SEB Warns About Regulatory Risk as Second-Quarter Profit Climbs

SEB AB, Sweden’s fourth-largest bank by market capitalization, posted profit that beat analyst estimates and warned that increasing regulation in Sweden and the European Union risks hampering economic growth.

Net income in the three months through June advanced to 3.79 billion kronor ($568 million) from 2.96 billion kronor a year earlier, Stockholm-based SEB said in a statement today. That beat the average 3.21 billion-krona estimate of 14 analysts surveyed by Bloomberg. Net interest income rose 3.2 percent to 4.68 billion kronor while net fee and commission income gained 10 percent to 3.81 billion kronor.

Sweden’s banks have been using earnings to boost capital ratios and meet new requirements that are stricter in the country than elsewhere in Europe. That has made Svenska Handelsbanken AB, Swedbank AB and SEB the three best capitalized major banks in the EU, with the latter’s core Tier 1 capital ratio rising to 16.1 percent at the end of June from 15.3 percent three months earlier.

“While we embrace the joint efforts to create a resilient global financial sector, the regulatory framework has grown more and more complex with different adaptations at the international, regional and national levels,” Chief Executive Officer Annika Falkengren said in the statement. “The risk for the cumulative regulatory effects hampering economic growth cannot be ruled out.”

Sweden’s four largest banks are required to boost their core Tier 1 ratios to 10 percent this year and to 12 percent by 2015. All of them, including Nordea Bank AB, already fulfill the 2015 requirement. The Swedish financial regulator in Stockholm this year also tripled the risk-weights banks must hold on their mortgage assets to 15 percent.

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