UPDATE 2-Handelsbanken bets on growth abroad as Q4 disappoints

Wed Feb 6, 2013 8:13am EST

Related Topics

* Nordics' No. 2 lender falls short on earnings

* Outlook still bullish, helped by robust Scandinavian economy

* Buys UK wealth manager, makes Netherlands a "home market"

* Raises dividend to 10.75 crowns per share, in line with fcast (Adds quotes, details)

STOCKHOLM, Feb 6 (Reuters) - Sweden's Handelsbanken announced the purchase of a UK wealth manager on Wednesday and targeted further gains in its fastest-growing market to counter a cost-driven fall in quarterly profits.

The bank's results wrap up a largely buoyant quarterly earnings season for Swedish banks, which have raised dividends, promised more payback for shareholders and targeted higher profitability.

That reflects robust economic growth in Scandinavia compared to a struggling euro zone and, for Handelsbanken more than most, a greater conservatism after a 1990s banking crisis which has served them well through four years of global turmoil.

The Nordics' second largest bank as expected also raised its dividend to 10.75 crowns per share, up from 9.75 crowns last year, giving a yield of 4.2 percent that is twice that of Deutsche Bank. It is also mulling other ways to return cash.

"I believe absolutely one can use buybacks if all regulations are in place," CEO Par Boman told a news conference.

While Sweden has finalised capital requirements for its banks, Boman said he was awaiting full clarity on the definition of capital, leverage ratios and countercyclical buffers.

One of Europe's most conservative lenders, Handelsbanken boasted a core tier one capital ratio of 18.4 percent at the end of the year. That contrasts with an 8 percent ratio for Deutsche last week.

It said it hadn't changed its aim to pay a "competitive" dividend in relation to other listed Nordic banks, boding well for investors after Swedbank raised its dividend payout ratio to 75 percent of net profit from 50 percent last week.

Still, the shortfall in earnings drove Handelsbanken shares 3 percent lower on a rising Stockholm exchange. The bank's stock rose almost 30 percent in price last year, compared with around 20 percent for the European banking index, and has gained some 7 percent this year.

"Handelsbanken and the other Swedish bank shares have performed very well since last week's reports, so the bank is down a bit on this. But underlying it is excellent," said Mats Anderson, an analyst at Cheuvreux.

DOUBLE DIGITS

While European peers are seen reporting single-digit returns on equity (ROE) on average for 2012, the Swedish banks all had double-digit ROEs last year. Handelsbanken at 14.7 percent ROE for the year was the highest.

The bank, which has almost 150 branches in Britain, expects to keep up the pace this year too. It said on Wednesday it was buying U.K. asset manager Heartwood Wealth Group, which manages around 15 billion crowns in assets.

Despite the economic crisis in Britain, Handelsbanken has seen brisk growth in a market where it is gaining share by opening a new branch every eight working days. It says it aims to offer clients old-fashioned, face-to-face banking services.

Officials also announced plans to make the Netherlands one of its home markets, alongside Sweden, Norway, Denmark, Finland and Britain. It currently has 15 branch offices in the country.

Mikael Sorensen, General Manager for Handelsbanken in the Netherlands, said the bank would focus on organic growth.

"We will use the same model as in England," he told Reuters. "We see big potential, it is a densely populated country."

Operating profits in the quarter reached 4.06 billion crowns ($639.9 million), missing a mean forecast for 4.25 billion seen in a Reuters poll of analysts and compared with 4.11 billion in the year-earlier period.

Total costs came in at 4.4 billion crowns, more than the 4.1 billion seen in a Reuters poll, due to payments into a staff profit-sharing fund, some non-recurring costs, exchange rate movements and higher salary costs in branches outside Sweden. ($1 = 6.3449 Swedish crowns) (Reporting by Mia Shanley and Oskar von Bahr, editing by Patrick Lannin and Patrick Graham)

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