Two Swedish banks surprise on the upside

Sweden's two largest banks exceeded market expectations, with Nordea and Handelsbanken both boasting profit increases in their second quarterly reports today.

• Nordea closes out 2011 by beating forecasts (24 Jan 12)
• Swedbank in massive Latvia write down (13 Jan 12)
• Swedbank hit by 'Twitter- generated' Latvia panic (12 Dec 11)

Share prices for both banks were up on Tuesday afternoon following the positive surprise.

Handelsbanken's strong performance can be attributed to lower credit losses and strong growth, while Nordea reported better-than-expected second-quarter net earnings but warned that the risk of losses on its loans was likely to increase during the year year.

Although both have been negatively affected by the global downturn, Nordea and Handelsbanken both have lower exposure to the recession in the Baltic countries and Ukraine than competitors such as Swedbank and SEB, which were hit by by bad loans and big loss provisions.

Nordea, the biggest Nordic bank, reported net earnings in the April-June period at €618 million ($879 million), down 11 percent from the equivalent figure for the same period last year.

But the performance beat expectations of net profit of €421 million from analysts polled by Dow Jones Newswires.

Compared with the first three months of the year, net earnings were down just 1.0 percent.

But the bank warned that a sharper-than-expected contraction in the world and Nordic economies since the start of the year "has increased the risk for a somewhat higher loan loss ratio for the full year compared to the first half year."

Excluding risks linked to loans, Nordea said it had raised its full-year profit projection and now sees risk-adjusted earnings greater than the €2.46 billion recorded in 2008.

Handelsbanken also reported today its second quarterly profits rise this year, becoming the only big Swedish bank to achieve this improvement on a 12-month basis.

The bank also reported a 25-percent rise in net banking income and a lower-than-expected rise in bad loans.

Handelsbanken, the second-biggest Swedish bank by capitalization, reported a 2.0-percent rise in net profit on a 12-month comparison to 2.53 billion kronor ($327 million) for the second quarter.

In the same period of last year, Handelsbanken's net profit was 2.48 billion kronor. But the figure was 9.0-percent down on net profit in the first quarter of this year, amounting to 2.77 billion kronor which was better than expected and 21 percent higher than the equivalent figure last year.