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.