Swedish banking group Swedbank shot past expectations for third-quarter operating profit and said it had more than enough capital to deal with risks from the debt crisis in southern Europe.
At a time when European banks are preparing to ask investors for more than 100 billion euros ($139 billion) to shield them from fallout from troubled countries such as Greece and Italy, Swedbank -- until recently -- was handing back cash to shareholders.
It only cancelled a share buyback programme in September due to market volatility and worries about the euro zone, and criticism from the Swedish finance minister.
Swedbank, the biggest bank in the hard-hit Baltic region, said on Tuesday it would maintain strong capitalisation long-term and was even currently over-capitalised in the face of financial market worries.
"Just now, we have enormous uncertainty in Europe and we also have uncertainty when it comes to regulations for the banks, and we must wait for that," Chief Executive Michael Wolf told reporters, refusing to say when he would relaunch the buy back.
The bank's core tier one capital ratio rose to 15.1 percent in the third quarter, from 14.8 percent in the second quarter.
That is already well above the 9 percent level which banks in Europe are likely to be asked to meet in a recapitalisation drive being discussed by European Union nations.
Operating profit rose 33 percent to 4.3 billion crowns ($655 million) in the third quarter, topping a mean forecast for 3.9 billion crown profit in a Reuters poll of analysts.
The bank's shares were up 4.7 percent at 90.95 crowns at 1044 GMT, easily outperforming the wider S&P European Banking index which was only slightly higher.
Eye on costs, eurozone crisis
Swedbank's earnings contrasted with results last week from rival Nordea that were far off expectations due to weak trading income. Swedish rivals Handelsbanken SEB and Norway's DnB NOR all report earnings this week.
"It is a good report across the board," said Andreas Hakansson, an analyst at Exane BNP Paribas. "The quality is also good given that they beat on quality areas including net interest income and provision intake."
Trading was the only weak line in the report, hit by volatile stock markets.
Echoing moves by other banks in Europe which are slashing costs to keep up profitability, Wolf said Swedbank planned to keep costs in 2012 lower than 2011.
Nordea, the Nordic region's biggest bank, has said some 6 percent of its staff would have to go in the coming years, but Wolf would not be drawn on potential cutbacks.
Deutsche Bank announced 500 job cuts earlier this month and said on Tuesday it was in the process of cutting 10 percent of its investment banking staff.
Swedbank said the impact of the current economic uncertainty would depend greatly on how the crisis was resolved.
Leaders of the 17 nations sharing the euro are trying to meet a self-imposed Wednesday deadline to agree on the terms of a second rescue package for Greece, including a deeper write-down in the value of privately held bonds.
Wolf said there seemed to be a common agreement about bank write-offs and some consensus about recapitalising banks.
"We have had the buffers necessary -- it has allowed us access to the funding markets," Wolf told Reuters. Swedbank went to investors twice during the 2009 financial crisis to bolster its balance sheet.
"Those banks who didn't go that route have felt it in the funding markets," he added.
The remaining issue, he said, was getting Europe's leaders to finalise the size the European Financial Stability Facility, a European rescue fund.
"It looks promising, but it's complex," he said, referring to Wednesday's meeting. "Hopefully they will have resolutions on all these three matters by tomorrow."
Swiss bank UBS AG said on Tuesday that in the absence of a resolution of the euro zone debt crisis and an improved U.S. economic outlook, market conditions and trading activity were unlikely to improve materially, creating potential headwinds.
Swedbank, which suffered a deep loss during the 2009 downturn, continued to claw back some money it had earlier set aside to cover expected loan losses in the Baltics.
Wolf said recoveries in the fourth quarter would be on a similar level to the 441 million crowns the bank wrote back in the July-Sept period.