Bloomberg News

SEB Profit Beats Estimates After Baltic Loan Losses Drop

October 27, 2011

(Updates with share price, EBA demands and CEO comment, starting in third paragraph.)

Oct. 27 (Bloomberg) -- SEB AB, Sweden’s fourth-largest bank, increased profit almost fivefold in the third quarter after its business in the Baltic countries rebounded.

Net income rose to 2.82 billion kronor ($435 million) from 581 million kronor in the year-earlier period, the Stockholm- based bank said today. That beat the average 2.7 billion-krona estimate of 16 analysts surveyed by Bloomberg.

SEB recouped 33 million kronor in bad-loan provisions as the Estonian, Latvian and Lithuanian economies recovered. The shares jumped as much as 6.5 percent, tracking gains by financial stocks across Europe after leaders reached an agreement on Greek writedowns and bank recapitalizations. Sweden, home to four of six biggest Nordic banks, wants its lenders to adopt stricter capital standards than those set out by the Basel Committee on Banking Supervision.

“The outlook for the global economic development is clearly more subdued and the robust Nordic economies will not be immune,” SEB Chief Executive Officer Annika Falkengren said in the statement.

SEB’s core Tier I capital ratio was 13.9 percent during the period. The European Banking Authority wants a June 30, 2012 deadline for lenders to reach core capital reserves of 9 percent after writing down their sovereign-debt holdings. The EBA puts banks’ capital needs at 106 billion euros, though Swedish lenders account for just 1.36 billion euros of that total.

Capital Needs

Sweden’s Financial Supervisory Authority said it supports the EBA’s plan and expects Swedish banks to meet the buffer requirements. Svenska Handelsbanken AB would need to increase its capital by 9.7 billion kronor, while Swedbank AB needs to lift its capital by 2.9 billion kronor. The two lenders are the biggest mortgage issuers in the country.

“SEB isn’t part of this,” Falkengren said in an interview. “We have double-digit capital however you measure us.”

SEB shares rose 5.2 percent to 43.47 kronor at 12:42 p.m. in Stockholm, trailing the 6.9 percent gain by the Bloomberg Europe Banks and Financial Services Index.

SEB’s net interest income, the difference between what the bank earns from lending and what it pays on deposits, slipped 0.9 percent to 4.14 billion kronor, while net fee and commission income rose 3.3 percent to 3.50 billion kronor.

--Editors: Keith Campbell, Dylan Griffiths.

To contact the reporter on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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