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* Nordea op profit 1.06 bln euros vs 1.02 bln forecast
* Handelsbanken op profit 4.3 bln vs forecast 4.2 bln
* Loan losses at both banks smaller than expected
* Nordea sees improvement in Denmark, shipping
By Mia Shanley and Oskar von Bahr
STOCKHOLM, April 24 Sweden's Nordea and
Handelsbanken said smaller loan losses helped profits
top forecasts and boosted capital buffers, strengthening their
position as some of Europe's strongest lenders.
Handelsbanken posted another quarter of robust revenue in
Britain, where it has opened a new branch every eight working
days. Nordea, the Nordic region's biggest bank by value, saw an
improvement in trouble spots in Denmark and shipping.
Swedish banks have largely escaped the financial turmoil
plaguing the rest of Europe, although slowing growth in Sweden
is expected to squeeze lending margins.
Sweden, the Nordic region's largest economy and one of the
few European countries to retain a top notch credit rating, has
seen growth weakening.
Nordea joined rivals Swedbank and SEB,
which reported solid earnings a day earlier, in saying that
customers were treading carefully.
"Demand for credit remains subdued, especially in the
corporate sector," Nordea CEO Christian Clausen said.
Credit losses at both banks were smaller than expected.
"The key positive was related to loan loss performance,
given the situation in terms of shipping and Denmark," said
Kimmo Rama, an analyst at Evli, referring to Nordea.
Nordea's operating profit for the period rose to 1.06
billion euros ($1.38 billion), topping a mean forecast for 1.02
billion in a Reuters poll. Handelsbanken posted a 4.34 billion
crown profit, above the 4.20 billion seen in a poll.
Swedish banks have had to meet tough regulatory demands on
capital and have continued to build up their buffers in case of
a new crisis. Swedish banking assets are around four times the
size of the country's gross domestic product.
Handelsbanken posted a core tier one capital ratio of 17.5
percent, according to Basel III capital rules, up from 14.6
percent in the same period a year ago.
Nordea said its core tier one capital ratio, excluding
transitional rules, rose to 13.2 percent from 11.6 percent.
Investors hope that some of that extra cash will be returned
through special dividends or buybacks.
But until regulations are settled and concerns over another
downturn diminish, banks are likely to keep their cashpiles and
wait out Europe's storm.
Swedish banks have worked hard in the past few years to get
down their risk-weighted assets and investors have rewarded them
with low funding costs - some of the cheapest in Europe.
Nordea said it expects to deliver capital efficiency gains
of 35 billion euros in 2013-2015, of which 25 billion will be as
early as this year, helping to keep its risk-weighted assets
largely unchanged during the period.
In an already strong domestic bank sector, Handelsbanken has
stood out. As one of Europe's most conservative lenders, it
pulled through the euro zone crisis relatively unscathed and
outperformed rivals, which were hit by a sharp downturn in the
It had a return on equity of 14.4 percent for the last
twelve months, beating the peer median of 11.5 percent,
according to Thomson Reuters StarMine data.
Many European banks have struggled with single-digit
The Nordic banking index has risen roughly 15
percent so far this year compared with a European banking index
which is down marginally.
($1 = 6.5285 Swedish crowns)
($1 = 0.7683 euros)
(Reporting by Mia Shanley and Oskar von Bahr, editing by
Alistair Scrutton and Louise Heavens)