SEB (OTCPK:SVKE.F) Q3 2025 Conference Call Summary Industry Overview - The call discusses the macroeconomic environment affecting SEB, including interest rates and foreign exchange (FX) movements, which are critical for the banking sector [2][4][14]. Key Points and Arguments Macro Environment - The average 3-month Stibor rate decreased in Q3 compared to Q2, with the Riksbank lowering the policy rate by 25 basis points to 1.75% [2][3]. - The average 3-month Euribor also saw a decline, while the European Central Bank maintained the deposit facility rate, impacting SEB's Baltic operations primarily on the deposit side [2][3]. Profit and Loss (P&L) Insights - FX movements significantly influence both the P&L and balance sheet, with a stronger SEK leading to lower income and costs, while a weaker SEK has the opposite effect [4][5]. - The P&L was affected by a negative impact from FX of approximately SEK 600 million, offset by a positive day effect of a similar magnitude [7][8]. - Net interest income (NII) was positively impacted by higher lending volumes and elevated NII from investor services, particularly during the dividend season [8][9]. - Business and retail banking experienced a decline of around SEK 200 million in NII compared to Q1 due to lower deposit margins and pressure on mortgage margins, although some stability was noted towards the end of the quarter [9][10]. Capital and Risk Exposure - SEB's current share buyback program amounts to SEK 2.5 billion, expected to conclude by October 21, 2025 [13]. - A transitory increase in risk exposure amount (REA) of about SEK 50 billion is anticipated due to Baltic IRB models, impacting the CET1 capital ratio by approximately 80 to 90 basis points [13][14]. - The dialogue with the European Central Bank regarding the approval of these models is ongoing, with gradual recognition of this effect expected starting late 2025 or early 2026 [14]. Costs and Expenses - Total expenses for 2025 are targeted at or below SEK 33 billion, with adjustments based on FX rates [11][12]. - Imposed levies are expected to decline, with an estimated total of around SEK 3.5 billion for the full year, similar to the previous year [12][19]. Market Activity and Outlook - The call noted that summer months typically see lower activity in capital markets, but SEB is positioned to capture opportunities as they arise [10][11]. - The competition in the Baltic region remains stiff, but loan growth is healthy [9][21]. Additional Insights - The sensitivity of the CET1 capital ratio to currency fluctuations was highlighted, with a 5% change in SEK affecting the ratio by around 40 basis points [5]. - The impact of share price on costs was discussed, indicating that a higher share price increases costs related to long-term incentive programs, although this is not a significant portion of total expenses [12][28][31]. Conclusion - The call provided a comprehensive overview of SEB's performance and outlook for Q3 2025, emphasizing the effects of macroeconomic factors, FX movements, and competitive dynamics in the banking sector. The management remains cautious yet optimistic about future growth opportunities while navigating the challenges posed by the current economic environment.

By Connor Smith When it comes to economic data, the market isn't always looking for "good news.†Most recently, weaker labor market data sent the major indexes to fresh highs because the numbers created a path for the Federal Reserve to lower interest rates. Rosenberg Research's Mehmet Beceren argues that's part of a character shift in the S&P 500. CONCLUDED Stock Market News From Sept. 18, 2025: Dow, S&P 500, Nasdaq Hit New Highs Last Updated: 3 hours ago Why Bad News Hasn't Kept the Stock Market Down "Th ...

Core Insights - The real estate sector has significantly underperformed compared to the S&P 500 over the past decade, with a $1,000 investment in the Vanguard Real Estate ETF (VNQ) growing to approximately $1,770, while the same investment in the Vanguard S&P 500 ETF (VOO) would have grown to $3,900 [1][2] Performance Comparison - The S&P 500 has experienced an impressive bull run, achieving annualized total returns of about 14.6% over the last ten years, making it challenging for the real estate sector to keep pace [4] - The real estate sector's performance is notably affected by interest rates, as it is one of the most rate-sensitive sectors in the market [5] Interest Rate Sensitivity - The Federal Reserve has implemented two extended periods of rate increases over the past decade, with the benchmark federal funds rate now over 400 basis points higher than it was ten years ago [5] - Real estate investment trusts (REITs) typically outperform in falling or zero-rate environments but struggle when interest rates are high or rising [5][6] Economic Implications - Rising interest rates increase borrowing costs for REITs, which often rely heavily on debt for growth, similar to how individuals use mortgages to purchase homes [6] - Higher rates can negatively impact commercial real estate property values, which generally have an inverse relationship with risk-free interest rates, leading to potential declines in the value of properties owned by REITs [6][7]

