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WRAPUP 2-SEB, DnB NOR shares dip after Q3 on growth worries

Published 10/28/2010, 07:50 AM

* SEB Q3 op profit 2.8 bln SEK vs 2.1 bln seen in poll

* DnB NOR Q3 pretax profit 4.16 bln NOK vs 3.88 bln in poll

* SEB credit loss recoveries 196 mln, vs fcast 580 mln loss

* DnB NOR sees lower loan losses than previously seen

* Shares fall as investors focus on underlying growth

(Recasts lead, adds quotes, details)

By Mia Shanley and Sven Nordenstam

STOCKHOLM/OSLO, Oct 28 (Reuters) - Shares in two top Nordic banks dipped on Thursday as investors looked beyond forecast-beating earnings and fretted about underlying growth prospects ahead.

Both SEB and DnB NOR reported much better loan books in the third quarter as the effects of a crippling recession in the Baltic region faded faster than analysts had foreseen, boosting profits.

SEB, the region's fifth-biggest bank, actually clawed back some money it had previously put aside to cover loan losses.

But despite the strong results, shares in both lenders eased as analysts said attention was turning from improved lending portfolios to future profitability.

Francis Dallaire, analyst at Ohman Fondkommission, highlighted core corporate lending at SEB as raising concerns.

"What will be the earnings base next year if it isn't growing, or even decreasing," he said.

SEB's Chief Executive, Annika Falkengren, struck a cautious tone in the bank's report.

"As global macro imbalances continue to hamper a broad-based economic recovery, uncertainty as to the timing of the pick-up in corporate credit demand in the Nordic region remains," she said.

She added that given the sluggish recovery abroad, the outlook was for lower activity in the Nordic region in 2011.

Results from rival banking groups Nordea, Swedbank and Handelsbanken had also set a high bar.

"The expectations were already higher given what Swedbank and Nordea had produced, so this was maybe not good enough," said Keefe Bruyette & Woods analyst Ronny Rehn.

Shares in SEB were down 2.5 percent at 1106 GMT with DnB Nor, the Nordic region's second biggest bank by market captalisation, down 1.3 percent, compared with a European flat banking index.

OUTPERFORMERS

Nordic banks have outperformed their European peers this year thanks in large part to their best-in-class capital ratios, with many staging a dramatic turnaround from 2009 when credit provisions soared due to a deep downturn in the Baltics.

DnB NOR said it expected loan losses for 2010 would probably be lower than the 4-5 billion Norwegian crowns ($679 million to $848 million) previously forecast.

SEB's operating earnings in July through September were 2.8 billion Swedish crowns ($414 million), well above the 2.1 billion seen in a Reuters poll and four times the same period a year ago.

Recoveries of credit provisions in the period amounted to 196 million crowns compared with the average poll forecast of further charges of 580 million.

Loan losses for DnB NOR were 643 million Norwegian crowns in the third quarter, below the 850 million seen in a Reuters poll.

DNB also announced it would buy the remaining 49 pecent of its Baltic and Poland joint venture, DnB NORD, from Germany's NordLB for 160 million euros ($220.9 million).

Nordea, the region's biggest lender, Handelsbanken and Baltic rival Swedbank all beat earnings forecasts in the third quarter. In addition to the regional recovery, they were helped by rising official interest rates in Sweden that boosted net interest income. (Additional reporting by Wojciech Moskwa in Oslo)

(Editing by David Cowell) ($1=6.762 Swedish Crown) ($1=5.895 Norwegian Crown)

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