SVNLF - Svenska Handelsbanken: Cheap On Asset Quality And Margin Concerns

2024-06-22 03:12:25 ET

Summary

• Shares of Svenska Handelsbanken have roughly matched wider European financials since my opening piece a year ago, albeit having struggled since March due to margin and asset quality concerns.
• Weak net interest income and higher costs have led to a contraction in pre-provision earnings and profitability, though the bank's return on equity remains comfortably in the double-digits.
• Handelsbanken shares trade for a little over book value. The stock would still offer a double-digit earnings yield and high single-digit dividend yield even if profitability hit historical lows.

Swedish bank Svenska Handelsbanken (SVNLF)(SVNLY) looked like a good value pick when I covered it this time last year , with the stock's then-discount to book value simply too cheap relative to its long-term history of earning a mid-teens return on equity ("ROE"). While the shares have returned a solid 25% in that time (with dividends), this is roughly in line with the wider European financials space ( EUFN ) and large Nordic bank peers like Nordea (NRDBY)(NBNKF) and Swedbank (SWDBY)(SWDBF)....

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