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A full review on swedbank CEO Jan Lidén’s Plan

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 27, 2008

The Board of Swedbank has resolved to raise in total SEK 12.4 billion through a new issue of preference shares with preferential subscription rights for existing shareholders. The new issue is subject to approval at an Extraordinary General Meeting (the “EGM) expected to be held on 25 November 2008.

The capital increase will enhance Swedbank´s Tier 1 ratio from 8.7% to 10.5% and core Tier 1 ratio from 7.4% to 9.2%. While Swedbank is currently in a sound financial position, capital markets continue to experience significant volatility reflecting greater uncertainty in the broader economy and Swedbank believes it is prudent to strengthen its capital position.

The new issue is underwritten 100% by a group of existing shareholders including Folksam, the savings bank foundations, over 60 savings banks, AMF Pension, AFA Insurance and the Swedish national pension funds, AP1 and AP2. These shareholders, together representing 42% of all outstanding shares in Swedbank, have committed to vote in favour of the new issue at the EGM.

The rights issue is being made on the basis of one new preference share for every two existing ordinary shares at a subscription price of SEK 48 per share, which is 19% lower than the last closing price of the ordinary shares on 24 October 2008 on OMX Nordic Exchange Stockholm.

Each preference share will have an annual preferential non-cumulative dividend of SEK 4.80 per share (note 3) (10% of the subscription price) and will automatically be converted into ordinary shares in 2013, or earlier at the request of the holder in February and August each year, the first time in August 2009.

The new issue will increase the total number of shares outstanding by 257,686,706 to 773,060,118, consisting of 515,373,412 ordinary shares and 257,686,706 preference shares.

“The market environment has changed dramatically over the last few months. All banks are affected by the turbulence in the global financial markets and the worsening macroeconomic situation, leading to a re-evaluation of capital requirements. It is important to stress that Swedbank is a profitable bank with sound capitalisation, however, we believe it is in the best interest of all stakeholders to take proactive and decisive action in this volatile and uncertain market environment., says Carl Eric Stålberg, Chair of the Board.

“This transaction will result in our capitalisation comparing favourably to other large European banks and puts us in a strong position. In addition, the strong support from our major shareholders represents an important vote of confidence in the bank., concludes Carl Eric Stålberg. A press conference (in Swedish) will be held today at 9:30 a.m. CET at Swedbank´s headquarters in Stockholm, Brunkebergstorg 8. The press conference can also be accessed via the web. Representatives from Folksam, the savings bank foundations and individual savings banks will be attending.

A conference call for analysts (in English) will be held today at 3:00 p.m. CET, please dial in at no +46 (0)8 5052 0114 or +44 (0)207 1620 177. An audio recording of the conference call will be available for one week following the event. Re-dial number +44 (0)20 7031 4064 or +46 (0)8 5052 0333, access code 815074.

Mr Jan Lidén, President and CEO, will present and comment on the new share issue and the Q3 results at an open analyst meeting at 8:00 a.m. GMT in London today. The presentation will be held at Andaz Hotel (previously Great Eastern), 40 Liverpool Street, London EC2M 7QN. The presentation is expected to end by 9:00 a.m. Other Lenner & Partners is acting as financial advisor, and Gernandt & Danielsson and Clifford Chance are acting as legal advisors to Swedbank in connection with the capital increase. Swedbank Markets, J.P. Morgan and Merrill Lynch are acting as Joint Lead Managers and Joint Bookrunners for the new issue.

For further information, please contact:
Carl Eric Stålberg, Chair of the Board, +46 8 5859 1296
Mikael Inglander, CFO, +46 8 5859 1314
Thomas Backteman, Head of Communications and IR, +46 8 5859 3509
Johannes Rudbeck, IR manager, +46 8 5859 3322

Background and rationale for rights issue

The development in the global financial markets has been extreme over the last couple of months. The entire banking system and infrastructure have been distressed to the point where governments around the world, including in Sweden, have been forced to introduce measures to stabilise and reinforce the market´s confidence in the financial system.

