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On Wednesday, Skandinaviska Enskilda Banken AB (SEBA:SS) (OTC: SKVKY) shares fell following the announcement of a lower-than-anticipated dividend. Citi analysts, led by Shrey Srivastava, reaffirmed their Neutral rating and SEK64.00 price target on the bank’s stock. The drop in share price, estimated at around 3-4%, was attributed to the bank’s decision to prioritize capital deductions for fiscal year 2025 buybacks over dividends, contrary to market expectations.
Investors and analysts had key questions regarding SEB’s financial strategies, particularly the choice between dividends, which are expected to become semi-annual starting in 2026, and buybacks, which offer more flexibility. Another focus was the timing of the net interest income (NII) reaching its lowest point, which is anticipated to be in the second half of 2025 or the first half of 2026, depending on central bank rate paths. Additionally, cost developments are being closely monitored, especially the impact of the U.S. dollar’s strength, which could pose further challenges if it persists throughout 2025.
Despite the negative earnings momentum, primarily due to NII headwinds, Citi’s analysis suggests that SEB remains a high-quality bank. The bank benefits from favorable conditions such as increased savings and investment activities in the Baltics, as well as its asset and wealth management and large corporate exposure. However, the current price, at approximately 1.5 times book value for a projected return on equity of around 14% in 2026, seems to reflect these positives.
In summary, Citi’s reiteration of the Neutral rating indicates a cautious stance on SEB’s stock, considering both the potential tailwinds and the challenges ahead. The bank’s strategic decisions on dividends and buybacks, along with macroeconomic factors such as interest rate trends and currency strength, are likely to be significant determinants of its financial performance in the coming year.
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