Good Q3 at SEB, With Additional Dividend and Buyback Program Making Up for Lost Dividend Income

No-moat Skandinaviska Enskilda Banken reported a good third quarter with an underlying operating profit of SEK 8 billion, up 35% versus the year-ago quarter. This strong performance was naturally driven by a weak comparable base in 2020, primarily owing to higher expected credit losses last year. Nevertheless, we believe performance was good. Net interest income came in 5% higher at SEK 6.3 billion, as weaker customer-driven interest income was offset by volume growth and lower funding costs at a group level contributing positively. Net fee and commission income also showed strong growth of 21%, as activity remained elevated across primary and secondary markets, advisory, and payments. At the same time, operating expenses increased only 2%. Credit losses came in at SEK 49 million, bringing the year-to-date loan-loss ratio to just a single basis point. Overall, this performance resulted in a respectable return on equity of 14.1%. We are increasing our fair value estimate to SEK 123 per share from SEK 110 after incorporating better-than-expected income generation and lower loan losses.