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SEB lays out fresh regulatory guidance as FY'16 profit dips YOY

Skandinaviska Enskilda Banken AB reported a 36% year-over-year dive in profit for full year 2016, amid a 27% rise in operating expenses, and offered guidance on upcoming changes in regulatory requirements.

Full-year 2016 net profit totaled 10.62 billion Swedish kronor, compared to 16.58 billion kronor a year ago. Meanwhile, fourth-quarter 2016 net profit came in at 4.24 billion kronor, down from 4.60 billion kronor in the year-ago period.

Net interest income totaled 18.74 billion kronor in 2016, compared to 18.94 billion kronor in 2015, and net fee and commission income amounted to 16.63 billion kronor, down on a yearly basis from 18.35 billion kronor.

Total operating income reached 43.77 billion kronor in 2016, compared to 43.76 billion kronor in 2015, while total operating expenses increased to 27.76 billion kronor from 21.80 billion kronor over the period. Net credit losses totaled 993 million kronor in 2016, up from 883 million kronor a year ago.

ROE stood at 7.80% for 2016, compared with 12.24% in 2015. In the long term, SEB aims to reach a sustainable ROE of 15%.

SEB's common equity Tier 1 ratio was 18.8% at the end of December 2016, compared to 18.6% at the end of September 2016. The ratio is unchanged from a year ago.

The bank said new legislation in Sweden implies that interest on subordinated debt that qualifies as Tier 1 capital and Tier 2 capital will not be deductible for income tax purposes. The estimated impact from the change is approximately 360 million kronor in 2017 and 300 million kronor in 2018 and onward. SEB has no plans to call any outstanding subordinated Tier 1 securities and cannot contractually call outstanding subordinated Tier 2 capital.

In addition, a payroll tax in the financial sector was implemented in Norway starting 2017 and is being proposed for implementation in Sweden 2018. The total estimated effect on SEB would be around 700 million kronor per year. Total regulatory fees are expected to exceed 2 billion kronor in 2017, compared to 1.4 billion kronor in 2016, primarily because the single resolution fund fee in Sweden increases to 9 basis points from 2017.

The bank's board proposed a dividend of 5.50 kronor per share for 2016, compared to 5.25 kronor per share a year earlier. The dividend will be paid to shareholders April 4.

Meanwhile, Peter Dahlgren, head of the life and investment management division, will leave SEB in July to pursue a new position outside the group. Nils Liljeberg, head of sales life and pension for Sweden, became acting head of the life business, while Peter Branner continues as head of the investment management business.

As of Jan. 31, US$1 was equivalent to 8.75 Swedish kronor.