As part of setting Nordea’s new financial targets in 2019, Nordea revised its capital and dividend policy. To complement dividend payments, share buy-backs were introduced as a tool to distribute excess capital. Due to Covid-19, the possibility to conduct share buy-backs was paused.
With society now normalising and the ECB lifting its pandemic dividend recommendation, I am happy to announce that Nordea today has received approval from the European Central Bank (ECB) for share buy-backs of up to EUR 2 billion – a recognition of Nordea’s strong capital position and strong business performance. In addition, today we also announced that approximately EUR 2.9 billion of unpaid dividends for 2019-2020 is proposed to be paid to our shareholders in early October – subject to Board confirmation. In total, shareholder capital distributions commencing in October 2021 are expected to amount to around EUR 4.9 billion or EUR 1.2 per share.
Nordea has also been consistent in its messaging around capital distributions. In July, we said that we had submitted an application for a share buy-back programme to the ECB. We are pleased to have now received the approval from ECB, which enables us to move ahead with the execution of the programme. Also, as a clear sign of our financial strength, we are among the very first banks in Europe to have received buy-back approval.
The fact is that Nordea is one of the best capitalised banks in Europe. We have enough capital to support our customers, even in adverse scenarios, to further grow our business, and to distribute capital to our shareholders. And not only do we have enough capital, we also continue to generate more, even after allowing for ordinary dividend payments. Thus, Nordea is in dialogue with the ECB around a potential follow-on buy-back programme and expects to make a formal application in early 2022. This means we are committed to make share buy-backs an integral part of Nordea’s capital management practice as set out in our plans in 2019.
Our capital and dividend policy includes both dividends and buy-backs as tools for capital distribution to shareholders. Our aim is to pay out 60-70% of the profit of the financial year to shareholders. In addition, buy-backs are intended to be used for distributing excess capital to our shareholders. Currently, we clearly have excess capital that also impacts our profitability. Being able to distribute excess capital to our shareholders is an important factor in improving our financial performance. More generally, we remain committed to an efficient capital structure and generating sustainable shareholder returns to the benefit of all shareholders.
We know that Nordea’s shareholders, which include pension funds and more than 500,000 private individuals across the Nordic countries, value consistent and reliable dividend income. Not only does this support their everyday income, but it also enables them to further invest in projects that create jobs and growth opportunities as well as provide stimulus to the recovering economy. In short, these capital distributions benefit both Nordea’s profitability, and the society at large.
In summary, starting next month we will deliver a significant pay-out to our shareholders – just like we said we would. This benefits both our shareholders and the broader economy. At Nordea, we do what we say.