2018 was on the surface a solid year for Handelsbanken. According to the 2018 annual report, operating profit increased by +5% and net income by +8%, top line by +5%. ROE was 12,8% which is below my assumed 15% but still a remarkably good number for a large bank.
Just looking at the bottom line, the first quarter of Handelsbanken looks great: Net income up +19%, operating profit up +18%. However top line only grew at +4% (vs. Q1 2018).
However this is solely a function of the fact that the bank reversed their provision into the Oktogonen pension fund for employees which they clearly state in the quarterly report:
Although I usually don’t care that much about quarterly earnings, let’s start with two interesting ones:
Handelsbanken is on my watch list, I consider them as one of the best bank franchises globally but still a little bit too expensive. Officially, “Mr. Market” was disappointed because earnings were below expectations. The stock dropped around 8% on that day:
Many value investors are of the opinion that banks are not investable. Either because they say the business is too complex or because they think banks are doomed anyway. Maybe due to the overall low valuations of banks, I get regularly requests on writing about how to value bank,s so at least some people seem to be interested. The greatest value investor of all obviously has no problems with investing into banks. Wells Fargo is the biggest position of Buffett at around 26 bn USD and he holds various other bank assets like the Bank of America Warrants.
A few days ago, a good friend recommended me to look at Handelsbanken from Sweden as an example how a well run bank should look like.