The Swedbank logo is pictured on its branch in Riga October 21, 2014. REUTERS/Ints Kalnins
STOCKHOLM, July 19 (Reuters) – Swedish lender Swedbank (SWEDa.ST) reported a smaller-than-expected net profit for the second quarter on Tuesday, as higher costs and lower trading gains took some of the shine off rising income from mortgages on the back of higher interest rates.
Like peers elsewhere, Nordic banks face surging inflation and interest rates fuelled in part by the war in Ukraine and lingering effects of the pandemic, lifting mortgage income but also squeezing corporate clients and households.
Swedbank, Sweden’s biggest mortgage lender, said net profit for April-June came in at 4.71 billion Swedish crowns ($452.8 million) versus 4.62 billion in the preceding quarter and 5.56 billion a year ago.
The result lagged a mean forecast of 5.01 billion crowns, according to Refinitiv estimates, and Swedbank shares fell 2.3% by 0701 GMT. They have dropped 30% this year amid a selloff in banking stocks and due in particular to the bank’s exposure to Baltic countries and the mortgage market.
“The result for the second quarter was strong with the second-highest net interest income to date,” Swedbank CEO Jens Henriksson said in a statement. “Credit quality is good and credit impairments are low.”
Swedbank, a rival of banks such as Handelsbanken (SHBa.ST), SEB (SEBa.ST) and Nordea (NDAFI.HE), said interest income, which includes revenue from mortgages, rose to 7.11 billion crowns from 6.74 billion a year ago and above the 7.05 billion analysts had forecast.
Commission income fell to 3.55 billion crowns from 3.67 billion a year earlier, lagging the 3.64 billion seen by analysts, while income from financial items, which includes trading income, narrowed to 57 million from a year-ago 645 million amid turbulent financial markets.
Swedbank reported loan loss provisions of 40 million crowns in the quarter compared to reversals of 27 million a year earlier, much better than the 301 million impairment seen by analysts.
“When inflation rears its ugly head as it has done, it will mean that people will have a worse economy, but then the advantage is that Sweden has a very good starting point,” Henriksson said in a conference call.
“When it comes to our customers, we have for a long time stress-tested them and made sure that they can handle higher interest rates.”
The bank repeated its guidance for a cost cap for 2022 of 20.5 billion crowns.
($1 = 10.4020 Swedish crowns)
Reporting by Niklas Pollard and Johan Ahlander; Editing by Subhranshu Sahu and Susan Fenton
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