Press Release 28 April 2022 

 

SBAB Interim Report January-March 2022

 

SBAB's Interim Report January-March 2022 is now available for download on www.sbab.se/IR.

 

Q1 2022 (Q4 2021)

• The quarter was largely dominated by geopolitical concerns arising from Russia's invasion of Ukraine. Moreover, the latter part of the quarter was marked by expectations of higher key interest rates as a result of rising inflation.  
• Total lending increased 2.5% to SEK 478.7 billion (467.0). Total deposits increased 1.4% to SEK 147.0 billion (145.0).  
• Net interest income rose to SEK 1,084 million (1,017). The resolution fee was moved from net interest income to a new line in the income statement (imposed fees) in the first quarter. After adjustment for the resolution fee, which amounted to SEK 48 million (43) for the first quarter, net interest income increased SEK 19 million, mainly driven by lower funding costs
• The risk tax was introduced during the quarter. For SBAB, the tax entails an additional cost (reported together with the resolution fee on a separate line in the income statement) of about SEK 261 million in the current year and thereafter around SEK 332 million in 2023.
• Operating profit decreased 2.6% to SEK 573 million (588), primarily due to the introduction of the risk tax, which amounted to SEK 65 million for the quarter. Lower expenses positively impacted the item.
• Credit losses amounted to SEK 17 million (recoveries: 1), primarily due to increased loss allowances of SEK 16 million resulting from increased concerns in the operating environment and higher interest rates. Confirmed credit losses remained low and totalled SEK 2 million (2).
• The return on equity amounted to 9.5% (9.4) and the C/I ratio was 33.7% (43.5). Return on equity, excluding the risk tax, amounted to 10.5%.

 

Financial information

	2022	2021		2022	2021
	Q1	Q4		Jan-Mar	Jan-Mar
Total lending, SEK bn	478.7	467.0		478.7	433.5
Total deposits, SEK bn	147.0	145.0		147.0	136.5
Net interest income, SEK million	1,084	1,017		1,084	1,041
Net result of financial transactions, SEK million	-49	-3		-49	-15
Expenses, SEK million	-358	-452		-358	-323
Credit losses, SEK million	-17	1		-17	9
Operating profit, SEK million	573	588		573	728
Return on equity, %	9.5	9.4		9.5	12.7
C/I ratio, %	33.7	43.5		33.7	31.0
CET1 capital ratio, %	13.1	13.5		13.1	13.1

 

 

 

 

 

CEO statement from Mikael Inglander:

 

SBAB's healthy business performance continued through the first quarter of the year and once again we have posted stable financial results and good volume growth. The outbreak of war in Ukraine dominated the quarter and gave rise to increased uncertainty and a deteriorating outlook.

 

Russia is continuing its invasion of Ukraine. The situation amounts to a humanitarian tragedy, which is causing tremendous human suffering. It is distressing that people are being forced to abandon homes and families; meanwhile, the economic consequences of the war are becoming increasingly apparent. The situation is unparalleled in modern times and impacts all of us - not least those of SBAB's employees with close family ties to Ukraine. In addition to offering support and various external contributions, we also support our employees in helping new arrivals - for example, by allowing them to use their volunteer days for this purpose.

 

Continued strong lending trend

2022 had a challenging start. Rising inflation, the after-effects in the wake of the coronavirus pandemic and rising uncertainty in the fixed-income market have created a new reality for us to contend with. Even though it has been pushed into the background by other events, naturally, the crisis in Ukraine also entails some economic consequences, both globally and in Sweden. Sharp price rises have been noted in recent months for electricity, fuel and food. Electricity costs have started to be factored into new home purchases in some parts of the country (a factor we highlighted during the quarter, including in one analysis).

 

Sweden's economy remains strong, however, and housing turnover and time taken to complete a sale remain at high levels. We are growing and capturing market shares. SBAB's total lending increased to SEK 479 billion during the quarter. An increase of 3% on the previous quarter and up 10% year-on-year. Retail lending increased 2% in the quarter to a total of SEK 343 billion, of which SEK 341 billion comprised residential mortgages and SEK 2 billion consumer loans. Lending to corporates and tenant-owners' associations continues to perform well and increased in the quarter, from SEK 130 billion at the start to SEK 136 billion at the end of the quarter. This corresponds to an increase of 5% on the previous quarter and a full 20% year-on-year. The growth is a clear signal that our customers appreciate the service we provide and our competitive offering. 

 

Western central banks have clearly announced future increases in market interest rates, which has led to raised funding costs for us and other banks. Due to the above, we have raised mortgage rates for essentially all maturities during the quarter. Transparency and attractive terms and conditions represent central components of our customer offering and we continuously adjust our interest rates to reflect the prevailing market circumstances.

 

Stable financial performance despite rising uncertainty

The underlying earnings trend for the quarter was good and profitability remained at a stable level. However, as a result of increased competition from new and existing mortgage providers, higher market interest rates and the introduction of the new risk tax, we believe that mortgage margins and therefore profitability may decline going forward. For SBAB, the tax alone entails an additional cost (reported together with the resolution fee on a separate line in the income statement) of about SEK 261 million in the current year and thereafter around SEK 332 million in 2023. SBAB has previously highlighted how inappropriate the new tax is since it risks creating unfair competition in the market and raising borrowing costs for households and companies. Costs developed as planned and amounted to SEK 358 million for the first quarter of the year. We are investing in new technology to enhance our customer offering and to increase cost efficiency in our operations. As previously communicated, my objective is for us to become even better at prioritising and reaching goals in various development and investment initiatives.

 

Finally, I would like to give my sincere thanks to all employees for performing so well during the quarter.

 

Mikael Inglander

Acting CEO, SBAB

 

 

 

For more information, please contact:

Douglas Norström, Head of Press, SBAB.

Tel: +46 (0)73-027 19 65, E-mail: douglas.norstrom@sbab.se