Handelsbanken earnings fall short, shares slide on Nordic lending weakness (updated)
UPDATE 3-Handelsbanken earnings fall short, shares slide on Nordic lending weakness Adds analyst comments in paragraph 2 and 5, share move in 6, CEO quotes in 7-9 and context in 10
By Jagoda Darlak
July 15 (Reuters) - Sweden's Handelsbanken SHBa.ST reported weaker-than-expected second-quarter earnings on Wednesday, sending its shares lower, as profit from lending operations declined more than analysts had anticipated.
Analysts at Citi and Jefferies said the earnings miss was largely due to weaker-than-expected net interest income, reflecting higher funding costs for the bank amid higher market rates and sluggish lending across the bank's Nordic markets.
Net profit at Handelsbanken, whose main markets are Sweden, Norway and Britain, was down 5% from a year earlier to 5.23 billion crowns ($542.2 million). Analysts polled by LSEG had on average forecast a 5.45 billion crown profit.
Net interest income, which includes revenue from mortgages, fell 7% to 10.0 billion crowns against an expected 10.2 billion.
"The bank continues to see sluggish loan growth in Sweden and a contraction in lending in Norway, with the UK the bright spot," Citi said in a note to clients.
Shares in Handelsbanken, the oldest company on the Stockholm stock exchange, were down 3% in morning trade.
CEO Michael Green in a call with analysts and media noted that corporate lending volumes in Sweden were down somewhat, adding, "when we look at the corporate business in Sweden, we would have been more happy if we had seen a pickup on the lending side. But ... we remain optimistic about the corporate business going forward."
Green said the drop in lending volumes in Norway was mainly due to increased low-margin competition.
After benefiting from a gradual economic recovery, Nordic banks are now operating in an environment where inflation concerns linked to Middle East tensions have put central bank rate hikes back on the agenda, raising the prospect of stronger net interest income after recent pressure on margins.
Handelsbanken rival SEB SEBa.ST on Wednesday reported an unexpected rise in profit, saying customer activity had been brisk with interest income growing more than expected, sending its shares up.
Handelsbanken, whose other competitors include Swedbank SWEDa.ST and Nordea NDAFI.HE, noted that the conflict in the Middle East has added to macroeconomic risks and uncertainty in the financial markets, saying however that its own exposure to market risks is low.
(Reporting by Jagoda Darlak, editing by Anna Ringstrom and Louise Heavens)
((Jagoda.Darlak@thomsonreuters.com; +48 58 769 65 40;))