March 26, 2013 / 9:16 PM / 5 years ago

Swedbank says buybacks unlikely this year

STOCKHOLM (Reuters) - Swedbank (SWEDa.ST) is unlikely to revive share buyback plans this year as it seeks clarity from regulators over its future capital requirements, its chief financial officer said on Tuesday.

Swedbank had a core tier 1 capital ratio of 15.4 percent at the end of 2012, above its 13-15 percent target level and ahead of many European peers still operating below 10 percent.

Global regulators have been putting pressure on banks to implement tough new capital rules known as Basel III before a 2019 deadline and said on Tuesday that top lenders are on course to meet their targets well ahead of time.

Swedish banks have benefited from low funding costs thanks to their high levels of capital and investors have snapped up their shares hoping that surplus cash will be returned through buybacks or extra dividends.

Swedbank’s share price is up 16 percent year-to-date compared with a European bank index .SX7P up 0.2 percent.

But Swedish banks say they want more detail on capital rules such as leverage ratios and risk weights.

Swedbank said uncertainty over the rules meant a share buyback program cancelled in 2011 in the face of government opposition would not likely be restarted anytime soon.

“I don’t rule out us having a buyback program at some point in time in the future, but there is nothing on the agenda at this point in time since there are a lot of open question marks for us,” Goran Bronner told Reuters in an interview.

Asked if there was any chance buybacks could happen this year, Bronner said: “That would be highly unlikely.”

Swedbank said in January it was hiking its dividend payout ratio to 75 percent from 50 percent previously.

“By all parameters we see today, we look very well-capitalized,” Bronner said. He added though that the bank would not know what was “excess” capital until rules were finalized.

Swedbank applied to the financial regulator at the end of 2012 for approval of its internal risk weightings for corporate loans - the so-called IRB Advanced approach - which could cut risk weighted assets by up to 50 billion crowns ($7.7 billion) and free up several billion for shareholders.

Bronner said an approval would not likely come before the fourth quarter this year or the start of 2014.


Swedbank sees growth coming from its home markets in Sweden and the Baltics and is not keen to venture out to new areas.

“We will grow by digging where we stand and become better with more satisfied clients,” he said. “This will allow us to get a larger part of the cake in our home markets.”

That is in contrast to Swedish peer Handelsbanken (SHBa.ST), which recently acquired an asset manager in Britain and named the Netherlands as a new home market.

Bronner said events in Cyprus had heightened risks for Europe but he did not expect a new round of financial turbulence.

Bronner said he doubted whether Cyprus was big enough to cause European bank funding costs to rise.

“It may very well be seen as a one-off, and I think that is the base case,” he said.

Swedbank got burnt in the last financial downturn in 2009, suffering a major operating loss after loans in the hard-hit Baltic region went sour.

Bronner saw a gradual recovery of lending activity in the Baltics as confidence returned from very low levels.

“Over time, the three Baltic states will pose very good growth opportunities,” he said. “I think the growth rate of these countries will be higher than in the rest of Europe.”

Editing by David Cowell

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