Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Skandinaviska Enskilda Banken AB (SVKEF, Financial) has successfully integrated the acquisition of Germany's Air Plus, enhancing its corporate credit card business.
- The bank continues its share buyback program, committing to a capital target of 300 basis points or below as a capital buffer by year-end 2024.
- The establishment of a Chief Operating Officer function aims to improve decision-making speed and clarity in a complex banking environment.
- Skandinaviska Enskilda Banken AB (SVKEF) maintains a strong position in the Nordic market, holding the number one spot in FX, Nordic equities, and asset management.
- The bank's operating income has grown by 3% year-to-date, reaching 61.9 billion for the first nine months of 2024.
Negative Points
- Net interest income has declined by 4% sequentially, excluding the impact of Air Plus, due to changes in deposit mix and market conditions.
- The bank has underperformed relative to larger peers in Sweden in terms of public perception, as indicated by the Swedish Quality Index.
- Operating expenses have increased by 6% on an underlying basis, partly due to the integration of Air Plus.
- Expected credit losses have risen to 393 million in the quarter, reflecting specific provisions on a small number of exposures.
- The bank's return on equity has decreased to 17%, with an operating profit decline of 7% compared to the same period last year.
Q & A Highlights
Q: What is Skandinaviska Enskilda Banken AB's (SEB) strategic focus in asset management and wealth, and why is the bank not participating in ongoing consolidation in Sweden?
A: Johan Torgeby, CEO, explained that asset management and wealth are key strategic focuses due to their attractive growth characteristics. SEB is not participating in large consolidation plays because such moves are rare and transformational. The bank is closely monitoring developments and is involved in smaller, strategic initiatives to enhance its offerings organically.
Q: How should we view the sustainability of net financial income (NFI) in a falling interest rate environment?
A: Christoffer Malmer, Head of Wealth Management, stated that SEB does not provide specific guidance on NFI. Historically, NFI has been difficult to predict, and the bank relies on past trends as a proxy. The impact of interest rates on NFI is inconclusive, but negative rates are detrimental. SEB views its NFI partly like an asset management firm, benefiting from asset price increases and market activity.
Q: What are the expected integration costs for Air Plus in 2025, and what cost reductions can be achieved?
A: Christoffer Malmer indicated that SEB plans to book 550 million SEK in implementation costs in Q4 2024. The run rate of costs for Air Plus is about 250 million SEK per month. SEB aims for Air Plus to be EPS accretive in 2025, with costs and income balancing out during the year. More detailed estimates will be provided with the full-year results.
Q: Can you comment on the deposit mix shift in LC and FI, and is this trend expected to continue?
A: Johan Torgeby noted that there are no permanent signs of a significant shift. The changes are attributed to different types of deposits and their margins. The bank does not see any meaningful impact from clients locking in rates due to falling interest rates.
Q: What is SEB's approach to capital return, and how should we think about the pace and size of potential buybacks?
A: Christoffer Malmer reiterated SEB's commitment to reaching a capital buffer of 100 to 300 basis points by year-end. The bank will use tools like dividends, extraordinary dividends, and share buybacks to manage capital levels. The exact pace and size of buybacks will depend on business growth and capital generation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
