EUR 850.00 For Business Accounts Only

Morningstar | SEB Reports Good 3Q; FVE Maintained

Profits at SEB were up 7% in the quarter (as compared with last year) to SEK 4.5 billion, as strong net interest income and fee and commission income more than offset weaker financial and other income generation. Loans grew 8% to SEK 1.7 trillion as SEB increased exposure to nonfinancial corporations and reverse repos, while deposits declined 3% to SEK 1.2 trillion. The higher lending volumes and a positive deposit margin effect supported the good performance in net interest income of SEK 5,319 million versus SEK 5,080 million last year. Growth in assets under management since the beginning of the year was strong, with net inflows of SEK 47 billion (excluding divestments) and valuation gains of SEK 48 billion. Costs remained steady on a total level as higher staff costs (up 5%) were offset by lower depreciation and impairment charges as well as other expenses. As a result, the cost/income ratio declined to 47% from 49% a year ago. Return on equity of 12.7% was stable and ahead of our cost of equity assumption of 9%, although below SEB’s long-term target of 15%. We maintain our fair value estimate of SEK 96 per share, along with our no-moat rating.

On a segment level, SEB noticed some weaker activity from large corporates preparing for expected interest-rate hikes and a normalisation of quantitative easing programs, although performance at the bottom line remained flat versus the year-ago period. Appetite for household mortgages waned slightly in numbers but increased in volumes, while the corporate segment remained positive, with demand for loans on the up.

SEB’s common equity Tier 1 ratio of 19.7% lies 310 basis points above requirements set by the Swedish Financial Supervisory board and exceeds management's intended buffer of 150 basis points.