Handelsbanken Closes 2021 in Line With Expectations; Shares Undervalued

Narrow-moat Handelsbanken reported full-year results for 2021 in line with our expectations. In the fourth quarter, total income grew 2% after adjusting for items affecting comparability compared with the quarter-ago period. Net fee and commission income continued to show strong growth to SEK 3,163 million, up 10%. Fund commissions were up 7% and net payment commissions up 21% were the largest contributors to this good performance. Net interest income, up 2% to SEK 7,503 million, saw higher volumes on business volumes. which more than offset an overall negative mix in margins and funding costs. As we had already heard from other Swedish banks, competition is squeezing margins on mortgages in Sweden, which is made up for by higher mortgage demand as real estate prices keep climbing. Operating expenses increased 5% on a like-for-like basis. Credit losses were virtually nonexistent at SEK 9 million, a picture we had seen throughout the whole of 2021. We maintain our SEK 112 per-share fair value estimate. Shares are undervalued.