CORRECTED-UPDATE 1-Sweden's Handelsbanken Q4 profit, dividend miss forecasts

(Corrects in eighth paragraph of Feb. 8 story to remove reference to not paying into employee profit-sharing scheme Oktogonen for second year in a row)

STOCKHOLM, Feb 8 (Reuters) - Sweden’s Handelsbanken reported fourth-quarter operating profit below estimates on Wednesday and proposed a lower-than-expected annual dividend as rising loan losses weighed on earnings.

Operating profit in the quarter fell to 4.70 billion Swedish crowns ($529 million) from the year earlier’s 5.53 billion, lagging a mean forecast of 4.99 billion seen in a Reuters poll of analysts.

Loan losses were up 75 percent to 832 million crowns, compared with 475 million in the same period a year prior and 484 million in the analyst poll.

“This increase was entirely attributable to a single exposure; the underlying credit quality remained stable,” the bank said in the report.

Net interest income, which includes income from mortgages, rose 5 percent to 7.30 billion crowns from 6.97 billion a year earlier and above the 7.15 billion crowns seen in the poll.

Net commission income rose to 2.45 billion crowns from 2.34 billion a year prior and 2.33 billion in the poll.

The bank proposed a dividend of 5.00 crowns per share, lower than the expected dividend of 5.61 crowns per share and the 6.00 crowns per share paid out for 2015.

Handelsbanken, which does not pay out yearly bonuses, said it had decided not to pay out any money to its long-term employee profit-sharing scheme Oktogonen, citing hiked capital requirements from the financial watchdog during 2016.

“The Bank’s assessment is that provisions for Oktogonen can resume during 2017,” it said.

$1 = 8.8783 Swedish crowns Reporting by Johan Ahlander; Editing by Johannes Hellstrom and David Holmes