Sweden’s Top Two Banks Beat Expectations for Lending Profits

(Bloomberg) -- Sweden’s two biggest lenders by market value, SEB AB and Swedbank AB, reported better-than-feared lending income during the first quarter, with weakness offset by lower funding costs.

SEB’s net interest income fell 11% from a year ago to 10.5 billion kronor ($1.1 billion) while Swedbank’s shrank 9% to 11.5 billion kronor. Analysts polled by Bloomberg had forecast slightly bigger year-on-year declines at both lenders.

Swedbank shares rose as much as 3% as trading started in Stockholm, with SEB shares little changed.

The prospects of a global trade war and a renewed bout of interest-rate cuts by central banks are continuing to pressure banks’ top line, with Sweden’s Riksbank expected by some economists to reduce borrowing costs further this year to counter any inflationary threat from tariffs.

SEB said it saw higher activity in its corporate and investment banking division during the quarter, helping it post better-than-expected net fee and commission income of 6.7 billion kronor. Swedbank’s commission income of 4.1 billion kronor fell short of analyst expectations on weaker performance from its card business and asset management.

For SEB, “all-in-all we expect the fee and trading beat to be taken well (though the latter was expected by investors in our-view), but to be offset by questions on NII resilience and worse provisions,” Citigroup Inc. analyst Shrey Srivastava said in a note.

The two Swedish lenders remain among the best capitalized in Europe, reporting common equity Tier 1 ratios of 19.7% and 17.5%, respectively. SEB also announced on Monday a new share buyback program totaling 2.5 billion kronor. The repurchases will start on Wednesday and end by mid-July.

The results of Swedbank, “are a positive surprise in the context of investor expectations for weaker NII, however with questions to – again – surround the durability of this benefit, as well as the worse fee print,” Srivastava said.

Swedbank, which is Sweden’s second-largest by market capitalization, continues to wait for a verdict from US authorities, including the Department of Justice, to end a long-running probe into its past failures in anti-money laundering and counter-terrorism financing as well as past errors relating to information disclosures at its Baltic branches. It was already in 2020 fined a record 4 billion kronor by Swedish authorities for breaching money-laundering rules.

The lender repeated its previous stance in the report, saying the investigations are at different stages and it cannot at this time determine any financial consequences or when the investigations will be completed.

(Updates with Swedbank results, shares for both banks, analyst comments.)

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