RPT-Fitch: No rating impact on Swedbank from acquisition of Sparbanken Oresund

Fri Feb 14, 2014 8:02am EST

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Feb 14 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings says that Swedbank AB's (A+/Stable/F1) acquisition of Sparbanken Oresund and a 22% stake in Sparbanken Skane is not material to its ratings. The latter will be created from the merger of Fars & Frosta, Sparbanken 1826 and some branch operations of Sparbanken Oresund.

The transaction strengthens Swedbank's franchise in southern Sweden. At the same time it also rationalises the region's savings banks' branch operations, with clear geographical coverage. As part of the transaction, Swedbank will sell eight branches of Sparbanken Oresund to Sparbanken Skane, which will become the largest savings bank in Sweden.

The transactions reflect a move by smaller banks towards consolidation due to rising pressure on their cost base, and hence overall profitability, from further technological and regulatory requirements.

The financial effect on Swedbank is limited. Swedbank will pay SEK3bn for Sparbanken Oresund, a price close to book value, while receiving SEK1.8bn for the sale of the latter's eight branches. The operations acquired represent a small 2% of risk-weighted assets.

The transactions reduce Swedbank's risk-weighted capital ratios by around 60bp, primarily driven by the addition of risk-weighted assets, to an estimated still strong fully loaded Basel III Common Equity Tier 1 ratio of 17.7% at end-2013. Sparbanken Oresund's risk-weighted assets are currently calculated using the standardised approach, meaning that once integrated into Swedbank's credit risk modeling and internal-ratings based approaches, the final effect is expected to be smaller.

Transaction and integration risks for Swedbank are easily manageable, in Fitch's view. Sparbanken Oresund is expected to be fully integrated into Swedbank within the next three years, generating some cost and revenue synergies. The deals are subject to the approvals of the Swedish banking and competition authorities, as well as the foundation that currently owns Sparbanken Oresund, and are expected to be completed in 2Q14.

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