July 18, 2018 / 6:33 AM / a month ago

UPDATE 1-Swedbank profit tops forecast as loan loss reversals give boost

* Q2 net profit 6.01 bln SEK vs forecast 5.35 bln

* Credit impairments net positive

* Swedish housing market has stabilised -CEO (Adds CEO comment, detail, background)

STOCKHOLM, July 18 (Reuters) - Swedbank reported a bigger-than-expected rise in quarterly earnings on Wednesday on stronger trading income and a surprise reversal in loan loss impairments in its Baltic and corporate businesses.

The Swedish banking group’s net earnings rose to 6.01 billion crowns ($678.9 million) from 4.75 billion a year earlier and topped a mean forecast of 5.35 billion in a poll of analysts.

Gains on financial items, which includes trading income, were 31 percent higher than analysts had forecast while credit impairments were net positive against an expected negative 292 million crowns.

Previously announced one-off items, including a capital gain from the sale of a stake in credit information provider UC, also helped.

A slump in Sweden’s housing market after two decades of rising prices has weighed on the shares of top lenders Swedbank, Nordea, Handelsbanken and SEB since the middle of last year.

While housing prices appear to have stabilised in recent months, the emergence of smaller players has raised questions about whether traditional banks can maintain margins on mortgage lending.

Swedbank, which rivals Handelsbanken as Sweden’s biggest mortgage lender with roughly a quarter of the market, said margins on new Swedish mortgages was in line with its existing stock while volume growth kept pace with the market.

“Housing prices have stabilised and we see that transactions have also stabilised. Things are less wild, rather there is now a calm, considered market,” Swedbank CEO Birgitte Bonnesen said on a conference call.

Swedbank said net interest income, which includes revenue from its mortgage business and is its single biggest source of income, rose 3 percent to 6.27 billion, missing the 6.33 billion seen by analysts.

Handelsbanken separately reported a slightly bigger-than-expected rise in earnings as firm growth in its main markets boosted income from lending and commissions.

$1 = 8.8520 Swedish crowns Reporting by Niklas Pollard, editing by Johannes Hellstrom and Jason Neely

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