Moody’s Investors Service has downgraded Swedish bank Handelsbanken credit rating outlook from stable to negative. This decision is based on the ongoing real estate troubles faced by the country.
The ratings agency highlighted that the Swedish real estate market has experienced one of the world’s most severe property downturns in recent years. Consequently, banks such as Handelsbanken, with significant exposure to this sector, face increased risks.
Moody’s anticipates continued weakness in the Swedish real estate market in the upcoming months. This could result in further loan losses for Handelsbanken. The agency also mentioned that the bank’s profitability may be negatively affected by higher funding costs and weaker capital markets conditions.
Handelsbanken, with assets exceeding $200 billion, holds the position of Sweden’s largest bank. Despite its strong track record, the bank has encountered growing challenges, including the effects of the Swedish real estate downturn.
Moody’s negative rating outlook serves as an indication that the bank’s creditworthiness is under pressure. In the future, if the Swedish real estate market fails to improve, Handelsbanken’s credit rating could be downgraded.
Rising interest rates and a slowdown in economic growth have severely impacted the Swedish real estate market. Since its peak in 2017, residential property values in Sweden have fallen by approximately 20%. This decline has led to an increase in loan defaults, compelling some banks to allocate more funds to cover potential losses.
The Swedish government has implemented measures in an attempt to stabilize the real estate market. However, it remains uncertain whether these actions will be sufficient. Moody’s negative rating outlook implies that the Swedish real estate crisis could significantly affect the banking sector of the country.
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