(Bloomberg) -- Swedish lender Svenska Handelsbanken AB agreed to break up and sell major parts of its business in Finland for €1.3 billion ($1.4 billion), taking a major step toward exiting the country to focus on its core markets. 

Oma Savings Bank Plc will buy Handelsbanken’s small and medium-sized enterprise unit, while the asset management and investment services division will be sold to S-Bank Plc. The life insurance unit will be acquired by Fennia Life Insurance Company Ltd, according to a statement Wednesday.

Handelsbanken has been seeking buyers for its Finnish operations since the fall of 2021, when it announced it would concentrate on the markets of Sweden, the UK and Norway. As part of the same strategy, the bank sold its Danish unit, with assets of almost $10 billion, to Jyske Bank A/S last June in what was the biggest bank deal in Denmark in two decades.

The new round of divestments is expected to free up around 3 billion kronor in capital, which could raise expectations of a boost to investor payouts along with peers including Nordea Bank Abp and SEB AB. However, Handelsbanken investors were disappointed following the Danish divestment and continuing uncertainty about the lender’s capital return policy may be weighing on the share price, according to Nicolas McBeath, an analyst at DNB ASA.

“Skeptics might point out that the proceeds from the Danish divestment have not been shifted out fully to shareholders,” he said in a note to clients.

DNB said it expects the capital to be distributed eventually but finds it unlikely that the divestments will directly trigger the board to raise capital distributions until end-2024, when the strategic shift is completed. The analyst estimates that the divested assets generate around 300 million kronor in annual earnings to Handelsbanken and should lead to negative earnings-per-share revisions of around 1% from 2025.

Handelsbanken’s shares rose as much as 0.6% after the announcement while a European-wide bank index edged lower. The stock is down about 16% so far this year, making it the worst performer alongside SEB and Swedbank AB, the other two major lenders in Sweden.

 

(Updates throughout the text, adds fresh analyst comment.)

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