Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Svenska Handelsbanken AB (SVNLF) reported its highest Q4 operating profit in its 153-year history, amounting to 9.2 billion.
• The cost-income ratio remained below 40%, demonstrating effective cost management.
• Net credit loss reversals were reported, indicating strong asset quality and risk management.
• The board proposed a total dividend of 15 per share, reflecting confidence in the bank's financial stability.
• The bank's capital position is robust, with a CET1 ratio of 18.8%, significantly above regulatory requirements.

Negative Points

• Total expenses increased by 7% in Q4, with restructuring expenses contributing to this rise.
• Operational operating profit for the full year declined by 2% when adjusted for items affecting comparability.
• Net interest income was flat compared to Q3, indicating challenges in growing this revenue stream.
• The bank's loan-to-deposit ratio in the UK suggests sensitivity to short-term rate changes.
• There is no clear cost outlook provided for 2025, leaving uncertainty about future expense management.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Sign with SVNLF.

Q: Could you provide insights into the UK loan book's recent growth and whether this trend is expected to continue? Additionally, how does the current loan-to-deposit ratio affect your sensitivity to interest rate changes? A: Michael, the CEO, noted that demand for lending, particularly in the corporate segment, is picking up in the UK. The bank is also working to deepen its presence in the mortgage market. Regarding the loan-to-deposit ratio, the bank is more sensitive to short-term rate changes due to having more deposits than loans, but there have been no changes in hedging strategies.

Q: What is the outlook for costs in 2025, and are there plans for significant investments in the business? A: CFO Carl stated that while efficiency gains have been a focus in 2024, the bank will continue to work on cost culture. Investments will continue to strengthen commission income, indicating a balanced approach to cost management and growth.

Q: Do you have any plans to split the dividend into two tranches, and what are your growth plans for non-Swedish operations? A: Carl confirmed there are no plans to split the dividend. The bank is focused on organic growth in the UK, Norway, and the Netherlands, with no immediate plans for acquisitions, although they remain open to opportunities.

Q: Can you elaborate on the rationale for maintaining a 400 basis point capital buffer above regulatory requirements? A: Carl explained that the buffer is a precautionary measure given geopolitical uncertainties. The bank will review this buffer continuously, but it is not a requirement from rating agencies.

Q: How do you view the long-term profitability of the bank, given your conservative risk profile and cost efficiency improvements? A: Carl emphasized that the bank aims for superior return on equity compared to peers. The cost initiatives and strong asset quality position the bank well for achieving its corporate goals, with growth expected in the UK, Norway, and the Netherlands.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.