March 24, 2020 / 7:53 AM / 2 months ago

UPDATE 2-Swedish banks re-evaluating 2019 dividends after regulator's coronavirus warning

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STOCKHOLM, March 24 (Reuters) - Two of Sweden’s top banks, SEB and Handelsbanken, said on Tuesday they were evaluating their proposed dividends for 2019, after Sweden’s financial watchdog called for the shareholder payouts to be cancelled due to the coronavirus outbreak.

In Sweden and elsewhere authorities have stepped in to boost companies’ access to credit to ensure the financial system does not seize up like it did during the 2008-9 financial crisis. But there is also concern taxpayer money could end up in the pockets of shareholders rather than with companies trying to weather the crisis.

“A final decision regarding the dividend will be made...at an extraordinary general meeting, once the consequences of the coronavirus pandemic have become more clear,” Handelsbanken said in a statement.

Handelsbanken added that its proposed dividend for 2019 - 5.5 Swedish crowns per share - would not “jeopardise the bank’s ability to support its customers through financing, in spite of the challenging circumstances.”

Earlier on Tuesday, SEB told Reuters, “We have noted the statement from Finansinspektionen. SEB’s board decided on 19 March to postpone the AGM and also said it would evaluate the dividend proposal for 2019.”

Finansinspektionen (FSA), Sweden’s financial watchdog, said dividends intended for shareholders should not be paid out in order to boost the supply of credit at a time of coronavirus-induced stress in the financial system.

“The FSA will today send a letter to all banks and credit finance companies under the FSA’s oversight with a recommendation to their boards to immediately change their dividend proposals and that the spring AGMs decide not to pay out a dividend,” the Financial Supervisory Authority said in a statement.

“The aim is to ensure that these companies have continued good resilience against possible future credit losses and the capacity to maintain the supply of credit.

Many of Sweden’s major companies, including retail giant H&M and truckmaker AB Volvo have already cancelled planned dividend payments.

Swedbank said on Monday it would review its dividend decision, but that it had the ability to pay, despite being hit with a record fine last week for breaches in anti-money laundering work.

Swedbank has yet to comment on the FSA’s call on Tuesday for 2019 dividends to be scrapped.

The FSA has already eased capital buffer rules and liquidity requirements for banks to support their ability to continue to supply credit to Swedish companies.

The central bank is also offering 500 billion Swedish crowns ($49 billion)in loans to banks at generous terms to help boost the credit supply. ($1 = 10.1980 Swedish crowns) (Reporting by Colm Fulton and Simon Johnson in Stockholm; editing by Niklas Pollard, Kirsten Donovan)

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