SEB profit surges 22% in quarter tree

Bloomberg

The Nordic region’s biggest foreign-currency trading bank told investors it has finished building capital buffers for now as shareholders look for clues as to how Sweden’s banks might treat excess cash.
Annika Falkengren, the chief executive officer of SEB AB, said the 170 basis-point buffer the bank holds on top of the requirement set by Sweden’s regulator is enough. “So as it looks now, we are fine,” she said in an interview in Stockholm on Thursday.
Falkengren wouldn’t go as far as to say that the bank has excess capital, as the industry awaits the final outcome of talks targeting the way in which lenders calculate how risky their assets are, known as Basel IV. “There are still a lot of unknowns for us, so I think it is too early to say,” she said.
Svenska Handelsbanken AB saw its shares drop on Wednesday after its CEO, Anders Bouvin, said the lender’s 24 percent common equity Tier 1 ratio may not be enough. That triggered concern the bank may not have as much excess capital for dividends as investors had assumed.
“As it is today, I don’t think you can say that anyone really has excess capital,” Falkengren said. “We need to know exactly how the regulation will play out and what it will look like.”
SEB, which was founded in the 1850s by Sweden’s famous Wallenberg family, has a policy of paying its owners at least 40 percent of profits. Falkengren said she sees “no necessary changes to that.” The bank estimates its dividend policy allows it to keep its CET1 capital ratio roughly 150 basis points above the FSA’s requirement.
Profit at SEB rose 22 percent in the third quarter after it booked an increase in operating income and as loan losses declined. Revenue was boosted by higher trading income, which is a more volatile source of income than traditional lending.
SEB said its common equity Tier 1 ratio was 18.6 percent of risk-weighted assets at the end of the third quarter, up from 17.8 percent a year earlier. The Swedish Financial Supervisory Authority has set a capital requirement of 16.9 percent. Though well above its regulatory requirements, Karl Morris, an analyst at Keefe, Bruyette & Woods, said the CET1 ratio was slightly below analyst expectations.
SEB’s net interest income slipped 1 percent, which was just shy of the average analyst estimate. Net fee and commission income was also slightly lower than expected, while SEB booked a 66 percent jump in net financial income from a year earlier.
Banks in the largest Nordic economy have to live up to some of the world’s strictest regulatory requirements, making them among the best-capitalized. They’re now awaiting so-called Basel IV capital rules, which could add to their requirements by forcing the industry to apply tougher risk-weight calculations.