Buy by micke (18/10/2023)
- 130.00 +40.57% by 11/06/2024
Handelsbanken had a good result 2023Q3 with net earnings of 4.02 SEK/share, slightly up from Q2. My best guess is that we will remain on these profit levels, a small decline in 24/25 when interest rates are lowered, but the bank's growth will compensate for this in a year or two. My approximation is 15 SEK/year net profit, PE23=6.5.The bank normally has a P/E of 10, which gives an upside of about 50%. I think we will see dividends of around 70%*15=10,5SEK, i.e. 10%, dividend yield.
Low credit losses
Should profits i.e. NII remain high and credit losses remain low as predicted by the bank, then the valuation should go up when the market perception of the risk returns to low levels.01
Handelsbanken is growing with good profits in all home markets especially interesting are the ones outside Sweden (i.e. England, Norway, Netherlands). The potential for growth is good, given Handelsbanken’s excellent credit rating and low C/I.01
Seem very competent and focused on delivering long term share holder value.
The CEO has announced that she (Carina Åkerström) will retire during 2024.01
Handelsbanken normally has P/B>1 and P/E=10 but now P/B=0.93, and P/E=8 (and the earnings are likely to be better 2023 than 2022).01
There are signals that this is peak interest rate, but FED and others central banks have indicated "higher for longer". Customers have moved savings to high yield savings but there is probably not much more to move since customers need to have money on salary accounts.01
Large exposure to commercial real estate
International analysts are worried that the large exposure to commercial real estate and private mortgage could result in significant credit losses. Local analysts and Handelsbanken does not seem worried, while explaining that there is a long way between the current situation and material risk for the bank having to take credit losses. Similar reflections where made on SEB's Q1 call. Taking this in consideration and the reasoning I see the risk for significant losses for Handelsbanken as very low.
The risks primarily is with real estate company share price, and unsecured bonds. I do see real estate companies getting very low valuations, take in more money from share holders, and restructure bonds. This could give an opportunity in this sector to get something with good risk/reward.01