LDN - Business

Handelsbanken, SEB top forecasts as Nordic banks weather pandemic

[July 15, 2020] By Colm Fulton

STOCKHOLM (Reuters) - Quarterly profits at Handelsbanken <SHBa.ST> and SEB <SEBa.ST> fell less than expected as the Swedish banks coped with the economic hit from the COVID-19 pandemic, although SEB saw a spike in provisions for bad loans.

Nordic banks are the first in Europe to report second quarter earnings and so far have defied gloomy predictions, with Norway's DNB also topping forecasts.

"The bank's credit quality remains good," Handelsbanken said on Wednesday, adding loan losses in the quarter were the lowest in years. "Household lending, household deposits and corporate deposits continued to exhibit stable growth."

Its second-quarter net profit fell to 3.96 billion crowns ($436 million) from 4.22 billion a year earlier, beating analysts' mean forecast of 3.34 billion.

SEB's net profit also fell less than expected, as income from its trading arm offset credit loss provisions and a fine for inadequate money laundering controls.

Net profit at SEB, Sweden's top corporate bank, fell to 3.5 billion crowns from 4.9 billion a year earlier, but beat analysts' mean forecast of 3.2 billion.

SEB said it would not appeal against a 1 billion crown fine from Sweden's financial regulator for failures in anti-money laundering controls in the Baltics, though it added it did not agree with parts of the watchdog's decision.

SEB's CEO Johan Torgeby said on a conference call that the bank was not, as far as he knew, under investigation in the United States, in relation to the Baltic "dirty money" scandal which has rocked rivals Swedbank <SWEDa.ST> and Danish lender Danske Bank <DANSKE.CO>. Swedbank and Danske Bank are under scrutiny from U.S. authorities.

SEB's interest income, which includes income from mortgages, increased 6% to 6.05 billion crowns.

CREDIT AND THE CORONAVIRUS

Analysts are generally expecting banks to see a jump in bad loans as the pandemic plunges economies into recession.

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A branch of Handelsbanken is seen in Wilmslow, Britain January 12, 2015. REUTERS/Phil Noble/File Photo

Loan losses for Handelsbanken were 97 million crowns, better than 435 million a year earlier and much lower than the 1.02 billion loss projected by analysts.

"This credit positive result provides a strong indication that Handelsbanken will continue to demonstrate the strength of its asset quality during this downturn," said Louise Lundberg, a senior risk officer at rating agency Moody's.

The losses were "significantly lower than most Nordic and European peers and reflective of the bank’s track record", she added.

SEB, however, saw loan losses surge to 2.7 billion crowns from 386 million a year ago, worse than analysts' mean forecast of 1.7 billion.

CEO Johan Torgeby said SEB was sticking with its forecast for credit losses of 6 billion crowns this year, nearly triple the level for 2019.

Kepler Cheuvreux analyst Robin Rane said he did not expect investors to buy into SEB as its performance was driven by its trading arm, "which was a given due to strong market conditions".

Rane added that although Handelsbanken's low credit losses stood out, performance in other parts of the core business was relatively weak.

Handelsbanken shares were down 1.6% and SEB's were 2% lower as of 1107 GMT.

Handelsbanken's net interest income, which includes income from mortgages, fell 5% to 7.6 billion crowns, missing analysts' forecast of 8.2 billion.

(Reporting by Colm Fulton; editing by Anna Ringstrom, Mark Potter and Emelia Sithole-Matarise)

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