Systemic Insolvency: Sweden's Biggest Pension Fund Loses Billions On Busted US Banks

Yesterday's (50%) collapse in First Republic Bank shares was - in a word - 'surprising' given all the positive 'rescue' chatter and upbeat overall market sentiment post-CS 'rescue'. US Regional banks broadly speaking were having a good day, but FRC was clubbed like a baby seal despite headlines proclaiming no lessor mortal than Jamie Dimon himself was on the case to rescue the community bank.

Well, we may now know why the selling pressure was so strong as Bloomberg reports that Alecta, Swedens largest pension fund, has lost billions in the recent bank busts and started to abandon its large position in FRC last week.

“The uncertainty about First Republic’s future was too great, partly due to the fact that the lender was downgraded to junk status,” Billing said in emailed comments, after Bloomberg News obtained a copy of a written response by Alecta to the Swedish Financial Supervisory Authority.

Alecta said its total invested capital in First Republic stood at 9.7 billion kronor “before a sale on March 15.”

The Swedish fund had been buying First Republic shares since 2019, making it the bank’s fifth biggest shareholder.

The fund is reportedly facing losses of almost $2 billion as a result of a failed investment strategy that made it one of the biggest shareholders in two collapsed US banks and another that’s been caught up in the crisis (expected losses of 8.9 billion kronor and 3.2 billion kronor in Silicon Valley Bank and Signature Bank, respectively).

The scale of the losses has become clearer after the private pension group sold all of its First Republic Bank stake at a loss of 7.5 billion kronor ($728 million), according to Chief Executive Officer Magnus Billing.

“Obviously it’s a big failure for us as an investor,” Billing said last week.