(Writes through after interview with CEO)
By Steve Slater
LONDON, March 6 Nordea, the Nordic region's biggest bank, will keep its options open on how to return cash to shareholders until the autumn to stay flexible while regulations shift and Sweden considers selling shares, its chief executive said.
Sweden owns 13.5 percent of Nordea and has said it wants to reduce that stake.
Nordea Chief Executive Christian Clausen said on Wednesday that directly buying back shares from the Swedish government would be difficult, but the state's plans for the shares could influence how it plans to release surplus cash.
Clausen said options included increasing the dividend payout ratio, paying a special dividend or buying back shares.
"If the stock is low it might be better to buy back stock. Or if somebody else is selling, as we know somebody might be doing, then it might also be a good idea to buy back shares," Clausen told Reuters on the sidelines of an investor presentation in London.
He said the timing of any state share sale was up to the government. Sweden owned 20 percent of Nordea as a legacy of the country's banking crisis in the early 1990s,. It sold 6.3 percent two years ago and said it would cut the stake further.
Shifting regulations will also dictate how Nordea chooses to return capital, Clausen said.
"We don't know the full effect of all regulations. The mix between buybacks and permanently increasing dividends is a fine balance because in this environment it's not obvious what the right answer is," he said.
He said the bank was likely to flag its preference "during the autumn when we know more", and it was unlikely to make a decision before then. It will ask shareholders to give approval to buy back shares at its AGM next week.
The Swedish bank also unveiled plans to cut a further 800 jobs, or 2.5 percent of staff, by the end of 2015 as part of a plan to save 450 million euros ($586 million) over the next two years.
The cuts will add to 2,700 job losses since mid-2011 and leave it with about 30,650 staff at the end of 2015. The bank said the cuts would be gradual and achieved through natural attrition.
Nordea is aiming for a return on equity (RoE) of 15 percent when more normalised interest rates return. It expects RoE to improve to 13 percent by 2015 from 11.6 percent last year.
After retaining capital in recent years the bank's core capital stood at 13.1 percent at the end of 2012, in line with a target of above 13 percent.
"We do not need to retain very much extra capital, which means it is possible to return to shareholders much more of the capital we make each year," Clausen told investors and analysts at the presentation.
Banks across the world are having to hold more capital to better safeguard taxpayers and depositors, but Nordic regulators have imposed higher requirements than overseas rivals.
Clausen said about a quarter of its operations were delivering an RoE above 15 percent, half had RoE between 10 and 15 percent, and just under a quarter had an RoE below 10 percent. It was implementing plans to improve profitability for its weakest businesses.
Its business in Poland was not delivering a high enough return, Clausen said, but he declined to say if it wanted to sell the business. The bank has hired advisers to sell Nordea Bank Polska, Poland's 12th biggest lender, according to Polish newspaper reports last week.
"We are looking at all the possibilities of increasing the return in Poland," Clausen said. ($1 = 0.7677 euros) (Editing by Jason Neely)