EU FINANCIALS: SEB Group (SEB Aa3/A+/AA)- Q4 Results - market reaction & valuation

Following the SEB group FY 24 results this morning the equity is down, following a good run into results. This was mostly being attributed to a lower than expected dividend this quarter. Reuters reports the SEK 11.5 dividend was below an expected SEK 12.73. 

Clearly management have to balance equity holder returns with bondholder expectations - which will be slightly jarred by the -1.8% fall in CET1, although this is largely frontloading of the planned - and still optional should a shock occur - share buyback. We think a combination of solid capital generation and management target of 100-300bps above the minimum threshold are both reasonable for creditors, although creditors would probably like to remain in the upper half of that range.

We think by far the most notable point in the Q4 results is the jump in Stage 3 loans - which were not touched upon much during the earnings call or questions. Management noted there were " a handful of larger exposures requiring provisioning", but believed this uncorrelated.  Further commenting that broadly credit quality remains legacy risks in funding-dependent sectors like real estate and private equity remains

The bonds are arguably lagging a strong market today, most noticeable in their 2's.

Valuation: Despite the minor concerns SEB trades close to SWEDA in Sr Non-Pref - which are lower rated but reported very decent results recently. The given how steep the SHBASS tier 2 curve is however, we wouldn’t be surprised if investors prefer the higher quality SHBASS 3.625% as the pick of the Swedish tier 2's

Link to earlier Q4 results post - https://mni.marketnews.com/412KTMd