Handelsbanken Falls Most in Six Months as Dividend Disappoints

Svenska Handelsbanken AB, Sweden’s second-largest bank, fell the most in more than six months in Stockholm trading after the European Union’s best-capitalized lender raised its dividend less than its Swedish rivals.

Handelsbanken dropped as much as 10.3 kronor, or 3.9 percent, to 252.3 kronor, its steepest intraday decline since July 17 last year. The bank’s shares decreased 2.3 percent to 256.5 kronor as of 9:20 a.m. local time, with trading volumes at 43 percent of the daily average in the past three months.

The Stockholm-based bank proposed raising its dividend by 10 percent to 10.75 kronor ($1.7) a share for 2012, compared with 9.75 kronor a year earlier, according to a statement today. Swedbank AB targets an 87 percent dividend increase to 9.9 kronor a share while SEB AB is raising its payment by 57 percent to 2.75 kronor a share. Nordea Bank AB stepped up its proposed payout for last year by 31 percent to 0.34 euro.

The dividend was “somewhat lower than expected,” which “is a disappointment in our view as expectations have been set higher after the previous Swedish bank reports that have all beaten on capital policies,” Pawel Wyszynski, an analyst at Nordea in Stockholm, said in a note to clients today.

Handelsbanken, Swedbank and SEB are the best capitalized major lenders in the EU, giving them scope to distribute more to shareholders at a time when other banks in Europe are trying to preserve cash to meet stricter capital rules.

U.K. Purchase

Handelsbanken’s capital strength is also helping it expand in Europe. The bank announced today the purchase of U.K. investment manager Heartwood, and named the Netherlands as one of its main markets as it targets growth abroad.

“We see major opportunities for continued growth here in the Netherlands,” Mikael Soerensen, head of the bank’s Dutch unit, said in a statement. “The market is similar to the U.K., with a few large, centralised banks. We’re opening branches and working close to the customer in a decentralised manner.”

Handelsbanken is expanding even as it faces some of Europe’s strictest regulatory standards. Sweden’s government is pushing through tougher capital rules than those set elsewhere. The country’s four largest banks already fulfill this year’s 10 percent core Tier 1 capital requirement of risk-weighted assets, and also top a 12 percent minimum rule effective from 2015. Handelsbanken’s core Tier 1 ratio rose to 18.4 percent in the fourth quarter, from 17.9 percent in the third quarter.

Handelsbanken’s profit in the three months through December jumped 49 percent to 4.54 billion kronor, beating the average 4.51 billion-krona estimate of 16 analysts survey by Bloomberg. The bank’s net interest income rose 2 percent to 6.48 billion kronor in the fourth quarter, while net fee and commission income rose 1.8 percent to 1.91 billion kronor in the period.

Before it's here, it's on the Bloomberg Terminal.