(Bloomberg) -- Two of Sweden’s top three lenders, Swedbank AB and Svenska Handelsbanken AB, advanced after reporting better-than-expected profit from lending in the third quarter even as absolute levels weakened amid falling interest rates.
Swedbank saw net interest income for the three months through September fall 5% from a year ago to 12.23 billion kronor ($1.2 billion) while Handelsbanken’s dropped 3% to 11.76 billion kronor. Analysts tracked by Bloomberg had forecast a lower metric, which captures the difference the bank earns from lending and pays for deposits, for both lenders.
The beat helped shares rise in Stockholm trading on Wednesday. Swedbank gained as much as 6.3%, the most in 2 1/2 years, and Handelsbanken by 6.6%, the most since July. Analysts covering the stocks expected consensus earnings estimates to rise on the back of the results.
The drop from year-ago levels comes as Sweden’s Riksbank embarked on a series of interest-rate cuts in May, a month before the European Central Bank, and has now reduced borrowing costs three times in total. Economists anticipate further cuts at both of this year’s remaining meetings, putting further pressure on the net interest income of banks such as Swedbank and Handelsbanken.
Growing income from fees and commissions is helping them offset some of the NII decline.
Expenses for the quarter also beat analyst expectations at both banks, helped by Handelsbanken cutting 286 staff in the quarter and Swedbank introducing a hiring freeze. Swedbank’s total expenses for the quarter came in at 5.99 billion kronor while Handelsbanken’s came in at 5.96 billion kronor for the period. Handelsbanken Chief Executive Officer Michael Green earlier this year pledged to curtail costs by trimming various management and group functions.
“Costs decreased seasonally, and as a consequence of the temporary hiring freeze and strict cost control,” Swedbank CEO Jens Henriksson said in a statement.
Swedbank, which is Sweden’s second-largest by market capitalization, continues to wait for a verdict from US authorities, including the Department of Justice, to end a long-running probe into its past failures in anti-money laundering and counter-terrorism financing as well as past errors relating to information disclosures at its Baltic branches.
The bank said investigations are at different stages and it cannot currently determine any financial consequences or when the investigations will be completed, according to the statement.
The uncertainty from the legal probe has for some time been seen as a drag on the shares, which are up 2.2% so far this year.
SEB AB, Sweden’s biggest bank by assets, is set to publish its third-quarter report on Thursday.
--With assistance from Jonas Ekblom.
(Updates with shares from the lead.)
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