By Dominic Chopping 
 

STOCKHOLM--Svenska Handelsbanken AB on Wednesday posted a 6.1% drop in second-quarter net profit as lower interest rates dented income, but the profit decline was smaller than expected amid lower costs and a sharp fall in credit losses.

Net profit at the Sweden-based bank fell to 3.96 billion Swedish kronor ($435.3 million) from SEK4.22 billion a year earlier, beating analysts' expectations in a FactSet poll for SEK3.42 billion.

Second-quarter net interest income at the bank fell to SEK7.62 billion from SEK8.06 billion, while loan losses decreased to SEK97 million from SEK435 million.

The continuing Covid-19 pandemic has, in many ways, been the main driving force behind customer needs and the bank's work during the quarter, it said.

The majority of employees have continued to work from home, and a significant proportion of advisory sessions and other customer contact has taken place remotely. Advisory activity has remained very high, it added.

Handelsbanken said the large increase in lending to corporate customers faced by the bank in March continued in the opening stages of the second quarter, but the need for new financing among customer companies gradually waned during the latter part of the quarter. Household lending, household deposits and corporate deposits continued to exhibit stable growth during the quarter.

Norway and the U.K. entered into a new low-interest-rate environment during the quarter as a result of the continuing pandemic and the immediate effect was that net interest income from deposits in these markets decreased by around SEK170 million during the quarter.

"From a more long-term perspective, a low interest environment probably entails positive effects for households and companies in Norway and the U.K., as well as for the bank," it said.

Handelsbanken's common equity Tier 1 ratio, a measure of financial strength, rose to 18.7% at the end of the quarter from 17.1% a year earlier.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

July 15, 2020 01:18 ET (05:18 GMT)