Analyst Note| Niklas Kammer, CFA |
We maintain our SEK 108 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 3% to SEK 11.3 billion as strong net fee and commission income offset weaker net interest income, or NIM. The decline in NIM was primarily driven by narrower deposit and lending margins relative to the same period a year ago, while this effect was more muted to a more comparable fourth quarter of last year. Mortgage volumes showed solid growth of 6% year over year, offsetting a corporate loan demand decrease. The restructuring of its Swedish and U.K. branch networks is progressing but weighing on expenses, as was to be expected. Compared with the first quarter last year, expenses excluding the employee profit-sharing scheme increased 2%, which was attributable to the required development spending. All in all, Handelsbanken reported a return on equity of 10.6%. We think shares remain attractive at current levels.