Investors eye strong shareholder returns from big Nordic banks

Investors in big Nordic banks can look forward to strong, stable payouts in the coming years, anchored by lenders' healthy capital generation and resilient earnings.

The banks — Nordea Bank Abp, Danske Bank A/S, Skandinaviska Enskilda Banken AB (publ) (SEB), Svenska Handelsbanken AB (publ), DNB Bank ASA and Swedbank AB (publ) — have estimated 2026 payout ratios ranging from 83% to 104% of profits, Visible Alpha data shows. Danske Bank and Handelsbanken are expected to provide the strongest shareholder returns through 2027.

Elevated interest rates in prior years and a resilient regional economy have bolstered earnings for Nordic banks, and after some pandemic-related caution, lenders are well positioned to release capital, said Surbhi Garg, research analyst at S&P Global Market Intelligence.

"Nordic banks generally have a positive outlook on dividends," Garg said via email.

Visible Alpha estimates indicate an earnings recovery in 2027 and 2028 following recent monetary tightening. The major Nordic banks also have between 2.28 and 5.35 percentage points of buffers above their common equity Tier 1 ratio requirements, Market Intelligence data shows, giving them ample room for maneuver.

These banks are seeking to expand their asset management and wealth management activities, which require less equity to be kept on their balance sheets, Inderes equity analyst Kasper Mellas said.

Banking is a "very mature business, so there aren't a lot of growth opportunities, which means most of the earnings can be distributed via dividends or buybacks," Mellas said in an interview.

SEB is projected to have the highest share of buybacks as capital returns in the sample. Its buyback payout ratio is expected to be in the 25%-30% range from 2025 to 2027. Danske Bank's buyback payout ratio is expected to be between 22% and 29% in the next three years.

Danske Bank currently pays the highest dividend per share among the sampled banks, distributing the equivalent of €2.98 per share for 2024. This included an extraordinary dividend in late 2024 following the sale of its personal customer business in Norway.

Shareholder returns could be boosted further by the resolution of legacy legal issues at several banks.

A three-year corporate probation imposed by the US Justice Department on Danske Bank due to suspicious transactions in the nonresident portfolio of its former branch in Estonia ended in mid-December. CEO Carsten Egeriis has indicated that the probation's end will be considered in updating the bank's capital distribution plans, which will be presented alongside its first-quarter 2026 results.

Swedbank is still awaiting a resolution on historical legal matters in the US.

"The timing of further capital release continues to be a judgment call depending on the many uncertainties, where the long-running US investigations is the largest one," Swedbank CEO Jens Henriksson said in October. It holds the highest capital buffer in the sample and has only made recent buybacks for employee incentives.

Handelsbanken also does not regularly repurchase shares, preferring instead to focus on maintaining solid capital buffers. Asked about the banks' capital buffers in relation to potential buybacks during an earnings call, CFO Marten Bjurman said: "We don't have any news [with regard] to the buffer as such. We want to stay 1% to 3% above the required capital."

– Access Visible Alpha estimates data for Danske Bank.  – View shareholder and ownership data for Nordea. – Read more European Data Dispatches.

 

The banks' returns have also grown substantially, though they lag the broader rally in the European banking sector. In the year to Dec. 8, the six banks' total returns grew 43.4% on average, according to Market Intelligence data. Nordea was the best performer, with a growth rate of 58.9%, followed closely by Danske Bank with 58.3%.

The biggest winners are those that have provided relatively better earnings stability compared with their peers, and Nordea and Danske Bank both have structural hedges that strengthen their net interest income into 2026, providing earnings momentum, said Alexander Demetriou, equity research analyst at Jefferies.

The two banks' relatively low valuation at the beginning of the year based on their return on equity profiles may also go some way to explaining their outperformance, Demetriou said.

Danske Bank is implementing a share buyback program of up to 5 billion Danish kroner, which will run until the end of January 2026.

Nordea announced a €500 million buyback Dec. 16, having completed €250 million buybacks earlier in December and in May. SEB also closed a buyback of up to 2.5 billion Swedish kronor in October and opened another of the same size to run until Jan. 27, 2026.

DNB is also implementing a repurchase program for shares equivalent to as much as a 1% stake. The buyback, which will run until Feb. 20, 2026, will include shares from the Norwegian government to maintain its stake at 34%.

Strong valuations

Nordea and Danske's profits have also been less impacted by falling interest rates than their peers. Profits in the nine months to Sept. 30 fell 6% at Nordea and 5% at Danske from the same period a year earlier. That compares to more severe declines of 14% at Handelsbanken and 16% at SEB.

Still, Nordic banks carry strong valuations. All banks in the sample had a price-to-tangible book value (PTBV) above 1x at the beginning of 2025 and continued to grow as the year progressed. Their average PTBV had increased to 1.65x as of Dec. 8.

Nordea is the highest-valued bank in the sample, with a PTBV of 1.94x as of Dec. 8. SEB and Swedbank each had multiples of 1.74x. Danske Bank's ratio also grew through 2025, reaching 1.46x.

The banks also all trade close to or above the consensus target price, Visible Alpha data shows.

Visible Alpha is a part of S&P Global Market Intelligence.

As of Dec. 16, US$1 was equivalent to 6.35 Danish kroner and 9.28 Swedish kronor.