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On Monday, Kepler Cheuvreux revised its stance on Svenska Handelsbanken (ST:SHBa) AB (SHBA:SS) (OTC: SVNLY), downgrading the bank's stock rating from Buy to Hold while raising the price target from SEK123.00 to SEK127.00. The adjustment comes in anticipation of the bank's fourth-quarter report scheduled for February 5.
Markus Sandgren, an analyst at Kepler Cheuvreux, noted that Svenska Handelsbanken, often abbreviated as SHB (HM:SHB), has seen its shares reprice and now believes they are trading close to what the firm considers fair value.
This reassessment follows a robust third-quarter performance and market expectations of a substantial dividend. While the rating has been lowered, the price target has been increased, reflecting a more optimistic outlook for the bank's financial prospects.
Kepler Cheuvreux has also updated its dividend estimate for 2024 for SHB, projecting an increase of nearly 10%. This revision is based on the bank's temporary Common Equity Tier 1 (CET1) target buffer of 400 basis points, which is significantly above the standard buffer range of 100 to 300 basis points. However, analysts expect SHB to lower its target to 300 basis points in the following year, considering the pressures from net interest income (NII) and cost inflation, which are likely to highlight the bank's relatively lower return on equity (ROE).
Despite a stronger-than-anticipated performance in the third quarter, Kepler Cheuvreux forecasts a 13% decrease in earnings per share (EPS) for the fourth quarter. This prediction is based on an expected decline in NII and seasonally higher costs. The bank's performance in the upcoming quarterly report will be closely watched by investors and analysts alike, as it will provide further insight into SHB's financial health and strategic direction.
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