Sydbank: Results Inline, Bumper Buyback May Question Recent EUR Curve Tightening

Sydbank (SYDB DC) reported 4Q23 results which were marginally ahead of expectations (ex-lower tax) with credit metrics generally moving in the right direction. However, a large new equity buyback (10.3% of CET1 capital). The bank’s EUR curve has tightened meaningfully YTD but that buyback (an equity positive) may start to question the credit move, we feel.

• Key credit metrics: credit losses were a positive, non-performers are 150bp of loans (from 170bp at Sep-23) and CET1 is up 40bp since Sep-23 (to 18.9%). So metrics are moving in the right direction but there is new DKK1.2bn buyback, which lowers CET1 to 17.0%.
• Revenues are flat q/q (+22% y/y) and broadly in line with consensus, with NII slowing on recent rate moves. Costs were 1% better than consensus and credit losses were, again, a small write-back, with retail lending write-backs covering the corporate loan book. Pre-tax profit was 2% better than expectations and a lower tax rate drove a bigger beat on net profit (+13%) .
• Outlook: net profit is seen at DKK2.5-2.9bn (consensus: 2.83bn) and dependent on a CD rate cut from the central bank (of 75bp, in line with expectations). So no upgrade here.