Swedbank (OMX: SWED A) bested expectations with 11.7 billion annual result. Fourth quarter result was affected by a near 2 billion kroner write-down of goodwill on Latvian operations. That pushed fourth quarter after tax profit below 1 billion. Net interest income was near 5 billion and total income around 8.5 billion in Q4 (on Q4 2010 revenue was just below 8 billion).
Full-year EPS was 9.52 SEK and return on equity 12.2%. The Board of Directors proposes a 5.30 SEK dividend. This is a large increase compared to 2010. Dividend policy is to pay out 50% of the profit per year.
The Board has decided to withdraw the current long-term capital targets (Tier 1 capital ratio of at least 10%, with at least 13% until 2013). A new policy will be decided as the situation stabilizes. The Board’s current feeling is that long-term target for core Tier 1 capital ratio will need to be revised upwards to 13.5-14.5 percent range. The bank is above that at the moment with Basel 2 Core Tier 1 capital ratio of 15.7% at the end of the quarter.
Swedbank managed a scary potential bank-run in Latvia during the quarter by longer opening times, continuous filing of ATM’s and an active participation in the social media. The situation stabilized in two days.
The base scenario in the bank’s internal planning is that of a recession in Europe. Therefore the bank aims to reduce costs in 2012 by around 1 billion Euros excluding variable staff costs. The bank feels it got restructuring done ahead of the curve and is well positioned for the future. The stock is trading flat just above 105 SEK ahead to the close.
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