• Net Income: SEK9.4 billion, a 9% increase for the third quarter.
• Net Interest Income: Stable, with lower lending rates offset by lower funding costs.
• Net Commission Income: Increased by 3%, driven by asset management and core business.
• Cost to Income Ratio: 0.31.
• Return on Equity: 18.4% for the third quarter.
• Earnings Per Share: SEK8.30 for the third quarter.
• Credit Impairments: SEK270 million for the third quarter.
• Capital Buffer: 5.2 percentage points.
• CT1 Capital Ratio: 20.4% with a buffer of 520 basis points above the requirement.
• Loan Portfolio: Stable, excluding a negative FX impact of SEK3 billion.
• Customer Deposits: Decreased by SEK7 billion, excluding a SEK2 billion negative FX impact.
• Corporate Lending in Sweden: Decreased by SEK7 billion.
• Private Lending in the Baltics: Increased by SEK3 billion.
• Corporate Lending in the Baltics: Increased by SEK6 billion.

• Warning! GuruFocus has detected 3 Warning Sign with SWDBF.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Swedbank AB (SWDBF) delivered a strong third-quarter result with a 9% increase, amounting to SEK9.4 billion.
• The company maintained a solid return on equity of 18.4% and a low cost-to-income ratio of 0.31.
• Net commission income increased by 3%, driven by asset management and core business activities.
• Swedbank AB (SWDBF) has a strong capital position with a buffer of 5.2 percentage points and a CT1 capital ratio of 20.4%.
• The bank continues to invest in improving its systems, fighting fraud, and enhancing customer experience, including a new digital savings platform.

Negative Points

• The global economy faces challenges such as geopolitical uncertainty, low growth, and high debt, impacting Swedbank AB (SWDBF)'s operating environment.
• Corporate lending in Sweden decreased by SEK7 billion, primarily due to property management, indicating a sluggish market.
• Customer deposits decreased by SEK7 billion in Sweden, reflecting seasonal effects and market conditions.
• The bank faces ongoing cyber threats, requiring high preparedness and continuous investment in security measures.
• There is uncertainty regarding the US investigations, with no clear timeline or potential financial impact, affecting capital management decisions.

Q & A Highlights

Q: Can you explain the impact of the reset of covered bond swaps on net interest income (NII) and whether further benefits are expected? A: Anders Karlsson, CFO, explained that while there was a positive impact from the reset of liability swaps, asset swaps also reprice over the quarter. The primary reason for stable NII was the repricing of savings accounts and transaction accounts, which offset the gradual rolling effect on the mortgage side. Funding costs are expected to decrease gradually as rates fall.

Q: How should we interpret the SEK366 million positive effect on NII this quarter, and is it expected to be a regular occurrence? A: Anders Karlsson, CFO, clarified that the SEK366 million effect is not extraordinary and similar timing effects will occur as rates change. The trajectory of NII will be difficult to project quarterly due to these effects, but once through, it provides a good proxy for future expectations.

Q: With a management buffer of 520 basis points, is there a cap on how high you would let it become, especially if US investigations drag on? A: Jens Henriksson, CEO, stated that the capital buffer target is 200 basis points by 2025, with excess capital expected to be released once private IRB models are approved. However, uncertainties remain, particularly regarding US investigations, and no new information is available on potential fines.

Q: Should we expect any cliff effect in Q4 due to mortgage repricing, and what is the rationale for Anders moving to a new role? A: Anders Karlsson, CFO, noted that the repricing of liabilities and assets occurs at different rates, leading to non-linear effects. Jens Henriksson, CEO, explained that Anders is moving to a new role in New York, which he desired, and a new CFO will be announced soon.

Q: How is the competitive environment in Sweden and the Baltics affecting loan and deposit pricing, and what are the cost implications of cyber threats? A: Jens Henriksson, CEO, acknowledged tough competition, especially in Swedish mortgages, but Swedbank maintains market leadership. On cyber threats, he emphasized the ongoing challenges and the need for preparedness, which impacts costs but is a necessary focus.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.