Monday, 10 June 2013

Analysis of Handelsbanken

A Swedish bank

Company: Handelsbanken

Business: Classical banking with traditional corporate transactions, investment banking and trading, as well as consumer banking, including life insurance.

Active: They claim to have six home markets. I would claim that they have one home market which is Sweden and then they have presence in five others: the UK, Denmark, Finland, Norway and the Netherlands. I kind of like that they did not run to the Baltic countries like many other Nordic banks did but instead they have started to establish themselves in the Netherlands which means they are confident that their business model can beat the Dutch banks model and they also then avoid the throat cutting experience that the Baltic countries might offer...

P/E: 12.2

This analysis comes from a request made here and there are more to come.

The P/E for Handelsbanken is currently as low as 12 which makes it look pretty interesting! The price to book could have been a bit better than the 1.7 but all in all we end up according to Grahams formula with a clear buy. The E/S is not bad at all with over 20% and few banks are that good! The book to debt is at a pretty classical level and one would have hoped it to be slightly better. For the last five years the revenue has significantly dropped especially after 2008 and for that reason the growth has been a negative 5% per year for the last five years. The earnings have however been pretty solid. We then end up getting a motivated P/E of around 13 which means that today the market has put an acceptable price on the stock. They pay out a pretty decent dividend of 3.8% which represents 47% of the earnings which means they can keep increasing the dividends if the earnings remain the same or increases. From what I could see they have for the last four years significantly pushed up the dividends (around 10% per year) being paid out which is great and counts in their favour.

Conclusion: Handelsbanken seems to be a good bank to be a shareholder of and even today I would find it fully acceptable to step in because they look very solid and they seem to have a good business model.

1 comment:

Fredrik von Oberhausen said...

They made a 3:1 stock split.