Reduced corporate tax in Sweden gives banks’ profits

Reduced corporate tax in Sweden gives banks’ profits; as a result of the Government’s reduction in corporation tax, Swedish banks will earn billions. Most profitable it is expected to be for the Swedish bank Handelsbanken.

The money will mostly go to the pool of more than 28 billion, that banks are expected to distribute to shareholders sometime in April-May 2013.

Handelsbanken excels with an estimated positive effect of the tax cut of around 1.5 billion, according to analysts at Credit Suisse.

SEB is expected earn more than a billion, while Swedbank expected to pull in 360 million.

There will not be much for Nordea, according to the analysts at Credit Suisse.

Due to the deferred tax liabilities that banks have stowed away, after Finance Minister Anders Borg’s tax cut now taxed at 22 percent instead of 26.3 percent. The banks picked out the difference in the fourth quarter of 2012.

The effect of the tax reduction is more significant for banks than for other heavyweights in the stock market due to the fact that banks do not use the type of interest turbines that internationally active groups in other industries now to some extent have to do without.

Swedbank, SEB and Handelsbanken dividends for 2012 is estimated to be around half of the banks’ profits. Nordea is expected to settle for 35 percent.

A joker in the deck is Swedbank that is regarded as more overcapitalized than the other banks.

Notice of dividend to Swedbank owners can come in the financial statements, according to analysts at Credit Suisse.

Banking analyst at Exane BNP Paribas believes that Swedbank will raise their dividend to about 65 percent of the profit, while SEB will raise from 40 to 50 percent.

It would be strange if they did not hand out more, due to the fact that they are so overcapitalized today.

Low interest rates have pushed down banks’ net interest income in the fourth quarter. And only Handelsbanken shows profit growth in the last three month of 2012, if we exclude the positive impact of the corporate tax cut.

Analyst at Exane BNP Paribas downplay the importance of the volatility between quarters and think you should take note that there is a positive underlying earnings growth in the industry, especially for the Swedish part of the business.

Net interest income can be a bit volatile from quarter to quarter. But analyst at Exane BNP Paribas see no problem with the credit losses and believes it will be a pretty good fourth quarter.