By Niklas Pollard
STOCKHOLM (Reuters) -Swedbank proposed a larger-than-expected annual dividend after beating fourth-quarter operating profit expectations on Thursday, sending its shares up 4%.
Its operating profit dipped to 10.67 billion crowns ($969 million) from 11.08 billion a year earlier but topped the 9.25 billion expected by analysts, LSEG data showed.
Sweden’s biggest mortgage lender proposed an annual dividend of 21.70 crowns per share, up from 15.15 crowns last year and above the 16.13 crowns forecasted by analysts.
Swedbank said late on Wednesday it was changing its dividend policy to shareholders to 60-70% of the annual profit from 50% previously.
After benefiting from higher interest income during the post-pandemic inflation surge, driven by rising central bank rates, lenders are now facing the opposite as rates decline, particularly in Swedbank’s home market of Sweden, where the Riksbank has made several cuts.
Swedbank, which competes with SEB, Handelsbanken, and Nordea, said its interest income, which includes revenue from mortgages, fell to 12.27 billion crowns from 13.33 billion a year earlier, but topped the 11.62 billion seen by analysts.
“We deliver a strong result, boosted by timing effects,” Swedbank CEO Jens Henriksson told reporters.
“When interest rates fall, our net interest income decreases, but in a falling interest rate environment, our borrowing costs fall faster than interest income does,” he said of the timing effects.
Analysts at JP Morgan labelled the results “strong”, especially on interest income, though they noted headwinds were likely to pick up in time, and predicted small upgrades to 2026-2027 estimates for the bank.
Commission income rose to 4.29 billion crowns from 3.75 billion a year earlier, above the 4.10 billion seen by analysts. The often volatile income from financial items, which include trading, rose to 923 million from 845 million a year earlier.
Loan losses have remained minor for Nordic banks even despite headwinds in the Swedish real estate sector over the past two years.
Swedbank booked 394 million crowns in credit reversals in the quarter, while analysts had expected impairments of 423 million.
($1 = 11.0076 Swedish crowns)
(Reporting by Niklas Pollard; Additional reporting by Johan Ahlander; editing by Anna Ringstrom, Sherry Jacob-Phillips and Jason Neely)
