Handelsbanken profits down 21 percent

Svenska Handelsbanken AB posted a first-quarter operating profit of 2.92 billion kronor ($494 million), down 21 percent from a year earlier, hit mostly by losses on financial items at fair value, with costs also rising at a double-digit rate.

Market expectations were for an operating profit of 2.66 billion kronor, according to a survey by SME Direkt.

Capital gains of 272 million kronor from a property sale, and non-recurring costs of 93 million kronor following the sale of SPP, also impacted this quarter’s profits, but were not including in the market expectations.

The bank said its total revenue declined 7 percent to 6.06 billion kronor as net commission income declined and net gains/losses on financial items at fair value moved into negative territory. Market expectations were for total revenues of 5.94 billion kronor.

Net losses on financial items at fair value amounted to 177 million kronor, compared with a gain of 754 million kronor last year. This quarter’s results included a 767 million kronor negative impact related to U.S. asset-backed securities. Net gains or losses on financial items at fair value showed the earnings related to items that are wholly or partly dependent on changes in market value.

The total impact of realized and unrealized value change in the liquidity portfolio on the profit and loss account was a negative 962 million kronor, compared with a negative 7 million last year.

Net interest revenue rose 17 percent to 4.4 billion kronor, marginally above expectations of 4.21 billion. It rose 9 percent in the Swedish branch operations, and 27 percent in branch office operations outside of Sweden (corresponding to 7 percentage points of the total increase).

Net fee and commission income fell 6 percent to 1.74 billion kronor, mainly due to a fall in brokerage income of 20 percent, due to lower turnover on the stock market. Mutual fund commissions fell by 7 percent, while payment commission rose 8 percent, mainly due to continued positive trends for card commissions.

Expenses rose 14 percent to 3.3 billion kronor. Handelsbanken said its international expansion continued and operations outside of Sweden made up some two-thirds of the group’s total increase in expenses.

Total staff costs rose to 1.98 billion kronor from 1.71 billion.

“Here too operations outside Sweden represented more than 60 percent of the increase,” Handelsbanken said.

The cost income ratio worsened to 54.3 percent from 45.2 percent, with net loan losses rising to 107 million kronor from a 70 million crown loan recovery last year.