* SEB op profit rises 20 pct to 4.87 bln SEK
* DNB pretax profit up 32 pct at 6.34 bln NOK
* Loan losses at both banks lower than forecast
* Banks face pressure though from new regulations
(Adds DNB details, quotes)
By Oskar von Bahr and Henrik Stolen
STOCKHOLM/OSLO, Oct 24 Swedish banking group SEB
and Norwegian lender DNB announced robust
third-quarter profits on Thursday, blowing past analysts'
forecasts on stronger income from corporate clients and better
Nordic banks have been some of Europe's best performers as
they escaped the worst of the financial downturn, building up
capital early on and benefiting from relatively sound economic
backdrops in Sweden and Norway.
SEB, Sweden's fourth-biggest lender by market capitalisation
and a bellwether for corporate lending in Scandinavia, announced
a 20 percent rise in operating profit in the quarter through
September to 4.87 billion Swedish crowns ($763 million). That
topped a Reuters consensus expectation for 4.20 billion and
easily beat the highest forecast.
"During the third quarter, we saw increasing activity on the
corporate side and despite a continued high level of economic
uncertainty globally, the corporate community showed emerging
optimism," SEB Chief Executive Annika Falkengren said in the
Net fee and commission income jumped 17 percent with
stronger corporate activity in the debt and syndication markets
and investment banking activity lifting income.
"It was a very strong set of results this time around and in
fact it was the best Q3 SEB has ever reported," said Kimmo Rama,
an analyst at Evli. "The key positive was that we saw a
continuation of higher customer activity."
At Norway's largest lender DNB, pretax profit jumped 32
percent to 6.34 billion Norwegian crowns ($1.07 billion) in the
quarter, topping expectations for 5.27 billion on wider lending
margins and as loan losses were nearly half expectations.
SEB and DNB's solid earnings followed strong third-quarter
results this week from rivals Nordea, Swedbank
SEB shares, which have rallied 39 percent this year, were up
2.1 percent after the results, while DNB's share price, up 46
percent in 2013, jumped 5.4 percent. Both outperformed a 1
percent gain in European banking shares.
While Nordic banks look relatively healthy they are,
however, facing pressure from stricter regulatory requirements,
particularly in Norway, which is forcing them to keep building
Authorities in Norway want the banks to raise the risk
assigned to their mortgage portfolios to as high as 35 percent -
more than twice that of Sweden - to curb risks in the Norwegian
DNB has reduced its dividend for the past two years and
plans to reduce it next year. On Thursday, it said it might have
to review its dividend policy to meet new capital requirements
as it will not raise new equity.
"We will not get new equity. This is not a theme. We will
grow organically. But we must use all means to achieve the
capital requirements demanded by the authorities. We must adjust
costs, revenues and assess our dividend policy," Chief Executive
Rune Bjerke told a new conference after the results.
New regulations on banks' mortgage books in Norway would
make DNB appear more weakly capitalised than its international
competitors, the bank said.
"The estimated capital requirements of 40 to 60 billion
Norwegian crowns by year-end 2016 will require higher earnings
than the achieved results," it said.
SEB's Falkengren said that "more regulation may not be the
right regulation", and that while the ambition of regulation was
admirable it remained difficult to assess the impact on the real
Nordic banks have nonetheless benefited from the region's
safe-haven status, while much of Europe was affected by the euro
zone debt crisis, and have shown they can maintain profitability
by keeping operating and funding costs down.
Swedish banks in particular, which have capital that exceeds
requirements, are widely expected to pay higher dividends this
year as loan demand remains weak.
SEB's Basel III common equity tier 1 capital ratio, based on
its interpretation of future regulation, reached 15 percent in
the quarter, up from 13.1 percent a year ago. That is higher
than the 12 percent that Sweden's financial regulator will
require it to have by 2015.
($1 = 6.3794 Swedish crowns)
($1 = 5.9174 Norwegian krones)
(Writing by Mia Shanley, additional reporting by Alister Doyle
in Oslo; Editing by Alistair Scrutton and Susan Fenton)