Company Reports

SEB reported second-quarter results with a return on equity of 15.7%. Corporate lending growth stood out positively.

SpaceX has filed for one of the largest IPOs in history, with Anthropic and OpenAI expected to follow in the most significant fundraising cycle in years. No European bank holds a lead equity arranger role; that honor belongs to five US banks.

Skandinaviska Enskilda Banken's focus on corporate lending and advisory banking services results in a healthy diversification between fee- and spread-based income streams. The bank runs a very efficient banking operation that has been supported by higher central bank interest rates over the last couple of years. Investments in a branch reduction and digitization of offerings have paid off. With central bank rates having normalized again, we expect efficiency to trend close to long-term historical averages.

Skandinaviska Enskilda Banken, or SEB, reported first-quarter return on equity of 13.1%. Operating income declined 7% versus the same quarter last year while cost savings lowered expenses 8%.

European banks have declined around 10% from their highs as rising oil and gas prices and the prospect of higher-for-longer interest rates fuel fears that loan defaults will rise.

We change our moat rating for SEB to narrow from none, as we believe the Nordic universal bank benefits from cost advantages and switching costs.

Skandinaviska Enskilda Banken's focus on corporate lending and advisory banking services results in a healthy diversification between fee- and spread- based income streams. The bank runs a very efficient banking operation that has been supported by higher central bank interest rates over the last couple of years. Investments into a branch reduction and digitization of offerings have paid off. With central bank rates having normalized again, we expect efficiency to trend close to long-term historical averages.

SEB reported return on equity of 14% for the third quarter. Net fee and commission income, down 6% sequentially, and net financial income, down 23%, more than offset marginally better net interest income, up 1%.

Skandinaviska Enskilda Banken's focus on corporate lending and advisory banking services results in a healthy diversification between fee- and spread- based income streams. The bank runs a very efficient banking operation that has been supported by higher central bank interest rates over the last couple of years. Investments into a branch reduction and digitization of offerings have paid off. With central bank rates normalizing again, we expect efficiency to revert to a longer-term historical average, as well.

Skandinaviska Enskilda Banken reported second-quarter results ahead of company-compiled consensus. Net interest income and net fee and commission income were 2% and 3% above consensus estimates, respectively. Net credit losses of 4 basis points were low.

Skandinaviska Enskilda Banken reported first-quarter operating profits of SEK 9.954 billion, down 19% versus the same period last year. Lower interest rates dragged net interest income down 11% to SEK 10.469 billion. However, higher client activity in the corporate and investment banking segment offset some of this weaker but expected performance. Net payment and card fees also contributed strongly. Net credit losses of 9 basis points were above levels through last year, driven by a few single exposures.

Skandinaviska Enskilda Banken reported full-year operating profits of SEK 46.0 billion ahead of the SEK 45.4 billion anticipated by consensus estimates collected by Infront. Despite the good operating performance, the stock traded down single-digit percentage points after the release, likely because the announced dividend and special dividend did not meet expectations. SEB announced an ordinary dividend of SEK 8.50 per share versus the SEK 8.90 consensus estimate and a SEK 3.00 per share special dividend versus expectations of SEK 4.43 per share. That said, we believe performance was good and raise our fair value estimate to SEK 166 per share from SEK 152 previously. Our change is driven by the time value of money since our last model update and better performance in net fee commission income than we had previously anticipated.

Skandinaviska Enskilda Banken's focus on corporate lending and advisory banking services results in a healthy diversification between spread- and fee-based income streams. The bank runs a very efficient banking operation that has been supported by higher central bank interest rates over the last couple of years. Investments into a branch reduction and digitzation of offerings have paid off. With central bank rates normalizing again, we expect effiiency to revert to a longer-term historical average, as well.

Danske published an improved guidance for its 2024 net profit, lifting the target from between DKK 20 billion to DKK 22 billion to between DKK 21 billion to DKK 23 billion. The bank flagged a continually strong credit quality and now expects small reversals of impairment charges for the second quarter of 2024. Previously, the bank guided for about 8 basis points of loan losses, or roughly DKK 1.4 billion, which would have been in line with its targeted through-the-cycle assumptions. Now, Danske believes that credit losses for the full year may not exceed DKK 0.6 billion. The better-than-expected credit quality outlook for this year is a positive development and may signal that although potentially strained, households and corporations will manage to service existing debts after a rapid rise in interest rates for the most part. We would also not be surprised if Danske's Nordic peers would show similar improved outlooks during their second-quarter earnings releases. We maintain our DKK 233 per share fair value estimate and narrow economic moat rating.

SEB reported first-quarter operating profits of SEK 12.316 billion, up 9% on a sequential basis. This good performance was carried by stronger net financial income (up 36%) and lower net expected credit losses (1 basis point versus 9 basis points in the fourth quarter of last year). The former benefited from material fair value adjustments in SEB’s derivative positions. The latter performed strongly on an absolute basis, suggesting a continued well-managed loan portfolio, but was also helped by an easy comparable as the fourth quarter of 2023 saw a large single credit exposure distort the picture. Looking through these movements in the quarter, performance was decent. Net interest income decreased by 3% as corporates and retail deposits migrated toward higher-yielding accounts. Net fee and commission income grew 2%, primarily driven by higher assets under management due to improving equity market levels. Operating expenses remained virtually flat as SEB compensated for 8% higher staff costs by reducing IT, marketing, and consultant costs. We maintain our fair value estimate of SEK 152 per share and no moat rating.

Skandinaviska Enskilda Banken reported fourth-quarter 2023 operating profit of SEK 11.3 billion, down 13% on a sequential basis. Nevertheless, the performance was decent and rounded out a good year for SEB. We maintain our SEK 152 per-share fair value estimate and no moat rating.

We are raising our fair value estimate for Skandinaviska Enskilda Banken, or SEB, to SEK 152 per share from SEK 123 previously after refreshing our model. Apart from the time value of money since our last model update, we believe that SEB's midcycle profitability has structurally improved. While we previously believed that the bank could achieve about 11% in returns on equity through the cycle, we now believe 12% 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 SEB had been able to achieve over the past decade. Our no-moat rating is unchanged.

Skandinaviska Enskilda Banken's focus on corporate lending and advisory banking services results in a healthy diversification between spread- and fee-based income streams. We like the group’s achievements in its efficiency programmes, keeping costs virtually flat for almost a decade. SEB has exploited its largest efficiency levers such as noncore divestments and branch closures. As a result, the group now has one of the smallest branch networks in the Nordics, and management already acknowledged that any further closures may chip away at its small and medium enterprise business, which relies on close customer relationships through branches.

No-moat SEB reported first-quarter operating profit before items affecting comparability that was up 6% to SEK 11.6 billion on a sequential basis. Lower operating expenses (down 4%) and just 4 basis points of net expected credit losses stood out positively in the quarter. Paired with slightly better income generation (up 1%), SEB achieved a noteworthy 17.9% return on equity in the quarter. We maintain our SEK 123 fair value estimate.

Stress has returned to the European banking system less than a week after a solution for Credit Suisse had been announced. Shares in European banks have traded down through March 24 around midsingle digits, with Deutsche Bank taking the brunt of it, down 15% at its lowest point intraday. We maintain our fair value estimates and moat ratings across our European banking coverage. Allianz remains our Best Idea. Admiral is one of our top picks