UPDATE 3-Swedbank warning on costs overshadows profit beat

* Q4 net profit tops expectations

* Shares down almost 5% as cost guidance disappoints

* Loan losses down v Q4 2019

* Dividend of 2.90 SEK per share, max allowed under rules (Recasts with analyst comment, share reaction)

STOCKHOLM, Feb 1 (Reuters) - Swedbank’s spending on anti-money laundering controls will remain around 2020 levels both this year and next, it said on Monday, defying analysts’ expectations for a fall and overshadowing forecast-beating quarterly profits.

The Swedish bank is beefing up controls following a record fine from Sweden’s financial regulator in March for its role in a Baltic dirty money scandal.

The lender said on Monday it was combining its Baltic network - Estonia, Latvia and Lithuania - into a single subsidiary in order to simplify governance in the region.

Its shares were down 4.7% at 0920 GMT, despite a boost to fourth-quarter profits from its asset management business and low loan losses.

“I think it’s justified that the share price is down today given the guidance they give,” said Danske Bank senior analyst Andreas Hakansson, pointing to the bank’s forecast that anti-money laundering spending would “level off” in 2021 and 2022.

Swedbank’s quarterly net profit edged up to 4.5 billion Swedish crowns ($538 million) from 4.4 billion crowns a year earlier, beating analysts’ average forecast of 4.14 billion.

Loan losses fell to 523 million crowns from 988 million a year earlier and were lower than the 680 million expected by analysts.

Sweden’s banks have largely defied predictions of soured debt in the wake of a coronavirus pandemic which has shut businesses around the globe, consistently reporting lower loan losses than their European peers in 2020.

Fee and commission income held stable at 3.4 billion crowns as a strong performance from asset management offset the impact of the pandemic on cards income.

Interest income, which includes income from mortgages, increased to 6.6 billion crowns from 6.4 billion a year earlier, in line with expectations.

Total expenses edged up to 5.6 billion crowns from 5.5 billion.

The bank proposed a dividend of 2.90 crowns per share for 2020 - equal to 25% of annual net profit, the maximum allowed under emergency coronavirus restrictions on shareholder payouts.

On Jan. 18, Swedbank proposed a dividend of 4.35 Swedish crowns per share for 2019.

$1 = 8.3589 Swedish crowns Reporting by Colm Fulton, additional reporting by Johan Ahlander; editing by Krishna Chandra Eluri and Mark Potter