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Strong Results for Swedish Banks

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01/30/2013 | 12:06pm CEST

STOCKHOLM--Two Swedish banks provided an optimistic start to the European banking sector's earnings season, posting better than expected fourth-quarter results and laying out plans to boost dividends.

Swedbank AB (SWED-A.SK) on Wednesday reported a more-than fourfold increase in net profit in the final three months of 2012 compared with the same period a year ago, while Nordea AB (>> Nordea Bank AB)--the largest Nordic bank by market capitalization--reported a 7% rise. The profit increases were due to a variety of factors, including higher commissions and net-interest income.

Both Stockholm-based institutions, however, continued to signal concern related to the underlying European economy and demand for credit.

Compared with the euro area, Sweden has remained a relative haven during the financial crisis as public finances have remained robust. Banks in Sweden face some of the toughest capital requirements in the western world and have maintained solid balance sheets.

In a statement, Swedbank Chief Executive Michael Wolf said that although the bank has "re-established robust profitability at the same time that we further reduced the risk level in the bank," the macroeconomic environment remains lackluster. "We...are planning for an environment with low interest rates and weak credit demand," Mr. Wolf said.

In the wake of its strong performance, Swedbank has boosted its payout policy to 75% of yearly profit from 50%, and proposed a dividend increase for 2012 to SEK9.90 per share from SEK5.30 for the previous year. Nordea, meanwhile, proposed a dividend per share of EUR0.34 for 2012, up from EUR0.26 the previous year.

Nordea's fourth-quarter net profit rose to 840 million euros ($1.13 billion), up from EUR785 million in the fourth quarter of 2011 and above analyst expectations for EUR781 million. Swedbank's net profit rose to SEK4.34 billion from SEK964 million a year earlier when the result was weighed by goodwill impairments, well above analysts' expectations for a SEK3.6 billion profit.

"Swedbank really steals the limelight today," analyst Mats Anderson at brokerage Cheuvreux said. "Profitability is solid and the raised dividend and payout policy are really good news." Nordea's earnings and dividend proposal were also better than expected though its trends were a bit more mixed than Swedbank's, with slightly disappointing net-interest income and cost development, he said.

Swedbank and Nordea are among the first banks in Europe to report fourth-quarter earnings. The next updates will come Thursday when two of the region's most important lenders, Spain's Banco Santander SA and Germany's Deutsche Bank AG, post full-year figures. The earnings reports are expected to shed light on whether prospects are looking up for a sector that has been under severe pressure during the euro-zone crisis. Nordic banks including SEB AB, Danske Bank A/S and DNB ASA will report in coming days.

Write to Gustav Sandstrom at [email protected]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Stocks mentioned in the article : Nordea Bank AB
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Average target price 11,9 €
Spread / Average Target 5,8%
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Casper W. von Koskull President & Group Chief Executive Officer
Björn Arne Christer Wahlroos Chairman
Torsten Hagen Jørgensen Group Chief Operating Officer, Deputy CEO & EVP
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