(Bloomberg) -- SEB AB dropped the most since March after Sweden’s biggest bank delivered worse than expected profit from lending in the third quarter amid interest-rate cuts by central banks.
Net interest income for the three months through September fell 9.7% from a year ago to 11.06 billion kronor ($1 billion), the Stockholm-based group said on Thursday. Analysts tracked by Bloomberg had forecast that the metric, which captures the difference the bank earns from lending and pays for deposits, would come in at 11.31 billion kronor.
“Credit demand among both our corporate and private customers was cautious during the quarter,” said Chief Executive Officer Johan Torgeby in a statement. He added that “mortgage margins remained at low levels.”
SEB’s shares fell as much as 5.6% in Stockholm on Thursday, marking the biggest intraday drop in seven months. The move trimmed year-to-date gains for the stock to about 9%.
The miss on net interest income “will probably be seen as disappointing in light of peers’ flattish NIIs yesterday,” DNB Bank ASA analyst Nicolas McBeath said in a note to clients. He estimated consensus estimates for next year’s earnings per share to come down by 2% following the report.
Sweden’s Riksbank started easing borrowing costs in May, moving a month before the European Central Bank, and has now reduced rates by a quarter point three times. Economists anticipate further cuts at both of this year’s remaining meetings, putting further pressure on the net interest income of lenders.
On Wednesday, Swedbank AB and Svenska Handelsbanken AB reported better-than-expected profits in the third quarter, with growing income from fees and commissions helping offset some of the decline in net interest income.
In July, SEB’s card division completed the acquisition of Deutsche Lufthansa AG’s payment services business, AirPlus International GmbH for about €450 million ($485 million) in cash. That deal fed into an updated cost target for the year with the lender now expecting an amount below or equal to 31 billion kronor.
Staff costs increased by about 3% during the third quarter. Including AirPlus, the number of full-time equivalents increased to 18,975, the bank said.
SEB’s capital position, as measured by the CET1 ratio, stood at 19.4%. The large buffer of 470 basis points over regulatory requirements provided the context for a new share buyback program totaling 2.5 billion kronor, announced late on Wednesday. The bank’s repurchases of Class A stock will begin this week and end in January.
--With assistance from Jonas Ekblom.
(Updates with shares and analyst comment from first paragraph)
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