Why is Swedbank doing a second rights issue?

Today, Swedbank, a Swedish bank with huge Baltic loan loss exposure, surprised investors with a second rights issue in less than a year.  In going to investors for more money, the company said its doing so in a fully underwritten deal demonstrated “a position of strength.” “This is a forward-looking rights issue” to deal with “downside risk.”

Huh? I just reported on their dismal earnings two weeks ago (“Earnings results at Swedish banks show large writedowns in Baltics”). They had the worst results of the big four Swedish banks. It’s obvious to everyone that Swedbank needs the money; why else would they ask for it?  Didn’t they just promise not to ask for more capital in June?

The only strength I see is in timing i.e. they are getting money from investors while the getting is good and bank stocks are still a relatively hot commodity – shrewd manoeuvre but hardly a sign of strength.

Watch the CNBC video and judge for yourself.

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Swedbank Plans Second Rights Offer to Bolster Funds – Bloomberg

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.