Bank of America just raised its EUR/USD forecast
On Tuesday, Citi analysts adjusted their stance on Swedbank (SWEDA:SS) (OTC: SWDBY (OTC:SWDBY)), downgrading the stock from Buy to Neutral and reducing the price target from SEK295.00 to SEK243.00. The bank, currently valued at $25.5 billion, trades at a P/E ratio of 7.3x and according to InvestingPro analysis, is trading close to its Fair Value. The revision comes after Swedbank’s net interest income (NII) outperformed consensus estimates due to timing differences, with a 4% beat in the third quarter of 2024 and a 6% beat in the fourth quarter of the same year. Despite these positive results, the bank’s stock has experienced a considerable run-up year to date, although not as sharply as other European banks.
Citi analysts have expressed concerns that Swedbank’s NII may face near-term pressure as the aforementioned timing differences begin to unwind. They project approximately 4% below consensus on NII for the first quarter of 2025, leading to a 6% lower pre-provision operating profit estimate. Consequently, they have initiated a negative 90-day Catalyst Watch on Swedbank shares.
The downgrade to Neutral reflects the analysts’ apprehension regarding the earnings outlook for the first half of 2025, which is obscured by the timing differences and market share loss in Sweden. These factors are expected to overshadow the potential positive impacts from loan growth in the Baltic region and the anticipated capital return following the conclusion of the US investigation into the bank. Despite these concerns, Swedbank maintains a notable 7.28% dividend yield and has delivered a strong 22.28% return year-to-date. InvestingPro subscribers can access 8 additional key insights about Swedbank’s financial health and growth prospects.
Swedbank has been a notable player in the banking sector, and its recent performance had exceeded expectations. However, Citi’s analysts suggest that investors should temper their expectations for the bank’s short-term financial performance. The reduction in the price target to SEK243.00 from SEK295.00 indicates a more conservative valuation of the bank’s shares in light of the emerging challenges. With the next earnings report due on April 29, 2025, investors seeking deeper insights into Swedbank’s valuation metrics and growth potential can access comprehensive analysis through InvestingPro’s advanced financial tools and expert recommendations.
In other recent news, Swedbank has been downgraded by BofA Securities. Analyst Tarik El Mejjad adjusted the bank’s rating from Neutral to Underperform, setting a new price target of SEK 217, down from SEK 239. This revision is due to Swedbank’s recent outperformance compared to Nordic peers, which El Mejjad attributes to temporary factors. The analyst pointed out that Swedbank’s net interest income has shown resilience, influenced by higher dividend payouts and lower market expectations for policy rate cuts. However, El Mejjad anticipates a significant decline in the bank’s estimated net interest income for 2025. He also forecasts that the difference between revenue and expense growth rates, known as operating jaws, will be negative. Additionally, the analyst noted that potential positives from a U.S. fine settlement have already been factored into the stock’s current distribution. El Mejjad concluded that Swedbank’s stock appears expensive when considering its price-to-earnings and price-to-tangible book value ratios.
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