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STOCKHOLM (Reuters) -SEB beat fourth-quarter net profit forecasts on Thursday as central bank rate hikes helped lift interest income at the Swedish banking group which proposed a larger-than-expected dividend.
Surging inflation, in part due to the energy crisis stemming from the war in Ukraine, has seen central banks crank up rates, boosting banks’ interest income while the financial pressure on households and businesses has yet to translate into painful loan losses.
Net profit at Sweden’s top corporate bank rose to 7.43 billion Swedish crowns ($728.8 million) from 6.20 billion a year earlier, beating a mean forecast of 7.15 billion in a Refinitiv poll of analysts.
“During the fourth quarter, the unprecedented macroeconomic environment continued to impact customer sentiment, activity and our results,” said Chief Executive Johan Torgeby.
“Nevertheless, savings buffers built up during the pandemic contributed to surprisingly resilient demand and consumption, while labour markets remained strong.”
SEB, which is the first of Sweden’s top banks to lay out results for the final quarter of 2022, reported interest income, which includes revenue from mortgages, of 9.72 billion crowns, up from 6.72 billion crowns a year earlier and above analysts’ expectations of 9.49 billion crowns.
However, trading income, a volatile source of revenue typically seen as of lower quality compared to interest income, accounted for a significant part of the earnings beat as it more than doubled from a year earlier to 3.50 billion crowns.
“Overall we believe the market reaction to the results will be muted,” J.P. Morgan analysts said in a note.
Meanwhile, fee and commission income at the bank fell to 5.42 billion crowns from 5.89 billion crowns a year earlier, just topping the mean forecast of 5.34 billion crowns, while net expected credit losses rose to 506 million crowns from 299 million crowns a year earlier.
SEB proposed raising its dividend to 6.75 crowns per share from 6.00 crowns, higher than analysts’s estimate of 6.23 crowns.
The soaring inflation has also raised cost pressures for SEB, which set a cost target of 26.5 billion crowns to 27 billion crowns for 2023, based on currency rates last year, compared to spending of 25 billion crowns in 2022.
($1 = 10.1946 Swedish crowns)
