HSBC sees risks to Nordic banks' NII, limited valuation upside
23/02/2024 11:54
** HSBC sees limited further valuation upside for Nordic
banks, citing risks to net interest income and weakening
earnings momentum
** It says that NII has peaked and numerous headwinds,
such as falling rate expectations, deposit switching, thinner
deposit spreads, and absence of loan growth are evident
** While higher than expected buyback/dividend announcements
from SEB SEBa.ST , Danske DANSKE.CO and Handelsbanken
SHBa.ST drove positive market reaction, HSBC says there are
factors contributing to payout constraints
** Among these factors, it names macro uncertainties,
internal model reviews, higher systemic risk buffers,
acquisition effects/AML investigations
** In a European sector context, Nordic distributions are
"unremarkable", the broker says, pointing out that all of the
Nordic bank, except Danske are in the bottom third of the
European sector for expected total yield over 2024-2026
** It cuts Handelsbanken and SEB to "hold" from "buy" as
recent price strength leaves valuations close to the broker's
target prices of SEK 128 and SEK 160, respectively
** It upgrades Islandsbanki ISB.IC to "buy" from "hold" as
planned buybacks mean 2024-2026 yield is the highest of the
Nordic group except Danske, and further government disposals are
a possible catalyst in 2024
** The broker retains its "hold" rating on Swedbank
SWEDa.ST and Nordea NDAFI.HE
(Reporting by Marta Frąckowiak)
((marta.frackowiak@thomsonreuters.com))