Handelsbanken is still one of the best-performing banks in Europe, in an environment where many of its peers are taking a major hit. One of the possible reasons for the bank outrunning its peers from the industry, is that it has a very good position on its credit risk and costs, which means that Handelsbanken prefers reducing from its growth but keeping a stable credit risk, unlike its peers who seek to expand at all costs. The bank does not approve of a high credit risk, which is a strategy that dominates the company, despite its decentralized business model. This helps it to be one of the most efficient financial companies on the continent, with funding costs below its competitors’. However, this also makes the stock unattractive because the market understands Handelsbanken attractiveness and does not allow the stock to decline and trade at a discount value.
The Swedish division of Handelsbanken, Svenska Handelsbanken had earnings of 3.25 billion SEK, which is 1% up on the year, while the total revenue of the company and the net income grew by 2% and 7% on the year respectivelly, which helped to reduce the 33% decline in profits from securities. One of the reasons for growth was Sweden’s stable economic environment, the country being Handelsbanken’s main market. The good economic environment in Sweden, helped the bank to increase its loans there by an annual 2%. However, outside of Sweden, the company managed to grow its loans by 7% on the year, which was mainly fueled by significant market share growth.
Moreover, the bank managed to reduce its costs during the third quarter, despite its significant growth. Its operating expenses inched down by 1% in comparison with the last year, while its efficiency ratio fell below the 45% level, which is significantly better in comparison with its competitors. Analysts also seem to like Handelsbanken, because the company posses a solid capital position, control over costs and a better credit quality than its peers.
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