SVNLF - Svenska Handelsbanken AB (SVNLF) Q1 2024 Earnings Call Transcript

2024-04-24 16:47:08 ET

Svenska Handelsbanken AB (SVNLF)

Q1 2024 Earnings Call Transcript

April 24, 2024 02:00 AM ET

Company Participants

Conference Call Participants

Rickard Strand - Nordea

Magnus Andersson - ABG SC

Andreas Hakansson - SEB

Namita Samtani - Barclays Bank

Sofie Peterzens - JP Morgan

Nicolas McBeath - DNB

Gulnara Saitkulova - Morgan Stanley

Riccardo Rovere - Mediobanca

Hugh Moorhead - Berenberg

Jens Hallen - Carnegie Investment Bank

Presentation

Operator

[Foreign Language] [Multiple Speakers]

Unidentified Company Representative

[Foreign Language] [Multiple Speakers]

Income is down, expenses are up and we are far from satisfied. We are never satisfied when development goes in that direction. Return on equity in the quarter amounted to 14%, which is somewhat down from the previous quarter and just below the average of the past ten quarters. Net interest income was generally impacted by a continued reduced credit demand and a high rate of amortizations in our home markets. But we also see quite a significant increase in pressures on the margins, especially on deposits in all of our home markets. Net fee and commission is holding up well. We see a continued good trend in savings and particularly in private banking and occupational pensions; these are areas, of course which are very significant for our growth, which is to be balanced both against lending growth and fees and commission business.

We have a cost increase of 6% in the quarter. Some parts of this were non-recurring in nature, such as a major component to the profit sharing system Oktogonen and mostly from 2023 and what's pleasing to note however in terms of the cost increases is that our branches are hiring more people. There is a demand for services out in the country and this is met by somewhat increased level of employees. CI ratio amounted to 42% and credit quality is, as expected, continued very stable and we report net reversals of 95 million; yet again a sign of the fact that the bank's model with lending to strong resilient customers and our proximity to our customers is a way for us to manage, for example, balancing credit losses. Credit losses are all about how you manage credits over time and our branches do this in a very, very good way with a strongly entrenched organization locally. The proximity to our customers is not only building our customer satisfaction, but we can also operate close to the bank's customers, make necessary adjustments and reduce the risk as a result.

The common equity tier one ratio was 18.8%, 4 percentage points above the regulatory requirement. In house, in the bank where we are right now, there's a very determined work of change ongoing to improve efficiency and strength in our organization. And as of the 1st of April we have a new organization in place. We've moved central business supporting units and components closer to our business and you know that we want to keep costs and expenses as close to income as possible. So business support operation costs are transferred close to business decision and we strengthen and expand the decentralized responsibility for the implementation of efficiency improvement to improve our abilities. In 15 years, our corporate objective has been to have a higher return on equity than our competitors in our competitive home and comparable home markets.

We have five main areas where we work in a very focused manner right now. The first one is the fact that we need to find an efficient operation and we require a good balance between business generating and business supporting units. And we're now reviewing very, in a very focused manner how we can improve efficiency, mainly in the business supporting component, and deliver everything that we need to drive our business forward, but no more than that. IT development expenses have been at a high level for a number of years and as a result, we have a number of new tools for our people to use, such as a CRM system. We've worked with Microsoft 365 that we've implemented, amongst many other things, and we've worked a lot with regulatory-based requirements to be compliance -- in line with compliance, and all of this is obviously reflected in our development costs. ...

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