Bank of America just raised its EUR/USD forecast
Investing.com -- Swedbank AB (ST:SWEDa) has been downgraded to "neutral" by analysts at Citi Research, following concerns that the bank’s recent positive performance, particularly in terms of net interest income (NII), could face headwinds in the near future.
The downgrade reflects the expectation that Swedbank’s NII will come under pressure due to the unwinding of timing differences that had previously benefited the bank’s earnings.
Citi analysts point out that Swedbank has been one of the few beneficiaries of timing differences in recent quarters, which helped deliver beats in NII by 4% in the third quarter of 2024 and 6% in the fourth quarter of the same year.
However, this positive momentum is expected to reverse, with Citi forecasting a 4% miss on NII for the first quarter of 2025, leading to a 6% shortfall on pre-provision operating profit.
This revision is one of the key factors influencing the downgrade and the opening of a negative 90-day Catalyst Watch on Swedbank shares.
The analysts also flag other concerns, such as the loss of market share in Sweden, which adds uncertainty to the bank’s earnings outlook for the first half of 2025.
While Swedbank may benefit from tailwinds like loan growth in the Baltic region and potential capital return after the conclusion of an ongoing U.S. investigation, these factors are not enough to offset the immediate challenges posed by timing differences and domestic market pressures.
This change in outlook is a shift from the more optimistic view Swedbank had enjoyed earlier, as the market’s previous assumptions did not fully account for the upcoming challenges.
Analysts at Citi now caution investors about the bank’s short-term earnings prospects, especially as they expect NII to remain under pressure in the near term.