Swedbank DB scheme hit by market rates
Written by Sunniva Kolostyak
Swedbank has seen its defined benefit pension obligations impacted by market rates, contributing to the decision to cut the dividend policy from 75 to 50 per cent.
The board of the Swedish bank decided to cut its dividend policy in order to stay in a good economic position, a decision taken after the fallout of its involvement in a Baltic money laundering scandal.
Swedbank said in a statement that its capitalisation will ensure that the bank can withstand changes in economic conditions and maintain a good margin to the regulator’s requirements.
The new financial targets work against the backdrop of a defined benefit pension obligation impacted by market rates, a higher counter-cyclical buffer in Sweden, continued loan volume growth and the uncertainty regarding the bank’s work on anti-money laundering.
According to the bank’s interim report, its collective occupational pensions were SEK 99bn at 30 June 2019, while the obligation for defined benefit pension plans exceeded the fair value of plan assets by SEK 9.2bn, compared with SEK 5bn at year-end.
Swedbank chair of the board Göran Persson said: “Swedbank will continue to be a well-capitalised, low-risk bank. The new financial targets will give us even better possibilities to continue to contribute positively to societies where we have operations.”
Reuters reported that the bank has lost its top executive, chairman and a third of its market value this year after its Estonian business was caught up in money laundering allegations that have also engulfed rival Danske Bank.
Its dividend will correspond to 50 per cent of the annual profit attributable to shareholders and will be decided annually with “respect to the bank’s capital target and the outlook for profitable growth in our home markets”.
Acting president and CEO Anders Karlsson commented: “This change will ensure that Swedbank remains one of the strongest banks financially in Europe while continuing to support our customers’ growth.”
Swedbank’s interim report noted that for January-June 2019 an expense of SEK 4.2bn was recognised in other comprehensive income, regarding re-measurements of defined benefit pension plans. At 30 June, the discount rate, which is used to calculate the closing pension obligation, was 1.47 per cent, compared with 2.42 per cent at year-end.