Dividends set to increase at large Nordic banks in 2024

Most big Nordic banks are set to pay out higher dividends in 2024 on the back of an improved economic outlook, consensus analyst estimates compiled by S&P Global Market Intelligence indicate.

Dividends paid by Swedish banks Svenska Handelsbanken AB (publ), Swedbank AB (publ) and Skandinaviska Enskilda Banken AB (publ) (SEB) are expected to be 19%, 16% and 6.5% higher, respectively, than those paid in 2023, while Denmark-based Danske Bank A/S is set to pay out 5% more and Finland-based Nordea Bank Abp 2.2% more. Norway's DNB Bank ASA is the only Nordic lender expected to pay out a skinnier dividend than last year, falling 0.7%.

Economic growth in the Nordic region is set to improve in 2024, supported by better real wages and lower inflation despite interest rates likely dipping, according to a Feb. 7 report from S&P Global Ratings. Capitalization at most Nordic banks is expected to remain resilient, with Ratings assessing them as either strong or very strong.

Danish banks' profitability is expected to rise in 2024 owing to improved net interest margins, negligible increases in credit losses and decreasing cost burdens. Swedish banks are expected to maintain strong earnings and achieve similar levels of return on equity (ROE) as 2023, despite credit losses being set to increase slightly.

Danske recovery

Danske paid out a dividend of 14.50 Danish kroner per share in 2023, in line with its dividend policy to return between 40% and 60% of net profit to shareholders. The lender's dividend total came to 59% of net profit in 2023 after it reported strong credit quality, fewer impairments and a 25% surge in total income.

The bank reported a net profit of 21.3 billion kroner and an ROE of 12.7%, representing a turnaround from its 4.6 billion kroner loss in 2022. It announced a share buyback scheme for the first time since 2018, taking its total shareholder payout ratio to 85% for 2023, which CEO Carsten Egeriis said includes the bank's decision to carve out a risk buffer for commercial real estate.

– Access financial highlights for Swedish banks on S&P Capital IQ Pro. – Link to an S&P Global Ratings 2024 Nordic banks overview. – Access the Peer Analysis template on S&P Capital IQ Pro.

Danske did not pay a dividend in 2022 owing to its $2 billion settlement of an anti-money laundering scandal that year. While Danske's resolution of the issue helped its performance in 2023, it is not completely attributable to that, Morningstar DBRS analyst Niklas Kammer said.

"It was a strong year for Danske because of good business momentum and of course rising interest rates. It did coincide nicely with resolving the [anti-money laundering] issue, the biggest negative aspect around its equity story. ... It certainly helped the bank to capture the tailwinds and pick up momentum," Kammer told Market Intelligence.

Special dividends in Sweden

Sweden's SEB proposed an ordinary dividend of 8.50 Swedish kronor per share and a 3.00 kronor special dividend for 2023 after reporting a 42% increase in full-year profit. The bank also initiated a 1.75 billion kronor share buyback using an existing mandate.

This came despite the bank reporting lower-than-expected fourth-quarter profit, due in part to an increase in credit impairments and deposit migrations to higher interest savings accounts in the Baltic region.

Fellow Stockholm-based lender Handelsbanken announced a special dividend of 6.50 kronor, alongside a 6.50 kronor ordinary dividend, after announcing a 35.6% increase in full-year 2023 profit.

Handelsbanken revealed it would preserve more capital after the dividend; its common equity Tier 1 (CET1) ratio increased to 18.8% after deducting the dividend, 4 percentage points above the Swedish regulator's minimum requirement. On the bank's fourth-quarter earnings call, CEO Michael Green said, "Significant geopolitical tension and macroeconomic uncertainty" are encouraging the bank to hold a strong capital buffer.

While Swedbank did not announce a special dividend, the bank hiked its annual dividend to shareholders with a proposal of 15.15 kronor per share, up from 9.75 kronor for 2022. On its earnings call, the bank said credit quality had remained strong through the year, despite higher interest rates impacting corporates and retail clients.

Sweden's central bank has been tipped to cut interest rates from its current 4% in the first half of 2024.

Target misses, projection dips

Nordea, which has pledged to return between €17 billion and €18 billion to shareholders between 2022 and 2025, missed its fourth-quarter target of €0.92 per share, falling short of the €0.96 consensus estimate.

With its total distributions now sitting at €9.6 billion, CFO Ian Smith maintained that the bank's recent dividend was "squarely in the center" of its dividend policy and reaffirmed the lender is committed to paying a strong dividend. The bank is also targeting an ROE of more than 15% in 2024 and hiked its 2025 target to 15% from 13%.

DNB's board proposed a full-year dividend payment of 16.00 Norwegian kroner per share for 2023, up from 12.50 kroner last year and beating the Market Intelligence consensus of 14.40 kroner per share. Its dividend per share is projected to dip in 2024 before rebounding in 2025.

The bank's shares fell as it revealed a dip in lending volumes and deposits in the fourth quarter, with higher interest rates causing customers using savings to pay for everyday items and accelerated mortgage repayments on top of a "substantial" reduction in credit demand, CEO Kjerstin Braathen said.

Norges Bank raised its key policy rate to 4.5% in December 2023, which is unlikely to change until it falls in either September or December, Braathen said.

As of Feb. 27, 2024, US$1 was equivalent to 6.87 Danish kroner, 10.30 Swedish kronor and 10.52 Norwegian kroner.