Investmentidea: Swedbank AB

Investmentidea: Swedbank AB

den 17 februari 2017

At the beginning of February, Swedbank reported the Q416 results. It seems to be a well-run bank with predictable revenues, rising interest margins, stable credit quality, strong capital ratios and a dividend yield of 6%. As a result, the company increased its FY16 dividend by 23%.

Swedbank is a modern bank with its roots firmly anchored in Swedish savings bank history. As an inclusive bank with 7.2 million private customers and 600,000 corporate and organizational customers, it is the bank with the most customers in Sweden and also with a leading position in Estonia, Latvia and Lithuania.


Swedbank has its roots in the Swedish savings bank movement, the history of which reaches back to 1820. The Savings Banks were founded for the purpose of contributing to increased prosperity and a more secure existence through financial planning. The company is the key beneficiary of persistent Swedish mortgage growth as almost 60% of its loans are Swedish mortgages.


Volume growth and rising mortgage margins


Swedbank reported 4Q16 EPS of SEK3.73, beating estimates by 1.3%. The beat was driven by decent volume growth and rising mortgage margins. In October 2015, Swedbank acquired Sparbanken Oresund and, according to the press-release, the deal has had a positive impact on the bank's loan book. Despite an impressive performance in 2016, mortgage margins in Sweden are still rising. This trend may support Swedbank's net interest income in 1H17.


Net commission income increased by 8% quarter over quarter due mainly to stronger results from Swedbank's asset management and brokerage arm, Swedbank Robur. Card commissions were down on a quarterly basis as the third quarter was positively affected by a one-off item. Importantly, commission income provides a significant contribution to Swedbank's top line, representing 37% of the bank's total revenues.


Conservative business model and a dividend-increase by 23%


The group's CET1-ratio underpins its low-risk, conservative business model. Thanks to strong earnings generation and solid capital ratios, Swedbank increased its FY16 dividend by 23% to SEK13.2. This corresponds to a dividend yield of 6%, based on current prices. It is important to note that the 75% payout policy does allow the group to grow its loan book by 5%-6% sustainably.


Although Swedbank seems to trade at rich multiples, it is a very well-run bank with predictable revenues, rising interest margins, stable credit quality and strong capital ratios.


Currently, Swedbank AB stocks quote at around SEK229.90 and have a twelve-month target price of SEK229.81 (Bloomberg). The trailing P/E-ratio of the last twelve months is 13.06. At Bloomberg, 7 analysts recommend to buy the stock, 19 to hold and 4 to sell.


Investors can leverage their Swedbank trades with Vontobel Bull & Bear Certificates or Mini Futures.



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2023-02-06 01:12:23