Swedbank AB, the second-best capitalized major lender in the European Union, raised its dividend payout ratio to 75 percent of profit after its net income in the fourth quarter more than quadrupled.
The Stockholm-based bank proposed a dividend of 9.9 kronor ($1.55) per share, compared with 5.3 kronor a year earlier, it said in a statement today. Net income rose to 4.34 billion kronor, from 965 million kronor a year earlier, when Swedbank booked a 1.9 billion-krona impairment on its goodwill related to Latvia. Profit beat the average 3.54 billion-krona estimate of 13 analysts surveyed by Bloomberg as net interest income and fee and commission income jumped and total costs slumped.
Svenska Handelsbanken AB, Swedbank and SEB AB are the three best capitalized major lenders in the European Union, giving them scope to distribute more to shareholders at a time when many other European lenders are trying to preserve cash to meet stricter capital rules. The three Swedish banks already fulfill Sweden’s requirement of 10 percent core Tier 1 buffers of their risk-weighted assets from this year and 12 percent from 2015. Swedbank’s core Tier 1 ratio rose to 17.4 percent in the fourth quarter, from 17.3 percent in the third.
Swedbank’s shares soared as much as 9.7 percent and traded 7 percent higher at 144.40 kronor as of 9:13 a.m. local time. The stock has advanced 14 percent this year, compared with a 9.7 percent increase in the 38-member Bloomberg index of European financial companies.
The decision to raise the dividend payout policy “is supported by the bank’s robust earning capacity and low risk, combined with limited credit demand in the foreseeable future,” Chief Executive Officer Michael Wolf said in today’s statement. “With the new dividend policy, we will continue to build capital in the bank, but not as quickly as before.”
Swedbank had previously had a dividend payout policy of 50 percent of profit.
Handelsbanken had a core Tier 1 ratio of 17.9 percent at the end of September, while SEB’s stood at 16.5 percent. Nordea Bank AB, the Nordic region’s largest lender, had a ratio of 12.2 percent.
“Based on our stress tests and a conservative view of what pending regulations will ultimately look like, Swedbank’s executive management believes we need a common equity Tier 1 ratio of 13 to 15 percent when all the new rules have fully taken effect,” Wolf said.