STOCKHOLM (Reuters) - Sweden's Svenska Handelsbanken AB (ST:SHBa) reported second-quarter operating profit above expectations on Friday and said it was well-equipped to handle far more difficult market conditions in Britain, should they arise after the Brexit vote.
Handelsbanken, the only Swedish bank with significant business in Britain, said its low tolerance of risk, sound capitalisation and strong liquidity situation meant it could deal with even tougher market conditions than those experienced in recent years.
"This would also be the case if the UK economic climate were to deteriorate as a result of a future secession from the EU," it said in a report.
The bank, which saw revenues in Britain grow strongly in 2015 to make up nearly one-fifth of its net interest income, hedges both capital and liquidity in British pound, while profits of the business are affected by exchange rate movements.
Handelsbanken said its business model, based on local branches and tight control of cost and credit risk, put them at an advantage.
"During the financial crisis, Handelsbanken had very low loan losses in the UK compared with those of British banks and since that time, the credit quality has improved further," it added.
Lower loan losses, higher dividends from its holdings and higher customer trading contributed to the result.
Operating profit rose marginally to 5.28 billion Swedish crowns ($622 million) in the second quarter, compared with 5.26 billion crowns a year ago, beating a mean forecast of 4.92 billion crowns seen in a Reuters poll of analysts.
Net interest income fell to 6.81 billion crowns from 7.02 billion a year ago, in line with the forecast.
Net commission income dropped to 2.28 billion crowns from 2.36 billion a year ago, better than the 2.24 billion crowns expected in the poll.
Loan losses were down at 229 million crowns, compared with 359 million crowns in the year-ago period and a loss of 346 million crowns in the poll.
($1 = 8.4933 Swedish crowns)