Those stock options suddenly look a lot more attractive

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Now the dust has settled from the latest reporting round, Swedish banks, it is clear, are by and large looking to keep a tight rein on costs this year while hiring is likely to remain muted.

But with Nordic economies predicted to do well during 2011, compared at least with the rest of Europe, equity growth this year could bode well for all banks' new propensity to award an increasing proportion of bonuses in stock options.

Research by financial derivatives brokers MF Global has argued Sweden's biggest banks will see a 10% average increase this year in net interest income, twice as much as their European peers.

In 2012 net interest income in Sweden will jump 11%, it argued, while rivals elsewhere in Europe will probably see growth of around 6.5%, it forecast.

This echoes predictions by Swedbank CEO Michael Wolf that the repricing of corporate loans that have failed to reach desired return, together with maturing state guaranteed funding, "will give support to net interest income", this year.

However, at least in the short term, this growth is unlikely to feed through into any extra hiring, argues Simon Maughan, co- head of European equities at MF Global.

"Growth is on both the retail and corporate side, with corporate loans growing. But I suspect they will be able to handle loan growth going from, say, 4-7% with their existing teams," he points out.

The relatively optimistic outlook has been backed by the OECD, which has suggested the Swedish economy will show strong growth both this year and in 2012, after emerging relatively unscathed from the economic crisis.

Danske Bank, for one, in its end-of-year results, forecast Denmark would experience GDP growth of 1.9% this year, Norway would be ahead 3.4% and Sweden and Finland would grow by 2.6% and 2.8% respectively.

A combination of low interest rates, rising property prices and a relatively stable employment climate gave "grounds for optimism" about better retail and corporate credit quality during 2011, it added.

Yet that does not mean the region will be immune from wobbles, as witnessed by the decision earlier this month by credit ratings agency Moody's to cut the rating of Danske and four other Danish lenders in the wake of fears around the collapse of small Danish lender Amagerbanken.

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