Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Swedbank AB (SWDBF, Financial) delivered a strong result with a return on equity of 17.5% and earnings per share of SEK7.61 for the second quarter.
- Net commission income increased by 5% due to higher income from asset management and card provisions.
- The company maintains a strong capital position with a CET1 capital ratio of 20.1% and a buffer of around 500 basis points above the requirement.
- Swedbank AB (SWDBF) has a solid credit quality, reporting credit recoveries mainly due to an improved economic outlook.
- The company is actively investing in fighting fraud, improving payment systems, data and AI, and IRB, reflecting a commitment to technological advancement and security.
Negative Points
- Net interest income decreased by 3%, primarily due to lower deposit margins.
- Expenses increased according to plan, with a higher investment and development pace, impacting the cost structure.
- The temporary hiring freeze introduced in late April resulted in a decrease in the number of employees.
- There is significant competition in the mortgage market, with low volumes and tight competition affecting growth.
- The ongoing discussions with US authorities regarding the pending AML case create uncertainty, with no clear timeline for resolution.
Q & A Highlights
Q: Can you discuss the funding strategy for the rest of the year given the significant funding done in the quarter and the NII outlook?
A: Anders Karlsson, CFO, explained that Swedbank issued approximately SEK80 billion in the first half of the year and plans to issue another SEK80 billion in the second half. The funding need is a mix of regulatory funding and maintaining MREL levels. On the NII outlook, he refrained from providing guidance but emphasized the importance of pricing strategy and potential lending volume increases.
Q: With a strong capital buffer, what is the timing and impact of IRB model approvals and Basel IV?
A: Jens Henriksson, CEO, stated that Swedbank targets a capital buffer of 200 basis points by 2025, with excess capital expected. Anders Karlsson added that Basel IV's impact is limited, mainly affecting operational risk, and IRB approvals are expected to continue into 2026. Rolf Marquardt, CRO, noted that Swedish private models are expected to be addressed in 2025.
Q: How do you view the competitive landscape for lending and deposit margins in Sweden and the Baltics?
A: Jens Henriksson noted that loan demand is low, leading to intense competition, especially in mortgages. Anders Karlsson mentioned that Swedbank has a significant amount of transaction deposits paying low interest, and the bank will continue its pricing strategy based on market rate changes and competition.
Q: Can you provide an update on the US AML case and its potential timeline?
A: Jens Henriksson stated that discussions with US authorities are ongoing, and while the process typically takes three to five years, the timeline is determined by the authorities. He emphasized transparency and adherence to disclosure principles when material developments occur.
Q: What is Swedbank's strategy for corporate lending in the Baltics, especially with new competition entering the market?
A: Jens Henriksson reiterated Swedbank's strong ambitions in the Baltics, aiming to grow in the corporate market. Despite new competition, Swedbank plans to maintain its leading position by offering the best services and products to its customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
