(Bloomberg) -- Swedbank AB reported first-quarter profit that beat analyst estimates, with costs better than estimated, in contrast with its Swedish peers.

Net income at the bank rose 11% from a year ago, to 8.43 billion kronor ($777 million), according to a statement Thursday. Analysts had penciled in 8.13 billion kronor. The shares rose as much as 2.6% at 9:57 a.m. in Stockholm.

Swedbank said that the number of employees has increased more than forecast “due to lower staff turnover” and that “a temporary hiring freeze has therefore been introduced with the exception of business-critical positions.”

That’s “likely to reassure on near-term cost development,” Citigroup Inc analyst Shrey Srivastava said in a note to clients. “The cost beat – especially in light of Swedish peers’ reporting yesterday (where Swedbank also fell -5%) is somewhat reassuring.”

While fee and commission income at 3.98 billion kronor exceeded estimates, the Stockholm-based lender joined its Swedish counterparts in seeing its net interest income begin to decline from a peak. The measure, gaging the difference between money made on lending and the cost of funding, came in at 12.6 billion kronor in the period, down 5% from the end of the year, missing estimates. 

The drop was driven by lower deposit margins, with contributions from slightly lower average lending volumes and higher funding costs.

“We are seeing more or less the same trend for Swedbank as we have for the other Swedish banks, with pressure on core income and operating expenses, but for now largely offset by the lower-quality items,” Danske Bank A/S credit analyst Mark Elving Naur said in a note.

Read More: Swedbank Rises as 1Q Net Income Beats Estimates: Street Wrap

Credit impairments at 144 million kronor were less than a third of what analysts had estimated.

Swedish banks, in line with a number of their European counterparts, are starting to report lower net interest income as benefits from previous interest-rate hikes begin to taper off. That comes after a period when banks quickly raised lending rates while those paid on deposits increased much more slowly. Many central banks are expected to start cutting rates this year while competition drives up how much lenders have to offer to attract savers, once again changing the equation for banks.

Swedbank, which is Sweden’s second-largest by market capitalization, said it is integrating the unit that combats financial crime into Group Products and Advice, which oversees saving, lending and payment processes.

“This will enable us to both increase efficiency, improve quality and lead to an even higher degree of digitalization,” Chief Executive Officer Jens Henriksson said on a call.

The lender is waiting for a verdict from US authorities including the Department of Justice, to end a long-running probe into its past failures in anti-money laundering and counter-terrorism financing as well as past errors relating to information disclosures at the Baltic branches. The uncertainty is seen as a drag on the shares. Still, the earnings report didn’t provide any further clues around when the matter may be resolved.

--With assistance from Alastair Reed and Christopher Jungstedt.

(Updates with shares, analyst comments and CEO comment from second paragraph.)

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