Swedbank AB, the largest bank in the Baltic region, fell to the lowest level in more than three years in Stockholm trading after Goldman Sachs Group Inc. cut its rating on the company to "neutral'' from "buy.''
Swedbank declined 2.5 kronor, or 1.7 percent, to 146.75 kronor by 9:34 a.m. local time, after earlier declining as much as 2.2 percent to the lowest price since September 2004. The stock has dropped 20 percent so far this year.
Goldman estimates that Swedbank's earnings from Estonia, Latvia and Lithuania will decline by 30 percent next year and in 2010 because of higher loan losses and lower commission and lending growth, London-based analysts including Aaron Ibbotson wrote in a note to clients today. The broker also removed the bank, based in Stockholm, from its "Pan-Europe Buy List.''
"A recent spate of negative macro-data out of the three Baltic countries on GDP growth and inflation suggest that they are heading for a hard landing already in 2008,'' Goldman said.
Economic growth in Estonia fell to 0.4 percent in the first quarter, its lowest level in 8 1/2 years. Swedbank generates a third of its earnings in the Baltics. Estonia, Latvia and Lithuania, the European Union's fastest-growing economies in 2006, face a possible recession after a surge in growth stoked inflation, prompting banks including Swedbank to cut lending.
Swedbank may have its credit ratings revised at Standard & Poor's should slowing economic growth in the Baltics worsen the banks' credit quality, S&P analyst Miguel Pintado said in an interview on May 15. Swedbank is the most likely Nordic bank to have its ratings revised because it has more operations in Estonia and Latvia and seeks "fast growth,'' Pintado said.