Analysts had forecast an operating profit of 3.297 billion kronor, according to Reuters.
Swedbank was the last of the major Swedish banks to publish reports this week. Handelsbanken and SEB had presented strong reports earlier in the week while Nordea met analyst expectations.
“Swedbank’s interim report came in way below forecast and the rapid increase in loan losses in the Baltic states is frightening,” said Mats Anderson, an independent banking sector analyst.
Revenues climbed however to 10.3 billion kronor, up 17 percent on the corresponding period of 2007.
The bank, like its sector colleagues, continues to earn a good margin from its Swedish business and this explains the positive net interest income, up 6 percent to 5.742 billion kronor in the quarter.
“But Swedbank’s net commission income was weak and costs have escalated primarily as a result of consultancy fees in connection with the large new share issue,” Mats Anderson continued.
The board recommended that the dividend be cut in half to 4.50 kronor/share.
Loan losses climbed from 238 million kronor to 1.633 billion kronor. The bank has made provision for loan losses of 3.156 billion kronor, in comparison to 619 million at the corresponding point of last year.
Net commission income declined to 2.011 billion kronor in comparison with 2.536 billion kronor in the corresponding period of 2007.
“Lending in the the Baltic banking operations has almost stopped. During the whole of last year there was only a small increase,” said Swedbank CEO Jan Lidén.
Lidén maintained that the bank was well prepared for the recession.
Swedbank joined the Swedish state’s bank guarantee programme in November 2008. But the bank reiterated that it has no need to take part in the 50 billion kronor banking rescue package recently announced by the government.
Goodwill related to Ukrainian Banking was written off by 1.403 billion kronor to 1.150 billion kronor. The write offs did not affect cash flow or capital adequacy. Total goodwill write offs and credit losses for 2008 amounted to 18.4 billion kronor.
Swedbank’s share price took a tumble when the Stockholm stock market opened on Thursday, down more than five percent in early trading.
Jan Lidén is due to be replaced as Swedbank’s CEO by Michael Wolf on March 1st 2009.