Release Date: July 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Svenska Handelsbanken AB (SVNLF, Financial) reported an improvement in ROE to 15.2% from 13.7% in the previous quarter.
- Operating profit increased by 3% to SEK8.5 billion, driven by income growth and cost reductions.
- The bank's CET1 ratio stood at 18.9%, which is 400 basis points above the regulatory requirement, indicating a strong financial position.
- Fee and commission income grew by 6%, reaching the second highest level historically, supported by the savings and mutual funds business.
- The bank maintained its high credit ratings, with Moody's raising the outlook from negative to stable, confirming its financial stability.
Negative Points
- The bank incurred a one-off cost of SEK300 million for redundancy payments as part of its efficiency initiatives.
- Volume growth remained subdued across all home markets, impacting overall business expansion.
- Expenses increased by 10% year-over-year, attributed to increased staffing and annual salary revisions.
- The Netherlands, the smallest home market, saw a drop in operating profit and an increase in the cost-to-income ratio from 53% to 55%.
- There is ongoing pressure on lending margins, particularly in the mortgage sector, due to fierce competition.
Q & A Highlights
Q: How do you foresee the level of IT investments in 2025-2026 compared to 2023, and are there more redundancies expected?
A: Carl Cederschiöld, CFO, stated that while they won't guide on absolute spending levels, they expect a slower pace of IT investments after completing major projects. Regarding redundancies, the current agreements are significant, but the process is ongoing, and more may follow as needed.
Q: Can you elaborate on the outlook for lending and deposit margins in the coming quarters?
A: Carl Cederschiöld, CFO, mentioned that while they don't guide on margin development, they expect lending margins to increase slightly as rates drop, despite fierce competition. Deposit margins might shrink, but the overall impact remains to be seen.
Q: What is the impact of the recent headcount reduction on revenue, and are more cuts expected?
A: Carl Cederschiöld, CFO, indicated that the reduction in headcount, particularly in overhead roles, should not impact revenue. The process of optimizing costs will continue as necessary to maintain efficiency.
Q: How should we think about underlying costs and restructuring charges going forward?
A: Carl Cederschiöld, CFO, explained that the focus is on achieving efficiencies in central departments and support functions. The goal is to maintain a competitive edge by adjusting costs according to market conditions, with a corporate focus on return on equity.
Q: Why is the CET1 buffer target still high at 400 basis points, and what would trigger a change?
A: Carl Cederschiöld, CFO, acknowledged that macro risks are receding, and they will review the buffer target by Q4. The current buffer is maintained to ensure stability, but adjustments may be considered based on future assessments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
