Major bank Swedbank is performing better than expected and is bringing in hundreds of millions on feared credit losses that have not materialized.
However, costs are increasing and the downward pressure on interest rates is causing the bank's profit and net interest income to be pressed down.
Costs increased according to plan, says CEO Jens Henriksson.
Swedbank reports an operating profit – before write-downs, taxes, and fees – of 11.8 billion kronor for the second quarter of the year. This can be compared to 12.4 billion during the same quarter a year earlier.
The result was, however, better than expected. The average forecast was 11.4 billion, according to Bloomberg.
In these uncertain times, Swedbank is delivering a strong result, says Henriksson.
Sold portfolio
The net interest income – i.e., what the bank earns on the difference between lending and borrowing rates – is falling to 12.2 billion, in line with expectations. The same quarter a year earlier, the net interest income was 12.8 billion.
The net interest income decreased by three percent, mainly due to financing costs.
The fee and commission income – what the bank earns from fees and commissions – is, however, increasing to 4.2 billion, compared to 3.8 billion kronor a year earlier.
Swedbank is taking back feared credit losses during the quarter, among other things by selling a portfolio of problem loans. As a result, credit losses became a positive post of net 289 million kronor during the second quarter of the year.
Increased costs
Costs are, however, increasing by 13 percent to 6.5 billion kronor, which was slightly more than the expected 6.4 billion.
The major bank itself expects three interest rate cuts from the Swedish Central Bank in 2024. How much their own mortgage rates may be lowered going forward if the repo rate continues to fall, the bank cannot answer.
When interest rates in society go down, we also lower the rate, says Jens Henriksson.
