The bank, which has spent the past two years scaling back riskier exposures in sectors like offshore oil and shipping, said it had seen signs of firmer business momentum but that household lending margins remained under pressure.

Operating profit at Nordea, which is set to move its headquarters to Helsinki this year, rose to 1.33 billion euros ($1.55 billion) from a year-ago 1.01 billion. That was ahead of a mean forecast of 1.29 billion in a poll of analysts.

Shares in Nordea traded 2.8 percent higher by 0705 GMT as traders focused on the earnings rather than the muted revenue forecast.

Swedish banking stocks have been under pressure over the past year due to worries over a slump in Sweden's long-booming housing market and moves by niche players to take a growing slice of the mortgage market, squeezing lending margins.

While interest income and commissions were roughly in line with forecast, lower costs underpinned the forecast-beating profit.

The results were also buoyed by previously announced capital gains from the sales of its Danish life and pensions business and a stake in credit information agency UC.

Nordea, whose shares had slipped more than 12 percent this year, cautioned in April that unexpectedly weak underlying revenues in the first quarter had left its goal of a slight rise in revenues this year more challenging.

On Thursday, guidance was further dampened.

"Although we expect some modest growth for the remainder of the year, given the slower first half of 2018, it is unlikely that the repeating revenues in 2018 will reach the 2017 level," CEO Casper von Koskull said in a statement.

However, Nordea still expected higher net profit this year versus last year and said it was on track to meet cost guidance of 4.9 billion euros in 2018.

HELSINKI MOVE

"We have seen that revenues have been under pressure for quite some time and that looks to have continued," Exane BNO Paribas Andreas Hakansson said.

"So I'm not that surprised, but I think the market may have underestimated how great the problems are on the revenue side."

The bank said interest income, which includes revenue from mortgage lending, fell 9 percent year-on-year in the quarter to 1.07 billion euros, in line with analysts' expectations.

Nordea's move to Finland, where it would fall under the supervision of the European Central Bank rather than Sweden's financial watchdog, is planned for the second half of this year.

The shift would cut Nordea's costs to comply with tough and shifting Swedish regulations but has raised concerns it may alienate customers and weigh on its business in the Nordic region's biggest non-oil economy.

Several of Sweden's biggest trade unions have pulled their business from Nordea over the move, though signs it has translated into a broader exodus have so far been less evident.

($1 = 0.8587 euros)