1、 SWEDISH BANKS Attractive valuations despite ROE decline We expect Q2 to show declining profitability(from lofty levels)in the sector,driven by central bank rate cuts and lingering cost inflation.However,we still see attractive shareholder return potential in the sector,underpinned by robust low-ris

2、k earnings,attractive valuations(2025e average P/E 10%in 20242026e.We keep our BUY ratings on the banks.Nordea and SHB remain our top sector picks.Q2 previews.We expect the Swedish banks and Nordea to report an average Q2 ROE of c16%,down c2%-points YOY,primarily due to lower NII and higher costs.We

3、 expect all the banks to report a sequential decline in NII(by c2%on average)due to rate cuts(Sweden and the eurozone)and continued deposit migration from transaction to savings accounts(particularly in the Baltics).We see commission income improving QOQ on higher mutual fund fees backed by rising s

4、tock markets,but do not expect a broad recovery in advisory fees in Q2.We forecast lingering cost pressures,with operating costs up on average 9%YOY,contributing to higher cost/incomes YOY for all the banks by 5%-points on average.We see asset quality remaining robust,with an average LLR in the low-

5、single digits.NII declines probably steeper than expected.The Riksbank kicked off the Swedish rate-cutting cycle with a 25bp lowering announced on 8 May.Most Swedish banks have reduced their 3-month mortgage rates(list rates and negotiated rates)by the full 25bp,while seemingly reducing savings depo

6、sit rates by less.We assume Riksbank and ECB rates of 2.5%by end-2026(close to money-market expectations),which,coupled with continued deposit migrations(from transaction to savings accounts),particularly in the Baltics,we believe will drive 1020%declines in NII from 2023 to 2026 for the Swedish ban