Handelsbanken posts record profit as interest income climbs

By Niklas Pollard

STOCKHOLM (Reuters) - Swedish bank Handelsbanken on Wednesday reported forecast-beating record earnings, as interest income jumped in the third quarter in an environment of rising inflation and tighter monetary policy, sending its shares up nearly 5%.

The rival of Swedbank, SEB, and Nordea said operating profit totalled 7.27 billion Swedish crowns ($654.5 million) versus year-ago's 6.13 billion, ahead of a mean forecast 6.72 billion, according to Refinitiv estimates.

Soaring inflation, fuelled in part by the war in Ukraine, has seen central banks rapidly hike rates, lifting interest income at Swedish banks but also squeezing households and businesses and depressing stock markets, potentially driving a rise in loan losses in the coming quarters.

The first of Sweden's major banks to publish results for the third quarter also said business volumes were rising even as the quality of its lending portfolio remained high and credit losses at low, indeed negligible, levels.

Handelsbanken, whose main markets are Sweden, Norway and Britain, added that its net interest income, which includes revenues from mortgages, climbed to 9.58 billion crowns from 7.59 billion crowns a year ago, well above the 8.67 billion crowns seen by analysts.

"Handelsbanken stands well-equipped to handle an increasingly uncertain environment," Chief Executive Officer Carina Akerstrom said in the report.

"Continued good volume growth, on both the private and corporate sides, together with recovering margins, has contributed to improved net interest income and to profits reaching a new all-time high."

Shares in Handelsbanken rose 4.7% by 0730 GMT while its results also gave a boost to the stocks of its peers across the Nordic banking sector with regional heavyweight Nordea, which publishes its results tomorrow, gaining 2%.

Meanwhile, commission income dipped to 2.73 billion crowns in the quarter from a year-ago's 2.87 billion crowns - just below forecast - while it booked credit loss reversals of 69 million crowns compared with net losses of 131 million crowns a year earlier.

Akerstrom told a news conference she had no concerns about the bank's lending portfolio to commercial real estate, a sector facing softer property prices and higher lending costs, saying stress tests showed quality remained very strong.

The 150-year-old bank said it made a gain on financial transactions, which include hedging instruments and yielded an unexpected setback earlier this year, of 471 million crowns versus a profit of 534 million crowns a year ago.

Total expenses at the bank rose 11% from a year earlier to 5.12 billion crowns.

($1 = 11.1085 Swedish crowns)

(Reporting by Niklas Pollard, editing by Terje Solsvik, Uttaresh.V and Emelia Sithole-Matarise)