Sweden’s SEB Falls Most in a Decade Amid Money Laundering Report

(Bloomberg) -- The prospect that another big Nordic bank will be dragged into the widening scandal over money laundering in the Baltics rattled investors Friday.

Shares of Sweden’s SEB AB plunged the most since the peak of the financial crisis after the bank said it was contacted by SVT, the nation’s public broadcaster, on plans to include it in a program about dirty money. The disclosure lopped as much as 15% from SEB’s market value and hit its bonds.

SEB, like Swedbank AB, has broad operations in the Baltic region, and SVT has been at the forefront of allegations that Swedbank’s operations there were linked to the Danske Bank A/S money-laundering scandal that involved hundreds of billions of dollars in suspicious transactions originating mainly in Russia. Swedbank is under investigation in Sweden, Estonia, Latvia and the U.S., and in March fired its chief executive following the SVT reports. Estonia expelled Danske Bank earlier this year. SEB has not been implicated in the scandal.

In its statement Friday, Stockholm-based SEB said it had received questions from reporters at SVT’s Uppdrag Granskning program. The bank said it had no further knowledge of the program’s content.

“In order to be transparent, SEB chooses to disclose this information to the market,” it said. In a statement on Nov. 7, Swedbank said it too was contacted by SVT for a program that would air Nov. 20.

What Bloomberg Intelligence Says:

SEB has been dragged into the long-running scandal over Baltic dirty money, with Sveriges Television set to air allegations of violations against the bank. While it’s impossible at this stage to assess the accuracy of those claims, the experience of Danske Bank (share price down 60% since its 2018 peak) and Swedbank (down 35%) will spook investors. SEB has a sizable presence in Baltic markets, deriving 10% of revenue from the region.
-- Philip Richards, BI banking analyst

Read More: Swedbank Made $104 Million Via Questionable Non-Resident Clients

“SEB is being pulled deeper into the Baltic money-laundering swamp,” Joakim Bornold, a savings adviser at Soderberg & Partners in Stockholm, said in an emailed comment. “The share price fall, however, feels like an overreaction. The price drop should probably not be regarded as concern about the new information but rather about uncertainty regarding the magnitude of it.”

SEB’s $900 million CoCo bond, issued less than three weeks ago, fell about 1.5 cents to around 98 cents on the news. While it’s too early to draw conclusions from the SVT news, “there could be more volatility ahead for SEB’s bondholders,” said Vaclav Vacikar, a credit analyst at Rabobank. CoCos are the riskiest form of bank debt.

The bank said it will “take action immediately” if new information warrants it.

“For a long time, SEB has worked hard to ensure that it has adequate routines and processes to prevent money laundering,” the bank said. “However, just like any other bank, SEB cannot guarantee that it has not been used, nor that SEB will not be used” for illicit activity.

SEB Chief Executive Officer Johan Torgeby has said repeatedly that the bank found no indications that it has “systematically” been used for money laundering.

--With assistance from Leo Laikola.

To contact the reporters on this story: Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.net;Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Paul Sillitoe

©2019 Bloomberg L.P.