- Nordea today reported a profit before tax of SEK 10.6 billion for the first quarter.
- As a result, all four major banks in Sweden have reported results that have exceeded market expectations.
- Good profits nonetheless, it is reduced credit losses that are most surprising.
Reduced credit losses are the common thread in the four bank reports. Handelsbanken even withdrew money from previously made provisions. Credit losses therefore became a positive item of SEK 8 million for the first quarter of this year.
Swedbank set aside 240 million, at the same time a year ago the corresponding sum was 2.1 billion. And the pattern is repeated in Nordea and the bank SEB. Compared with the previous quarter, credit losses also fell markedly.
There are several explanations.
The feared bankruptcy wave has so far failed to materialize, the industry recovered quickly and the banks have been able to deliver stable results throughout the pandemic – and this quarter is no exception. An additional contributing factor, probably the main one, is the government’s and the Riksbank’s support measures.
The purchases of bonds keeps interest rates and banks’ borrowing costs down, while housing and share prices soar. This entails increased volumes of mortgages. The stock market acid means that commissions from fund management are growing, as are brokerage income from trading in shares and fixed-income securities.
In the hot housing market, deals are being settled already at the screenings, said Swedbank CEO Jens Henriksson when the bank’s results were presented on Tuesday. He admitted that Swedbank was too slow to give a loan notice. Swedbank lost market share.
SEB’s CEO Johan Torgeby is on the same track. New digital competitors and the battle for market share open up for price pressure and lower margins.
This is good for customers, but in the long run dangerous for the big banks’ profitability.
Mortgages are the banks’ large and stable profit generator.
Source: ICELAND NEWS