Swedbank Chairman Is Next in Firing Line After CEO Is Ousted

(Bloomberg) -- If the market is any gauge, Swedbank AB’s dismissal of Chief Executive Officer Birgitte Bonnesen wasn’t enough.

A turbulent week for Sweden’s biggest mortgage lender came to a head on Thursday with Bonnesen’s firing and a shareholder meeting in which the board was put on the defensive. That followed growing allegations of money laundering, a police raid of Swedbank’s headquarters and news that the U.S. was also investigating the bank.

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Trading in Swedbank’s shares was suspended before the annual general meeting in Stockholm, to give investors time to digest Bonnesen’s firing. When the suspension was lifted, the stock tanked, bringing losses since the scandal first erupted last month to about a third of its market value, or roughly $8.5 billion.

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The dismissal of Bonnesen was generally welcomed. Her continued presence became untenable after the 62-year-old appeared to deliberately mislead the public about the scale of the laundering scandal. What’s more, between 2011 and 2014, Bonnesen had been in charge of the Baltic operations at the center of the dirty money saga.

Spot the U-Turn

But less than a week ago, Bonnesen still had the full confidence of the board and its chairman, Lars Idermark. Now, the board’s handling of the case is coming under scrutiny by investors.

Alecta and AMF, two pensions providers that are among Swedbank’s biggest shareholders, say that in the near future it may be necessary to hold an extraordinary general meeting with a view to installing a new board.

In a tweet, Hermitage Capital co-founder Bill Browder also questioned the legitimacy of letting the current board continue.

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Nordnet, an online broker that provides savings advice to Swedish households, says a fresh start is needed at the board level. The Swedish Shareholders’ Association has also made clear it wants all or parts of the board replaced.

This week showed how quickly the mood can change. The market only learned a few hours before the AGM started on Thursday that Alecta, Folksam and AMF, which together control about 16 percent of Swedbank’s shares, no longer had confidence in Bonnesen.

A Contrite Chairman

Idermark, the chairman, apologized to the shareholders and journalists gathered on Thursday, and promised more transparency in future. But at the first test, he seemed to stumble.

After the AGM, Idermark held a press conference. In the 15 minutes he spent answering reporters’ queries, he avoided giving a clear response to one key question. That related to a report by a lawyer allegedly hired by Swedbank to investigate its money-laundering procedures. That report, which was leaked to Swedish media this week, alleges that up to $23 billion in potentially suspicious flows went through Swedbank’s non-resident unit in Estonia, every year between 2010 and 2016.

The question now is whether Swedbank’s board knew about the report. Idermark’s answers left some doubts. He said he hadn’t processed it. When asked why not, he said “because I and the board didn’t really know about the report.” Asked why he still hadn’t looked at the report, after it was leaked to Swedish media, Idermark declined to comment. “That’s not what it’s about,” he said. Shortly after that, the press briefing was brought to an abrupt end.

Folksam, which owns about 7 percent of Swedbank, says its main focus now isn’t on a new board, but on getting the results of the criminal investigation, as well as the financial watchdogs’ probes. AMF, which controls just under 5 percent of Swedbank, wants to look into “strengthening” the board “in the spring.”

While Idermark was re-elected on Thursday, with the backing of Swedbank’s biggest owners, some of the smaller shareholders voted against him. They also demanded, albeit unsuccessfully, that he not be freed of liability for 2018.

Meanwhile, both Bonnesen and the Swedbank board risk being targeted by lawsuits, according to Torsten Sandstrom, a professor emeritus at the department of law at Sweden’s Lund University. He told business daily Dagens Industri that Swedish law allows legal action if the board is found to have provided misleading information, even if shareholders have previously voted to discharge it of liability.

“I think we have only seen the beginning," Sandstrom said. "A claims process is most likely.”

Swedbank’s laundering case is allegedly tied to the $230 billion Danske Bank A/S Estonian scandal. In the case of Danske, its chairman was pushed out by the biggest shareholder roughly a month after the bank got rid of its CEO, Thomas Borgen. Since then, the bank’s share price seems to have stabilized somewhat, after plunging 47 percent in 2018.

Meanwhile, the pension funds that hold large chunks of Swedbank shares have themselves been criticized in Swedish media for not doing more in the past to elect boards that prevent scandals. That raises the stakes for them. On Thursday, they all voted not to free Bonnesen of liability for 2018, meaning she may face legal action. The question is, what’s next?

To contact the reporters on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net;Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.net;Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net

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