January 29, 2020 / 6:55 AM / 24 days ago

UPDATE 2-SEB Q4 profit beats forecast, flags uncertainty on money-laundering probe

* Net profit SEK 5.8 bln vs mean forecast 4.9 bln

* External factors created strong trading conditions

* CEO: SEB ‘well capitalised’ ahead of money-laundering probe

* Bank proposes higher annual dividend (Adds analyst quote, share price reaction, CEO quote)

By Colm Fulton and Johan Ahlander

STOCKHOLM Jan 29 (Reuters) - Swedish banking group SEB reported higher-than-expected fourth-quarter earnings on Wednesday as the bank’s trading arm took advantage of favorable conditions such as Sweden’s interest rate hike in December.

The forecast-beating earnings come a month after the Swedish financial watchdog said it was investigating SEB over its alleged role in a Baltic money laundering scandal which has hammered the share price of rival Swedbank.

SEB’s net profit rose to 5.8 billion Swedish crowns ($610.7 million) from 4.6 billion a year before, beating a mean forecast for 4.9 billion from a poll of analysts compiled by Refinitiv.

“We put the result on two pillars. One is that we continued to have very high client activity… but we also had external factors helpings us,” SEB Chief Executive Johan Torgeby told Reuters.

This included interest rates moving from negative to positive territory, “which had a remarkable effect on net financial income”, he said.

The result was boosted by high trading income, as the stock market made gains and credit spreads tightened, Torgeby added.

Stockholm-based SEB said the outcome of the Swedish watchdog’s investigation into alleged money laundering was due in April.

“We have a very well capitalized bank with reserves built up for all potential risks, so we’re very adequately prepared for anything that might come,” Torgeby said.

Shares in the bank were up 0.11% at 0913 GMT, lagging the European banking index which was 0.73% higher.

“The report was better than expected, but if you look line by line it is the lines that normally do not affect next year that were good,” Andreas Hakansson, senior banking analyst at Danske Bank, said.

“If you look at the lines that can be extrapolated into 2020, such as net interest income, fees and costs, there will be no earnings-per-share adjustments for 2020, which is why the share is traded around zero today,” he said.

Loan losses increased to 997 million crowns in the quarter, more than double the 413 million seen a year before, due to two specific customer relationships, the bank said.

Net interest income, which includes earnings from mortgages, was up 14% to 5.9 billion crowns from 5.2 billion a year ago.

The bank proposed an ordinary dividend of 6.25 crowns per share for 2019, up from 6.00 crowns in 2018 but slightly lower than the mean analyst forecast of 6.31 crowns.

$1 = 9.4970 Swedish crowns Reporting by Colm Fulton and Johan Ahlander; Editing by Niklas Pollard and Jan Harvey

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