The CEO of Swedish banking group Swedbank told CNBC on Wednesday that a sustained economic recovery remained elusive, with corporate and private customers reluctant to borrow.
"The real economy is still biting and the credit demand remains lackluster," Michael Wolf told CNBC.
Nevertheless, the group posted a fourth-quarter operating profit that topped forecasts on Wednesday and said it was raising its dividend payout ratio to 75 percent. Wolf said the bank had succeeded in adjusting to the new regulatory environment.
Operating profit was 4.98 billion crowns ($782 million) against a mean forecast for 4.40 billion seen in a Reuters poll of analysts and compared with a 1.75 billion result in the year-ago period. Shares in the group rose 9 percent in opening trade.
"We took out 8 percent of our cost base in 2012 and that makes us extremely well positioned for the future," he said.
Wolf warned that the real issue for the bank was household debt in Sweden and called for more house building regulation to ease soaring house prices.
"We need more housing and Sweden is having an urbanization trend that is quite enormous," he said.
(Read More: Roche CEO: Emerging Markets Key to Momentum)
Swedbank said it would raise its dividend policy to distribute 75 percent of net profit, up from a previous 50 percent and said it would pay a 9.90 crown per share dividend for 2012. Wolf said that the bank still had the ability to grow despite this increase in dividend.
The country's problem with household debt hasn't gone unnoticed by Sweden's central bank. The Riksbank's First Deputy Governor Kerstin af Jochnick warned on Friday that the financial crisis has made the risks linked to the housing market and high household debt "crystal clear".
"In Sweden, house prices have risen substantially since the middle of the 1990s, even compared with the countries where prices have since plummeted," she said.
The risks associated with any potential fall in house prices include weak household consumption and a lack of confidence among foreign investors, according to Kerstin af Jochnick.
"This could have direct effects on financial stability in that the banks have greater difficulty obtaining funding," she said.