Swedbank (SWED) Q2 2024 earnings summary

Executive summary

• Q2 2024 profit reached SEK 8.6 billion, up 2% sequentially, with return on equity at 17.5% and cost/income ratio at 0.35, reflecting strong profitability and high cost efficiency.

• Credit quality remained solid, supported by net credit recoveries and a CET1 capital ratio of 20.1%.

• Net interest income declined 3% due to lower deposit margins and higher funding costs, while commission and trading income increased.

• Expenses rose 5% sequentially, mainly from higher staff and IT costs, and a donation to an educational foundation in Latvia.

• Economic conditions improved in home markets, with positive macro outlook for 2025 and expectations of prolonged high interest rates.

Financial highlights

• Net interest income: SEK 12,165m (-3% QoQ); net commission income: SEK 4,169m (+5% QoQ); net gains and losses: SEK 911m (+34% QoQ); other income: SEK 991m (+19% QoQ).

• Total income: SEK 18,237m (+1% QoQ); profit for the period: SEK 8,595m (+2% QoQ); EPS after dilution: SEK 7.61.

• Expenses: SEK 6,465m (+5% QoQ); cost-to-income ratio: 0.35.

• Customer deposits increased by SEK 22bn (excluding FX impact); loan portfolio up SEK 13bn (excluding FX impact); loans to customers: SEK 1,799bn (+1% QoQ); deposits: SEK 1,282bn (+1% QoQ).

• Net credit impairments: SEK -289m (recoveries); credit impairment ratio: -0.06%.

Outlook and guidance

• Economic recovery and higher growth expected in 2025 for Sweden and the Baltics, with inflation falling but policy rates to remain high for longer.

• Lending demand expected to return as economic outlook improves.

• Cost development to be more evenly distributed in H2 2024; hiring freeze to impact expenses.

• Basel IV impact expected to be limited, mainly from operational risk; IRB approval process ongoing into 2026.

• Capital buffer target of 100-300 basis points, aiming for 200 basis points in 2025.