Swedbank (Hold, TP: SEK202.00) - Encouraging signs
We have raised our 2021–2023e earnings by 1–2% and consequently our target price to SEK202 (198), inspired by Swedbank’s good Q3 results, including signs of abating pressure on lending margins. We find the valuation undemanding at a 2022e P/E of c11x, given the bank’s earnings stability and profitability. Despite the signs of reduced margin pressure, we still see downside risk to mortgage margins, which could continue to weigh on Swedbank’s profitability. On balance, we find the risk/reward neutral and reiterate our HOLD.Swedbank provides financial services and products in its home markets of Sweden, Estonia, Latvia and Lithuania. Co. has four segments: Swedish Banking, which is responsible for all its Swedish customers except corporates and financial institutions; Large Corporates and Institutions, which is responsible for large corporates, financial institutions and banks as well as for trading and capital market products; Baltic Banking, which operates in Estonia, Latvia and Lithuania; and Group Functions and Other. At Dec 31 2013, Co. had 731 branches and 1,396 automated teller machines. Also as of such date, Co. had total assets of SEK1.82 trillion and deposits of SEK620.85 billion.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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