Investing.com – Citi downgraded Svenska Handelsbanken AB () to Sell, citing concerns over the bank’s ability to achieve significant loan book growth in Sweden and Norway.
The firm lowered its volume growth assumptions for both the short and long term based on competitive sector dynamics and the bank’s exposure to the challenged real estate segment in household and corporate lending.
The bank grew Swedish household and corporate lending by 1% and -2% respectively from 4Q24 to 2Q26, while the system grew 4% and 5%. Swedish household and corporate deposits increased 6% and -1% during the same period, compared with system growth of 8% and -2.5%. Sweden accounts for approximately 69% of the bank’s loan book.
Citi noted that competition is intensifying in the region from state-owned and digital challengers as well as other incumbents such as Swedbank, which has focused on improving mortgage processing times. The firm expects sluggish system growth going forward, with Swedish household debt-to-GDP at approximately 85%, among the highest in Europe.
The bank has experienced a contraction in its lending book in Norway.
The UK, which has seen strong growth in recent quarters, represents only 10% of the loan book. Citi believes it may be difficult to reverse the growth dynamic given lower investment in digital offerings versus peers, with IT expenses as a percentage of total operating expenses lower than three Swedish peers.
The stock trades at a premium of approximately 11-12x price-to-earnings versus the sector at 10-11x and approximately 1.5x tangible book for a forecasted 12-13% return on tangible equity. Handelsbanken remains Citi’s least preferred Nordic and European bank.