Swedbank's 20% Slump Draws in Hoards of Swedish Retail Investors

(Bloomberg) -- Since allegations of money laundering were leveled against Swedbank AB last week, it’s lost a fifth of its value. Now, Sweden’s retail investors are flocking to the stock in the hope they’ll see a rebound.

Retail clients bought more shares in Swedbank than in any other company in February, according to online brokers Avanza AB and Nordnet AB. Avanza says its data points to a 50 percent jump in customers owning Swedbank in less than a week. At Nordnet, the increase was 40 percent in February.

But the question is whether that’s a risky strategy. For now, Swedish media reports point to almost $6 billion in suspicious transactions linking Swedbank to the $230 billion Estonian laundering scandal that’s engulfed Danske Bank A/S. The 20 percent that Swedbank has lost in market value since the allegations first surfaced are equivalent to more than $5 billion.

The brokers warn that investors diving into Swedbank now could be facing a turbulent future. Danske’s history may offer a road map of what to expect. Initial revelations pointed to a considerably smaller scandal until the bank’s own report showed the full scale of the scandal. Denmark’s biggest bank has since seen its share price plunge by almost 50 percent.

“The uncertainty is large, and we do not yet have the full picture of what has happened," said Frida Bratt, a savings adviser at Nordnet. “Until we know that and what the potential consequences may be in terms of fines and other things, I believe the pressure on the stock will remain.”

Swedbank traded about half a percent lower on Thursday after the market opened in Stockholm.

‘Risky Strategy’

Johanna Kull, a savings adviser at Avanza, said clients who are buying up Swedbank now are embarking on “a risky strategy.” She says the laundering allegations will act as a “wet blanket” on the shares for some time and “the risk in the stock has increased significantly.”

Sweden’s oldest bank found itself at the center of a new Nordic-Baltic money laundering scandal last week after broadcaster SVT reported allegations that it handled suspicious transactions worth about 40 billion kroner, or $5.8 billion based on average exchange rates over a nine-year period until 2015. The flows were linked to the Danske Estonia scandal, SVT said. Swedbank is now being investigated by the financial supervisory authorities of Sweden and Estonia.

Some are questioning the allegations. Joakim Bornold, a savings adviser at Soderberg & Partners, said the latest revelations by SVT, which linked Swedbank to former Ukraine President Viktor Yanukovych, were "very vague."

‘Catastrophic Communication’

He says the main concern is that the bank has done a bad job in being transparent. “This is primarily a catastrophic communication management from Swedbank, more than anything else,” Bornold said.

Meanwhile, many of Swedbank’s senior people have bought shares in the bank. They include board members Ulrika Francke, Bo Johansson and Anna Mossberg. Ola Laurin, head of large corporates and institutions, and Anders Ekedahl, head of group IT, have also bought shares in their bank since the SVT allegations were first published on Feb. 20.

Swedbank has hired Forensic Risk Alliance to look into the case and plans to publish the results of that investigation by March 28.

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