UPDATE 1-Swedbank limits dividend hike amid regulatory uncertainty

Tue Jan 28, 2014 2:35am EST

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STOCKHOLM, Jan 28 (Reuters) - Swedish banking group Swedbank is bracing for tougher capital rules in the Nordic country, it said on Tuesday, as it announced a smaller than expected dividend and said share buybacks were off the table until regulatory uncertainty cleared.

Swedbank also said its net profit for continuing operations slid 13 percent to 3.67 billion Swedish crowns ($571 million) in the fourth quarter, missing a mean forecast for 3.96 billion in a Reuters poll of analysts, weighed down by a write-down in its portfolio of repossessed real estate.

Investors have been waiting for Nordic banks to start returning what some of them view as "excess" capital, with Swedbank's core tier one capital ratio - a key measure of financial strength - rising to 18.3 percent at the end of the fourth quarter from 15.4 percent at end-2012.

Sweden's financial watchdog will require Swedish banks to have a 12 percent core tier one capital ratio by 2015 but authorities still need to hammer out other details such as counter-cyclical capital buffers.

Swedbank said there was too much regulatory uncertainty.

"If we look at the capital uncertainty that now prevails, we cannot in the current situation say that we have excess capital," CEO Michael Wolf said on a call with journalists.

Asked whether the bank could start considering share buybacks, Wolf said: "We need to get more clarity on capital regulation before we can discuss this issue."

The Swedish bank, the first of the Nordic banks to report earnings for the quarter, said it would pay a 10.1 crown per share dividend for the year, up from the year before but below an average forecast in a Reuters poll for 10.4 crowns per share.

Swedbank suffered during 2008-2009 as a deep recession hit customers in Latvia, Lithuania and Estonia, but it was early to raise capital and has benefited from a healthy economic backdrop at home in Sweden.

The bank said the write-off in its Ektornet portfolio of repossessed properties, mainly in the Baltics, had amounted to 311 million crowns in the quarter.

Swedbank's share price has gained more than 35 percent in the past year, roughly in line with peers and faster than an 11 percent rise in the European banking stocks index.

($1 = 6.4312 Swedish crowns) (Reporting by Mia Shanley and Johan Ahlander; Editing by Mark Potter)

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