SWEDEN - The first and the second Swedish state pension funds, AP1 and AP2, alongside AMF Pension, have underwritten the SEK12.4bn (€1.23bn) rights issue of Swedbank, the biggest bank in the Baltics.

Together with Swedish insurers Folksam, ASA Insurance, SPK, Swedbank employee foundation, the savings bank foundations, a number of savings banks, AP1, AP2 and AMF own 42% of the bank's shares and have commited to vote in favour of the new issue at the extraordinary general meeting (EGM) on November 25.

AMF Pension held around 2% of Swedbank shares at the end of September while  AP2 held 1.27% of Swedbank shares at the end of last year and AP1 said over 4% of its SEK27.8bn Swedish equity portfolio was invested in Swedbank at the end of last year.

The bank today announced it wants to raise the extra capital in light of uncertainties and market concerns.

"Swedbank believes it is prudent to work with an additional buffer over its existing capital ratio targets," said the bank in a statement.

The capital increase will boost the bank's Tier 1 ratio from 8.7% to 10.5%.

Swedbank is the first Swedish bank to sell new shares and raise capital since the credit crisis.

The news follows Moody's Investors Service's downgrading of the bank financial strength rating (BFSR) to C+ from B- and its long-term senior debt and deposit ratings to Aa3 from Aa2 earlier this month.

Moody's said at the time its outlook on these ratings remained negative.

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