As a result of the disruption in financial markets, the current macroeconomic outlook has become increasingly uncertain and a more pronounced downturn cannot be ruled out. Investors´ and other stakeholders´ benchmarks for appropriate bank capital requirements have also increased considerably.

In light of these uncertainties and market concerns, and despite Swedbank´s sound financial position, Swedbank believes it is prudent to work with an additional buffer over its existing capital ratio targets. The Board of Swedbank has therefore decided to increase its Tier 1 capital by raising
SEK 12.4 billion in new equity capital before deduction for issue related expenses. However, the existing target of a Basel 2 Tier 1 ratio of around 8.5-9.0% remains the medium term target. The capital increase is expected to improve Swedbank´s competitive position and enables the group to act from a stronger position.

The capital increase will on a pro forma basis enhance Swedbank´s Tier 1 ratio from 8.7% to 10.5%, core Tier 1 ratio from 7.4% to 9.2% and capital adequacy ratio from 12.5% to 14.3% as of 30 September 2008 and based on full implementation of Basel 2 rules. Based on Basel 2 transition principles, the capital increase will pro forma enhance Swedbank´s Tier 1 ratio from 6.8% to 8.2%, core Tier 1 ratio from 5.8% to 7.2% and capital adequacy ratio from 9.9% to 11.3% as of 30 September 2008.

The Board of Swedbank has resolved on a new issue of preference shares with preferential rights for existing shareholders, which will raise proceeds of SEK 12.4 billion before deduction for issue related expenses. The Board´s resolution on the new issue is subject to approval and amendment to the articles of association at an EGM expected to be held on 25 November 2008.

The new issue is underwritten 100% by a group of existing shareholders consisting of Folksam, the savings bank foundations, over 60 savings banks, AMF Pension, AFA Insurance, SPK, Swedbank employee foundation, and the Swedish national pension funds, AP1 and AP2. This shareholder group represents 42% of all outstanding shares in Swedbank and has committed to vote in favour of the new issue at the EGM.

Existing shareholders in Swedbank have preferential rights to subscribe for the new preference shares. The rights issue is being made on the basis of one (1) new preference share for every two (2) existing ordinary shares at a subscription price of SEK 48 per share, which is 19% lower than the last closing price of the ordinary shares on 24 October 2008 on OMX Nordic Exchange Stockholm. In total, 257,686,706 preference shares will be issued.

The preference shares will have a right to an annual dividend of SEK 4.80 per share, 10% of the subscription price, unless a higher dividend is decided for the ordinary shares, in which case such higher dividend will be equally paid for all shares (except in 2009, when the preference shares will have a right to a fixed dividend of SEK 2.40 per share)(note 4). The preference shares carry right to dividend (such right not being cumulative) before any dividends are paid on ordinary shares. The holder can convert the entire holding of preference shares into ordinary shares upon request in February and August each year, the first time in August 2009. The preference shares will automatically be converted into ordinary shares shortly after the Annual General Meeting in 2013.
The preference shares will have the same voting rights as the ordinary shares. In contrast to preference shares in some other jurisdictions, the issue proceeds from the preference shares qualify as core Tier 1 capital under Swedish regulations.

The notice of the EGM is expected to be published on 28 October 2008, with the EGM expected to be held on 25 November 2008. The Board´s resolution and other information relating to the new issue of preference shares will be made available on Swedbank´s website, www.swedbank.com, not later than two weeks prior to the EGM.

Jan Lidén

President and CEO.
2003-2004     Manager, Stockholm Region, Acting President and CEO of FSB
1999-2003     Head of Swedbank Markets, Deputy President, FSB
1995-1999     President, Spintab, Vice President FSB
1992-1995     President, Sparbanken Finans
1990-1992     Divisional Manager, Corporate, Vice President Industri Finans

Directorships

* Group Excecutive Management, Chair
* Swedish Banking Management, Chair

Other Directorships

* FöreningsSparbankens Gemensamma Pensionsstiftelse I och II, Member
* Hansabank Group Council, Chair
* Swedbank Hypotek AB/Mortgage AB, Chair
* The Swedish Bankers’ Association, Chair
* Swedbank Finans AB, Chair
* Visa EU, Chair
* Visa International, Member

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