Swedbank’s profit beats forecasts as it rides rate rises

By Niklas Pollard

STOCKHOLM (Reuters) -Swedish bank Swedbank reported a bigger-than-expected rise in net profit for the fourth quarter and proposed raising its annual dividend on Tuesday as surging central bank interest rates helped lift interest income.

The bank, with roots in Sweden’s two-centuries-old savings bank movement, reported a net profit of 6.81 billion Swedish crowns ($653 million) for the quarter, up from 4.84 billion crowns a year ago and higher than analysts’ mean estimate of 6.26 billion crowns in a Refinitiv poll.

Swedbank and its peers have seen a year of rapid rate hikes by central banks, aimed at bringing red-hot inflation back under control, which has boosted their interest income, although the pressure on households and businesses has only gradually begun filtering through as rising credit loss provisions.

“Credit impairments increased slightly due to the weaker macroeconomic outlook, but credit quality is good and our liquidity position is strong,” CEO Jens Henriksson said in a statement.

“In these turbulent times, Swedbank stands strong.”

Sweden’s biggest mortgage lender said its net interest income, which includes revenues from mortgages, rose to 10.92 billion crowns from 6.75 billion crowns a year ago. That beat the 9.31 billion crowns estimated by analysts.

Shares in the bank rose 2.3% by 0850 GMT, with analysts at JP Morgan predicting upgrades of profit estimates for the bank in the wake of the results.

The interest income rise, which eclipsed that of competitor SEB last week, yielded “a positive read-across for the Nordic peers yet to report”, the analysts added in a note.

Swedbank, a rival of banks such as Handelsbanken and Nordea, proposed raising its annual shareholder dividend to 9.75 crowns per share from 9.25 crowns a year ago, just below the 10 crowns per share expected by analysts.

Commission income dipped to 3.45 billion crowns from 3.67 billion crowns a year ago, lagging the 3.69 billion crowns analysts expected.

Meanwhile, Swedbank booked credit impairments of 679 million crowns in the quarter, compared to reversals of 67 million crowns a year earlier, slightly worse than the Refinitiv smart estimate of a 519-million-crown impairment.

(Reporting by Niklas Pollard; Editing by Terje Solsvik, Savio D’Souza and Alexander Smith)