Handelsbanken's Quiet Quarter Has a SEK 3 Billion Footnote
A five-year model approval finally lands, but the old margin and growth questions haven't gone anywhere.
SHB-A.ST · Earnings Call · 2026-10-21
A capital footnote that matters more than the quarter
The headline numbers were Handelsbanken-solid: operating profit of SEK 7.4bn, ROE of 13.5%, a cost/income ratio of 42.3%, and a credit loss ratio of zero. But the item that actually changes the forward math sits in the capital section: after five years of dialogue with the Swedish FSA, the bank has approval for new PD models for both corporate and Household exposures. Corporate was implemented in Q3; household lands in Q4. Net of the related Pillar 2 add-on cancellation, the household model is expected to reduce the capital requirement by about SEK 3bn. This is the freshest company-specific signal in the transcript. In February, when asked about the IRB review, Michael Green was explicit: “The outcome, we don't really know. We are working on the situation that we have in the IRB world, both in U.K. and for that matter, in other places as well. It's too early to tell -- to be concrete in that matter.” — Michael Green, Chief Executive Officer (CEO) · 2026-02-04 Seven months later, the largest models are approved and the uncertainty has flipped into a capital tailwind. Green called it “a milestone after 5 years of dialogue with the FSA” — Michael Green, Chief Executive Officer (CEO) · 2026-10-21. The CET1 ratio was 17% after deducting the anticipated dividend, 250bp above the 14.5% requirement including Pillar 2G, and inside the 100-300bp target range. That matters because Handelsbanken's capital return debate has been stuck. The bank pays out most of its earnings—92% of profits for the period, SEK 8 per share anticipated—but management has refused to steer to a point inside the range. Marten Bjurman: “we don't steer towards anything. It's basically we have set a range.” — Marten Bjurman, Chief Financial Officer (CFO) · 2026-10-21 The model approval doesn't answer the dividend question, but it does mean the bank enters the Q4 board debate with more capital flexibility than it had in the summer.The same margin story, told again
The income statement is where the old Handelsbanken tension returns. NII rose only marginally in Q3 and was down on an FX-adjusted basis; for the first nine months it fell 8% adjusted for currencies, which management attributed to lower margins in the wake of lower short-term market rates. Bjurman was blunt about the mechanism: “we have not been able to take out the increased funding cost on our customers. That is the bulk of it in this.” — Marten Bjurman, Chief Financial Officer (CFO) · 2026-10-21 The margin pressure is broad—mortgages in Sweden and Norway are described as thin, corporate margins are competitive, and the higher funding cost is not being fully passed through. This is not a new theme. In July, Bjurman said: “We see margin pressure both on the mortgage side and also on the corporate side in Sweden. It's both.” — Mårten Bjurman · 2026-07-15 The difference now is that the rate conversation has turned. Analysts on the call were already asking about the next rate hike and how customers might amortize more; Green said the bank's macro team expects one or two hikes, nothing like the previous hiking cycle. That is a modest positive for a deposit-rich bank, but it cuts both ways: higher rates help deposit income and hurt borrowers' appetite.Growth: the U.K. and Netherlands carry the flag; Sweden stays flat
The volume picture is the most familiar part of the story. Sweden is roughly 75% of home-market profits, and lending there is still flat. Management's explanation is unchanged: it is deliberately exiting corporate relationships that no longer fit the risk appetite. Bjurman called it lagging behind the market a little bit in terms of volume and added that it is not a major concern. The Q&A pushed back hard, as it has for several quarters.The offset is outside Sweden. U.K. household lending rose 5% in local currency and corporate lending 9%; the bank called it the highest loan growth since Q2 2018. Netherlands lending rose 10%, with corporate up 18%. Management leans on small market share in those markets and the branch office model as the growth engine. That is credible—but it is also the same argument the bank has made for several quarters, and it still leaves group growth dependent on markets that are small relative to Sweden.we have performed what I would call a little bit of housekeeping of the books, primarily in the former part of the year. And we have seen that also a little bit in Q3, not as much as in the previous quarter, but still this is not a onetime thing. This is something that we do continuously. So that can happen anytime. And we are happy to do so that is basically a guarantee for prudent banking long term.