Investor AB (INVEB), SEB AB’s biggest shareholder, said Finance Minister Anders Borg is wrong to criticize mounting dividends at Sweden’s banks because the capital distributed is a boon to the economy, not a threat.
“It’s important that banks don’t sit on too much cash -- it must be better that capital is reallocated,” Investor AB Chief Executive Officer Boerje Ekholm said in an interview in Stockholm. “It’s not that the capital leaks out of the system - - instead the banks distribute it, which benefits investors who then invest it again in new companies.”
Borg last month slammed banks for their dividend plans, warning they face even stricter capital requirements “to make them take their responsibilities with greater seriousness.” Sweden’s four top banks raised shareholder payouts for 2013 to more than $7 billion after building buffers that have made them the best-capitalized major lenders in Europe.
Sweden subjects lenders to some of Europe’s toughest capital rules and has warned it may demand more after property prices and household-debt levels soared to records. While the big banks already exceed the government’s 2015 requirement for a core Tier 1 ratio of 12 percent, Borg has called on them to continue filling coffers to protect taxpayers from future financial-industry losses.
The Wallenbergs founded SEB in 1856 as Stockholm’s first private bank. Today, the family’s publicly traded holding company Investor AB holds stakes in about a fifth of the companies on the OMX Stockholm 30 benchmark index, including Ericsson AB, Electrolux AB (ELUXB) and Atlas Copco AB. (ATCOA) Net asset value amounted to 215.4 billion kronor ($34 billion) at the end of last year, equivalent to about 6 percent of Sweden’s gross domestic product.
Ekholm said the government should be happy the banks are doing well and make money. It’s “actually a rather sound policy and quite rational that when you have reached some kind of capital level -- and we have high capital levels in the Swedish banks -- that that capital is distributed and is then injected into new companies.”
Nordea Bank AB (NDA), the largest Nordic lender, plans to raise its dividend by 26 percent, while Svenska Handelsbanken AB (SHBA) last month said it will pay out 53 percent more, including an extraordinary dividend. SEB wants to raise its shareholder payout by 45 percent and Swedbank AB (SWEDA) has proposed to increase its dividend payment by 2 percent. All four will ask shareholders to approve distributions this month and on average they plan to pay 66 percent of last year’s profit.
“I cannot possibly think that it’s in any way bad that they distribute capital,” Ekholm said.
The executive, 51, also called on the government and regulators to be clearer on what new rules and requirements they have planned. So far, Borg and Financial Markets Minister Peter Norman have only warned that banks probably face higher capital requirements and said that they plan to publish a so-called roadmap sometime this spring.
The government’s lack of clarity creates uncertainty, which generally leads to more caution, Ekholm said. While caution can be a good thing, it may also hurt the capital provision for small and medium-sized companies.
“Then this uncertainty hurts the real economy as well,” said Ekholm. “You can say what you want about rules but when they actually exist, you can relate to them and act accordingly. Otherwise, you often fight your own shadow.”