Banks, EU – Baltic States, Financial Services, Loan

The Riksbank said it had adjusted downward its estimate for Swedish banks' loan losses compared to its assessment in June but that losses in the Baltic region – where Sweden's banks are heavily invested – were expected to increase because of continued weak performance in those countries.

The Riksbank predicted losses of Sek 125 billion in the five quarters – from the fourth quarter of 2009 through the fourth quarter of 2010, and Sek 155 billion over the full three years from 2009-2010.

In the June report, the central bank had foreseen losses of Sek 170 billion in the period 2009-2010.

"This downward revision is partly because economic prospects have improved in relation to the previous report, and partly because loan losses in the first three quarters of this year have been lower than expected," the report said.

"It is primarily in Sweden that loan losses are assessed to be lower. In the Baltic countries, on the other hand, loan losses are expected to increase slightly more than in the assessment in June as a result of the continuing very weak development of the economies," the experts note.

The central bank said it expected total loan losses to be SEK 60 billion in 2009, SEK 65 billion in 2010 and SEK 30 billion in 2011.

"Slightly less than 50 percent of the loan losses stem from the banks' operations in the Baltic countries and approximately a third stem from operations in Sweden and the other Nordic countries," the report said.

That's an upward revision from the June report, where the central bank said it saw 40% of loan losses stemming from the Baltics.

The central bank predicted Sek 13.5 billion of losses from Estonia, Sek 31.2 billion from Latvia and Sek 29.2 billion from Lithuania.