Handelsbanken Reports Lower-Than-Expected Q1 Earnings Amid Rising Costs

Handelsbanken, a major Swedish bank, reported lower-than-expected earnings for the first quarter of 2024 due to rising costs and a deterioration in its net interest margin. The bank's net profit fell 3% to 6.60 billion crowns ($611 million), missing the mean analyst forecast of 6.69 billion crowns.

The disappointing results have drawn increased attention to Handelsbanken's financial performance as it faces challenges in its operations. The bank's expenses increased 12% to 6.47 billion crowns, with staff costs being a major contributor. Net interest income declined 5% from the previous quarter, hit by narrowing margins.

Handelsbanken's cost-to-income ratio, a measure of profitability, worsened in the quarter, setting it apart from peers Nordea Bank and DNB Bank. The bank's return on equity was 14%, down slightly from the previous quarter and below the 10-quarter average.

Why this matters: As Sweden's biggest property lender, Handelsbanken's financial performance has broader implications for the Swedish banking sector and economy. The bank's struggles with rising costs and narrowing margins highlight the challenges faced by lenders in the current economic environment.

In response to the weak results, Handelsbanken has initiated a strategic review of its Norwegian operations, citing an "ongoing weak development." The bank appointed Marion Ulander as the acting country general manager for Norway, replacing Arild Andersen, in a bid to improve its performance.

Handelsbanken's shares slumped almost 10% following the earnings report, contributing to a 1.2% decline in the European banking sector. The bank stated that it will focus on trimming overhead costs and bringing the bank closer to its roots, with a greater emphasis on clients and daily interaction at branch offices and online.

Despite concerns around rising credit losses due to financial difficulties in the property sector, Handelsbanken reported net credit recoveries for the quarter. The bank's decentralized business model and focus on long-term customer relationships remain key priorities as it aims to differentiate itself in an increasingly homogeneous banking landscape.

Key Takeaways

• Handelsbanken reported lower-than-expected Q1 2024 earnings due to rising costs.
• Net profit fell 3% to 6.60B crowns, missing analyst forecasts of 6.69B crowns.
• Expenses increased 12%, with staff costs being a major contributor.
• Handelsbanken initiated a strategic review of its Norwegian operations.
• Shares slumped 10% after the earnings report, impacting the European banking sector.