Cards and Payments Drive Good Q2 Results for Swedbank; FVE Maintained

We maintain our SEK 192 per share fair value estimate and narrow moat rating for Swedbank after the bank reported a good second quarter. Performance in the quarter was driven primarily from card and payments income returning as the economy has begun opening up and activity recovered. Net interest income, on the other hand, was flat, as lower margins on Swedish mortgages offset volume growth and a positive contribution from treasury. In total, operating income grew 4%, compared with the first quarter this year. This led to a positive operating leverage effect as expenses of SEK 4.9 billion were kept in check and are on track for meeting the full year underlying cost guidance of SEK 20.5 billion. Loan loss reversals of SEK 27 million, or 1 basis point of total loan volumes, also supported the good results this quarter. This performance resulted in a respectable 14% return on equity.