Big banks’ mortgage profits rising

The total net interest for Sweden’s big four banks amounted to around SEK 30 billion for the second quarter – an increase of over one billion kronor since last year. The profits come mainly from mortgages.

“This is a completely unreasonable figure,” says Håkan Larsson, housing economist at the Swedish Homeowners Association. Håkan Larsson says that the development is due to the low repo rate, which has meant there is a huge difference between the interest banks themselves pay and what they offer mortgage customers.

During the same period mortgages have grown in importance for banks. For Swedbank and Handelsbanken, the mortgage share of the group rocketed from 25% in 2010 to 49% and 42% respectively in 2015.

Håkan Larsson points out that the four big banks have very similar interest rates for mortgage customers, calling it a price-fixing cartel. He believes politicians ought to act and the state SBAB bank ought to lead the way by bringing down interest rates.

Government backs down over banking fee

The government is backing down on the proposal to raise the resolution reserve fund fee. This is the second time in a short period that the government reverses on taxation of banks. In February, it withdrew a proposal for a new bank tax, replacing it instead with this rise in the resolution fee.

The purpose of the resolution fee is to create a buffer for any future financial crises. In its final form, presented yesterday, the original changes were either gone or had been toned down significantly.

Nordea has discussed plans to move its head office to Copenhagen or Helsinki because of the fee. However, the bank had no comment to make on Thursday.

Finance Minister Magdalena Andersson had previously commented that there are benefits for taxpayers if Nordea leaves the country. However yesterday her tone was milder, “Nordea is of course welcome to stay in Sweden and we see a significant point with having a head office in Sweden.”

Representatives of the alliance were pleased with the government’s U-turn.

Nordea has decided to move

 

The issue of whether Nordea will move its head office to either Helsinki or Copenhagen has been a hot topic since the government presented its proposal to raise the resolution reserve fee. In March Nordea chair Björn Wahlroos said the higher fee could cost Nordea an extra SKr 5 billion, motivating a move.

Svenska Dagbladet reported on Saturday that sources have now confirmed that the decision has been made and all that remains is a formal decision by the bank’s board on 30 May. However Nordea’s head of investment Rodney Alfvén would neither confirm nor deny the reports.

Dagens Industri, DI, reports today that Finance Minister Magdalena Andersson denies that the Swedish state would lose any tax income if Nordea moves its head office. Nordea pays corporate tax in Sweden for its Swedish operations regardless of where its head office is situated.

Andersson: Taxpayers tired of Nordea’s games

Finance Minister Magdalena Andersson has criticised the Danish government’s attempts to persuade Nordea to place its head office in Copenhagen. “It sounds as though the Danish government is prepared to compete by easing the rules on the finance market. That is a path that the Swedish government will not tread,” she said.

She has also berated CEO Casper von Koskull, saying “many taxpayers, who saved the bank in the 90s, are tired of Nordea’s games”.

Dispute over Nordea’s head office

Both parties could end up losing in the dispute over Nordea’s head office, according to several commentators. Nordea has threatened to move its headquarters out of Sweden as a result of the political decision to raise the fees for the resolution reserve (to aid banks in the case of a financial crisis – ed.).

However, although the government has so far focused on the positive elements of a Nordea move for taxpayers, an anonymous source to SvD points out, “It would make big international news. It could lead to a discussion about the business climate in Sweden, something the government does not want.” On the other hand Nordea risks disappointing customers, as the move could be perceived as a rejection of the bank’s largest market.

Meanwhile, writing in Dagens Industri today, MEP Gunnar Hökmark accuses the government of undermining Sweden’s competitiveness with the new bank tax and says that it is incomprehensible that Finance Minister Magdalena Andersson want to bring in this tax, which is making Nordea, the Nordic countries’ largest bank consider moving.

M: companies being driven out the country

After Nordea’s threat to move its head office out of Sweden the Moderates have attacked the government. Ulf Kristersson, the party’s economic spokesperson, says, “We are driving companies out of the country with the policy the government is threatening to bring in.” He says Sweden needs more head offices, not fewer.

Nevertheless Finance Minister Magdalena Andersson is not fazed by Nordea’s threat. “If they place their head office in another country then it lowers the risk for Swedish taxpayers in the case of a crash,” she says. She points out that the banking sector is healthy, has high profits and the fees have not created any problems. She also emphasises that Nordea made billions of kronor in profits last year.

The proposal is now out for consultation.

Swedish money financing criticised project

After Donald Trump waived the requirement for the company behind the controversial oil pipeline in North Dakota to consult the indigenous population again about the environmental impact on their water, the tribe is being removed from protest camps at Standing Rock.

SvD reports several Swedish banks and fund companies, including Skandia, Swedbank and Länsförsäkringar, have invested in the company. Länsförsäkringar is trying to get the company to reroute the pipeline while Skandia’s sustainability analyst Helena Larson says Skandia is waiting for a UN special rapporteur to determine whether the rights of the indigenous population have been breached.

Meanwhile Nordea has recently stopped its fund managers from investing in the company and SEB’s fund company has sold its holdings although still has holdings via its index funds.

Probe shows flaws in Nordea

Nordea’s internal probe into the Panama scandal reveals flaws in the bank’s Luxembourg operations and adds to concerns over potential mega fines and raised capital requirements. However, Nordea’s chief executive Casper von Koskull does not foresee that this will impact on dividend payment. He tells Dagens Industri (DI) that it is part and parcel of his job to ensure that Nordea’s errors are fixed.

Nordea facing increased capital requirement

 

The Riksbank may be forced to bolster Sweden’s foreign currency reserves, the reason being that Nordea Bank AB is to merge its wholly owned subsidiaries Denmark, Finland and Norway with the parent company in Sweden. The Swedish Financial Supervisory Authority has said the mergers will not lead to an increase in the risks associated with public interest and creditors in Sweden (ed.), but Riksbank deputy governor Cecilia Skingsley is of a different opinion, and wants the bank’s capital requirement increased. “I do not understand why taxpayers should have to bear the burden,” she tells Dagens Nyheter.

Good news for Riksbank

A TNS/Prospera survey published on Wednesday showed that inflation expectations five years ahead have risen from 1.8 to 1.9%, the highest level since the third quarter of 2013. Employer expectations rose from 1.9 to 2.0% while money market expectations remained unchanged at 2.0%.

Salary increase expectations rose 0.1 points to 2.3% over one year, to 2.4% over two years and 2.3% over 5 years. Nordea has commented that this is good news for the Riksbank.

According to the Riksbank’s own survey, firms are experiencing continued low price pressure and are finding it hard to raise prices despite relatively healthy demand.