Company Reports

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

With Credit Suisse shoring up liquidity, concerns around a banking crisis spreading in Europe have been firmly planted. While we expect that the next days and weeks will remain volatile, we do not currently see a liquidity crisis spreading through the European banking system. The issues at Credit Suisse are idiosyncratic in nature and we believe containable for now even in a worst-case scenario. With capital and liquidity levels high across the board, asset quality still good, and regulators much better equipped than 15 years ago to quell any sparks, we believe European banks are solid. The major caveat being that developments are currently happening at a rapid pace and views we form today may be stale tomorrow. We believe investors are best placed in European banks with a greater retail focus and a sound profitability outlook. We would highlight BBVA, Handelsbanken, ING, and Lloyds.

We do not believe investors should view the collapse of U.S.-based Silicon Valley Bank as a read-through of the health of European banks' balance sheets. Nevertheless, banks remain highly reliant on the confidence of depositors and other funders. It would be foolish to say there is no contagion risk for European banks, especially if other global banks run into trouble. The current uncertainty could also push up the cost of funding and increase the rate at which European banks pass on higher interest rates to depositors. But we believe it is vital for investors to take note of the contrasts between European banks' and SVB's balance sheets.

No-moat Skandinaviska Enskilda Banken, or SEB, reported fourth-quarter operating profits of SEK 9.590 billion, up 5% on a sequential basis. Performance was good overall, as operating income of SEK 18.829 billion (up 14%) more than compensated for 7% higher operating expenses. SEB posted a 14.7% return on equity, which included a SEK 1.4 billion impairment for its Russian operation. Excluding this one off, SEB’s return on equity stood at 17.4%, rounding out a good year for the banking group. We maintain our fair value estimate of SEK 123 per share.

No-moat SEB reported third-quarter operating profits of SEK 9,118, up 25% on a sequential basis. Operating income up 15% to SEK 16,551 million paired with just a 1% increase in operating expenses to SEK 6,201 million resulted in a respectable 14.9% return on equity in the quarter. Net expected credit losses increased to SEK 567 million from SEK 399 million a quarter ago. We maintain our fair value estimate of SEK 123 per share.

No-moat Skandinaviska Enskilda Banken reported second-quarter operating profit of SEK 7,285 million, more than 5% ahead of consensus polled by the bank itself. We maintain our SEK 123 fair value estimate.

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.

Skandinaviska Enskilda Banken reported first-quarter operating profit of SEK 7,857 million, up 4% on a sequential basis. Growth in operating income and lower operating expenses more than offset higher net expected credit losses in the quarter. We maintain our SEK 123 fair value estimate and no-moat rating.

Skandinaviska Enskilda Banken, or SEB, published fourth-quarter operating profits of SEK 7.5 billion versus a company-collected consensus estimate of SEK 7.4 billion. Performance in the quarter was decent with income generation up 6% to SEK 13.8 billion versus the same period a year ago. Net interest income increased 2% on 4% higher loan volumes. Net fee and commission income showed another strong quarter, up 23% year over year and 13% on a sequential basis. Good activity in mergers and acquisitions, high equity market levels driving mutual fund and custody fees, and healthy securities issuance activity all supported the strong results. Recovery of the card business continued in the fourth quarter as well. However, operating expenses did offset part of the strong income generation as they came in 4% higher at SEK 6.1 billion. The increase was driven primarily by seasonal effects and IT and project expenses while staff costs declined 2% despite an increasing headcount on a lower special salary tax on pensions. Loan losses of SEK 299 million equivalent to 5 basis points of total loans showed no sign of deteriorating asset quality. In sum, the quarter allowed SEB to close a strong year with a return on equity of 13.9%, just shy of its long-standing ambition to achieve returns around 15%. We maintain our fair value estimate of SEK 123 per share and no moat rating.

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.

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.

Skandinaviska Enskilda Banken showed the strongest performance among the banks under our coverage in the 2021 European Central Bank stress test. In the adverse scenario, its common equity Tier 1 ratio dropped to 16.9% from 21% over a three-year stress horizon. This is easily ahead of its minimum capital requirement of 11.1%. Even if we would add a countercyclical buffer, which currently are not in place (around 2%), SEB would have held an admirable cushion of capital. Risk-weighted assets increased during the stress by 17.4%, driving the majority of the 19.6% capital drawdown. Indeed, its capital only declined 5.4% throughout the adverse scenario. This speaks to SEB’s ability to remain profitable for most periods, even in the harshest environments. We maintain our fair value estimate of SEK 110 per share and no-moat rating.

No-moat Skandinaviska Enskilda Banken reported strong second-quarter results with operating profits of SEK 7.9 billion, up 6% from the first quarter this year. Unsurprisingly, performance increased dramatically relative to the same period a year ago. The prime reason was lower loan losses. On the back of an improving economic outlook in the Nordics and the Baltics, SEB booked only SEK 7 million in loan-loss provisions in the quarter, or zero basis points of its total loan book. Reversals for loans in stage 1 and 2 offset the increase in provisions for loans deemed nonperforming, while provisions booked over the last year adequately covered write-offs in the quarter. Furthermore, management updated its loan-loss guidance to below 8 basis points for the full year. Year to date, SEB has booked only 1 basis point. We plan to lower our loan-loss expectations for 2021 based on the more positive economic outlook and updated guidance, but we don’t anticipate a material change to our fair value estimate of SEK 110 per share. Our fair value estimate is driven primarily by our midcycle assumptions, which we leave unchanged.

Skandinaviska Enskilda Banken's, or SEB'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. However, we find it difficult to close the gap between SEB’s ambition for a 15% return on equity and its current outlook.

SEB reported a good first quarter of 2021 with net profits up 17% versus the fourth quarter of 2020. Total operating income increased 2%, supported by higher net financial income more than offsetting lower net interest income. The decline in net interest income of SEK 262 million on a sequential basis was of a more technical nature as the quarter had fewer days to accrue interest. More important, the higher deposit inflow that SEB has been experiencing for some quarters has now lowered funding costs for the group, affecting net interest income positively. Flat net fee and commission income was a good performance considering the income drag from low card spending. As COVID-19 restrictions are lifted throughout this year and card spending comes back into the mix, we except a higher contribution from this line. Operating expenses declined 2% to SEK 5.7 billion primarily as other expenses came down materially. The bank is on track to meet its SEK 22.9 billion cost target in 2021. Provisions for credit losses declined to SEK 156 million versus SEK 835 million a quarter ago, further supporting the strong performance this quarter. We increase our fair value estimate to SEK 110 per share from SEK 93 after incorporating higher net fee and commission income assumptions as well as a better cost-saving performance.