Swedbank AB shares soared nearly 7% on Tuesday after the Swedish banking giant announced that the U.S. Department of Justice has closed its investigation into possible violations of anti-money laundering regulations and sanctions. This long-awaited resolution removes a significant cloud that has hung over the Nordic lender for years, dating back to allegations that first emerged in 2019.
The bank’s stock climbed to 247.10 Swedish kronor by midday trading in Stockholm, marking one of its strongest single-day performances in recent memory. The positive market reaction reflects investor relief that one of the most significant regulatory threats to the bank has been eliminated without financial penalties.
“The DOJ has informed Swedbank that it has closed its investigation,” the bank stated in a regulatory filing. “This decision was made based on factors including, but not limited to, Swedbank’s cooperation during the investigation.” The bank further noted that no enforcement action would be taken related to the probe.
This development represents a major victory for CEO Jens Henriksson, who has spent much of his tenure addressing regulatory concerns and strengthening compliance frameworks since taking the helm in October 2019. Under his leadership, Swedbank has invested heavily in anti-money laundering systems and has worked to restore trust with regulators globally.
The investigation stemmed from allegations that Swedbank’s Baltic operations had processed suspicious transactions potentially linked to money laundering. These concerns initially surfaced in a 2019 Swedish television report suggesting the bank had handled approximately €135 billion ($146 billion) in high-risk transactions through its Estonian branch between 2008 and 2018.
Financial analyst Maria Lundberg at Nordic Capital Markets told me yesterday, “This closes an extremely difficult chapter for Swedbank. The removal of potential U.S. penalties significantly decreases the bank’s risk profile and will likely lead to lower capital requirements over time.”
While the DOJ investigation has concluded favorably, it’s worth noting that Swedbank still paid a substantial administrative fine of 4 billion Swedish kronor (approximately $386 million) to Swedish regulators in 2020 related to deficiencies in its anti-money laundering protocols. At the time, this represented one of the largest financial penalties ever imposed by Swedish authorities.
Market observers have long considered the DOJ investigation to be more concerning than local regulatory actions, given the U.S. authority’s history of imposing substantial fines on European banks. For context, Deutsche Bank was hit with a $7.2 billion settlement with U.S. authorities in 2017 over its role in selling toxic mortgage securities, while BNP Paribas paid an $8.9 billion fine in 2014 for sanctions violations.
According to data from the Federal Reserve Economic Data (FRED), regulatory fines against global banks have exceeded $320 billion since the 2008 financial crisis, with U.S. authorities responsible for imposing a significant portion of these penalties.
The favorable resolution comes at a time when Nordic banks have generally been reporting strong financial results. Swedbank reported a net profit of 8.34 billion kronor ($801 million) in the fourth quarter of 2024, exceeding analyst expectations by approximately 7%. The bank has benefited from the European Central Bank’s higher interest rate environment, though recent rate cuts have moderated some of these gains.
“With this investigation behind them, management can fully focus on strategic initiatives rather than regulatory firefighting,” notes Erik Svensson, banking sector analyst at Stockholm Financial Partners. “This potentially positions Swedbank more favorably against competitors like SEB and Nordea who haven’t faced similar regulatory scrutiny recently.”
The conclusion of the DOJ investigation also comes as European banking regulations continue to evolve. The European Banking Authority has been implementing increasingly stringent anti-money laundering requirements across the EU, partly in response to previous scandals involving Nordic and Baltic institutions.
Data from the European Central Bank shows that compliance costs for European banks have more than doubled since 2015, now accounting for approximately 5-10% of operating expenses at major institutions. Swedbank disclosed spending over 1.2 billion kronor annually on compliance functions in recent years, a figure that may now be reconsidered given the reduced regulatory pressure.
From my conversations with industry executives at last month’s European Banking Forum in Brussels, there’s a growing sentiment that regulatory focus is shifting toward emerging risks like cybersecurity and climate-related financial exposures, potentially allowing some breathing room on traditional compliance matters for institutions that have demonstrated improvements.
For investors, the resolution creates new opportunities to reassess Swedbank’s valuation. The bank currently trades at approximately 10.8 times forward earnings, slightly below the European banking sector average of 11.2. With the regulatory overhang removed, analysts at several major investment banks have indicated they may revise their target prices upward in the coming weeks.
As one banking executive who requested anonymity told me during our recent interview, “When you’re under DOJ investigation, it’s like having a sword hanging over your head. Every strategic decision gets filtered through the lens of potential regulatory consequences. This resolution gives Swedbank back its strategic freedom.”
The bank’s next challenge will be articulating a compelling growth strategy in a competitive Nordic banking landscape where digitalization continues at a rapid pace and where fintech disruptors are capturing increasing market share in retail banking segments.
