SWDBF - Swedbank: A High Yield But Now No Upside (Rating Downgrade)

2024-06-05 15:48:33 ET

Summary

• Swedbank has seen significant market-beating returns since November 2023, based on low valuation and attractive yield.
• The company has generated solid rates of return, with high interest rates leading to impressive RoE and declining cost-to-income ratios.
• Swedbank remains conservative in its operations, with solid asset quality and strict underwriting criteria.

Dear readers/followers,

Swedbank ( SWDBY ) has been a very profitable investment for me as of late. Since I wrote my last article on the company back in November of last year, close to the time when the bank "troughed", the company has seen a significant market-beating rate of return. You can see this here, and you can find my last article on the bank here.

My thesis at the time was based on a very solid sort of outperformance due to both a low valuation and a very attractive upcoming yield, derived from interest rate tailwinds. This has materialized - and not just for Swedbank. I also updated my thesis for other Scandinavian banks, such as Handelsbanken ( SVNLF ) and Nordea (NRBAY). Swedbank has never been, for the past few years, in as good a position fundamentally as these two, but still represents an attractive opportunity for the medium term....

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