I haven’t heard banks complaining about liquidity regulation, and based on Nordea’s Q2 report, for example, it is not liquidity that limits profit distribution/growth, but rather capital adequacy that would be the first hurdle.
A decrease in capital requirements for large, cross-border banks would be an interesting move, as it would improve their competitive position relative to smaller banks. Even now, economies of scale in banking are significant, even though larger players are required to hold larger capital buffers. But as mentioned, it has been possible to quite effectively compensate for this impact using internal credit risk models, and the necessary investments in areas like technology, risk management, and regulation have been constantly increasing.
Of course, it is possible to weaken these economies of scale by easing the regulatory burden for everyone, which was also mentioned on the list of measures. So, it largely depends on the details of that proposed regulatory package as to what kind of effects it will have on the competitive situation. Or if it will have any at all.
An American bank is heaping praise on Nordea’s exceptionally profitable operations. As a result, it is raising its target price for the stock.
According to Jefferies, Nordea’s return on equity is in a “superior class” in both Nordic and European bank comparisons. Based on the forecast, the return on equity could rise as high as 17 percent.
The American bank has set a target price of 20.10 euros for Nordea’s stock.
A ‘catalyst-light’ bank in terms of share price potential, but the target was still raised → €19
Analyst Gulnara Saitkulova said the firm continues to view Nordea as a high-quality pan-Nordic franchise with a solid profitability profile but sees the stock as increasingly catalyst-light.
The analyst said solid corporate lending growth, continued Swedish front-book mortgage share gains ahead of the back book, and improvements in the speed and quality of service should support earnings. Morgan Stanley believes the valuation now largely reflects these considerations.
Trading at 1.95 times 2027 estimated price-to-tangible book value and 11 times 2027 estimated price-to-earnings for an 18.5% return on tangible equity, the firm sees a more balanced risk-reward. Currently, the stock trades at a P/E of 12.95 and 1.93 times book value. Despite the downgrade, InvestingPro analysis suggests the stock remains undervalued based on Fair Value calculations, with additional insights available through 5 more InvestingPro Tips for subscribers.
Morgan Stanley said delivery ahead of plan on costs could provide a path back to Overweight.
Many industries face a upheaval in their working life in the coming decades, but this is hardly news. Rather, it is just another estimate among others.
For banks, labor is a major cost item, and it had to be significantly increased as regulation tightened. Now, artificial intelligence is bringing a change to this and cutting these costs considerably.