Eesti Pank and the Financial and Capital Market CommissionChart 2:55

Stress test To assess how less probable negative

events might affect the banks’ resilience

A much worse development than in the main scenario in the years 2009-2010

Based on publicly-available information The banks are passive and take no

measures

The stress test shows… The banks can cope with a much more

negative development than in the main scenario

The loan losses for the four major banks would amount to just over SEK 300 billion for those two years

All of the banks would manage to meet the statutory Tier 1 capital ratio of 4 per cent

The banks’ Tier 1 capital ratios in the stress test

Per cent

Source: The RiksbankChart 3:22

0

2

4

6

8

10

12

14

SEB Swedbank Nordea Handelsbanken

2008-12-31 (faktisk) 2009-12-31 (stresstest) 2010-12-31 (stresstest)

Article Global recession and financial stability

Illustrates a number of financial crises and the interplay between loan losses and real economic developments

The importance of measures for both loan losses and the length of time taken before the countries recovered from the crisis

Assessment of stability Increased loan losses…

…but good resilience

The banks can withstand higher losses than in the main scenario

Measures are an important condition for financial stability

The central banks’ balance sheets

Index, January 2000=100

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100

150

200

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300

350

400

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0

50

100

150

200

250

300

350

400

Riksbanken ECB Federal Reserve00 01 02 050403 09080706

Sources: Reuters Ecowin and BloombergChart 1:1

Exposures to eastern Europe as a share of the home country’s GDP

2008Per cent

0

10

20

30

40

50

60

70

Österrike Belgien Sverige Grekland Holland Schweiz Italien Tyskland Frankrike

Source: The BIS and the IMFChart B5

Households’ liabilities and interest expenditure after tax

Per cent of disposable income

0

40

80

120

160

200

83 87 91 95 99 03 07 11

0

4

8

12

16

20

Skuldkvot (vänster skala) Räntekvot (höger skala)

Sources: Statistics Sweden and the RiksbankChart 2:8

Households below the margin, impaired loans and potential loan

losses Per cent

0

1

2

3

4

5

6

7

8

2004 2005 2006 2007 2008(prognos)

2009(prognos)

2010(prognos)

Hushåll under marginal Osäkra krediter Potentiella kreditförluster

Sources: Statistics Sweden and the RiksbankChart 2:9

Percentage of liabilities, financial assets and real assets held by

indebted households in different income groups

Per cent

0

10

20

30

40

50

60

Inkomstgrupp 1 Inkomstgrupp 2 Inkomstgrupp 3 Inkomstgrupp 4 Inkomstgrupp 5

Andel totala skulder Andel finansiella tillgångar Andel reala tillgångar

Chart 2:10 Sources: Statistics Sweden and the Riksbank

Breakdown of loan losses in 2009 and 2010 in the Riksbank’s main

scenarioPer cent

Nordea 37%

Swedbank 26%

Handelsbanken 15%

SEB22%

Sources: The banks’ reports and the RiksbankChart 3:15

Real wages in the Baltic countries

Annual percentage change

Sources: Reuters EcoWin and the RiksbankChart 2:49

-5

0

5

10

15

20

25

dec-

00

dec-

01

dec-

02

dec-

03

dec-

04

dec-

05

dec-

06

dec-

07

dec-

08


Households’ borrowing in the Baltic countries

Percentage change from the previous month, calculated on an annual rate

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0

20

40

60

80

100

jan-07 jul-07 jan-08 jul-08 jan-09


Sources: NCBs, Reuters EcoWin and the RiksbankChart 2:52

Corporate borrowing in the Baltic countries

Percentage change from the previous month, calculated on an annual rate

-20

0

20

40

60

80

jan-07 jul-07 jan-08 jul-08 jan-09


Sources: NCBs, Reuters EcoWin and the RiksbankChart 2:53

GDP growth during a number of crises

Annual percentage change

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-5

0

5

10

15

20

-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Argentina 2001-02 Uruguay 2002 Sverige 1991-93

Finland 1990-93 Japan 1991-2001

4 kvartal innan krisen

Source: Reuters EcoWinChart 3

Percentage of problem loans and GDP falls internationally during a selection of earlier crises.Per cent

0

5

10

15

20

25

30

35

40

45

-15 -10 -5 0 5 10

Sämsta uppmätta BNP-utfallet

Hö

gst

a a

nd

ele

n p

rob

lem

kre

dite

r

Argentina

Finland

IndonesienJapanSydkorea

Malaysia

Filippinerna

Sverige

Thailand

Uruguay

Source: Laeven, Luc and Valencia (2008),”Systemic Banking Crises: A New Database” IMF Working PaperChart 5

Financial Stability Report June 2009. Increased loan losses are the greatest risk Swedish banks can...

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