Swedbank is reorganising, cutting costs, and the bill is arriving now

The most important takeaway from this report is that the decline in headline profit is driven almost entirely by deliberate choices rather than a deterioration in the underlying business. Profit for the quarter came in at SEK 7.3 billion, down about 10 percent from both the previous quarter and the same quarter last year. On the surface, that looks worrying. However, if the increased costs from the two acquisitions, annual salary increases, and the absence of one off income items that boosted Q4 2025 are adjusted for, the picture looks more stable. In that light, the bank’s underlying earnings power appears to be holding up reasonably well in a more difficult environment than a year ago.

Return on equity, a measure of how efficiently a bank turns shareholder capital into profit, fell from 15.2 percent a year ago to 13.3 percent. This decline is significant, and management has not tried to hide it. The cost to income ratio, which shows how many kronor the bank spends for every krona it earns, rose to 0.40 from 0.35 a year ago. Neither figure looks particularly strong on its own.

Net interest income, the core margin between what a bank earns on loans and pays on deposits, held up better than expected. It increased sequentially to SEK 11.1 billion, with Entercard and Stabelo contributing a combined SEK 485 million during the quarter. Lending volumes increased to SEK 1,898 billion, up 6 percent year over year, suggesting that demand remains intact. Credit impairments, or provisions set aside for loans that may default, came in at just SEK 164 million. This is modest by any standard, even against a stressed geopolitical backdrop.

At first glance, the 13 percent increase in expenses compared with Q1 last year makes it appear as if the bank is losing control of its costs. A closer look tells a different story. Entercard and Stabelo contributed significant headcount and operating costs that simply were not part of last year’s figures. In addition, Swedish salary increases took effect, and one off VAT reimbursements that flattered Q4 2025 expenses have now disappeared.

More importantly, management said after the quarter closed that the ongoing reorganisation is expected to generate around SEK 1.3 billion in extraordinary costs by the end of 2026. In return, the bank expects annual savings of SEK 1 billion from the end of 2028. Headcount is expected to decrease from approximately 17,350 to 16,800. This is a concrete commitment rather than a vague ambition.

Swedish banks have enjoyed a strong couple of years, supported by higher interest rates as central banks tightened aggressively. However, that backdrop is now changing. The Riksbank and the ECB have started lowering rates again, and the conflict in the Middle East has introduced a layer of genuine macro uncertainty that cannot be priced with confidence.

Swedbank’s economists expect Swedish GDP growth of around 2 percent in 2026, which points to neither a boom nor a recession. The Baltic operations, which contributed significantly to profit this quarter, are expanding faster, with Lithuania expected to grow by around 3 percent. Compared with Nordic peers, Swedbank’s credit quality still looks solid, with only 0.52 percent of loans classified as impaired. The bank is trading at approximately SEK 318 to SEK 322 per share, giving it a market capitalisation of just over SEK 358 billion.

The first is whether the restructuring charges in the coming quarters will be in line with the SEK 1.3 billion estimate or rise further. Cost discipline will be management’s main credibility test over the next two to three quarters.

The second is the DFS investigation in New York, which remains open with no disclosed timeline or financial estimate. While the DoJ’s decision to close its case in January was a relief, one unresolved US regulator is enough to cast a shadow over the stock.

Taken together, both factors suggest that it is still too early to consider the setup compelling.