UPDATE 1-Nordic banks can weather turmoil, system stable
(Adds FSA, c.banker comment, bank shares)
STOCKHOLM, Sept 18 (Reuters) - Financial sector turmoil is a cause for extra vigilance, but major Nordic banks are well-prepared to weather the storm, senior bankers and Sweden's financial watchdog said on Thursday.
Nordic banking stocks have tumbled alongside those of their peers across the globe as major financial institutions such as Fannie Mae (FNM.N), Freddie Mac (FRE.N) and Lehman Brothers LEH.N have succumbed to the credit market crunch and the cost of writing down or writing off bad loans.
A number of small Danish banks have been forced to seek partners and one has been taken over by the central bank, but the region's major firms have so far survived the crunch.
Sweden's Financial Supervisory Authority said it believed the country's major banks -- which also operate across the region -- were in a solid position.
"Swedish banks are well-equipped to meet this crisis," the FSA's chief economist, Tomas Floden, told journalists after a meeting of the Swedish parliament's finance committee.
He said the banks had strong finances and capital buffers to deal with the current uncertainty in markets.
The First Deputy Governor of Sweden's Riksbank, Irma Rosenberg, said Sweden's financial system was stable and that the interbank funding market continued to function. But she said the central bank was watching developments in the financial system closely and stood ready to act if the necessity arose.
Nordea (NDA.ST), Handelsbanken (SHBa.ST) and Swedbank (SWEDa.ST) echoed the reassuring comments of regulators.
"The financial crisis unfortunately is spreading both psychologically and in the shape of higher costs for loans. However, I still think we are well-prepared," Swedbank Chief Executive Jan Liden told daily Svenska Dagbladet.
Nordea (NDA.ST) CEO Christian Clausen said the region's biggest bank had avoided exposure to subprime debt and the balance sheet strains that have toppled international firms.
Handelsbanken CEO Par Boman said his bank had the lowest funding costs and strong income streams.
Earlier on Thursday, Deutsche Bank raised Handelsbanken to "Hold" from "Sell" and lifted its price target on the bank. However, it cut its price targets for shares in Nordea, SEB and Swedbank, along with Denmark's Danske Bank (DANSKE.CO) and Norway's DnB NOR (DNBNOR.OL) [nWNAS1542].
SWEDBANK
The Nordic banking index .TBNKF is down 38 percent this year versus a 40 percent fall in the European index .SX7P.
Hardest-hit has been Swedbank, partly due to worries over the potential for large loan losses related to its Baltic operations and partly because of its exposure to Lehman Brothers, which has filed for bankruptcy protection.
Liden told Svenska Dagbladet he was frustrated over the recent slide in Swedbank shares.
"We simply have a different opinion than some investors. We have a good view of our own liquidity. I know a lot more about Swedbank than many others."
The FSA's Floden said the watchdog believed Swedbank "can comfortably meet the uncertainty prevalent at the moment".
Swedbank shares are off nearly 50 percent this year.
With the financial market turmoil spurring a trend toward financial sector consolidation, Nordea's Clausen added that he expected to see deals in the Nordics as well as the broader European market in the longer term.
"We might of course consider being part of such a process if the right opportunity presents itself, even if our main focus is on organic growth," he told Svenska Dagbladet.
Swedbank's Liden told the paper current valuations were too low and the mistrust in the market too great to allow for deals in the sector at the moment. (Editing by Louise Ireland/Simon Jessop)