Real Estate Investment Analysis - Real estate is more sensitive to interest rates than inflation [1][2] - In the current environment, real estate is likely to decrease in real terms [2] - Real estate is a fixed asset, making it easily taxable [1][2] - The fixed nature of real estate limits diversification [2] - Real estate's immobility hinders the movement of money [2][3] Ray Dalio's Perspective - Ray Dalio considers real estate a poor investment [1][3]

Financial Performance Highlights - Net interest income increased to $467 million in 2Q 2025, which included $29.1 million in contractual accretion income and $13.1 million from accelerated loan payoffs[54] - Noninterest income rose to $222.2 million in 2Q 2025, driven by strong fund services income, higher card purchase volume, and increased 12b-1 fees, including a $37.7 million gain on investment securities[54] - Operating PTPP (Pre-Tax, Pre-Provision) income reached $309.2 million, or $4.06 per diluted share[54] - Average total deposits grew to $55.649 billion in 2Q 2025, with average noninterest-bearing deposits (DDA) increasing by $975 million to $14.403 billion[55] - The FTE Net Interest Margin was 3.10%, which included a $42.2 million benefit from purchase accounting accretion; excluding PAA, the core NIM was 2.83%[55] Balance Sheet and Credit Quality - Average loans increased to $36.407 billion in 2Q 2025, led by C&I growth, followed by owner-occupied and investment CRE[55] - The allowance for credit losses on total loans was 1.06%[55] - Net charge-offs were 0.17% of average loans, with legacy UMB NCOs at 0.13%[55] HTLF Acquisition Impact - $42.2 million in net interest income accretion was recognized in 2Q 2025 related to the HTLF acquisition[44] - Core deposit intangible amortization related to the HTLF acquisition was $(21.6) million in 2Q 2025[45] Business Segment Performance - Commercial & Personal Banking Services revenue was $514.9 million in 2Q 2025, with average deposits of $39 billion[8] - Institutional Banking Services revenue was $174.3 million in 2Q 2025, with average deposits of $16.6 billion and $600.6 billion in AUA[10]

Core Insights - AGNC Investment Corp. (AGNC) and Annaly Capital Management (NLY) are leading players in the mortgage real estate investment trusts (mREITs) sector, both providing attractive long-term returns and substantial dividend yields, but differing in portfolio strategies and risk profiles [1] Capital Distribution & Dividend Yield - AGNC has a dividend yield of 15.34% with a payout ratio of 81%, but has not increased its dividend in the last five years [2] - NLY announced a cash dividend of 70 cents per share for Q1 2025, a 7.7% increase from the previous payout, with a current dividend yield of 14.37% and a payout ratio of 101% [3] - AGNC has a share repurchase plan authorizing up to $1 billion of common stock until December 31, 2026 [6] - NLY has a share repurchase program allowing for the repurchase of up to $1.5 billion of common stock until December 31, 2029, but has not executed any repurchases since its announcement [7] Business Model & Portfolio Diversification - AGNC focuses exclusively on agency mortgage-backed securities (MBS), which exposes it to volatility, while NLY employs a diversified capital allocation strategy that includes residential credit and mortgage servicing rights, reducing rate sensitivity [8][11] - NLY's diversified strategy is expected to contribute to long-term growth and stability, allowing it to capitalize on various market cycles [12] Interest Rate Sensitivity - AGNC is significantly affected by interest rate changes due to its concentrated agency MBS exposure, leading to increased borrowing costs and profit margin pressures [13][14] - AGNC's interest expenses surged from $75 million in 2021 to $2.9 billion in 2024, reflecting its vulnerability to rate hikes [15] - NLY's diversified portfolio allows it to better withstand interest rate volatility, resulting in lower increases in borrowing costs compared to AGNC [16] Benefits From Mortgage Rates - Both AGNC and NLY are expected to benefit from declining mortgage rates, with the average 30-year fixed-rate mortgage dropping from 6.95% to 5.80% year-over-year [19] - NLY is likely to see stronger book value appreciation due to tightening spreads in the Agency MBS market, while AGNC may benefit from increased refinancing activity [20][21] Earnings Estimates - AGNC's earnings estimates for 2025 and 2026 indicate year-over-year declines of 11.2% and 3.9%, respectively [22] - NLY's earnings estimates for the same period suggest year-over-year growth of 6.3% and 1.4% [25] Price Performance & Valuations - Over the past year, AGNC gained 12.6% and NLY rose 17.7%, outperforming the industry average of 8.6% [29] - AGNC trades at a forward price-to-tangible book (P/TB) multiple of 1.10X, while NLY trades at 0.99X, both above the industry average of 0.98X [31][34] Conclusion - NLY's recent dividend hike and diversified strategy position it as a more attractive option for long-term stability and growth compared to AGNC, which has faced challenges due to its concentrated agency MBS exposure [36][38]