Some of the Swedish bank stocks fell hard during the credit crisis due to their large exposures to the former Soviet states in the Baltic region. However in the past few months these banks have rebounded nicely.

Sweden’s fourth largest bank Swedbank (OTC: SWDBY) is also the biggest bank in Estonia, Latvia and Lithuania. In the domestic market Swedbank’s shares have risen six fold since the March 2009 lows according to a Bloomberg report last month. The ADR price is up over 20% YTD.

Christer Gardell, a local businessman invested heavily in Swedbank recently saying that the bank’s current share prices do not reflect the long-term potential of the company. He now controls 4.64% of Swedbank. US-based billionaire activist investor Carl Icahn holds a 1.06% stake in the bank.

Sweden-based SEB is the second largest lender in the Baltic countries. Its share price in the local market has more than tripled in market value during the same period.

From the Bloomberg report:
“Both banks are seen as a recovery story,” Kimmo Rama, a financial analyst at Evli Bank in Helsinki, told Bloomberg. “In the Baltic countries, credit quality has improved more rapidly than previously expected, and as a result loan losses have decreased strongly.

“Credit quality remains strong in Sweden,” Kimmo Rama told the newswire. “This, combined with a good economic outlook, will provide a good growth platform for the Swedish banks.”Handelsbanken, Sweden’s second-biggest bank by market capitalization, Swedbank and SEB all reported better than expected earnings for the second quarter.

The other Swedish banks Nordea Bank AB (OTC:NDBAY) and Svenska Handelsbanken AB (OTC:SVNLY) currently have dividend yields of 3.56% and 3.97% respectively.

Investors with a long-term horizon can consider adding some of the Swedish banks at current levels for the reasons discussed above.