Svenska Handelsbanken Reports Good First-Quarter 2022

We maintain our SEK 112 per-share fair value estimate and narrow moat rating for Svenska Handelsbanken after its first-quarter earnings release. On an underlying basis, total income increased 5% to SEK 12,305 million, driven by strong growth in net interest income as well as net fee and commission income. Net interest income increased 8% to SEK 8,013 million on higher loan volumes in households and businesses as well as some foreign-exchange effects contributing positively. Net fee and commission income saw a healthy 9% growth to SEK 2,911 million on higher mutual fund volumes and also greater fees collected on fund management and custody. Compared with the first quarter of last year expenses, excluding the employee profit-sharing scheme, increased 3%. Despite the cost increase, operating profit on an adjusted basis remained stable and the cost-to-income ratio of 45.9% versus 47.4% a year ago is moving in the right direction. Credit losses remain low at Handelsbanken. In the first quarter the group booked SEK 6 million in loan-loss provisions, which is negligible. Within that the group booked SEK 512 million in provisions for uncertainties and second-order effects from the war in Ukraine, which was however, offset by reversals of previous coronavirus provision overlays. In sum, the group’s performance was reflected in its return on equity of 13.4%, which improved by 280 basis points.