An important part of society

As part of the financial system, Swedbank plays an important role in society. By promoting savings and lending money to households and businesses, we contribute to our customers’ financial security and support the national economy. Our business is affected by a number of factors, the most important of which are:

Customer behaviour

Customers are increasingly choosing to bank digitally. At the same time, many still seek personal assistance for more complex issues. Our aim is to make all day-to-day banking digital, but still offer personal help at our physical meeting places.

Competition

Our competition consists of traditional banks as well as new firms. To stay relevant for our customers, we must continuously improve our offerings, such as by analysing our large customer base to design more tailored services and products.

Macroeconomic development

As an integral part of the economy, we are dependent on economic development globally and locally. To stay competitive and relevant, we must be able to quickly adapt to changing market conditions.

Regulation

The banking sector is subject to a number of regulations, whose purposes include increasing financial stability and improving the position of bank customers. This affects the competitive landscape and how we price our products.

Financial crime

Banks are often targeted by financial criminals. To increase security for our customers, we therefore have to continuously improve our processes and procedures. Our ambition is to achieve a leading international industry standard in this area.

Net interest income is our largest income source

Swedbank’s main income source is interest income from lending. The lending is financed through deposits from businesses and private customers and through funding from the capital market. Net interest income is the difference between interest income and interest expenses on deposits and funding.

To maintain a low risk level, we have to correctly understand and price our lending. The margin we earn must therefore be high enough to cover credit impairments for borrowers who cannot pay their interest or amortise their loans. The margin must also cover expenses and provide a return on shareholders’ equity.

It is important for us that the money we lend contributes to sustainable development, and as a bank we play an important role in the transition to a sustainable society.

Net interest income and credit impairments are both strongly tied to economic development, and to survive difficult economic times and continue to support our customers we maintain capital reserves for unforeseen losses. The size of this capital, which largely consists of shareholders’ invested capital, is determined by various regulations and depends in part on how risky our assets are considered to be.

Funds and cards are important for net commission income

Net commission income is our second-largest source of income, and is comprised of fees on products and services such as asset management and cards. Our asset management company, Swedbank Robur, is the largest asset manager in Sweden. Income from asset management is generated by a fee on assets under management and is therefore affected in part by the performance of the stock market. Demand for sustainable investments is increasing, and today we offer various forms of sustainable savings.

Card fees account for the majority of our payment income, and our income is generated by customers who use our cards to make purchases and from stores and restaurants that use our terminals. The income consists of annual fees, but is also based on transaction volume.

Personnel and IT are our largest operating expenses

Swedbank’s largest expense is salaries. IT and properties and rents are also a large expense, since we have a distribution network in the form of both digital channels and physical meeting places. Swedbank is also a major taxpayer in the markets where we operate.

Credit impairments vary over time

Swedbank’s credit impairments are normally low, since we have maintained a low-risk appetite for a long time. Credit impairments are reported in accordance with IFRS 9, which is based on an assessment of expected future credit impairments. This means that the provisions for expected credit impairments can change either up or down over time, depending on how the future outlook changes.