Swedbank, one of Swedenâ??s biggest banks, on Friday reported worse-than-expected second quarter losses and announced plans to cut 16 per cent of its workforce, amid spiralling losses in the troubled Baltic states.

The results brought the clearest sign yet of how badly the Swedish banking sector has been hit by bad loans in Latvia, Lithuania and Estonia as the trioâ??s economies have plunged into deep recession.

The Stockholm-based bank, which is the largest lender in the Baltics, posted net losses of SKr2.01bn, compared with net profits of SKr3.6bn a year earlier.

Loan losses soared to SKr6.67bn, from SKr423m a year ago, with about two-thirds of the losses in the Baltics and a third in Ukraine.

Despite the losses, Swedbank insisted its liquidity position was very good. The shares gained nearly 10 per cent after the announcement.