Swedbank sees income growth outpacing costs as eyes set on ROE boost

STOCKHOLM (Reuters) – Swedbank said on Tuesday it would grow average annual income by 3 percentage points more than costs as it looked to boost returns on equity by 2025, driven by a normalised interest rate environment and rising lending volumes and commissions.

The Swedish bank also said it expected to have generated around 300 basis points of capital in excess of its target management buffer of 200 basis points by 2025 as it outlined strategy for the coming years.

The rival of banks including Handelsbanken, SEB and Nordea said in a statement it would maintain its dividend policy of a 50% payout ratio and that any excess capital would be distributed to shareholders.

“A sustainable bank is a profitable bank. Our target is therefore to reach a 15% return on equity,” Chief Executive Jens Henriksson said.

The bank, which is holding a capital markets day for investors and analysts on Tuesday, recorded a return on equity of 12.4% in the first nine months of this year.

With inflation running at its highest levels in decades, in part due to the war in Ukraine, central banks have hiked rates repeatedly this year, lifting interest income for Sweden’s banks sharply but also squeezing households and businesses and hitting asset markets.

(Reporting by Niklas Pollard, editing by Anna Ringstrom)