HSBC sees 'more pain than gain' from rate cuts for Nordic banks

Islandsbanki hf

10/05/2024 13:15

** HSBC remains cautious on Nordic banks, saying Wednesday's
25bp rate cut from the Riksbank signals the start of policy
easing that is likely to maintain downward pressure on Net
Interest Income (NII)
    ** Share prices continue to lag the sector with Nordic banks
underperforming the STOXX European Banks index  .SX7P  by over
20% in the last quarter, the broker says
    ** "We expect the absence of core earnings momentum to
continue to weigh on share performance," it says, adding that Q1
EPS forecasts were only met due to trading profits and low
impairments
    ** It sees positive news on capital distributions as
unlikely until later in the year and says pay-out constraints
remain an issue for investors
    ** Margin dynamics look more favourable in the Danish market
as deposit repricing and customer switching continues to lag
other markets, HSBC notes
    ** The broker maintains "buy" on Danske Bank  DANSKE.CO  and
Islandsbanki  ISB.IC , but trims TP by 3-4% for both, as they
trade at discounts to P/TNAV and offer double-digit yields with
buyback support
    ** It maintains "hold" for SEB  SEBa.ST , Swedbank
 SWEDa.ST , Nordea  NDAFI.HE  and Handelsbanken  SHBa.ST , 
lowering TP by 18% to SEK 105 for the latter

 (Reporting by Elsa Ohlen)
 ((elsa.ohlen@thomsonreuters.com;))