Higher Operating Expenses Dent Swedbank's Fourth-Quarter Results; Fair Value Estimate Maintained

For the fourth quarter, Swedbank reported profits before tax of SEK 5.97 billion, in line with consensus estimates collected by the group. On a sequential basis, profits before tax declined 12% caused primarily by higher operating expenses. Higher staff costs, marketing activities, and IT spend were the main culprits. Expenses in the fourth quarter tend to be seasonally higher caused by increased investment spend in particular. That being said, this performance did stick out negatively. Income generation was decent, declining 1% on slightly lower lending margins being partially offset by higher lending volumes. Net commission income showed a strong quarter (up 6%) on high equity issuance activity and increasing assets under management. This was, however, offset by lower results in fixed income trading. We maintain our SEK 203 fair value estimate per share and narrow moat rating.