SEB Tops European Stress Test Results

Skandinaviska Enskilda Banken showed the strongest performance among the banks under our coverage in the 2021 European Central Bank stress test. In the adverse scenario, its common equity Tier 1 ratio dropped to 16.9% from 21% over a three-year stress horizon. This is easily ahead of its minimum capital requirement of 11.1%. Even if we would add a countercyclical buffer, which currently are not in place (around 2%), SEB would have held an admirable cushion of capital. Risk-weighted assets increased during the stress by 17.4%, driving the majority of the 19.6% capital drawdown. Indeed, its capital only declined 5.4% throughout the adverse scenario. This speaks to SEB’s ability to remain profitable for most periods, even in the harshest environments. We maintain our fair value estimate of SEK 110 per share and no-moat rating.