Swedish bank Swedbank has reported a drop in fourth-quarter net profit as a rising interest income was unable to fully compensate for higher costs.

Swedish bank Swedbank has reported a drop in fourth-quarter net profit as a rising interest income was unable to fully compensate for higher costs. Assets under management, however, rose sharply.

The net profit of SEK3.61 billion ($563 million) for the three months to 31 December 2013, was a drop from SEK4.25 billion a year earlier and below analysts' expectations for SEK4.02 billion. Swedbank, the Nordic region's second-biggest bank after rival Nordea, said that the result “was weighed down slightly by write-offs in Ektornet, tax expenses and redeployment provisions”.

“There were a number of signs in 2013 that the global economy is slowly recovering, though much points to the fact that the recovery is fragile,” said chief executive Michael Wolf. “In our home markets, economic conditions remained stable,” it added.

The bank, which has services in Sweden, Norway and the Baltics, said it is preparing for an environment with low interest rates and weak credit demand as global economic uncertainty persists. The bank said it will aim to keep costs unchanged in 2014 from 2013 and focus on profitability and improved efficiency.

Swedbank posted a 5 per cent rise in net interest income from a year earlier to SEK5.63 billion, against expectations for SEK5.56 billion. It booked loan loss recoveries of SEK32 million compared with SEK76 million in recoveries a year earlier, against expectations for SEK161 million in loan impairments.

AuM grew by 12 per cent

Worth noting is Swedbank’s asset management operations, which are conducted through the Swedbank Robur group in its four home markets and Norway. With 120 funds in addition to discretionary asset management, the division’s assets under management amounted to SEK889 billion at the end of the fourth quarter, a 12 per cent growth since 2012. The total net inflow to Swedbank Robur’s funds in Sweden was SEK9.3 billion, where flows mainly went to investment solutions and short-term fixed income funds. As a result of the positive performance, the bank will be expanding its advisory services, it said.

“We are now devoting a larger portion of resources to improving the availability of advisory services. Already in 2013, we hired more advisors in Sweden. Resources tied to centralised staff functions are being reduced. The changes are intended to help expand business with our customers,” the firm said in the report.

This follows a year where the Robur group implemented several measures to simplify its customer offering through 14 fund mergers and discontinued funds. More conversely, two Robur funds - Allemansfond Komplett and Kapitalinvest - were criticised in the Swedish media in December 2013 for marketing the funds as actively managed despite them not being so. The group was also charging the same fee for the two vehicles as other actively managed funds. This has recently prompted the Swedish Consumer Agency to assess the marketing of the two funds, while The Swedish Financial Supervisory Authority said earlier this week, that it would look into the matter later in the Spring.