SEB Raises Dividend After Fourth-Quarter Profit Jumps 44%

SEB AB, the third-best capitalized major lender in the European Union, increased its dividend after fourth-quarter profit climbed and announced a plan to lower costs.

The Stockholm-based bank proposed a dividend of 2.75 kronor a share, compared with 1.75 kronor a year earlier, it said in a statement today. The lender said it now aims to pay out an annual dividend that represents 40 percent or more of earnings per share, compared with a previous policy of about 40 percent.

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 some European lenders are preserving cash to meet stricter capital rules. The three Swedish banks already fulfill Sweden’s requirement to hold 10 percent core Tier 1 buffers of their risk-weighted assets starting this year and 12 percent from 2015. Still, as financial markets remain volatile, SEB said it plans to cut costs and improve efficiency.

“The Nordic countries have shown remarkable resilience throughout the crisis, but as small open economies they were affected towards the end of the year,” SEB Chief Executive Officer Annika Falkengren said in today’s statement. “The world economic outlook continues to be characterized by a ‘muddling through’ scenario although some glimmer of hope has now returned to the markets in some geographies.”

Net income jumped to 3.23 billion kronor from 2.25 billion kronor a year earlier, boosted by rising lending and fee income and a lower corporate tax rate in Sweden. The average estimate of 13 analysts surveyed by Bloomberg was for a 3.37 billion-krona profit.

Cost Cap

The bank introduced an annual cost cap of 22.5 billion kronor for 2013 and 2014, meaning it aims to trim costs by at least 4.9 percent this year from the 23.7 billion kronor it reported in 2012. SEB also said that it is targeting a return on equity of 15 percent in the long term.

SEB’s core Tier 1 ratio fell to 15.1 percent in the quarter, from 16.5 percent in the third, and was negatively affected by the implementation of new pension accounting rules. The Swedish bank aims to have a common equity Tier 1 ratio under Basel III capital rules of 13 percent, it said today.

Swedbank yesterday increased its dividend payout ratio to 75 percent of profits, from 50 percent previously, and said it aims to keep the ratio at that level while continuing to build capital buffers. Nordea Bank AB, which lags behind its Swedish rivals in terms of capital levels, kept its ratio unchanged.

Swedbank’s decision to raise its dividend payout policy “is supported by the bank’s robust earning capacity and low risk, combined with limited credit demand in the foreseeable future,” Swedbank CEO Michael Wolf said yesterday. “With the new dividend policy, we will continue to build capital in the bank, but not as quickly as before.”