Analyst Note| Niklas Kammer, CFA |
Narrow-moat Handelsbanken reported a good third quarter with operating profit of SEK 6.6 billion, up 4% on a sequential basis. On an underlying basis, total income increased 2%, driven primarily by a continued strong performance of its mutual funds, asset management, and insurance business. Net interested income remained stable, however, as 1% volume growth quarter-over-quarter was offset by weaker margins and foreign exchange effects. Handelsbanken continues to see a strong growth in mortgage volumes, with a market share of 17% year to date. Operating expenses declined 3% while loan loss provisions remained low at just SEK 66 million. Updating our model slightly for the strong fee and commission income and considering the time value of money since our last update, we lift our fair value estimate to SEK 112 per share from SEK 108 share.