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* 9.75 SEK/share dividend tops expectations
* 4.1 bln SEK Q4 operating profit matches forecasts
* Market uncertainty hits trading in Q4
By Oskar von Bahr and Mia Shanley
STOCKHOLM, Feb 15 (Reuters) - Swedish bank Handelsbanken sees room for further growth in the British market where regulators have been seeking more competition in the retail market, it said on Wednesday, in reporting a 12 percent rise in full-year profits and 8 percent rise in its dividend.
Handelsbanken raised its dividend to 9.75 crowns ($1.5) per share for last year, beating analysts' foreceasts after higher core income and lower loan losses lifted fourth quarter earnings in line with forecasts.
Swedish banks have outperformed regional peers during the European debt crisis, backed by two years of healthy economic growth in Sweden and Norway and capital solvency ratios which are amongst the highest in the region.
The government expects growth in Sweden to slow sharply, with one influential think tank forecasting zero growth this year. There are growing concerns about an overheating housing market in Norway and Denmark's economy is already in bad shape.
Worries that tough new bank regulations will make it increasingly difficult for the Swedish banks especially to meet profitability targets have also made investors more wary.
But Handelsbanken, Sweden's second-biggest bank by market capitalisation, is seen by investors as one of Europe's most conservative lenders, and with a core Tier 1 capital ratio of 15.6 percent of assets it has benefited from far lower funding costs than peers. It avoided the worst of the 2008-2009 crisis, which hammered regional rivals.
Shares in the bank were up 2.2 percent at 217.4 crowns by 1548 GMT on Wednesday, when the Stoxx Europe 600 banking sector index was up 1.7 percent.
Handelsbanken's profits in Britain surged 72 percent to 224 million crowns in the fourth quarter and made up 5.5 percent of its total earnings. Profit in Sweden was 3.3 billion crowns.
Last year it opened another 21 branches in Britain to take the total there to 104, almost a quarter the size of its Swedish network.
The bank said it has been opening a new British branch nearly every other week, focusing on clients with good cash flow and offering a more traditional face-to-face service approach.
"Long term, Britain represents an opportunity to open many new branches," Chief Executive Par Boman told Reuters.
"There are very many places where we do not exist in Britain, far more than in Sweden."
"We've been very optimistic about Britain for a couple of quarters because we think it's working well. It is a perfect environment for them to grow really unhindered," said Francis Dallaire, an analyst at Pareto Ohman, of the Swedish bank.
"It is very encouraging to see how they are developing it, and probably we are only seeing the beginning of an area that could develop even more," he added.
Handelsbanken is the last of the big Nordic banks to report earnings for the fourth quarter.
Turbulent markets in the fourth quarter bit into trading income, but strong core income helped boost operating profit from continuing operations by 7 percent to 4.1 billion crowns, matching a Reuters forecast.
For the full year net profit rose by 12 percent to 12.3 billion crowns, with earnings per share up 12 percent at 19.78 crowns. Operating profit from continuing operations was also up 12 percent at 16.5 billion crowns while return on equity rose 0.6 percentage points to 13.5 percent.
While both Handelsbanken and rival Swedbank's dividends topped forecasts, Norway's DnB halved its dividend and SEB said it would pay below its payout target.
Handelsbanken's rivals are implementing tough cost cuts and sacking staff to keep up profitability levels, but Boman said his bank would take on new staff this year.