It has gone well for the Swedish major banks during the third quarter. Swedbank is no exception, the bank is reporting figures that are better than what analysts expected.
Why is it going so well for the banks?
I don't want to comment on other banks. But for us, it's about a strong underlying business, in addition to which there have been some one-time effects and timing effects, says Swedbank's CEO Jens Henriksson.
When interest rates go down, the banks' net interest income also goes down. That is, how much the bank earns on the difference between lending and deposit rates. For Swedbank's part, it's a decrease of 5 percent during the quarter compared to the same period last year.
Then we must have a cost structure that is not too large, says Henriksson.
Employment Freeze
To keep track of their costs, the bank introduced an employment freeze before the summer. According to Jens Henriksson, it has an effect, in combination with lower consulting costs.
Households are still under pressure, how does that affect you?
We notice that consumption is not taking off, we see in the mortgage market that it is still dampened. Many Swedes are still having a tough time.
Jens Henriksson is, however, optimistic about next year, which he believes will be good for households in both Sweden and the Baltic region. A combination of falling interest rates, tax cuts, real wage increases, and "stable and well-managed banks that can be there and help the economy grow" will contribute to this, according to Henriksson.
In line with the Swedish Central Bank lowering interest rates, it will gradually brighten up for households, he says.
Tough Competition
Swedbank still has 22 percent of the Swedish mortgage market. But Jens Henriksson describes the competition as tough.
If we're not fast enough and don't respond quickly enough to customers, we can lose the deal, he says.
In a comparison from Compricer of the banks' average mortgage rates in September, which Di published, Swedbank had the second-highest variable rate.
Shouldn't you lower your mortgage rates faster?
We lower in line with the Swedish Central Bank lowering interest rates. Now, when the Swedish Central Bank lowered by 25 points, we went out five-ten minutes later and announced that we're lowering. We should have the best overall offer.
Swedbank reports an operating profit, before write-downs, taxes, and fees, of SEK 13.2 billion for the third quarter. This can be compared to SEK 12.9 billion during the same quarter a year earlier.
The net interest income, i.e. what the bank earns on the difference between lending and deposit rates, fell 5 percent to SEK 12.2 billion. The corresponding quarter a year earlier, the net interest income was SEK 12.9 billion, and the average forecast among analysts was SEK 11.7 billion according to Bloomberg.
The fee income – what the bank earns on fees and commissions – increased 11 percent to SEK 4.3 billion.
American authorities are investigating Swedbank's work against money laundering in the past. In the report, the bank writes that the investigations are ongoing and that it is currently not possible to assess the scope of "potential financial consequences or when the investigations will be completed".
Source: TT, Swedbank
