Swedbank Q3 operating profit tops forecast

* Q3 core profit tops expectations despite market turmoil

* Says declining regional conditions pose challenges

* Says raising credit quality requirements

* Plans stricter rules on deposit/lending relationship

(Adds background, company comment)

STOCKHOLM (Reuters) - Sweden's Swedbank (SWEDa.ST) posted third-quarter operating profit above market expectations on Thursday despite the current financial market turmoil.

Operating profit for the period was 3.11 billion Swedish crowns ($398 million) against a forecast in a Reuters poll of 2.94 billion and down from 3.67 billion in the same period in 2007.

"The global economy and financial system is being affected by unprecedented turbulence," Swedbank Chief Executive Jan Liden said in a statement.

"The financial crisis has spread rapidly and is impacting the development of the real economy worldwide, and Swedbank's domestic markets are no exception to this."

Liden said the bank's financial risks were limited, but it was nonetheless taking measures to raise credit quality requirements and introduce stricter rules on the relation between deposits and lending.

Swedbank reported higher than expected core income from lending activities, but loan losses were higher, and income from trading and changes in the valuation of asset holdings were worse than analysts had foreseen.

Loan losses in the Baltic region, which some analysts have worried are set to rise considerably, were 405 million crowns for the period, against 153 million crowns in the same period a year earlier and 245 million in the second quarter of 2008.

"Declining regional conditions pose challenges for Swedbank as the largest bank," the bank said.

"Credit quality has gradually worsened during the year."

Rival SEB, which also reported its third-quarter figures on Thursday, saw a bigger hit to its results for the period and said it would cut 500 jobs in Sweden as it prepares for tough times ahead.

(Reporting by Simon Johnson, editing by Will Waterman)