Markets News

UPDATE 3-Swedbank shakes off pandemic slump as commissions recover

* Q3 net profit 5.26 billion

* Saved costs as U.S investigation slowed by pandemic

* Commission income back to around pre-pandemic levels

* Bank reiterates desire to pay dividend

* Interest income weaker than analysts expected (Adds shares, analyst comment)

STOCKHOLM, Oct 20 (Reuters) - Swedbank on Tuesday reported a bigger-than-expected 13% rise in third-quarter net profit helped by strong trading conditions and income from cards and asset management.

Its loan losses were also much lower than expected, as Sweden’s banks continued to buck the trend of soured debt throughout the pandemic-hit global economy.

“We believe that the bottom has been reached and we are on the way up, at the same time we do not dare to fully take this into account because we see the increased uncertainty currently affecting the world,” CEO Jens Henriksson said on a phone call with reporters.

Net profit rose to 5.26 billion Swedish crowns ($596 million) from 4.66 billion a year earlier and beat the 4.32 billion analysts expected, Refinitiv Eikon data showed.

Loan losses, closely watched due to the economic impact of the pandemic, were 425 million crowns, up from 154 million a year earlier but well below the 732 million expected by analysts.

Interest income, which includes income from mortgages, rose to 6.71 billion crowns from a year-ago 6.55 billion, but lagged expectations as the bank could not convert strong deposit-taking into increased lending.

Rising unemployment due to the pandemic will still likely mean some heavily-indebted households may have trouble paying their mortgages.

Shares in Swedbank were up 0.7% at 0924 GMT.

“The share has been pretty strong in October, market expectations were perhaps slightly higher than consensus,” Robin Rane, an analyst at Kepler Cheuvreux, said of the muted reaction from investors.

“Net interest income was weaker than expected, which is an important line for Swedbank,” Rane said, adding that increased competition on mortgages and negative interest rate stances by some central banks hurt Swedbank’s ability to invest deposits.

Total expenses fell to 4.8 billion crowns from 5.2 billion, as the pandemic slowed investigations by U.S authorities into the bank’s Baltic business, reducing expected legal costs, Henriksson said on the phone call.

He added that total costs for 2020 were estimated at just under 21 billion crowns.

Net commission income fell by 2% to 3.25 billion crowns as payment income and the bank’s asset management business helped it out of the pandemic-related slump in Q2.

Gains on financial transactions increased to 669 million crowns from 457 million, amid strong financial trading during the pandemic.

Swedbank has postponed dividends for 2019, with authorities and politicians urging banks to do so, but reiterated its desire to pay them.

$1 = 8.8256 Swedish crowns Additional reporting Johan Ahlander in Stockholm; editing by Niklas Pollard, Jason Neely and Emelia Sithole-Matarise