January 28, 2020 / 7:32 AM / 22 days ago

Swedbank confident on money-laundering fines as profit pips forecasts

STOCKHOLM (Reuters) - Swedbank (SWEDa.ST) said it would be able to handle any fines relating to a Baltic money-laundering scandal on Tuesday as fourth quarter profit fell by less than some analysts had forecast, lifting its shares.

FILE PHOTO: A view of the Swedbank in Tallinn, Estonia October 3, 2019. Picture taken October 3, 2019. REUTERS/Ints Kalnins

The Swedish bank is alleged to have processed suspect gross transactions of up to 20 billion euros ($22 billion) a year from mostly Russian non-residents through Estonia from 2010 to 2016.

“Thanks to our solid capitalization ... we will be able to handle any fine,” CEO Jens Henriksson told analysts, in reference to investigations by Swedish and Estonian authorities.

“Is there a problem with our corporate culture? I don’t know, but let’s find out,” Henriksson added, referring to a planned assessment announced in December.

Swedbank shares were up 4% at 0947 GMT, as investors latched onto the indication from the Swedish bank that it could absorb the additional expenses and potential fines from the scandal.

Although Swedbank’s net profit fell to 4.43 billion Swedish crowns ($467 million) for the period, from 4.59 billion a year earlier, it topped the 4.26 billion expected by analysts in a Refinitiv poll.

“Income grew, but expenses and credit impairments were also higher. It has become more expensive to operate a bank,” Henriksson said in a statement.

Swedbank said its expenses rose by 26% to 5.55 billion crowns, largely due to increased costs for money-laundering investigations but also higher IT and staff costs.

“The share is going up because there was some short interest in the stock ahead of the report, with many betting on a lower dividend than proposed,” Robin Rane, an analyst at Kepler Cheuvreux, said of the results and stock move.

Swedbank proposed a 2019 dividend of 8.80 crowns per share, down from 14.20 crowns in 2018, but higher than the 8.28 crowns expected by analysts.

“The management also signaled confidence with regards to fines from the Swedish and Estonia FSAs,” Rane added after Swedbank said it expected to complete its money laundering prevention action plan this year.

The bank’s net interest income rose to 6.41 billion crowns from 6.34 billion, but fell short of the 6.55 billion expected by analysts, amid a competitive Swedish mortgage market.

JP Morgan said Swedbank’s underlying profit was better than expected thanks to “strong trading income” over the quarter.

However, JP Morgan said in a analyst note that: “Given the weaker NII and higher costs, we believe Swedbank will see low-single-digit downgrades post these results.”

Swedbank said loan losses for the quarter more than doubled to 988 million crowns from 429 million, due to “previously known oil-related problems”.

Reporting by Colm Fulton, Johan Ahlander; Editing by Jason Neely and Alexander Smith

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