Revenue must increase 3 per cent more than costs

The goal of achieving a 15 percent return on equity in 2025 is supported by the relationship between income and expenses, called the K/I ratio, to be 0.40 with strict cost control in place.

“The effect of inflation is offset by efficiency gains from automation of internal processes and structural cost savings,” writes Swedbank.

In terms of the capital base, the underlying capital ratio should be 100-300 basis points above FSA requirements, with Swedbank aiming to reach 200 basis points in 2025 and beyond.

The level of credit loss should be 7 basis points in 2025, based on the 10-year average, which includes declines in the value of the offshore and offshore shipping portfolio. Corrected, the 10-year average is 3 basis points, the bank says.

Maintains dividend policy

Swedbank maintains a dividend policy of distributing 50 percent of annual profits.

“In addition to the regular dividend, by 2025 we expect to generate approximately 300 basis points of surplus capital in addition to the target capital buffer of 200 basis points. Any excess capital will be returned to our shareholders,” writes Swedbank.

The report says how much excess capital can be returned, when this can happen and a possible adjustment to the bank’s dividend policy during the planning period depends on Swedbank having greater clarity on its capital needs.

“In these times, it is critical that we have banks that are sustainable, and therefore profitable. By being profitable, we contribute to a financially sound and sustainable society. When we are profitable, we can support our customers, give dividends to our shareholders and further develop the bank. And it contributes to financial stability. For the sake of our customers, employees and society,” says Swedbank CEO Jens Henrikson.