Svenska Handelsbanken AB fell to its lowest level in two months in Stockholm trading after Morgan Stanley said the lender is unlikely to return as much money to shareholders as its rivals and cut its rating on the stock.
The shares dropped as much as 5 kronor, or 1.8 percent, to 266.8 kronor, its lowest intraday price since Feb. 19, and traded 1.3 percent lower at 268.4 kronor as of 11:25 a.m. local time. The stock, falling for a third day, has advanced 15 percent so far this year, giving the bank a market value of 170.2 billion kronor ($26.2 billion)
Morgan Stanley cut its rating on Handelsbanken shares to underweight from equalweight, saying that potential capital returns are “already priced in.” Handelsbanken, which is expanding outside the Nordic region by opening new branches in the U.K. and Netherlands, has advanced 30 percent in the past 12 months, compared with an increase of 17 percent in the 40-member Bloomberg Banks and Financial Services Index.
“Although we believe Handelsbanken is one of the best run banks in Europe, we believe it is fully valued,” Alvaro Serrano, an analyst at Morgan Stanley in London, wrote in a note. It also “needs to hold higher capital ratios than its peers -- towards the higher range of 13 percent to 15 percent -- and hence its ability to pay out additional capital is more limited.”
While Handelsbanken had an estimated core capital ratio adjusted for Basel III regulation and higher risk-weights on Swedish mortgage assets of 14.9 percent last year, its funding profile and bigger reliance on short-term funding as well as the loan growth in its international divisions means it has less scope than rivals to pay out cash to shareholders, Serrano wrote.