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Svenska Handelsbanken SHB A

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Svenska Handelsbanken Reports Good First-Quarter 2021; We Still See Some Upside in the Valuation

Niklas Kammer, CFA Equity Analyst

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.

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Company Profile

Business Description

Handelsbanken is one of the largest Swedish banks with significant exposure to the Swedish mortgage market, about 44% of total loans are tied to the Swedish real estate market. Outside of Sweden, the bank operates primarily in the U.K., Denmark, Finland, and the Netherlands. Handelsbanken generates about three quarters of its income through its interest spread based business including mortgages, household loans, as well as corporate loans to large and small enterprises. The bank increasingly offers asset management, mutual fund and private banking services to its clients.

Kungstradgardsgatan 2
Stockholm, SE-106 70, Sweden
T +46 87011000
Sector Financial Services
Industry Banks - Diversified
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2020
Stock Type
Employees 12,396


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