Sweden‘s fourth-biggest bank Swedbank, which is badly exposed to the troubled Baltic economies and Ukraine, reported Thursday an unexpectedly heavy loss in the first quarter.

While analysts had anticipated a profit in the January to March period, Swedbank posted a net loss of 3.3 billion kronor (300 million euros, 394 million dollars), owing mostly to its loans in eastern Europe.

“Swedbank today faces one of the biggest challenges in the bank’s history. The global economic downturn has worsened as the financial crisis increasingly affects the real term economy,” the bank’s chief executive Michael Wolf said in a statement.

“In several of the markets in which Swedbank operates, the downturn is substantial,” he said.

Impairment losses on loans totalled 6.8 billion kronor in the first quarter, including 4.2 billion in the Baltics and 1.4 billion in Ukraine. Analysts had expected the figure to come in around 2.7 billion.

Swedbank also said it planned to continue to develop financial restructuring and recovery units for its “bad banks”, where it will place it toxic assets but which is empty for the timebeing.

Swedbank’s share price was down around 6.5 percent in afternoon trading on the Stockholm stock exchange, in an overall market down by around 1.5 percent.

With rival Swedish bank SEB, which is scheduled to present its earning report on Friday, Swedbank is the Swedish bank most affected by the crisis in Eastern Europe. Its loans in Estonia, Lithuania and Latvia represent some 17 percent of its total portfolio.

After years of booming growth, Ukraine and the Baltic countries are the countries in Europe hardest hit by the economic crisis, with recessions of around 10 percent expected this year.

International credit rating agency Moody’s in March said the Swedish banking sector, especially SEB and Swedbank, were basically solid but badly exposed to the troubled Baltic economies.