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UPDATE 2-Nordea says close to new FSA capital target, relief for shares
October 3, 2016 / 6:51 AM / a year ago

UPDATE 2-Nordea says close to new FSA capital target, relief for shares

* Says FSA review calls for core capital of 17.3 pct by end Sept

* Says pro-forma end-June level 17.2 pct

* Analysts say threat to dividend receded

* Shares up 2.2 pct, outperforming index (Adds analyst comment, share reaction)

STOCKHOLM, Oct 3 (Reuters) - Nordea said a Swedish regulatory review required it to boost its capital buffers from their end-June level, but added it had made significant progress towards the new target, relieving investors’ worries about its dividends.

The bank had been expected to face higher capital buffers after a leaked memo from Sweden’s Financial Supervisory Authority earlier this year said it might need up to 80 billion Swedish crowns ($9.35 billion) in extra capital.

Investors were worried Nordea would have to cut its dividend or even issue new shares to meet the new requirements.

”The market is expecting a cut, but I think today’s figures suggest clearly that they won’t have to cut the dividend, said Matti Ahokas, banking analyst at Danske Equities. He said the bank would definitely not need a rights issue.

Nordea shares were up 3.6 percent at 0836 GMT, outperforming the European bank index.

The bank said the FSA expected its common equity tier 1 ratio requirement - the ratio of its core equity capital to its total risk-weighted assets - to have reached 17.3 percent by Sept. 30.

Nordea said the ratio was 16.8 percent at the end of June. However, it completed an 8.4 billion loan securitisation in August, bringing the ratio - a measure of the bank’s ability to absorb losses - to 17.2 percent.

Nordea has said it would like to have an internal buffer of 0.5 to 1.5 percentage points above the FSA’s requirement.

It expects to have made further significant progress towards meeting its capital and dividend policy targets when it presents third-quarter results, due on Oct. 26.

Nordea has a target of increasing its annual dividend. It paid out 0.64 euros per share, or 2.6 billion euros ($2.91 billion), in 2015.

In June, an internal FSA document showed Nordea had underestimated risks in its corporate lending portfolio and could need a big boost to its buffers. The FSA later said the document significantly overstated the need for fresh capital.

The bank said on Monday it would take a final decision on the dividend by the time of its 2017 AGM.

Earlier this year, the FSA changed its rules covering banks’ calculations of capital requirements related to corporate lending portfolios. It said this would result in bigger buffers.

Nordea has had several run-ins with regulators in recent years.

In 2015, it was fined 50 million Swedish crowns - the maximum amount - for breaching money laundering rules.

Earlier this year, the FSA launched an investigation into Nordea after the publication of the Panama Papers, which showed the bank helped clients set up offshore accounts.

Nordea, the Nordic bank named most in the Panama Papers, said its governance and controls had been lax. ($1 = 0.8906 euros) ($1 = 8.5791 Swedish crowns) (Reporting by Daniel Dickson, Johan Ahlander and Simon Johnson; Editing by Mark Trevelyan)

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