Handelsbanken scores profit beat as interest income climbs

STOCKHOLM (Reuters) -Swedish bank Handelsbanken reported first-quarter net profit above market expectations on Wednesday on the back of climbing interest income and said its credit quality remained good against a backdrop of heightened uncertainty.

Soaring inflation over the past year has seen central banks crank up key rates radically, boosting interest income for banks such as Handelsbanken, but also spurring their own costs and ramping up pressure on their customers and on property prices.

The rival of Swedbank, SEB and Nordea said net profit totalled 6.81 billion Swedish crowns ($661.23 million) versus a year-ago 5.69 billion, topping a mean forecast 6.20 billion, according to Refinitiv estimates.

"Given the heightened macroeconomic and geopolitical uncertainty, together with an intensification of uncertainties surrounding the global financial system, our assessment is that a slightly more conservative approach to capital adequacy than in normal circumstances is commercially justified at present," Chief Executive Carina Akerstrom said in the report.

"Credit quality remains good," she added.

The bank, whose main markets are Sweden, Norway and Britain, said its net interest income, which includes revenues from mortgages, rose to 11.49 billion from a year-ago 8.01 billion, above the 10.89 billion expected by analysts.

Commission income, which has been dented by the slowing economy, dipped to 2.77 billion crowns from a year-ago 2.88 billion, above the mean forecast 2.71 billion, while it made a profit on financial transactions, which includes hedging instruments, of 602 million compared to 420 million a year earlier.

Falling real estate prices, above all in Sweden, may spur greater loan losses ahead, though for now there is little sign of this. Handelsbanken said its credit losses edged up to 30 million crowns from only 6 million a year ago, well below the 386 million seen by analysts.

A rise in costs at the 150-year-old bank, which is investing heavily in areas such as IT, dented its shares in connection with its previous set of results. It said spending rose 12% year-on-year in the first quarter.

($1 = 10.2990 Swedish crowns)

(Reporting by Niklas Pollard, editing by Terje Solsvik)