Swedish banking group Swedbank warned on Tuesday of limited credit growth and low interest rates as the effects of the eurozone debt crisis start to drag on the Nordic economy after posting forecast-beating third-quarter earnings.
Swedish banks have been largely insulated from Europe's debt crisis, serving as a safe haven for many investors, but the Nordic economy has shown signs of weakness and lower policy rates are putting pressure on deposit margins.
"At the same time that risk willingness has increased in the financial markets and stock prices have risen thanks to political decisions and bailout measures from the ECB, estimates of both global and Swedish growth have been revised lower," Chief Executive Michael Wolf said in a statement.
"We expect credit growth to be limited and interest rates low for the foreseeable future."
Operating profit at Swedbank was 4.75 billion crowns ($721.8 million) against a mean forecast for 4.34 billion in a Reuters poll of analysts and compared with a 4.31 billion result in the year-ago period.
Core income in the quarter beat forecasts and credit impairments were also lower than expected.
Swedbank's earnings come a day after Sweden's second-biggest bank, Handelsbanken , said its third-quarter net interest income came under pressure from lower policy rates.
Swedish banks were well-positioned for the most recent crisis following early moves to bolster balance sheets by raising capital and scaling back on risky lending after getting stung in 2009 by heavy writedowns in the Baltics.
A focus on slashing costs has helped keep up profitability in the face of tough new capital and liquidity rules. The banks have also benefited from extremely low funding costs relative to peers.
Wolf told journalists on a conference call that the bank would beat its one billion crown cost savings target this year and would keep costs at a similar or lower amount in 2012.
He also said the bank had adequate capital buffers for new regulations and that there was "surplus capital" to repay to bank shareholders.
($1 = 6.5808 Swedish crowns)
(Reporting by Mia Shanley and Oskar von Bahr)