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15 Feb 2024
To: 2024, Cc: Credit and Capital
Skandinaviska Enskilda Banken (SEB-A:STO), 0 | Skandinaviska Enskilda Banken AB Class A (SEB.A:OME), 0 | Swedbank AB Class A (SWED.A:OME), 0 | Swedbank (SWED-A:STO), 0 | Svenska Handelsbanken AB Class A (SHB.A:OME), 0 | Svenska Handelsbanken (SHB-A:STO), 0 | Danske Bank (DANSKE:CPH), 0 | Danske Bank A/S (DANSKE:CSE), 0 | Nordea Bank Abp (NDA:STO), 0 | DNB (DNB:STO), 0 | DNB Bank ASA (DNB:OSL), 0
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To: 2024, Cc: Credit and Capital
Skandinaviska Enskilda Banken (SEB-A:STO), 0 | Skandinaviska Enskilda Banken AB Class A (SEB.A:OME), 0 | Swedbank AB Class A (SWED.A:OME), 0 | Swedbank (SWED-A:STO), 0 | Svenska Handelsbanken AB Class A (SHB.A:OME), 0 | Svenska Handelsbanken (SHB-A:STO), 0 | Danske Bank (DANSKE:CPH), 0 | Danske Bank A/S (DANSKE:CSE), 0 | Nordea Bank Abp (NDA:STO), 0 | DNB (DNB:STO), 0 | DNB Bank ASA (DNB:OSL), 0
- Published:
15 Feb 2024 -
Author:
Davey Nick DN | Thurner Bettina BA -
Pages:
23
Post-FY23 - Nordics are now on a divided path
Nordic Banks'' Q4 earnings are now wrapped up, which means we are officially entering a year where NII and EPS growth are no longer a given. Balance sheet structure defines the path ahead, as Swedish banks are poised to face declining NII, while the other Nordics still have some tailwinds ahead. As NII becomes less powerful in driving earnings, we saw investors, earnings calls and management meetings focus on two topics: capital and credit demand.
Credit demand - since you''ve been gone
While rates kept increasing, the margin expansion experienced by the Nordic banks clearly overpowered the lack of credit demand. It previously appeared to be almost a rounding error; now it is anything but. Rates have peaked, and for Sweden we see direct second order implications via intensifying competition. We highlight some geographical differences and explain why a higher LTV cap wouldn''t solve Sweden''s lack of credit growth.
Capital - overpowering most results
Q4 is naturally a quarter where capital (return) is discussed - this year it was clearly a factor that captured the market''s attention on the day for most Nordic banks. We summarise the most important developments on capital, headwinds and buffers and show which banks can keep up with the sector.
SEB - Outperform; DNB and Handelsbanken - Underperform
Heading into 2024, a year of economic recovery and turning PMIs, we remain less enthusiastic on more defensive Nordic banks. Higher ''restorative'' power from rates elsewhere in Europe means the sector is catching up on most metrics - notably capital return. We continue to prefer SEB, which offers an attractive business mix into lower rates and capital return upside. We rate Handelsbanken and DNB at Underperform, where rates have been less transformative and they are trading at a premium.