Nordic Credit Rating (NCR) said today that the largest Swedish savings banks continued to reverse loan-loss provisions over the first half of 2021, driving strong earnings and improved capital metrics across the sector despite significant pressure on interest margins. The banks built high levels of provisions following the onset of COVID-19, but are now unwinding them as the pandemic appears to recede.
For many of the banks in the sector, the strong earnings in the first half were also due to deferred dividends from Swedbank AB paid out in the first quarter.
"We expect Swedbank to pay out additional dividends of the same amount before year-end, to meet its target pay-out ratio of 50% for both 2019 and 2020 net profits," said NCR credit analyst Ylva Forsberg. "We believe Swedbank will confirm plans to pay a second dividend instalment in the next few weeks following a regulatory decision to end a recommendation restricting bank dividend payments."
NCR expects the prospective dividend payments to provide a strong boost to savings banks, which historically have relied on such additional income to help counter the negative impact of tough competitive lending conditions and costly deposit funding.
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Ylva Forsberg, credit rating analyst, +46768806742, firstname.lastname@example.org
Sean Cotten, chief rating officer, +46735600337, email@example.com