SEB Capital Buffers Rise as Third-Quarter Profit Beats Estimates

SEB AB (SEBA), the second-largest bank in the Baltic countries, said capital buffers increased after profit in the third quarter jumped 33 percent on higher lending and commission income and lower expenses.

Net income rose to 3.75 billion kronor ($589 million) from 2.83 billion kronor a year earlier, the Stockholm-based bank said in a statement today. That beat the average 3.39 billion-krona estimate of 12 analysts surveyed by Bloomberg. Net interest income gained 6.6 percent to 4.76 billion kronor while net fee and commission income increased 17 percent to 3.74 billion kronor.

SEB is the last of Sweden’s four major banks, all among the best capitalized lenders in Europe, to report earnings for the third quarter. Nordea Bank AB (NDA), Swedbank AB (SWEDA) and Svenska Handelsbanken AB (SHBA) all reported an increase in core Tier 1 capital ratios after profits rose, with Handelsbanken reaching a ratio under Basel II of 19.3 percent. SEB had a ratio of 17.4 percent while under Basel III rules, it stood at 15 percent.

“A key take-away from the last five years has been the value of a strong balance sheet in turbulent times,” Chief Executive Officer Annika Falkengren said in today’s statement. “Ample liquidity and strong capital ratios ensure resilience to future possible system shocks as well as capacity to invest in and support long-term relationships. Swedish banks have been at the forefront and have significantly strengthened their balance sheets.”

Capital Rules

Sweden requires its biggest banks to hold a core Tier 1 ratio of at least 12 percent by 2015, a ratio all Sweden’s major banks already exceed. The European Central Bank will require the euro region’s biggest banks to hold a capital buffer of at least 8 percent as it takes charge of financial supervision in the currency bloc next year. The ECB will ask banks to hold capital equivalent to 7 percent of risk-weighted assets, plus a supplemental 1 percent for the largest lenders.

The Swedish government has warned banks it may further toughen capital standards to protect the economy and taxpayers from any financial industry losses after housing prices and debt levels rose. It’s also introducing counter-cyclical buffers for banks on top of the capital requirements and has called for risk-weights on mortgages to be raised further.

Nordea reported a core Tier 1 ratio of 14.4 percent, excluding transition rules, at the end of September, up from 14 percent at the end of June. Swedbank had a common equity Tier 1 ratio under Basel II of 18.8 percent while Handelsbanken reported a core Tier ratio under the same rules of 19.3 percent.

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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