Sweden’s light-touch Covid-19 approach spared economy, says SEB chief

Sweden’s light-touch response to coronavirus has helped its economy and limited loan losses for the banking sector, the head of one of the country’s largest lenders has said.

Johan Torgeby, chief executive of SEB, told the Financial Times that it had been positive that shops, banks and schools for younger children had remained open throughout the crisis.

“Everything else being equal, it helps the credit quality of Swedish corporates,” Mr Torgeby said. “We have clearly seen in consumption and in forward-looking indicators that it is looking to be a less severe downturn [than in other European countries],” he added.

Sweden’s economy is forecast to fare substantially better than most countries that imposed lockdowns, but many economists estimate it will do no better than neighbouring Denmark and Norway, both of which imposed more restrictions in an effort to contain the virus.

SEB, controlled by the investment vehicle of the Wallenberg family of industrialists, is one of four large lenders that dominate the Swedish economy and that have been much prized by European investors in the past decade until a series of money laundering scandals hit.

Mr Torgeby said Covid-19 continued to affect Sweden and SEB but that a “less severe recession” was now forecast for the country of 10m people. 

He said the lack of a formal lockdown in Sweden had particularly helped domestic companies but that industrial groups reliant on export markets were affected just like their international competitors.

However, Sweden’s approach has proved controversial, with the country’s death toll far higher than its Scandinavian neighbours. Amid rising criticism, Stefan Lofven, the country’s centre-left prime minister, last month launched a commission to investigate the handling of the crisis.

The SEB chief executive on Wednesday warned about the “worry for a second wave” of coronavirus even as the first stabilises in Europe.

“We have no clue what the real economy will look like. The second wave, there could be murkier waters coming our way,” he added, pointing to renewed restrictions in the US in recent weeks as cases in many states climb.

His comments came as SEB reported better than expected second-quarter results with operating profit falling 25 per cent from a year earlier to SKr4.6bn ($509m) and a return on equity of 11.2 per cent.

Its profits were hurt by a SKr1bn fine from Swedish regulators for weak anti-money laundering controls. 

SEB had considered appealing against the fine, as Mr Torgeby said it did not agree with the regulators’ conclusions or the “proportionality” of the fine, but had decided against it.

“It’s never fun to be criticised. In this case, we’re also happy that they’ve concluded that it’s not of a serious nature,” he said, an implicit comparison to harsher regulatory criticism of Swedbank and Danske Bank over money laundering problems in the Baltics.

Mr Torgeby said the second quarter was marked by “very active” trading and lending. “The trickiest area,” he added, was credit losses where SEB set aside SKr2.7bn and estimated losses of about SKr6bn for 2020, lower than analysts’ estimates but a significant increase from last year.

SEB’s assessment came as local rival Handelsbanken made its lowest credit provisions for several years in the second quarter, with losses of SKr97m, far better than the SKr1bn feared by analysts.