Swedbank beats Q2 forecast on cost cuts, strong trading revenue

Investing.com -- Swedbank (ST:SWEDa) on Thursday reported a second-quarter net profit of SEK 7.89 billion, 9% above the consensus estimate of SEK 7.24 billion, supported by lower costs and stronger trading income.

Pre-provision operating profit reached SEK 10.84 billion, 5% ahead of expectations. Total (EPA:TTEF) income was SEK 16.96 billion, 1% above consensus, while operating expenses of SEK 6.12 billion came in 6% below forecasts. 

The decline in costs was driven by lower staff expenses, linked to a reduction in full-time employees, and reduced marketing expenditure compared to the previous quarter.

Net interest income stood at SEK 10.92 billion, matching estimates but falling 5% from the prior quarter. 

The decrease was attributed to lower interest rates and foreign exchange impacts, partly offset by lower deposit and funding costs and a favorable day count.

Fee and commission income dropped to SEK 3.90 billion, 5% below forecast, due to reduced asset management revenue, which was affected by a lower average stock market level during the quarter. 

Trading income rose to SEK 856 million, exceeding the SEK 698 million consensus, driven by higher activity in fixed-income and foreign exchange markets and SEK 180 million in positive revaluation effects on shareholdings.

Credit impairments totaled SEK 150 million, resulting in a cost of risk of 3 basis points versus the expected 6 basis points. 

Provisions increased by SEK 176 million for individually assessed loans and by SEK 95 million for updated macroeconomic scenarios. 

Post-model adjustments of SEK 129 million were reversed, with SEK 594 million remaining.

The Common Equity Tier 1 capital ratio was 19.7%, flat from the previous quarter and 20 basis points below consensus. 

Organic profit contributed 30 basis points, but was offset by increased credit risk and higher risk-weighted assets. 

The CET1 buffer stood at 450 basis points, within the bank’s target range of 100 to 300 basis points.

Earnings per share were SEK 7.02, 9% above consensus. Return on equity was 15.4%, up from 15.2% in the first quarter but down from 17.5% a year earlier. The cost-to-income ratio remained at 36%.

Total lending increased to SEK 1.97 billion, up 2% quarter over quarter. Deposits rose 3% to SEK 1.33 billion. 

Risk-weighted assets totaled SEK 889 billion. Market capitalization was reported at SEK 274.1 billion, with shares priced at SEK 244.10.

Despite improved trading results and operational efficiency, Swedbank’s second-quarter earnings were pressured by interest and fee income.