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Swedbank reports lower than expected earnings

Tuesday, 16 July 2013
Swedish banking group Swedbank posted a second-quarter operating profit that missed forecasts on weaker-than-expected net items at fair value and on an unexpected write-down related to its IT system.

Swedbank's operating profit was Skr4.393 million in the second quarter compared with the expected Skr4.61 million, according to analysts expectations.
Net interest income was Skr5,409 million, against an expected Skr5.324 billion, and commission income was Skr2.525 million. There was an average forecast of Skr2.458 million.

Bank's total income stood at Skr8.979 million, compared to the expected Skr8.995 million according to analysts.

Swedbank said it was waiting for approval on its advanced models to calculate risk weights on its corporate book. Based on the financial regulator's final proposal on mortgage risk weights, it believs its common equity tier 1 capital ratio needs to be around 15 percent according to Basel 3.

"As a result of the FSA's final proposal regarding risk weights on mortgages makes Swedbank's management is of the opinion that the core Tier I capital ratio needs to be about 15 per cent according to Basel 3 "writes CEO Michael Wolf in the quarterly report.

"The Board of Directors has not yet decided on the bank’s capital objectives, since several new regulations that will affect them have not been finalised. Based on
the Swedish Financial Supervisory Authority’s final proposal on mortgage risk weights, Swedbank’s executive management today believes that the Common
Equity Tier 1 capital ratio needs to be around 15 per cent according to Basel 3*," writes Swedbank
See interim reports here

Interim Report January - June

Second quarter 2013 Compared with first quarter 2013

January-June 2013 Compared with January-June 2012

The result for the quarter amounted to SEK 1 592m (3 525), of which the result for continuing operations** was SEK 3 478m (3 916)
Earnings per share for total operations amounted to SEK 1.45 (3.21*) before dilution and SEK 1.44 (3.19*) after dilution
Earnings per share for continuing operations** after dilution amounted to SEK 3.15 (3.54*)
The return on equity was 6.5 per cent (13.8) and the return on equity for continuing operations** was 14.1 per cent (15.3)
The cost/income ratio was 0.46 (0.45)
Net interest income amounted to SEK 5 409m (5 353)
Profit before impairments decreased by 4 per cent to SEK 4 853m (5 039)
Swedbank reported net credit impairments of SEK 88m (60)
The Common Equity Tier 1 ratio was 18.0 per cent according to Basel 2 (16.7 per cent on 31 December 2012). The Common Equity Tier 1 ratio according to Basel 3 was 17.2*** per cent (15.4 per cent on 31 December 2012)

The result for the period amounted to SEK 5 117m (6 557), of which the result for continuing operations** was SEK 7 394m (7 177)
Earnings per share for total operations amounted to SEK 4.66* (5.97) before dilution and SEK 4.63* (5.95) after dilution
Earnings per share for continuing operations** after dilution amounted to SEK 6.69* (6.51)
The return on equity was 10.1 per cent (13.6) and the return on equity for continuing operations** was 14.7 per cent (14.9)
The cost/income ratio was 0.45 (0.48)
Net interest income increased by 8 per cent to SEK 10 762m (9 930)
Profit before impairments increased by 6 per cent to SEK 9 892m (9 362)
Swedbank reported net credit impairments of SEK 148m (net recoveries of SEK 145m)

* After deducting the preference share dividend, earnings per share for the first quarter 2013 were SEK 1.63 for total operations. The calculations are specified on page 50.
** Russia and Ukraine are reported as discontinued operations.
*** According to Swedbank’s interpretation of future regulations
Swedebank