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 efficiency.

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

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

• Policy rates were cut by Riksbank and ECB, with further reductions expected, but rates to remain high for longer.

• Focus on customer value, operational efficiency, digital transformation, and sustainability initiatives.

Financial highlights

• Net interest income declined 3% sequentially to SEK 12,165m due to lower deposit margins and higher funding costs; net commission income rose 5% to SEK 4,169m, driven by asset management and card activity.

• Total income for Q2 was SEK 18,237m (+1% sequentially); net gains and losses increased 34% to SEK 911m, supported by FX and fixed income trading.

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

• Credit impairments were a net recovery of SEK 289m, with a YTD credit impairment ratio of -0.06%.

• Customer deposits increased by SEK 22 billion (excluding FX impact); loan portfolio up SEK 13 billion (excluding FX impact).

Outlook and guidance

• Economic recovery expected in 2025, with GDP growth forecasts improving across Sweden and the Baltics.

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

• Basel IV and IRB model changes expected to have limited impact; operational risk to drive capital requirement changes.

• IRB approval process ongoing through 2026, with Swedish mortgage models expected to be approved in 2025.

• Targeting a sustainable return on equity of at least 15% through operational efficiency and growth in prioritized segments.