Swedbank Earnings: Good First Quarter Despite IT-Related Fine

We maintain our SEK 207 per share fair value estimate for Swedbank after the bank reported first-quarter operating profits before tax of SEK 9,681 million, up 13% on a sequential basis. Owed to its low cost/income ratio (37%), the bank was able to offset 14% higher expenses with 9% higher income. The culprit for the increased expense line was found in the SEK 850 million fine Swedbank received for an IT incident in April this year. Underlying expenses excluding fines, which we don't view as recurring, decreased 2% to SEK 5,520 million. Income generation in the quarter of SEK 17,387 million was good overall, with higher net interest income of SEK 11,936 million versus SEK 10,918 million a quarter ago standing out. Higher deposit margins more than making up for weaker product margins, both driven by rising interest rates, drove the bulk of this quarter's NII performance. Credit impairments of SEK 777 million, or 16 basis points, still speak to an overall benign credit risk environment. Of the total SEK 777 million, Swedbank added SEK 198 million to its reserves beyond what its models predicted. We maintain our narrow-moat rating.