Nordic regulators are likely to follow the European Central Bank's new dividend policy, which will have a "significant impact" on large Nordic banks' distributions in 2021, according to an analysis by Nordic Credit Rating.

While the ECB lifted its de facto ban on bank dividend payouts on Dec. 15, it came with limitations. Financial institutions, it said, should only pay up to 15% of their combined 2019-2020 profits, or up to 20 basis points of their common equity Tier 1 ratio, whichever is lower.

The latter will be the key constraint for the ability of large Nordic banks such as Nordea Bank Abp, Danske Bank A/S, Svenska Handelsbanken AB (publ), Skandinaviska Enskilda Banken AB, DNB ASA and Swedbank AB (publ) to reward shareholders, according to Nordic Credit Rating, a rating agency based in Oslo and Stockholm.

It would result in dividend payments in 2021 that are "well below" those paid in 2019 based on 2018 profits, it found. The figures are calculated as 20 bps of the risk exposure amount as of Sept. 30, 2020.

For Nordea, the region's largest lender by assets, this means paying no more than 7.5 euro cents per share for 2019 and 2020 profits in total. This is compared to the 40 cents dividend per share that the board had authorized to distribute for 2019 profits alone, and a payment of 69 cents per share for 2018 profits.

Nordea, which said Dec. 16 it would follow the ECB's updated recommendation, will be one of the hardest-hit eurozone institutions, according to Berenberg analysts. The pan-Nordic lender has one of Europe's largest capital buffers above regulatory requirements, of 6.2 percentage points.

Headquartered in Finland, a eurozone country, Nordea is the only of the Nordic region's six largest banks that are supervised directly by the ECB, but Nordic Credit Rating expects national regulators across Sweden, Denmark and Norway to follow the European stance, as they have previously done.

In such a scenario, large Nordic banks will in 2021 be able to pay only between 10% and 20% of those dividends paid out in 2019. This reflects between 10% and 20% of their estimated 2020 net profits, compared to well over 50% of 2018 profits paid out in 2019 by most of the banks, it said.

Norway's largest bank DNB, which on Nov. 30 authorized its board to decide on a dividend of up to 9 kroner per share for 2019 profits, would face a limit of 1.3 kroner per share for 2019 and 2020 combined, according to the analysis. Swedbank would be limited to 1.2 kronor per share, while SEB and Handelsbanken each face a 0.7 kronor cap.

As of Dec. 16, US$1 was equivalent to 6.11 Danish kroner, 8.70 Norwegian kroner and 8.37 Swedish kronor.