By Dominic Chopping

STOCKHOLM--Nordea Bank AB (NDA.SK) on Thursday raised its dividend and posted a 30% rise in fourth-quarter net profit as lower costs helped offset sluggish net interest income.

Net profit at the Stockholm-based bank climbed to 1.1 billion euros ($1.18 billion) in the three months ended Dec. 31, from EUR848 million in the same period a year earlier, beating expectations of EUR845 million, according to a FactSet poll.

Chief Executive Casper von Koskull said: "Despite a challenging revenue situation in 2016, we have throughout the year improved our net interest margin; for 2016, the inflow to our Assets under Management reached an all-time high."

Net interest income inched higher to EUR1.21 billion from EUR1.20 billion a year ago.

Credit quality remained solid, it said, with total loan losses falling to EUR129 million from EUR142 million in the same quarter a year earlier. More than 90% of the losses in the fourth quarter came from its oil and offshore exposures and the bank expects largely unchanged credit quality in the coming quarters, it added.

The bank expects cost growth of approximately 2%-3% in 2017 compared with reported costs in 2016 and flat costs in 2018 compared with 2016.

The common equity Tier 1 ratio--a key measure of financial strength--stood at 18.4% at the end of the quarter, up from 16.5% a year ago. The final dividend was raised to EUR0.65 a share from EUR0.64.

-Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter: @domchopping @WSJNordics

(END) Dow Jones Newswires

January 26, 2017 03:08 ET (08:08 GMT)