Swedbank: Raising Our Fair Value Estimate

We are raising our fair value estimate for Swedbank to SEK 243 per share from SEK 207 previously after refreshing our model. Apart from the time value of money since our last model update, we believe that Swedbank's midcycle profitability has structurally improved. While we previously believed that the bank could achieve about 12% in returns on equity through the cycle, we now believe 13% is more likely. Although interest rates are set to fall this year, we believe they will settle above previous levels, allowing for greater net interest margins than Swedbank achieved over the past decade. Our narrow moat rating is unchanged.