Handelsbanken profit beats consensus as loan losses shine

STOCKHOLM (Reuters) - Sweden's Handelsbanken SHBa.ST reported a smaller-than-expected fall in quarterly net earnings on Wednesday as the bank's loan portfolio continued to weather the impact of the coronavirus pandemic with ease.

File Photo: A branch of Handelsbanken is seen in Wilmslow, northern England in this January 12, 2015 file photo. REUTERS/Phil Noble/File Photo

Second-quarter net profit fell to 3.96 billion Swedish crowns (£347 million) from 4.22 billion in the previous year, easily beating the mean forecast of 3.34 billion seen by analysts according to Refinitiv data.

“The Bank’s credit quality remains good,” Handelsbanken said in its report, adding that loan losses in the quarter had been the lowest it had seen in years.

“Household lending, household deposits and corporate deposits continued to exhibit stable growth during the quarter.”

Loan losses, a figure closely watched due to a slump in the pandemic-hit wider economy, were 97 million crowns, better than a year-ago 435 million and much lower than the 1.02 billion loss expected by analysts.

Like in its first-quarter report in April, the bank showcased resilience in the face of a pandemic expected to result in a jump in soured debt for banks, as the spread of the coronavirus has shut businesses around the world.

Net interest income, which includes income from mortgages, fell 5% to 7.6 billion crowns from 8.06 billion a year ago, missing a Refinitiv estimate of 8.2 billion.

Increased unemployment due to the pandemic is still likely to mean some heavily indebted households may have trouble paying their mortgages.

Total expenses, a line which worried investor’s in recent years, fell 1% to 5.47 billion from a year ago 5.5 billion.

Gains on financial transactions were 409 million, up 15% from a year-ago 355 million, while fee and commission income fell to 2.5 billion crowns from 2.7 billion a year ago.

Reporting by Colm Fulton; editing by Niklas Pollard