Handelsbanken net profit exceeds estimates amid loan loss reversals

Investing.com - Handelsbanken posted a smaller-than-anticipated slide in third-quarter net profit on Wednesday, as the Swedish lender was bolstered by loan loss reversals and broadly resilient interest income.

Impairments saw a reversal of 35 million Swedish crowns, compared to an anticipated loss of 186 million. In a note, analysts at Jefferies said this was due to net reversals rather than "a release of a management overlay" seen in the first and second quarters.

Expenses, which have been a focus for investors and have fueled a drive by executives to boost efficiency, also declined by 4% from a year ago. Versus the previous quarter, costs fell by 5%.

Meanwhile, net interest income, the difference between what a bank makes from loans and pays out for deposits, came in at 10.47 billion Swedish crowns during the quarter, down from 11.76 billion a year ago. Analysts had seen the figure at 10.48 billion.

Along with rivals like SEB and Swedbank, Handelsbanken’s interest income has been put under pressure by a raft of central bank interest rate cuts in recent quarters, as well as a broadly uncertain global economic landscape. The bank, which also operates in markets like Britain and Norway, cited "lower short-term market rates" as a cause for the drop in interest income.

Net profit, in turn, decreased by 21.2% to 5.95 billion Swedish crowns, although this was above analysts’ mean projections of 5.79 billion, according LSEG estimates cited by Reuters. Improved asset management fees were partially offset by lower brokerage income and advisory services demand, the Jefferies analysts said.

"Asset management volumes climbed in all home markets and lending volumes increased in the majority," Handelsbanken said in a statement.

Shares of the 150-year old company were higher in mid-morning European trading.