Q3 2026 Svenska Handelsbanken AB Pre-Close Earnings Call
Speaker #1: Feel free to reach out to us in the IR team. Now, let's go through the respective lines and start with NII. First, in terms of volume development, we always refer to official statistics.
Speaker #1: And the majority of the group's lending is, of course, in Sweden. Swedish official statistics for July and August suggest that mortgage lending growth in the bank has been slow, and that corporate lending volumes have decreased since the end of Q2.
Speaker #1: In Norway, the lending volumes have declined on both mortgages on both the mortgage and corporate side over the past 2 years, but in Q2 we stated that we are starting to see signs of a declining of the declining trend leveling out.
Speaker #1: On a positive note, in Q2 we highlighted the positive trends in household and corporate lending in the UK and the Netherlands, which had continued consecutively for the past two years.
Speaker #1: Second, the net of margins and funding can be a bit volatile between quarters, as you know, given the abundance of factors affecting it, such as funding, competition, mix effects, time lag effects, etc.
Speaker #1: In Q2, there was a fairly large negative sequential effect on NII from margins and funding, of around $250 million. Of the decline, we mentioned that about half or so related to two main parts.
Speaker #1: First, while higher market rates in the quarter resulted in higher funding costs, the interest rates on central bank deposits were unchanged, as the policy rates were largely unchanged.
Speaker #1: Second, we also mentioned a negative lag effect in the repricing of some corporate lending as market rates increased. As you all have seen, market rates in Q3 have shown similar patterns as in Q2, with higher market rates and flat policy rates throughout most of the quarter.
Speaker #1: In other words, given what we said and saw in Q2, the market development suggests a headwind also in this quarter in the net of margins and funding, all else equal.
Speaker #1: Third, Q3 has one more day than Q2. The net day count effect of the past quarters has been around SEK 20–30 million per day.
Speaker #1: Finally, in terms of FX, the average FX rate, or the average rate of the Swedish krone in the quarter, has weakened so far against all relevant currencies.
Speaker #1: And this should, of course, mean some tailwind to sequential NII development. Then, over to FIN commissions. Starting with savings-related fees, which account for around two-thirds of the commissions.
Speaker #1: The development of the daily average stock market indices during the quarter usually tends to be somewhat of a leading indicator for the savings-related fees.
Speaker #1: There are, however, of course, several other factors affecting the savings-related fees, such as level of inflows, mix effects, etc. But we can note that the daily average of the stock market indices is up in Q3 compared to Q2.
Speaker #1: In terms of the development of the other fee lines, we can only refer to the historical seasonal patterns. Moving on to NFT, NFT is a minor income line, as you know, and has averaged around SEK 500 to SEK 600 million per quarter over the past few years.
Speaker #1: However, as seen in the past, it can vary by a few hundred million in some specific quarters, when credit spreads, interest rates, and/or currencies have been particularly volatile.
Speaker #1: Over a few quarters, these swings tend to even out, though. The base component of the NFT line is the customer-driven NFT, which is fairly consistent at around $400 to $500 million per quarter.
Speaker #1: Then the cost lines. Just like on the income side, FX volatility also affects the cost side. And as mentioned previously, the Swedish krona has weakened, which should lead to negative FX effects on the costs—meaning higher costs in our foreign home markets in Swedish krona terms, all else equal.
Speaker #1: But you are well aware of how to do these calculations. In terms of potential octagonal provisions, we do not guide, as you know, but, as always, we appreciate when you are transparent about your octagonal estimates in order to assess the underlying expectations for the staff costs.
Speaker #1: Apart from that, we can only refer to the historical patterns on the cost side—credit losses. The only thing we can say is that there have been no public disclosures that you might have missed during Q3.
Speaker #1: Regulatory fees. Here, just bear in mind that in Q2, $123 million was booked as regulatory fees for mandatory interest-free deposits at the central bank.
Speaker #1: That fee refers to the next 12 months and will obviously not be repeated in Q3. Finally, on capital: the reported CT1 ratio in Q2 was 17.2%, which was 250 basis points above the SREP.
Speaker #1: This means that the bank has now been back for a few quarters in the target range of 1 to 300 basis points above the SREP.
Speaker #1: You should not expect that we will guide on an exact targeted level within that target range, since the target range is a range, not a specific point within the range.
Speaker #1: In Q2, we stated that the new Peter models for corporate exposures had been approved by the FSA. This will come into effect in Q3, and we stated in Q2 that we expect a net neutral effect on the capital requirement, as the Pillar 2 add-on for these is expected to be removed.
Speaker #1: In Q2, we also stated that the risk exposure amount for sovereign, central bank, and municipality exposures will decrease by approximately SEK 13 billion, as these exposures will move from IRB to standardized models in Q3.
Speaker #1: And finally, on capital: in Q3, we will communicate this year's SREP. With those final words, we thank you all for listening, and if you have any questions, as said, please reach out to us in the IR team.
