April 30, 2018 / 5:33 AM / a month ago

UPDATE 2-Cautious companies curb profits at Sweden's SEB bank

* Q1 operating profit 5.26 bln SEK vs forecast 5.48 bln

* Low corporate activity hit commission income

* Shares down more than 4 percent (Adds details, analyst comment, share price reaction)

By Johan Ahlander and Esha Vaish

STOCKHOLM, April 30 (Reuters) - Swedish banking group SEB reported a larger than expected fall in first-quarter operating profit on Monday, hit by weak demand from corporate customers.

SEB, Sweden’s biggest corporate bank, said net commission income fell 1 percent and income from trading dropped 29 percent from the same quarter last year.

“Business sentiment subsided a bit from the peak levels seen during last year and equity markets were marked by high volatility. We saw little large event-driven activity,” CEO Johan Torgeby said in a statement.

Operating profit fell 5 percent to 5.26 billion Swedish crowns ($607 million), lagging a mean forecast of 5.48 billion in a Reuters poll of analysts.

At 0945 GMT, SEB’s shares were down 4.6 percent at 82.48 crowns, underperforming the European banking index which was up 0,1 percent.

The stock had already fallen 10 percent this year, as investors worried about Sweden’s housing market. House prices have dropped around 10 percent in the last six months after the financial watchdog announced tougher mortgage repayment rules.

“We believe it (the housing market) might go down somewhat more, but that we’re beginning to reach the bottom,” said Torgeby, adding mortgage lending in Sweden grew at around 4 percent in the first quarter.

As a result, SEB’s net interest income, which includes income from mortgages, rose to 4.99 billion crowns from 4.72 billion a year ago and against a forecast for 4.98 billion.

“I think obviously going into the report, consensus for the first quarter was cut and clearly these numbers have missed those revised numbers so I don’t think that the market will be particularly pleased,” said Karl Morris, banking analyst at Keefe, Bruyette & Woods.

SEB was the last of the four Swedish banks to report first quarter earnings. While the reports have been mixed, all four stocks are down this year due to the housing market turmoil.

$1 = 8.6622 Swedish crowns Editing by Niklas Pollard and Mark Potter

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