Sweden’s third largest bank SEB swung to a second-quarter net loss after having written off all of its remaining acquisition goodwill in Eastern Europe and the Baltics.

Related news: • Swedbank posts heavy credit losses • Baltic exposure hits Norway's largest bank • Sweden's SEB seeks state guarantee after profits drop • City analysts: Swedish stocks headed for slump

Skandinaviska Enskilda Banken, Sweden's third-biggest bank in terms of market capitalisation, failed to remaine in the black after massive Baltic write-offs, the bank said Monday.

During the second-quarter the bank swung to a net loss of 193 million (€17.5 million, $24.8 million) from a profit of 2.81 billion kronor a year earlier.

The banks operating profit dropped to 618 million kronor, against 3.5 billion kronor for the same period a year earlier. The figures were far below analysts expectations -- a survey by Reuters had forcast a profit of 2 billion kronor.

The bank's credit losses increased to 3,567 million kronor, which was more than the markets outlook. The Baltic countries accounted for 2,642 million kronor of the credit losses, covering provisions for possible future non-payment of borrowers' debts. SEB has now no goodwill values left in Eastern Europe, the bank said.

“It’s not surprising that the bank made a loss considering the goodwill write-offs. However, goodwill is non-cash items that investors doesn't pay much attention to", said Henrik Schmidt, London based analyst at Keefe, Bruyette & Woods, to The Swedish Wire, adding that SEB has a solid capital ratio, good earnings and stands strong despite the murky times.

The SEB stock share fell on the Stockholm stock exchange on Monday, after a 15 percent increase last week.

“We were expecting the report to be fairly good. Both commission and trading income were better than expected although the expectations were high. But net interest and loan losses were below consensus”, Henrik Schmidt said.

Despite the gloomy report, SEB's chief executive officer Annika Falkengren said that times are getting brighter, the market “is gradually stabilizing” and that sentiment has “turned a bit less pessimistic” during the second quarter.

“The first green shoots for a recovery in the worlds economy were noted and the conditions in the financial market improved somewhat”, she said in the statement, although adding that the bank is "not out of the woods yet".

"The quarters ahead will be challenging not just for SEB but for the markets and economies in which we operate".

Operating income increased by 27 per cent to 13,174 million kronor, compared with the second quarter last year.

Last Friday Sweden's fourth-biggest bank Swedbank posted a bigger than expected loss, hurt by huge credit losses in the recession-hit Baltic region, and will cut around 3,600 staff to adjust to the tougher economic conditions. The credit losses amounted to 6,672 million kronor, resulting in a operating loss of 1.8 billion kronor, compared to a profit at 4.6 billion kronor the second quarter last year.

Norway's largest bank DnB NOR said its second-quarter net profit fell by 63 percent to 1.2 billion kroner (131 million euros, 182 million dollars), on a 12-month basis as turmoil in the Baltic economies wiped off millions in value from some of its assets

 

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