Swedbank's Q1 profit rises more than expected, helped by lower credit losses

Swedbank SWED_A reported on Thursday a bigger rise than expected in first-quarter net profit on the back of lower credit impairments, although higher funding costs lowered its net interest income.

Sweden's biggest mortgage lender said net profit rose to 8.43 billion crowns ($776 mln) from 7.56 billion in the same period last year. Analysts polled by LSEG had on average expected a profit of 8.22 billion crowns.

"We yet again deliver a strong and resilient result and we see our profits rise," CEO Jens Henriksson told reporters.

"Despite an uncertain world, with war in Europe, turmoil in the Middle East and climate change, I feel quite confident about economic development," he said.

Swedish banks have seen income boosted by higher interest rates but have also faced headwinds from a slumping economy and a real estate crisis that has rattled investors about potential loan losses.

Shares in Swedbank rose 1.4% on 0805 GMT, paring some of the losses seen on Wednesday, when a poor report from Handelsbanken weighed on the Swedish banking sector.

Swedbank, a rival to Handelsbanken SHB_A, Nordea NDA_FI and SEB SEB_A, said its interest income - which includes revenue from mortgages - rose to 12.6 billion crowns from 11.9 billion, below analysts' forecast of 12.9 billion.

"Our financing costs have risen," Henriksson said, adding that customers had moved their savings to accounts and products with higher interest rates and that the central bank's reduced asset purchases had led to higher lending costs.

J.P. Morgan said in a note that net interest income had been disappointing but that the miss was masked by credit losses.

"Overall we would expect to see low-single-digit downgrades to consensus estimates from a weaker-than-expected net interest income progression," it said.

The credit impairments shrank to 144 million crowns from 777 million.

Swedbank said it had introduced a temporary hiring freeze with the exception of business-critical positions, after the number of employees increased more than forecast due to lower staff turnover.

($1 = 10.8681 Swedish crowns)