The funding market situation has improved, Sweden's fourth largest bank said as it exits the state aid program with immediate effect.

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Sweden's fourth-biggest bank Swedbank, which has been badly exposed to the troubled Baltic economies and Ukraine, has decided to leave the state guarantee program with immediate effect, the bank said Friday.

This is yet another sign of strength. Last month its chief executive officer Michael Wolf said he expects the bank to make a profit this year as credit losses decline -- after posting a 9.46 billion kronor ($1.3 billion) operating loss last year.

The decision to exit the state aid scheme was made on the back of improved financial market situation but “above all due to the fact that the bank has not used the state guarantee program for its funding since July 2009”.

“The fact that the bank can fund itself on its own is a result of the support from the shareholders through the two rights issues, our ongoing efforts to reduce the credit and liquidity risk levels as well as a consequence of the market beginning to normalise," said Michael Wolf.

In autumn the bank raised around 15 billion kronor ($2.1 billion) by issuing shares in a rights issue. It was the bank's second rights issue in less than a year following the 12.4 billion kronor the bank raised in December 2008.

Swedbank has since July 2009 borrowed 200 billion kronor ($28 million) in long-term funding outside of the state guarantee program.

Still, the bank will have outstanding loans previously issued under the guarantee until July 2014.

Swedbank posted a fourth-quarter operating loss of 1.67 billion kronor ($224.3 million) compared with a 2.4 billion kronor profit a year ago.