Swedbank has had it rough since the financial crisis began. Photo courtesy of Swedbank

STOCKHOLM — Troubled Swedish bank Swedbank announced an ambitious rights issue of 15 billion kroner (€1.46 billion) Monday in an attempt to liberate it from existing government guarantees and improve its ability to access capital at a competitive market rate. The latest rights issue of 15 billion kroner follows a similar exercise last year of 12.4 billion kroner (€1.2 billion). Competitor Nordea Bank also made similar moves earlier this year. “With this capital raising we will strengthen Swedbank’s competitive position in our four home markets Sweden, Estonia, Latvia and Lithuania,” Carl Eric Stalberg, Chairman of Swedbank said in a press release.

“The capital will also ensure the implementation of our strategy where we continue our focus on lowering the risk-level in the bank, improving the earnings capacity and managing our capital actively,” he said.

Swedbank says the move is designed to create flexibility for the bank to continue to support both its existing and new customers on competitive terms, regardless of how the markets develop. The rights offering also aims to reduce Swedbank’s reliance on their government’s guarantee and accelerate the bank’s return to independent long-term financing on fully competitive terms, the statement said.

The capital market’s view of a bank’s balance sheet and guarantors is critical to its ability to borrow on competitive terms and hence its ability to lend to it’s customers on attractive terms. According to a consultant familiar with the matter, as recently as July, Swedbank insisted that it did not need to raise additional capital, so the details of this rights issue will be analyzed carefully. Ultimately the market will decide whether this shows Swedbank still has serious capital problems or whether the bank is taking an opportunity to strengthen their strategic position and cut ties with its government.