Banks ponder collapse of Lehman

  • 2008-09-18
  • By Abdul Turay

TALLINN - Swedbank, the region's largest bank, has revealed a 1.3 billion-dollar (921.4 million-euro) exposure to Lehman Brothers, the U.S. investment bank that filed for bankruptcy on Sept. 15.
SEB's  total credit exposure was much smaller at  64 million euros.
Analysts say that that the collapse of Lehman is unlikely to lead to any major bank failures in the region.
"It is definitely not good news, [but] it will just be an indirect effect. They will have to slow down lending. It will be tougher for Baltic companies," Mattias Wallander, chief of investment at the investment bank Evli, told The Baltic Times.

Wallander added that the small size of the region's banks prevented the level of exposure to the real estate market that the bigger global banks have faced.
"Local banks never really got into the real estate bubble [and] now that the bubble is over they are glad that they weren't overexposed. But during the boom years they were probably frustrated," Wallander said.
Following Lehman's request for bankruptcy protection, Swedbank decided to communicate its exposure to the global financial services firm.

Swedbank and Lehman have been commercial partners since the early '90s, dealing bank-to-bank in custody, finance and derivatives trading.
Swedbank's unsecured exposure currently amounts to 30 million dollars.
In a press release the company said that it was too early to say if eventual provisions or write-offs will be necessary, or to what extent. Swedbank has a secured exposure of 1.35 billion dollars in real estate. The collateral has initially been evaluated by an independent firm and valuations are continuously being altered based on the ongoing development of real estate prices.

The company said it does not consider any provisions necessary and will not act to liquidate any holdings prematurely. Swedbank admitted that collateral might fall below the 1.3 billion dollar mark only if real estate in the United States fell by 30 percent of its current value.

Name Change
In unrelated news, Swedbank began rebranding its Hansabank subsidiary as Swedbank on Sept. 15 the same day at Lehman's collapse.
"The change of name into Swedbank is a proof that we are here on a long term basis. The core of the Swedbank brand is service leadership, and the main aim is to provide the best service on the markets where we are present," said Jan Liden, president and CEO of Swedbank.

The first step is changing the names of the 30 branches, among them the main offices in Riga, Tallinn and Vilnius. The bank will legally change its name in spring 2009 and the process of rebranding will be finished during autumn 2009.
By the end of next year the Swedbank Group will operate under one brand in all markets. The rebrand will cost 2.9 million euros.