Handelsbanken net profit beats forecast on strong credit quality

STOCKHOLM (Reuters) -Swedish bank Handelsbanken reported on Wednesday a smaller-than-expected fall in third-quarter net profit, on the back of loan loss reversals while interest income held up in the face of pressure from central bank rate cuts.

Net profit at the more than 150-year-old bank fell to 5.95 billion Swedish crowns from 7.21 billion a year ago, topping a mean forecast of 5.79 billion in an LSEG compilation of analyst estimates.

The bank said its costs, which have periodically been under investor scrutiny and the focus of management efforts to boost efficiency, fell 4% from a year earlier and were down 5% compared to the second quarter.

Handelsbanken is the first of the major Stockholm-based banks to issue its third-quarter report. Last week, Nordea, which has a sizeable business in Sweden but is headquartered in Finland, beat earnings expectations on the back of higher lending and deposit volumes.

The bank said net interest income, which includes revenue from mortgages, fell to 10.47 billion crowns from a year-ago 11.76 billion, or roughly in line with analysts' expectations of 10.48 billion.

Handelsbanken and rivals such as Swedbank and SEB, which are both set to publish results on Thursday, have seen central bank rate cuts put pressure on interest income in recent quarters, while global trade tension has clouded the broader economic recovery.

"Asset management volumes climbed in all home markets and lending volumes increased in the majority," Handelsbanken said in statement. "However, lower short-term market rates led to a slide in interest rate margins during the quarter."

The bank, which also operates in markets such as Norway and Britain, booked net credit loss reversals of 35 million crowns in the quarter, versus expected losses of 186 million.

(Reporting by Niklas Pollard; Editing by Louise Rasmussen and Clarence Fernandez)