LONDON - Sweden joined the ranks of countries with troubled banking industries on Monday as two lenders took steps to shore themselves up amid the global economic downturn.
Swedbank said it was raising $1.5 billion in a rights issue to help disentangle itself from the economic problems of the Baltics, while Carnegie, the securities firm, received a short-term loan from the central bank. More banks could follow suit because of high exposure to the Baltic nations of Latvia, Lithuania and Estonia.
Swedbank said Monday that it would be raising 12.4 billion kronor ($1.5 billion) in a rights issue underwritten by investors, to take away the uncertainty over its capital position. The bank is issuing one preference share for two common shares at 48.00 kronor ($5.92) each, a 19.3% discount to its closing share price on Friday. The move boosts the closely watched measure of the bank's capital, its core Tier-1 ratio, to 9.2% from 7.4%.
Shares of Swedbank (other-otc: SWDBY - news - people ) dove 12.6% , or 7.25 kronor (91 cents), to 52.25 kronor ($6.54) in Stockholm, while rival Skandinaviska Enskilda Banken (other-otc: SVKEF - news - people ), also known as SEB Bank, fell 12.0%, or 7.50 kronor (77 cents), to 55.75 kronor ($7.22).
Separately, Sweden's central Riksbank said Monday that it would be providing short-term financing of 1.0 billion kronor ($123.2 million) to Carnegie, pending a government guarantee program. The central bank's governor, Stefan Ingves, said the step was being taken to reduce the risk of "a serious disruption" to the financial system.
The problems currently plaguing the Swedish banking sector highlight how the financial crisis has spread well beyond banks that invested in now toxic, American mortgage-backed securities. (See "Sweden Takes Action.")
Swedish banks had little exposure to these securities but have, like the rest of the world banking system, been plagued by funding problems as trust between banks has evaporated, freezing up interbank lending. Swedish banks have also been leading lenders in the troubled Baltic region. The economies of these countries have come under strain as previously booming house prices have dropped, and the countries have struggled to raise funds internationally, paying the price for their large current account deficits. In August, Estonia became the first Baltic country to fall into recession. (See "A Baltic Bust.")
Eric Stalberg, the Swedbank chairman, said that the capitla increase should not be interpreted as a sign that the bank was in for further large loan losses from the Baltic region. "There is no big dark hole that we need to cover up, this is a prudent move." he said.
The Associated Press contributed to this report