Morningstar | Skandinaviska Enskilda Banken Reports in Line First-Half 2019 Results; Shares Fairly Valued
No-moat Skandinaviska Enskilda Banken reported first-half 2019 results in line with our full-year expectations. We maintain our fair value estimate of SEK 95 per share. Net interest income of SEK 11 billion, up 5% versus the same period last year, was supported by volume growth of 5% and a positive deposit margin effect after the Swedish repo rate was increased in the beginning of the year. We anticipate SEK 21.8 billion in net interest income for the full year. Net fee and commission, virtually flat year over year, benefited from good activity in the corporate finance business that was offset by weaker contributions from assets under management. Although AUM volumes increased owed to higher equity market valuations as well as net inflows, a shift toward passively managed funds and therefore lower margins formed a headwind on fee income. Operating expenses increased 3% year over year in the first half of 2019, in line with our full-year assumption.The group experienced good business activity from corporates, large and small, as well as healthy growth in mortgages supporting its retail operation, while concerns around trade conflicts, a slowing global economy, and a flattening yield curve dampened activity of financial institutions creating somewhat of a drag. The Baltic segment continued its strong performance on the back of robust economic growth, driving both loan and deposit volumes as well as increasing margins.
Its capital and liquidity position looks healthy. At the end of the second quarter, the group had a 190 basis points common equity Tier 1 buffer above its minimum requirement of 14.7% set by regulators. Additionally, its liquidity coverage ratio of 149% is comfortably above the minimum target of 100%.
Skandinaviska Enskilda Banken provides corporate, retail, investment and private banking services, as well as asset management and life insurance services. Merchant Banking provides wholesale and investment banking services to corporations and institutions. Retail Banking provides products mainly to private customers and small and medium-sized corporate. Wealth Management performs asset management and private banking activities and Life provides life, care and pension insurance. Division Baltic provides retail, asset management and private banking services in the Baltic countries. As of Dec 31 2013, Co. had total assets of SEK1,904.16 billion and total deposits of SEK821.47 billion.
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