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26 May 2023
Waiting for the clouds to clear
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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Waiting for the clouds to clear
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:
26 May 2023 -
Author:
Davey Nick DN | Thurner Bettina BA -
Pages:
12
Good start into the year, but not appreciated by the market
Like the sector, the Nordics generally reported a strong Q1, beating bottom line estimates by 18%. In particular, NII surprised positively (and by more than the sector), signalling ongoing underappreciated rates potential. Cost inflation was ''good enough'' and some lower quality items supported the PBT beat further. However, the positive operating trends were rewarded in valuations, a function of peak-NII and CRE concerns.
Not the peak (yet)
One conference call constant was ''is this peak NII?'' questioning. It''s clearly a relevant debate in these markets given predominantly floating-rate assets, higher observed deposit beta and higher wholesale funding gaps. Additionally, banks see an increase in deposit competition, with Handelsbanken even mentioning they could start remunerating transaction accounts. But less doesn''t mean none, there are still hikes to be priced in over the next 2 quarters. With a 15-30% system ''interest benefit channel'', the peak is still not reached until 2H23 earliest.
Real estate double whammy
Real estate markets are weighing on the Nordics twofold. Firstly: CRE, a topic that is not new but intensified in the aftermath of the SVB turmoil. Except for DNB, all Nordic banks appear at the top of CRE-exposure rankings. In our new note [here], we argue why current fears might be exaggerated. Secondly, mortgage market activity has slowed down significantly, given tighter household budgets and falling house prices. Norway is faring somewhat better than the rest, but new credit creation might become more difficult throughout year for players with mortgage focus.
Continue to favour SEB, less potential for Danske and DNB
So far, the Nordics have seen a difficult start to the year in the markets, underperforming the sector by up to 22%. There is however room for some re-rating, especially as some of the concerns ease. We continue to favour SEB, mainly on their corporate...