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 NEW YORK, Dec. 14 /PRNewswire/ -- Nordbanken's recently announced acquisition of the Gota Bank Group will strengthen its position in the Swedish banking market and enhance privatization prospects. Following a recent review of both banks, Fitch concludes that the integration of Gota will not impair short-term credit quality or compromise Nordbanken's recovery. Despite substantial loan quality problems, strong state support and recent actions to shore up Gota's balance sheet should shield Nordbanken. Pressures to privatize Nordbanken should accelerate integration of Gota, which is also state-owned.
 The merger offers further opportunities for Nordbanken to strengthen its position within the small business and middle market. Gota has a dominant position in numerous communities north of Goteborg and important corporate relationships in southern Sweden. Nordbanken's branch coverage will nearly double with little overlap. Another benefit is the addition of private banking operations that have been largely unaffected by the Swedish recession.
 Due to recent restructuring, Nordbanken will acquire a profitable bank with limited loan quality problems. Before the acquisition is implemented, Gota Bank is expected to receive a Swedish kronor (SKr) 3.1 billion capital injection and all problem loans valued over SKr 5 million will be placed into a new subsidiary, Retriva. Fitch estimates that Gota's problem loans will fall to 4% of total loans after Jan. 1, 1994 from nearly 36% at Sept. 30. Future loan quality problems should be limited as Gota recently reviewed the entire loan portfolio under a rigorous credit scoring system. Excluding Retriva, Gota reported operating income after credit losses of SKr 1.2 billion in 1993's first nine months.
 Initially, Gota will remain a separate subsidiary before ultimately being merged into Nordbanken. However, Nordbanken will assume all Gota's funding and debt obligations in the near future. As all of Gota's liabilities are guaranteed on an interim basis by the Swedish State, the assumption of Gota Bank's liabilities will have no adverse effect on Nordbanken's funding. Fitch expects the enlarged bank to maintain a total BIS ratio in excess of 9%. The combined bank will have loans of SKr 255 billion (US$30 billion).
 The most critical challenges for Nordbanken before privatization will be the ability to forge a sound credit culture and limit future credit losses. While problem loans have been transferred to a separate subsidiary, new credit losses on small business loans continued to be identified in 1993 at Nordbanken. Another challenge will be the ability to realize full potential from its association with the Swedish post office. Nordbanken pays the postal system SKr 1.3 billion each year to use its post office sites to provide basic banking services. The timing for privatization will depend on progress in these areas.
 Finally, future earnings capacity within the entire bi?ng system is expected to improve with further reductions in credit losses. However, earnings pressures will remain through 1994 as competition for retail deposits intensifies and banks scramble to rebuild earning assets in the national market. Longer-term performance, including the timing for privatization, will depend on the economic outlook in 1994. In 1993's third-quarter, Sweden's gross domestic product rose a seasonally adjusted 2.0% from the second quarter but fell 0.4% from a year earlier. While strong exports have helped the Swedish economy emerge from a deep recession, domestic economic activity remains sluggish due to uncertainty over public finances.
 -0- 12/14/93
 /CONTACT: Ricardo Kleinbaum, 212-908-0525, or Marc Pinto, 212-908-0618, both of Fitch/

CO: Nordbanken; Gota Bank Group ST: IN: FIN SU: RTG

MP -- NY051 -- 3643 12/14/93 12:12 EST
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Publication:PR Newswire
Date:Dec 14, 1993

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