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Banking on a recovery?

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Carlsquare
31 mar 2022 | 2 Minimiera
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In the wake of Russia’s invasion of Ukraine and ensuing sanctions, shares in European banks have performed weakly. Since the beginning of the year, Swedish banks have underperformed but have actually fared less bad than their European peers since the start of the war on February 24.

In the wake of Russia’s invasion of Ukraine and ensuing sanctions, shares in European banks have performed weakly. Since the beginning of the year, Swedish banks have underperformed but have actually fared less bad than their European peers since the start of the war on February 24. We believe one explanation is that the direct exposure to Russia and Ukraine is small. However, one should note that both Swedbank and SEB have substantial operations in the Baltics, and some of its corporate clients there may be affected as trade with Russia will likely suffer.

Since March 8, OMXS30 has recovered some twelve per cent. We believe Swedish bank shares are well-positioned if the ongoing bounce in global stock markets continues.

One reason is the poor relative price performance YTD, as mentioned above. SEB A is down some 16 per cent, and Nordea is down ten per cent (the dividends have already been paid out).

Also, bank valuations are low, with PE and Price/Book ratios below ten and close to 1x, respectively, at the same time as dividend yields are 6-12 per cent. (Source: S&P Capital IQ).

Further, Swedish banks could benefit from rising interest rates. Unlike the US, the yield curve in Sweden is steepening.

SEB A (in SEK) 12-month chart

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Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

The SEB A share has moved above MA20and Fibonacci 38.2 levels and has positive short-term momentum. From a technical point of view, we see the potential for the shares to appreciate to slightly above SEK 112 (MA50 and Fibonacci 50 levels)

SEB A (in SEK) weekly five-year chart

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Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

 

The full name for abbreviations used in the previous text:

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence

Risker

This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the trading products (securities) mentioned herein, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. The base prospectus and final terms constitute the solely binding sales documents for the securities and are available under the product links. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. This information includes or relates to figures of past performance. Past performance is not a reliable indicator of future result.

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