Swedish banks set for short-term hit but government measures will ensure recovery, says GlobalData

The Swedish Governments’ comprehensive financial packages should ensure its banking sector is relatively insulated from the level of damage felt in other countries, says GlobalData.

GlobalData’s expects residential mortgage lending to collapse in Sweden over the next few months. It forecasts negative growth of -1.8% in 2020, compared to 5.2% growth in pre-COVID-19 forecasts. However, it is expected to recover swiftly and post growth of 6.1% in 2021, higher than in the original forecasts. GlobalData expects mortgage lending growth in the country to be higher in its post-COVID-19 forecasts that the original ones in all three years from 2021-2023.

GlobalData’s retail banking analyst, Resham Karira, commented: “Limited liquidity and social distancing measures will make viewing properties properly a challenge in Sweden. The measures taken by the Swedish Government to reduce the risks associated with household debt have increased households’ resilience. Good resilience indicates that there is limited risk that mortgages will cause extensive credit losses for banks. Therefore, we expect mortgage balances growth to bounce back in 2021 and beyond.”

GlobalData expects declining consumer confidence will see a short-term drop in demand for loans and taking on any debt in Sweden, while the safer retail deposits, will rise.

Karia continues: “The relatively stable deposit holdings of Swedes is expected to grow faster than previously forecasted, as investors prioritize wealth conservation in light of the volatile securities markets. However the increase is expected to be more modest post 2021 due to the extremely low interest rates on offer in the Swedish Banking systems.”

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