Swedbank SWOT and PESTLE Analysis

Strength

1. Leading financial services group in the Nordic-Baltic region: Swedbank is the leading bank for many households and businesses in their four major markets of Sweden, Estonia, Latvia and Lithuania. They cater to over seven million private customers and 550,000 corporate customers in these regions. As of 2019, the bank has 168 branches in Sweden and 99 in the Baltic countries. It also holds a significant market share in these countries under the areas of private and corporate lending and deposits, payments and funds. For private lending, the bank holds market share of 24% in Sweden, 44% in Estonia, 33% in Latvia and 38% in Lithuania. In the payments segment, the bank holds a market share of 36% in Sweden, 58% in Estonia, 51% in Latvia and 50% in Lithuania. To further strengthen the bank’s financial position, the Board of Directors has adopted a new dividend policy where 50% of the profit will be distributed to the shareholders. The bank also has solid capitalization which makes it capable to withstand any stressed scenario and remain competitive.

2. Maintaining low risks in operation: The Swedbank group maintains a strong capital surplus a robust margin to the minimum common equity Tier 1 capital ratio requirement as per the Swedish Financial Supervisory Authority. Swedbank has maintained credit impairments below 0.1% of total lending for more than five years in a row indicating low risk in lending activities. This is important for building trust with the clients as well as long-term survival. It also allows the group to finance their operations through deposits from the public and funding from the capital market in order to lend money to the households and corporates at competitive prices. The group has also revised its dividend policy from 75% to 50% to prep itself for any unforeseen future events. Also, the group’s Common Equity Tier 1 capital ratio was 17% (2019) compared with the required 15.1%.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Financial Services companies acknowledging climate change dangers: Climate change is impacting financial institutions and the financial system. It greatly influences the types of activities that a financial institution may or may not fund. For instance, the increasing frequency of natural calamities like droughts, floods etc. is putting companies on a spot making it difficult for them to assess insurable risks and is also driving up insurance premiums. Banks are facing risks to fund the activities that contribute to climate change. Through its operations, Swedbank can have both a direct and indirect impact, i.e. directly through its operations – mostly travel and heating of premises – and indirectly through customers, their businesses and their choice of products and services. Swedbank has also collaborated with Alight, Infranode and Tekniska to build Sweden’s largest solar park. Swedbank has committed to buy all the electricity produced by the park as part of an effort to reduce its climate impact. Swedbank has pledged to set climate goals in line with the Science-Based Targets Initiative. Swedbank’s focus has been to identify where emission reductions have to be made in its mortgage business and commercial real estate lending to ensure that the bank’s climate targets for these holdings are aligned with the Paris Agreement. For its operations, Swedbank has set targets to reduce resource consumption and promote a stable climate and energy transformation. The aim of Swedbank’s climate-related targets is to further reduce the bank’s direct emissions. Since 2003, Swedbank’s environmental management system is certified according to ISO 14001, where compliance is reviewed annually through internal and external audits.

2. Active engagement in sustainable finance: Positive impact finance, where loans are evaluated based on their contribution to one or more areas of sustainable development, is a product area that Swedbank offers its customers and that promotes more sustainable financing. Swedbank also works actively to scenario test its loan and investment portfolios according to the TCFD’s recommendations based on climate-related risks and opportunities. Since 2017, Swedbank has issued green bonds and based on this, the business can target and support financing for sectors that are in transition to a sustainable society. Swedbank Debt Capital Markets also provides advice on the green, social and sustainability bonds. This benefits both issuers that are looking for green financing, e.g. companies and municipalities, as well as investors who are seeking out sustainable investments e.g. insurance companies and pension managers. In May 2019, the bank began offering low-interest consumer and business loans for the installation of solar panels, which is positive for the sustainability of their finances and society’s energy transformation. In October 2020, the bank launched a new fund, Transition Energy, with focus on solar wind and energy transition. This fund will primarily focus on business around the globe that will contribute to a future renewable energy system.