By Niklas Pollard
STOCKHOLM (Reuters) -Swedish bank SEB on Thursday proposed a bigger than expected annual shareholder payout in the form of ordinary and special dividends, though fourth-quarter net profit was marginally below market expectations.
SEB, which is more focused on corporate clients than some of its Nordic peers, proposed a total dividend of 11.50 Swedish crowns per share for 2023, up from 6.75 crowns in the previous year and well above the 9.59 crowns forecast by analysts.
The payout was structured as an ordinary dividend of 8.50 crowns per share with an additional disbursement of 3 crowns. The bank said late on Wednesday that it would utilise an existing mandate to initiate a 1.75 billion crown ($167.7 million) share buyback.
The bank's fourth-quarter net profit rose to 8.37 billion crowns from 7.40 billion a year earlier, lagging the 8.79 billion forecast in an LSEG poll, after tax changes in the Baltics and higher credit impairments capped earnings.
"While the result today slightly missed expectations ... the higher than expected capital return, both in the form of dividends and buybacks, should be well-received," Jefferies analysts said in a note.
SEB and rivals such as Swedbank, Handelsbanken and Nordea have been racking up hefty profits over the past two years as soaring interest rates have driven up interest income.
However, central banks are expected to begin cutting rates this year.
SEB's interest income including mortgage revenue was 12.10 billion crowns, up from 9.72 billion crowns a year earlier but slightly lower than analyst expectations of 12.27 billion crowns.
"Interest rates started to plateau towards the end of the year and the positive effect on our results experienced earlier in 2023 continued to abate," said Chief Executive Johan Torgeby.
While boosting bank interest income, soaring central bank rates have also squeezed real estate markets and heavily indebted companies in that sector, notably in Sweden, raising concern over potential loan losses for banks.
SEB reported net expected credit losses of 664 million crowns, compared with 506 million crowns a year earlier and the 476 million crowns projected by analysts. The increase was driven by mainly by a single corporate exposure, it said.
"Overall asset quality remained robust," Torgeby added.
($1 = 10.4345 Swedish crowns)