It reduced SEB’s long-term debt and deposit ratings by two notches, from Aa2 to A1, and downgraded its bank financial strength rating to C- from B-, Moody’s Investors Service said.
The move “reflects Moody’s expectation of significantly higher loan provisions for SEB’s Baltic states-related lending portfolio due to the rapidly deteriorating credit conditions in those countries,” the statement said.
“In addition, the worsened macroeconomic outlook in SEB’s other operating markets – Sweden, Germany and the other Nordic countries – will likely result in a greater need for loan loss provisions.”
The SEB share price was down by 1.95 percent at 30.20 kronor in late afternoon trading on the Stockholm stock exchange, in an overall market down by 0.40 percent.
After years of record growth, Estonia, Latvia and Lithuania are currently experiencing the deepest recession of the European Union’s member states.
Estonia’s economy is expected to contract by 8.5 percent this year, Lithuania’s by 10.5 percent, and Latvia’s by 12 percent.
Swedish banks, led by SEB and Swedbank, took advantage of the deregulation of the financial markets in the neighbouring Baltic states in the 1990s and invested aggressively, quickly gaining significant market shares.
For example, by 2008 Swedbank accounted for 49 percent of private lending in Estonia, while SEB held a 30.1-percent market share in Lithuania.
In early March, Moody’s warned Sweden’s banks were badly exposed to the troubled Baltic economies but said they were basically solid.