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Svenska Handelsbanken A SHB A

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Svenska Handelsbanken Aces European Stress Test

Niklas Kammer, CFA Equity Analyst

Analyst Note

| Niklas Kammer, CFA |

Svenska Handelsbanken passed the 2021 European Central Bank stress test with flying colors. Our thesis on Handelsbanken has long been that the bank is a superior underwriter following a bottom-up credit risk approach, which has kept credit losses well below peers' over the past decades. Additionally, Handelsbanken is very well capitalized. It therefore comes as no surprise to us that Handelsbanken performed well in this exercise. In the adverse scenario, its common equity Tier 1 ratio fell to 16.2% at its lowest point over a three-year stress horizon from a starting point of 20.3% at the end of 2020. This is well ahead of its minimum requirement including buffers of 11.1%. This 5.1% spread above requirements would have even covered any additional countercyclical buffer (around 2%), which was not considered during this stress test. Risk-weighted assets inflated 8.7% during the stress, while 13% of Handelsbanken’s capital base was consumed by credit losses and lower net interest income. We maintain our fair value estimate of SEK 108 per share and narrow moat rating.

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Company Profile

Business Description

Handelsbanken is one of the largest Swedish banks with significant exposure to the Swedish mortgage market, about 44% of total loans are tied to the Swedish real estate market. Outside of Sweden, the bank operates primarily in the U.K., Denmark, Finland, and the Netherlands. Handelsbanken generates about three quarters of its income through its interest spread based business including mortgages, household loans, as well as corporate loans to large and small enterprises. The bank increasingly offers asset management, mutual fund and private banking services to its clients.

Kungstradgardsgatan 2
Stockholm, SE-106 70, Sweden
T +46 87011000
Sector Financial Services
Industry Banks - Diversified
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type
Employees 12,272


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