Swedbank operating profit pleases analysts

Swedbank AB said its nine-month operating profit rose 11 percent to 11.476 billion kronor ($1.74), as growth in total revenues outpaced growth in costs, boosted by strong net interest income.

Operating profit was bang in line with market expectations, according to a survey by SME Direkt.

Total revenue rose 13 pct to 24.050 billion kronor, and was above market expectations of 23.851 billion.

Net interest income rose 19 pct to 13.898 billion kronor, versus market expectations of 13.779 billion kronor.

“Net interest income from the lending portfolio increased by 910 million kronor through a volume increase and despite continued margin pressure. Net interest income from savings operations increased by 1.703 billion kronor due to both volume increases and higher interest margins. Net interest income from other operations decreased by 389 million kronor,” Swedbank said.

Net commission income rose 12 percent to 7.344 billion kronor, mainly due to higher income from asset management and payment processing, the bank said.

Total costs excluding loan losses rose 10 pct to 12.193 billion kronor. Net loan losses amounted to 381 million kronor, versus net loan recoveries of 133 million kronor.

Staff costs rose by 12 pct to 7.159 billion kronor. The cost-to-income ratio before loan losses improved to 0.51 from 0.52.

“Profit-based compensation accounted for 131 million kronor of the increase. Rapid growth in the Baltics, wage increases, the acquisitions of TAS-Kommerzbank and Söderhamns Sparbank, and the Folksam agreement all contributed to the increase in staff costs,” Swedbank said.

Total lending to the public rose 13 percent to 1,043 billion kronor.

Operating profits from the Swedish Banking operations fell 1 pct to 6.453 billion kronor from 6.524, while Swedbank Markets saw its operating profits fall 10 percent to 1.040 billion.

Lending in Baltic Banking rose 43 percent to 164 billion kronor, while deposits rose 20 percent to 92 billion kronor.

Baltic Banking’s operating profits rose 59 pct to 3.583 billion kronor, and had a return on allocated equity of 32.2 percent, up from 31.3 percent.

“During the last quarter we have seen, as expected, that the economy in Estonia is slowing, and several indications that Latvia is headed in the same direction.

“Swedbank expects the gradual slowdown to continue and that the imbalances that exist will eventually subside. In the long term prosperity in the Baltic economies will continue to approach the EU average,” the bank said, adding that the initial stage of the integration of TAS-Kommerzbank in Ukraine has been positive.

Asset Management and Insurance saw its operating profits rise 17 percent to 1.020 billion kronor.

Thomson Financial