Barclays turns bullish on Swedish stocks in Nordic bank ratings shake-up

Barclays has changed its stance on Swedish banks, giving a positive outlook to two of them and keeping another at a neutral rating as it anticipates a recovery in corporate lending and the Riksbank's potential interest rate hikes. Analysts, headed by Namita Samtani, noted that most European banks have become less attractive since late August due to sovereign spread and fiscal concerns, while Swedish banks have remained relatively unchanged.

The country has led the Nordics in corporate deleveraging since 2022, with corporate debt falling by around 15 percentage points of GDP from its highest point. Corporate lending in Sweden has recently improved, growing by 4% in 2024, up from a 1% decline in 2023. Barclays sees Sweden as the most attractive corporate lending growth opportunity in the Nordic region.

The bank raised its rating for SEB to Overweight from Equal Weight and increased its target price to SEK262 from SEK204, expecting SEB to capture a rebound in large corporate borrowing and forecasting EPS 6-7% above consensus for 2027-28. Swedbank was also upgraded to Overweight with a target of SEK467 from SEK347, with Barclays focusing on its sensitivity to interest rates.

Handelsbanken was moved to Equal Weight from Underweight, with a target of SEK146, due to franchise pressure dampening a more optimistic outlook. Barclays projects two more Riksbank rate increases of 25 basis points, scheduled for November 2026 and June 2027. Swedish banks are among the most sensitive to interest rate changes in Europe, with an 8% increase in pre-tax profits for every 50 basis point rise, compared to about 5% for Nordic banks and 2.1% for European peers.

Barclays maintained Jyske Bank at Overweight, increasing its target to DKK1,340 from DKK1,045, highlighting its rate sensitivity and solid performance. The bank anticipates EPS 5-16% above consensus for 2027-28. Barclays downgraded Norway's DNB to Underweight from Overweight, reducing its target by 15% to NOK282 due to increased competition from savings banks in the corporate sector.

Barclays anticipates EPS 1-5% below consensus and expects a capital markets day on November 11 to provide a potential boost. Norway continues to have one of the most leveraged corporate markets in Europe, with a debt-to-GDP ratio of 140%, primarily driven by petroleum and industrial investments. This leaves less room for a cyclical recovery in borrowing.

Barclays also downgraded Danske Bank to Equal Weight from Overweight, citing limited upside potential compared to the current consensus EPS. Nordea was kept at Underweight, as Barclays believes consensus projections underestimate the trade-off between market share growth and margin pressures for the bank.