Handelsbanken released its quarterly report on Wednesday, a report that left the market disappointed and the share price dived 12%. It was the stock’s worst trading day in modern times, according to Di. On Thursday, the downward journey continued and the share traded down just over 2%.
Handelsbanken reported a result for the first quarter that was below expectations. Operating profit decreased by 3% to SEK 8.267 billion compared to the same period last year and by 9% compared to the fourth quarter of 2023. The reason was weaker net interest margins that weighed on net interest and higher operating costs.
Adjusted for exchange rate effects and the fee to the deposit guarantee system, net interest income fell by 4% on a sequential basis during the first quarter.
However, Morningstar analyst Niklas Kammer maintains his fair value estimate of SEK 137 per share and the narrow economic moat.
“Handelsbanken flagged that competition was weighing on margins when pricing on customers’ deposit accounts was tightened. The bank also saw customers moving balances to deposit accounts with lower margins, which exacerbated the problem. The comparison bank SEB showed a similar dynamic in the first quarter,” writes Kammer in an analysis after the report.
Operating expenses increased by 6% compared to the previous quarter, driven by higher salary costs as a result of an expanded staff base and salary adjustments.
“The resulting cost-to-income ratio of 42% demands attention from management, which has established cost control as one of its cornerstones in the coming years,” notes the analyst, who believes the stock is undervalued and trading at a discount of around 29%.
The CEO buys shares after the price crash
Handelsbanken’s CEO Michael Green took the opportunity to add to his holdings after the price crash and has bought 5,000 shares in the company for SEK 97 each, corresponding to close to half a million kroner. The purchase is dated to April 25 and after the transaction the CEO owns 75,000 shares, according to the owner data service Holdings, Nyhetsbyrån Direkt reports.
Michael Green took office as CEO of the big bank on January 1 this year.
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