Skandinaviska Enskilda Banken Earnings: Good Cost Control Is Positive as Net Interest Income Weakens

SEB reported first-quarter operating profits of SEK 12.316 billion, up 9% on a sequential basis. This good performance was carried by stronger net financial income (up 36%) and lower net expected credit losses (1 basis point versus 9 basis points in the fourth quarter of last year). The former benefited from material fair value adjustments in SEB’s derivative positions. The latter performed strongly on an absolute basis, suggesting a continued well-managed loan portfolio, but was also helped by an easy comparable as the fourth quarter of 2023 saw a large single credit exposure distort the picture. Looking through these movements in the quarter, performance was decent. Net interest income decreased by 3% as corporates and retail deposits migrated toward higher-yielding accounts. Net fee and commission income grew 2%, primarily driven by higher assets under management due to improving equity market levels. Operating expenses remained virtually flat as SEB compensated for 8% higher staff costs by reducing IT, marketing, and consultant costs. We maintain our fair value estimate of SEK 152 per share and no moat rating.