SEB Capital Buffers Swell After Quarterly Profit Increased 29%

SEB AB (SEBA), Europe’s third-best-capitalized major bank, said capital buffers grew in the first quarter after it reported a 29 percent jump in profit.

Net income at SEB, whose biggest shareholder is the Wallenberg family’s holding company Investor AB, rose to 3.88 billion kronor ($590 million) in the quarter from 3.01 billion kronor a year earlier, the Stockholm-based bank said in a statement today. That met the average 3.86 billion-krona estimate in a Bloomberg survey of analysts. SEB’s common equity Tier 1 ratio increased to 15.7 percent of its risk-weighted assets at the end of March, from 15 percent on Dec. 31.

That was “more than expected,” analysts at Nordea Bank (NDA) AB said in a note to clients today. Nordea had foreseen an increase to 15.3 percent. “We will most likely nudge up our forecasts and would expect the stock to outperform somewhat today on the back of positive forecast revisions and higher capital ratios.”

Sweden’s banks, which face some of Europe’s strictest reserve rules, have increased buffers by cutting costs and retaining earnings to become the best capitalized in the region. SEB, Nordea Bank, Svenska Handelsbanken AB and Swedbank AB already exceed a requirement for a core Tier 1 capital ratio of 12 percent by 2015 and all raised their dividend payments this year to make use of excess capital.

SEB shares advanced as much as 1.6 percent to 89.75 kronor in Stockholm trading and added 0.3 percent to 88.55 kronor as of 9.37 a.m. Swedish time. Trading volume was at 11 percent of the daily average in the past three months.

Raising Dividends

Net interest income at SEB rose 8.1 percent to 4.82 billion kronor in the three months through March while net fee and commission income advanced 15 percent to 3.73 billion kronor. Total costs fell 4.5 percent to 5.34 billion kronor.

On average, Sweden’s four biggest banks paid out 66 percent of profits to shareholders for 2013. Nordea raised its 2013 dividend by 26 percent to 0.43 euro a share. Handelsbanken (SHBA) paid 53 percent more than in 2012, SEB raised its shareholder payout by 45 percent and Swedbank increased its by 2 percent.

SEB is likely to pay out a dividend of 4.25 kronor per share for 2014, compared with 4 kronor for 2013, according to Bloomberg dividend forecasts, which take into account seven variables including analysts’ estimates and company guidance.

At the end of last year, Handelsbanken and Swedbank were the two best capitalized major banks in Europe under Basel III rules, followed by SEB as No. 3 and Nordea in fourth place.

SEB is the first of Sweden’s four biggest banks to report first-quarter earnings. Handelsbanken, Swedbank and Nordea are all scheduled to release their earnings next week.

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

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Tasneem Hanfi Brogger, Kati Pohjanpalo

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