By Rupini Bergstroüm in Stockholm
SEB, the bank controlled by Sweden's powerful Wallenberg-family, on Friday said it was prioritising further investments in growth rather than share buybacks, after reporting surprisingly strong third-quarter results, thanks largely to robust financial markets, strong sales and volume growth.
In the three months to September 30, Sweden's fourth-biggest bank reported a 32 per cent increase in operating profits, to SKr 3 billion against an expected SKr 2.7 billion, on total revenues that grew to SKr 8.3 billion from SKr 7 billion.
Healthy financial markets, strong volume growth, particularly in mortgage and corporate lending, higher management and credit-card fees, and growing assets under management were key contributors to SEB's revenue increase.
The bank, which has grown aggressively in the Baltic region and Eastern Europe in the last year, said 56 per cent of its income came from outside Sweden, with operations across Latvia, Lithuania and Estonia reporting revenue growth of 20 per cent, to Skr 822 million, and boosting operating profits by 27 per cent to SKr 372 million.
SEB's German unit showed continued improvements in asset management and merchant banking, but its retail banking unit continued to underperform, forcing the bank to launch initiatives focused on boosting sales over coming years.
Unlike other banks in the region, which have flagged share buybacks, SEB said it would rather use its strong capital position for growth than repurchases.
Lars Thunell, outgoing chief executive, said: "We'd rather see the money invested in our operations and there are many areas showing strong growth right now. Afterwards, if our capital situation allows it, then we will consider conducting share buybacks."
Mr. Thunell, who is leaving for a post at the World Bank, is being replaced by Annika Falkengren.
In Poland, SEB said it would not prolong the offer period for the outstanding 53 per cent of Bank Ochrony Srodowiska. SEB is facing obstacles in its bid because the major shareholder, State Environmental Protection Fund, had not accepted its takeover bid by the expiry date last Friday.
SEB said it was awaiting the outcome of political changes after a recent election before deciding whether to press ahead with a full takeover or settle with its current shareholding.
While analysts were happy with the results, shares of SEB - which had been boosted earlier this week by strong reports from other Swedish banks – fell back after the report.
In morning trade, SEB shares were down or 0.3 per cent SKr 144.5, while the Stockholm OMXS-30 index was up 0.1 per cent.