SEB Gains as Exane Favors Bank’s Business Mix: Stockholm Mover

SEB AB rose to its highest level in more than 20 months in Stockholm trading after Exane BNP Paribas said the Swedish bank’s business mix will help it cope better with the economic environment in 2013 than Nordic peers.

SEB advanced as much as 0.4 krona, or 0.7 percent, to 58.8 kronor, its highest intraday level since April 26 2011. The stock was up 0.5 percent at 58.7 kronor at 11 a.m. local time, with volume at 34 percent of the three-month daily average.

SEB generated 44 percent of its operating profit in the third quarter from its Merchant Banking unit, which offers commercial and investment banking services to large corporate and institutional clients, making the lender less reliant on net interest income for profits than many of its more retail banking-focused Nordic peers. Exane BNP Paribas today upgraded their recommendation on SEB shares to outperform from neutral with a 12-month share price estimate of 65 kronor, up from 55 kronor and 11 percent higher than yesterday’s closing price.

“Our more positive view on SEB is founded on a belief that its business mix, which favours fee income over net interest income, is the right one for 2013 as we expect a sector-wide slowdown in NII growth and a recovery in market related activities,” Andreas Haakansson, an analyst at Exane BNP Paribas in Stockholm, wrote in a note to clients today.

Exane BNP Paribas downgraded its recommendation on DNB ASA, Norway’s largest bank, to neutral from outperform. It has underperform ratings on Denmark’s Danske Bank A/S and Stockholm-based Nordea Bank AB, while Swedbank AB is rated outperform and Sweden’s Svenska Handelsbanken AB has a neutral recommendation.

“Even though the Swedish economy is slowing down, we expect only a minor increase in loan losses as we believe the fundamentals of both the household and the corporate segments are sound,” Exane BNP Paribas’s Haakansson said. “Instead, our main concerns continue to be shipping and Denmark.”

Danske Bank is Denmark’s largest bank, while Nordea is the second-biggest lender in the country, as well as the world’s fourth-largest shipping bank. DNB is the No. 2 ship financier.