Swedish bank SEB hit by drop in interest income
SEB Q3 net profit 9.45 bln SEK vs forecast 8.61 bln
Net interest income misses forecast
Profit beat driven by higher net financial income
Bank affirms full year cost target
Shares fall 5%
Recasts paragraph 1, adds CEO and shares in 6, analyst in 7
By Niklas Pollard
STOCKHOLM, Oct 24 (Reuters) -Swedish bank SEB SEBa.ST reported a bigger than expected slide in third-quarter interest income on Thursday as falling central bank rates took a toll, taking the shine off a net profit beat due to trading income and sending its shares lower.
SEB reported interest income, which includes revenues from mortgages, of 11.06 billion Swedish crowns ($1.04 billion)compared to 12.25 billion a year ago when Riksbank rates were at their zenith, below analysts' mean estimate of 11.38 billion.
The results from SEB, a key part of the investment sphere centred on Sweden's Wallenberg family, come after domestic rivals Handelsbanken SHBa.ST and Swedbank SWEDa.ST reported forecast-beating earnings and robust income earlier this week.
Sweden's banks have faced higher staff costs as a now dissipated inflation surge fuelled wage rises while central bank rates have begun falling in what is expected to be a rapid easing cycle that analysts say could dent bank interest income.
"As expected, net interest income was negatively affected by further interest rate cuts," SEB CEO Johan Torgeby said in a statement. "Credit demand among both our corporate and private customers was cautious during the quarter."
Torgeby added mortgage margins had remained at low levels in a "highly competitive market." Shares in SEB had been given a lift over the past week as Nordic banks rolled out largely strong results and the stock was down 5% by 0707 GMT.
"Overall we would expect some share price weakness for SEB post these results given (the) current valuation," JP Morgan analysts said in note, predicting consensus estimate cuts.
SEB, which is more focused on corporate clients than some of its Swedish peers, said third-quarter net profit fell to 9.45 billion crowns from 10.58 billion a year ago. But that was above analysts' mean forecast of 8.61 billion, according to LSEG data.
The profit beat was mainly driven by net financial income, which includes trading and is often more volatile and therefore seen by analysts as a less robust revenue stream than income from items such as mortgages.
The more than 165-year-old bank affirmed its target for costs to be at or below 29 billion crowns for the full year compared with 27.5 billion in the previous year.
($1 = 10.5824 Swedish crowns)
Reporting by Niklas Pollard; Editing by Louise Rasmussen and Mark Potter
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